Page v Hendra HC Palmerston North CIV 2009-454-772

[2010] NZHC 1833

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

CIV-2009-454-772

BETWEEN  PAUL PAGE Plaintiff

ANDPAUL HENDRA Defendant

Hearing:         13 August 2010

Appearances: G.A. Paine - Counsel for Plaintiff

G. Allan - Counsel for Defendant

Judgment:      21 September 2010 at 10.30 am

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

This judgment was delivered by Associate Judge D.I. Gendall on 21 September 2010 at 10.30 am under r 11.5 of the High Court Rules.

Solicitors:           Davis O’Sullivan, Solicitors, PO Box 192, Wellington

McIntosh & Signal, Solicitors, PO Box 11, Feilding

P PAGE V P HENDRA HC PMN CIV-2009-454-772  21 September 2010

Introduction

[1]      The plaintiff Paul Page (“Mr Page”) and the defendant Paul Hendra (“Mr Hendra”) were engaged in a joint venture project principally involving the repair and refurbishment of aircraft and helicopters in New Zealand. As part of the project, the parties established a hangar at Palmerston North International Airport at a cost of just under $800,000.00. Mr Hendra, who is an experienced New Zealand aircraft engineer, contributed expertise, labour and some funds to the overall project, while Mr Page, who is an American businessman, advanced most of the funds and sourced helicopters  and  aircraft.  The  joint  venture  business  was  conducted  essentially through a company named Paulair Limited (“Paulair”), and the hangar was initially recorded as an asset of that company. A separate company, Aviation Property Developments Limited (“Aviation Property”), was set up to enter into a ground lease of the site on which the hangar was to be constructed with Palmerston North International Airport.

[2]      In 2006, the parties’ personal relationship soured and the joint venture came to an end. Paulair is currently in liquidation. The parties are in dispute and unable to agree on their respective entitlements arising from the overall business venture. The only substantial asset that remains from the project is the hangar, which was recently sold by Aviation Property to Helipro interests at a total price of $1,150,000.00 plus GST. The net sale proceeds (which so far only comprise a $200,000.00 paid deposit less agents’ commission on sale) are currently held by the solicitors acting on the sale pending resolution of the parties’ differences.

[3]      The present proceeding is brought pursuant to s 26M of the Judicature Act

1906, which provides that an Associate Judge may act as a referee under the High Court Rules in respect of any proceedings. The parties agreed that this process was to be followed upon signing a “Deed of Arrangement” at the time of the hangar sale submitting their dispute to arbitration:

An offer has been received by Aviation Property for the purchase of all its interests in the Premises (inclusive of the Improvements) and all parties to this Deed have agreed, notwithstanding the differences between them, that such sale should proceed but without  prejudice  to  their  respective  rights  and  interests  in  relation  to  the  nett

proceeds  of  sale  thereof  which  shall,  if  necessary,  be  determined  by  way  of submission to arbitration subsequent to such sale on terms set out in this Deed.

...

The parties agree that the Tenant [Aviation Property] may proceed to effect a sale of the Improvements to the Purchaser and give & convey full title thereto to the intent that the Tenant may give a warranty of title in respect of the Improvements and deal with the same as outright owner thereof.

...

Any issue whatsoever as between Page and Hendra incidental to the Improvements or incidental to either Paul Air or Aviation Property or the business venture they undertook together in relation to the construction of the hangar or the operation of Paul Air shall be determined by way of submission to arbitration...

[4]      At the hearing of this matter before me, evidence was given by both Mr Hendra and Mr Page. I also heard evidence from an accountant, David John Underwood, (“Mr Underwood”), engaged by Mr Hendra with regard to, amongst other things, the parties’ respective contributions to the business, and from Roderick Thomas McKenzie (“Mr McKenzie”), the liquidator of Paulair.

Background and Facts

[5]      The parties’ business relationship, and friendship, goes back a number of years.  Some time after 1999, Mr Hendra and Mr Paul jointly embarked on a project in the United States of America which involved rebuilding a damaged Bell 412 helicopter.   This took a period of 14 months and the completed helicopter was ultimately sold to Gulf Helicopters Company in Qatar. The project was successful, and the parties were keen to further develop their common business interests and together to set up what was a similar business in New Zealand.

[6]      In February 2003, while travelling across the United States of America, the parties created a written plan for a joint venture involving repair and refurbishment of aircraft and helicopters in New Zealand. This document, which I will refer to as the “Joint Venture Agreement”, recorded the parties’ basic understanding as to how the joint venture would proceed. I use the term “Agreement” in this context in a loose sense. Its use is not necessarily intended to be a reflection of the contractual validity of the document. The Joint Venture Agreement appears to have been signed

by Mr Page, but not by Mr Hendra.  Nothing turns on this, however, as Mr Hendra acknowledges his agreement to the joint venture arrangement at the time.  At para

4.1 of his 9 August 2010 brief of evidence Mr Hendra states:

And

... (the joint venture document) is a true copy of the written plan we developed as a result of our discussions ...

I do accept though that the joint venture document ... records an understanding we reached as to how we intended to proceed at that stage although in fact things did not pan out quite in the way that the document records.

[7]      It is important to set out the terms of the Joint Venture Agreement in full:

Joint Venture between Paul Page and Paul Hendra

Time and Date

Minutes of a meeting conducted On Interstate 70 Colorado on 25 February 2003

Present Paul Page Paul Hendra

Purpose

The purpose of the meeting was to discuss the forming of a joint venture agreement between

Paul Page and Paul Hendra.

It was agreed to establish a joint venture company between Paul Page and Paul Hendra to carry out the  maintenance, repair and refurbishment of aircraft and helicopters in New Zealand. It was also agreed that the joint venture company would investigate the possibility of building aircraft hangars for lease.

The basis of the joint venture would be a transfer of 50% of the shares between Aviation Trading Company Limited owned by Paul Page and Paulair Limited owned by Paul and Lyn Hendra, thereby giving Paul Page and Paul Hendra equal shareholding in both companies.

It was agreed that Paulair Air Limited would carry out the engineering aspects and Aviation Trading  Company  Limited  would  control  any  aircraft  on  lease  and  the  ownership  of buildings and property.

It was agreed that land would be sort (sic) on Palmerston North International Airport and a hangar would be built.

Aircraft repair and refurbishment.

It was agreed that each project should have a project outline detailing the following:

•    Ownership of the Aircraft.

•    Participants involved
•    Participants shareholding
•    Profit sharing arrangements
•    Purpose of the project

•    An outline of the proposed progress of the project

Hourly Rate

Establish a “Base Rate” for engineering charges to the project. This rate will fluctuate over

time due to the establishment time for the engineering company and its growth.

The profitability of the engineering company would be paramount.

Aircraft Ownership

It was agreed that Paul Page, Darian Bregman and Paul Hendra would participate in the

ownership of the aircraft. Other persons would be invited to participate as appropriate and agreed by both Paul Page and Paul Hendra.

Paulair Limited may give key employees profit sharing on appropriate aircraft projects or engineering profits.

Hangar

The Hangar to be established at Palmerston North International Airport would be owned by

Aviation Trading Company Limited. Paul Hendra to purchase 50% of the building from his share of the profits.

Tasks

Paul Hendra to meet with Jane Signal in Feilding to draw up the legal documents for the

transfer of shares between the companies.

Paul Hendra to make up an inventory of assets. Inventory document should have the value and supply source of the asset.

It was agreed that Paul Hendra would transfer the present Toyota Landcruiser into the joint venture.

Paulair would proceed with certification with New Zealand Civil Aviation Authority under

Rule Part 145 and AS9110. Signed.

Paul Page: Paul Hendra:

[8]      As I have noted, in general terms, it seems the parties’ intention was to do two things initially.  The first was to set up a maintenance, repair and refurbishment business for aircraft and helicopters in New Zealand.  The second was to establish a hangar at Palmerston North International Airport from which the business was to operate. As is apparent from the Joint Venture Agreement, the joint venture was originally  intended  to  involve  two  companies,  Paulair  and  Aviation  Trading Company Ltd, (not to be confused with Aviation Property). Paulair was to be used as the trading company, to carry out the engineering aspects of the helicopter and aircraft business. Paulair was incorporated by Mr Hendra in 1975, but the shares in the company were held by Mr Hendra’s daughters. However, contrary to the parties’ initial  intentions,  no  transfer  of  the  shares  was  ever  effected  once  Mr  Hendra returned to New Zealand.   Again, little turns on this, as both the parties and Mr Hendra’s daughters  acknowledged throughout that the shares in Paulair were in reality held for the benefit of Mr Page and Mr Hendra equally.

[9]      Aviation Trading Company Limited was also an existing company, but was owned by Mr Page and his interests. The company was originally intended to be used for the ownership and leasing of airport properties. As it turned out, however, Aviation Trading Company Limited never became involved in the joint venture, as the  parties  decided  to  form  a  new  company in  New  Zealand  instead,  Aviation Property.

[10]     After his return to New Zealand from the United States of America, Mr Hendra took over management of the hangar project and also rented a hangar at Feilding Airport to work on damaged helicopters and aircraft that Mr Page was sending to New Zealand. Paulair started trading as the engineering company around February 2003. Aviation Property in turn entered into a ground lease of the hangar site with Palmerston North Airport in February 2004.  The lease agreement was for an initial term of twenty years, and provided that Palmerston North Airport would be entitled  to  purchase  any  improvements  erected  on  the  land  at  expiration  or termination of the lease. The construction of the hangar on the site had commenced in 2003 and took about 14 months to complete.

[11]     Contrary to the terms of the Joint Venture Agreement, the parties’ business was almost exclusively conducted through Paulair. Most importantly, the funds for construction of the hangar contributed by the parties were recorded as loan advances in the accounts of Paulair, and the hangar was recorded in those accounts as an asset of Paulair.  It was not at that point shown as an asset of Aviation Property, the lessee of the site. Moreover, the parties did not, as envisioned in the original Joint Venture Agreement, draw up project outlines for each aircraft repair/refurbishment project. These outlines were, amongst other things, to detail ownership, participants and the parties’ profit sharing arrangements.

[12]     In broad terms, the actual arrangement between the parties seems to be that, so far as the hangar project was concerned, Mr Page provided most of the funds required for its construction, and Mr Hendra managed, and worked on, the project without remuneration.  And, so far as Paulair’s engineering business was concerned, from time to time, Paulair was “propped up” by cash injections from Mr Page. Mr Page did  not  charge  interest  on  his  advances  to  Paulair.  Mr  Hendra’s  financial

investment in Paulair however was more limited.  Nevertheless, it does appear that, at least initially, Mr Hendra contributed some funds to commence construction work on the hangar.

[13]     The engineering business of Paulair essentially consisted of two parts. One was to repair and refurbish helicopters and aircraft for third parties, and the other was to work on helicopters and aircraft that were sourced by Mr Page and his interests. Paulair never issued any invoices however for this latter work.

[14]     Despite what are described as Mr Hendra’s best efforts, Paulair did not turn into a profitable enterprise. On 19 December 2006, Mr Hendra says he ceased his involvement with the day-to-day running of the company, due to a breakdown in his relationship with Mr Page. Mr Page then took control of the business. It does not appear to be disputed that none of “Mr Page’s” helicopter projects were completed before Mr Hendra left the company.

[15]     In order to dissolve the joint venture, it seems Mr Hendra was willing to sign over  all  of  his  interests  in  both  Paulair  and  Aviation  Property  in  return  for  a monetary payment. Mr Page was opposed to this proposal. Earlier this year, Paulair was put into liquidation, and Mr McKenzie was appointed as liquidator. Both Mr Hendra and Mr Page lodged claims as unsecured creditors of that company. Other miscellaneous creditors of Paulair are owed $49,943.25, excluding the liquidator’s and legal costs.

[16]     Subsequently, the parties agreed that the hangar should be sold, on condition that the proceeds from the sale would be held by solicitors pending clarification of the parties’ respective entitlements. As I have noted, the hangar has been sold for a total sum of $1,150,000 plus GST, but only the deposit of $200,000.00 has been paid so far.  The balance is to be paid plus interest on 31 August 2012.

[17]     Mr Hendra’s position is that he is entitled to a share of the proceeds that reflects his financial and non-monetary contributions to the venture. He accepts that Mr Page advanced the majority of funds, but argues that, overall, his contributions of funds, expertise and labour matched the financial contributions of Mr Page. In his

view, the joint venture arrangement proceeded without any real concern regarding the parties’ respective contributions and entitlements, with the result that this arrangement was never formalised.

[18]     In response, Mr Page, contends that he is entitled to the entire hangar sale proceeds. He points to a term in the Joint Venture Agreement which provides that Mr Hendra was to purchase one half of the hangar with his share of the proceeds, which never occurred. In response, Mr Hendra insists that this term was included in the Agreement on the presumption that Mr Page would provide all of the funds for the hangar and that Mr Hendra would not be responsible in any way for managing the hangar project.  He says that this clearly did not occur here.

[19]     The parties are not agreed on all of the facts giving rise to the present dispute. In particular, there seems to be disagreement on the following matters.

The role of Paulair

[20]     It is common ground that the shares in Paulair were always intended to vest in Mr Hendra and Mr Page equally, and that the hangar was envisioned to be held by Aviation Property (or Aviation Trading Company Limited). In respect of the first matter, Mr Hendra clearly accepts that, although the shares in Paulair were in his daughters’ names, they were beneficially owned by Mr Hendra and Mr Page. There is no dispute, therefore, regarding Mr Page’s beneficial ownership in Paulair.

[21]     Mr Hendra further claims, however, that throughout, he, Mr Page and Mr Page’s accountant were fully aware that the hangar was an asset of Paulair. He says that the hangar was recorded as an asset of that company when the project first started and Aviation Property was not yet up and running.  Mr Hendra’s evidence is that Mr Page paid his funds directly into Paulair’s bank account, and that Mr Page was sent copies of the company’s accounts on a regular basis. He accepts it was always intended the hangar would eventually become an asset of Aviation Property, but that it was agreed that, for tax purposes, this would only occur gradually.

[22]     Mr Page, on the other hand, insists that he forwarded funds to Mr Hendra directly, but that Mr Hendra was “channelling” these   funds through Paulair.   He argued initially that the hangar is in fact owned by his company Aviation Trading Company Limited but later appeared to acknowledge that it is an asset of Aviation Property. He accepts that both parties agreed that the funds he provided would be recorded as an “advance”, but says that he expected Mr Hendra to pass on the funds to  the  correct  entity.      Mr  Hendra  disputes  that  any  funds  were  paid  to  him personally, relying on Paulair bank accounts recording payments from Mr Page.

[23]     The implication arising from Mr Page’s position is that he disputes, first, that the hangar “has anything to do with Paulair”, and secondly, that the sale proceeds should therefore be subject to the claims of Paulair’s creditors. Mr Hendra, on the other hand, acknowledges fully that the creditors are entitled to be repaid from the proceeds.

Aviation Trading

[24]     Mr Page in his cross-examination evidence appeared to claim at one point that he never agreed that a new company would be entered into for the purposes of owning the hangar.  As I have noted, initially he claimed that it was always intended that Aviation Trading Company Limited would be used for that purpose.

[25]     This is rather hard to justify however.  In his written brief of evidence at para

14 Mr Page stated unequivocally that “the hangar is owned by Aviation Property .... (of) which I am a half owner”.   And as Mr Hendra notes, Mr Page was clearly involved in the setting up of Aviation Property. He points to the fact that Mr Page’s signature appears on company registration documents and also on the lease in the name of Aviation Property with the airport company.

Costs of “joint venture projects”

[26]     Mr Hendra claims that throughout, Paulair undertook a considerable amount of work for Mr Page or his related entities without getting paid and that, as a result, Paulair struggled financially. No Paulair invoices were ever issued for the work it

undertook on the aircraft and helicopters sourced by Mr Page and his interests. Mr Hendra considers that this arrangement reflected the parties’ attitude to “just [get] on with things on an informal basis”. He now argues that, when assessing Mr Page’s financial contributions to Paulair that were used to “prop up” the business, account should also be taken of what were in effect “debts” incurred by Mr Page for services rendered by Paulair.    Mr Hendra alleges that a significant amount of Mr Page’s claim for total contributions of $1,475,411 was in fact paid to Paulair to meet costs incurred by Paulair on his behalf.

[27]     Mr Page disputes that he should be responsible for these costs. He argues that it was never agreed that he would become a “third party customer” of Paulair, but that it was always intended that “Hendra would do the work, Page would supply the aircraft, the projects would be sold and the profit divided between the parties”. Mr Page says he met all of the wages for employees working on “joint venture aircraft”. In cross-examination, Mr Page accepted that Mr Hendra was “doing a significant amount of work on joint venture aircraft”, and then summed up his position (at p 14 of the evidence) as follows:

... per the joint venture agreement, had Mr Hendra finished even one helicopter or two helicopters in this period of time, of which he never finished one, he finished none of the five or six that [were] going through rebuild and refurbish and if he had and sold it, he could have proceeded on and I wouldn’t have to keep propping it up to try to keep it going. But he never sold one, he never completed one and he never managed the joint venture agreement per the agreement.

[28]     It appears that all the helicopters, aircraft and parts provided to the venture by Mr Page are now back in his possession. In cross-examination, he stated (at p 15) that he got these items  back “with no benefit” and “with an added  expense of shipping them down [to New Zealand] and back [to the United States]”. He then stated that, once Mr Hendra left, he “spent over US$500,000.00 sourcing the parts to complete two of the helicopters that [Mr Hendra] never finished”.

[29]     When  asked  about  the  reference  in  the  Joint  Venture  Agreement  to “engineering charges”, Mr Page explained that the cost of each repair and refurbishment project was assessed in accordance with its established “base rate”, comprising the costs for the aircraft, labour and parts. The specific provision in the Agreement was headed “Hourly Rate” and required that a “Base Rate” be established

for “engineering charges to the project”, which would “fluctuate over time due to the establishment time for the engineering company and its growth”. According to Mr Page, it was Mr Hendra’s responsibility to account for these costs on each particular project, and then “each would be reimbursed what our costs [were]”, and any profits would be split equally. It appears that Mr Hendra’s “skill and expertise” were to form part of the base rate.  Nothing further appears to have happened on any of this, however.  There are no accounts for this particular cost as Mr Hendra acknowledges in his evidence (at p 58).

Inventory

[30]     Mr Hendra suggests that Mr Page has taken or disposed of inventory that either belonged to Paulair or to Mr Hendra personally.  He argues that the inventory consisted of valuable aircraft parts and incomplete aircraft on which he had worked, and of equipment and tools he had personally contributed to the business. He argues that significant monetary benefits were also derived from his work on both the inventory and other aircraft said to belong to Mr Page.

[31]     In cross-examination, Mr Page confirmed that he is still in possession of the inventory that was left at Paulair when Mr Hendra “quit”; and that in the United States of America he has completed two joint venture projects that  Mr Hendra “never  finished”,  using  parts  that  were  “repaired  or  ready  to  go  back  on  a helicopter”. He said that the value of the total inventory at the time Mr Hendra left the company was comparatively low, because the aircraft were “totally dismantled and  in  pieces”,  and  that he  incurred  expense  in  trying to  “put  the  pieces  back together”.   Specifically, the only reference by Mr Page anywhere in his evidence as to the value of that inventory is in cross-examination at page 31 of the Notes of Evidence where he states:

“Well, here you have an asset sitting there and its totally torn apart, it’s worth one number when it’s together, okay, it’s worth another number if it’s totally dismantled and in pieces and you gotta scurry around trying to find those pieces and the records to put it back together, that was the problem, that’s the mess he left me in.”

[32]     Regrettably, there is no evidence before the Court from Mr Page of what

“number”  represents  the  value  of  that  inventory  effectively re-possessed  by  his

interests or, more particularly, what “number” represents the increase in value of the inventory over and above its original acquisition cost (if anything) by Mr Page’s interests.

[33]     The only evidence that is before the Court as to the value of any part of that inventory repossessed by Mr Page is from Mr Underwood at para [47] of his brief of evidence.    There,  he  notes  with  certain  conditions  amounts  of  $US50,000  or

$NZ73,529 for what he describes as “parts alleged to have been converted (“by the Page interests)” and $NZ8,373.00 for the “Purchase of Parts” (by Paulair in New Zealand utilising advances made to it).  This “evidence” from Mr Underwood must be seen as rather sketchy.  Nevertheless, it is not in any way contradicted here by Mr Page, nor is any expert evidence as to the value or increase in value of the “repossessed” parts provided by Mr Page.

Remuneration

[34]     The parties differ on whether it was intended that Mr Hendra would receive any remuneration for his work at Paulair. It is clear, however, that during the earlier project in the United States of America for the rebuild of the Bell 412 helicopter, Mr Hendra received no remuneration. He did receive a portion of the profits from the eventual sale, which Mr Hendra says amounted to about $US160,000 and effectively reimbursed him for his labour and expenses.

[35]     Mr Hendra argues that, when drawing up the Joint Venture Agreement, the parties envisaged that they would employ a third party to undertake and manage the hangar project, but that it was later agreed that Mr Hendra should take on that responsibility. He says that he never complained about not getting paid at the time because he thought that he was “working to build up an asset” in which he would have an equal interest by virtue of his contributions. He says that neither Mr Page nor he were concerned about quantifying exact shares in the hangar because they had agreed that, generally, everything was to be split on a 50/50 basis.

[36]     In response, Mr Page claims that the parties agreed that Mr Hendra would not be paid for work done as matters progressed. He says that he remembers asking Mr

Hendra how he could afford to work free of charge, and that Mr Hendra replied that his family could live off his wife’s income. He further argues that “it is scarcely credible” that Mr Hendra expected to be paid a salary as part of the parties’ contractual arrangement, as the joint venture agreement made no reference to this, and Mr Hendra did not receive a salary for his role in the earlier Bell 412 project on which the present arrangement was modelled.  He says that Mr Hendra had the opportunity to “buy into the hangar” at cost, and that the share in the hangar was never intended to be “a gift”. He says that the idea was to build the hangar so it could be used “to make more money”.

[37]     As noted previously, Mr Hendra’s “skill and expertise” were to form part of the base rate for engineering projects, which would establish the value of the finished product, to which would then be added the profit margin.  It seems that no such base rate was ever set for any project.

Liquidator’s costs and legal costs on sale of the hangar

[38]     Mr Hendra says that he decided to put Paulair into liquidation “to bring matters to a head” between himself and Mr Page because he was frustrated with the situation. His position is that the liquidator should be paid out of the proceeds of the hangar.  He  also  considers  that  the  fees  and  disbursements  of  approximately

$25,000.00 of Fitzherbert Rowe, the firm of solicitors that was acting on the sale of the hangar, should be deducted from the proceeds, as these were a necessary expense as part of the agreed process of selling the hangar.

[39]     I understand that it is Mr Page’s position that neither the liquidator’s costs nor the legal fees should come out of his entitlement to the proceeds.

My Decision

[40]     While Mr Hendra maintains that this matter must be resolved on a purely “equitable” basis, Mr Page argues that the terms of the Joint Venture Agreement are paramount and that they alone should be applied to determine the parties’ respective entitlements. Mr Hendra contends that the Joint Venture Agreement does not hold

“contractual status”, that it is simply a summary of “a bunch of ideas”. He argues that the parties’ relationship was a fiduciary one, with the result that “neither party can assert rights over the other for their sole benefit, but each is obliged to recognise as a matter of good faith the interests of the other”.

[41]     In Chirnside v Fay [2006] NZSC 68; [2007] 1 NZLR 433 Tipping J made the following general observations concerning joint ventures:

[91] Before leaving this aspect of the case it may be helpful if we make the following general remarks. The essence of a joint venture which is not yet contractual is that it is an arrangement or understanding between two or more parties that they will work together towards achieving a common objective. It is fallacious to think that there can be no joint venture unless and until all the necessary details have been contractually agreed. A joint venture will come into being once the parties have proceeded to the point where, pursuant to their arrangement or understanding, they are depending on each other to  make progress towards the  common objective. Each party is  then proceeding on the basis that he or she is acting in the interests of all or both parties involved in the arrangement or understanding. A relationship of trust and confidence thereby arises; each party is entitled to expect from the others loyalty to the joint cause, loose as the formalities of the joint venture may still be. This in essence is the position which was reached between Messrs Chirnside and Fay. Neither of them was thereafter entitled to act solely in his own interests.

[92] The resulting fiduciary relationship is not one from which a party is unable to withdraw, albeit withdrawal will usually require appropriate arrangements to be made in consideration of the severance of the joint interests and the release of the parties from their duties of loyalty to each other. Because there is, as yet, no contract between the joint venture parties, each will ordinarily be free to withdraw, on giving the other notice to that effect. On the giving of that notice duties of loyalty for the future will come to an end but confidentiality obligations may remain; and any assets, tangible or intangible, held on behalf of the joint venture will still usually be held on trust for both the erstwhile joint venturers. Appropriate steps will be necessary to agree, or obtain some external resolution as to how those assets are to be dealt with. There is, in a general sense, some analogy with the steps necessary when a formal partnership is dissolved.

[93] The point, in short, is that joint ventures, like partnerships, can generally be brought to an end by appropriate notice. The previous joint venturers must, however, still act equitably towards each other in the steps necessary to bring the affairs of the joint venture to a conclusion which is fair to all concerned. The further the joint venture has progressed the more complex those obligations may be. Once the venture becomes contractual the contract will normally govern what is to happen on the termination of the venture or the withdrawal of a party from it. In the absence of contractual  regulation,  equitable  principles  will  supply  the  solution.  (Footnote omitted)

[42] Tipping J also noted that a relationship of a contractual nature may involve fiduciary as well as contractual obligations, and that relationships which do not generally give rise to fiduciary obligations may nevertheless have a fiduciary dimension (at [72]). The essential feature of a fiduciary relationship is the

entitlement of one party to place trust and confidence in the other, with the effect that the party is entitled to rely on the other not to act in a way which is contrary to the first party’s interests (at [80]).

[43]     In Amaltal Corporation Ltd v Maruha Corporation [2007] NZSC 40; [2007]

3 NZLR 192, the Supreme Court clarified that, if and once the parties choose to use an incorporated vehicle for a venture, a fiduciary relationship is unlikely. The relationship is no longer analogous to a partnership, and there is no warrant for generally imposing obligations not found in a company’s constitution, in companies legislation, or in the terms of the contract:

[19] The broader view of the relationship as fiduciary was said to be tenable because the joint company had been incorporated to replace a partnership which had formerly existed between Maruha and Amaltal and some of the partnership agreement terms had been carried over into the company’s structure and the shareholders’ agreement. We do not accept this argument. These were commercial companies who had elected not to continue as partners and, instead, to frame their relationship by internal and external rules applicable to a company, supplemented by a contract between them in their capacity as shareholders. There is no warrant then for imposing upon them generally obligations not found in the company’s own constitution, in companies legislation or in the terms of the contract. As partners they would have owed fiduciary duties to one another, but their relationship no longer took that unincorporated form. They  had  deliberately  substituted  the  Companies Act  regime  for  that  of  the Partnership Act. Mr Miles helpfully provided the Court with a table which compared the  provisions  of  the  partnership  agreement  and  the  shareholders’ “joint venture agreement”, but it merely demonstrated the great differences between the two structures, which perusal of the documentation itself confirms.

[20] The characterisation of a commercial arrangement as a joint venture can be unhelpful as a guide to whether the parties owe each other fiduciary obligations. In our view, when commercial parties elect to use an incorporated vehicle for a venture that can only loosely be called a joint venture, it is unlikely that their relationship as a whole will be fiduciary in nature. To that extent we agree with the Court of Appeal. (Footnote omitted )

[44]   However, the Court reiterated that, even in a commercial non-fiduciary relationship, there may be aspects which engage fiduciary obligations:

[21] We respectfully differ from that Court, however, when it comes to the accounting and tax functions of the relationship. It is well settled that, even in a commercial relationship of a generally non-fiduciary kind, there may be aspects which engage fiduciary obligations of loyalty. That is because in the nature of that particular aspect of the relationship one party is entitled to rely upon the other, not just for adherence to contractual arrangements between them, but  also  for  loyal performance of  some function which the latter has either agreed to perform for the other or for both or has, perhaps less formally, even by conduct, assumed. (Footnote omitted)

[45]     In Counties Manukau Pacific Trust v Manukau City Council [2009] 2 NZLR

260, Cooper J considered that fiduciary duties might arise to supplement an incomplete contractual agreement:

[91] ... If a matter has not been dealt with in the agreement, fiduciary duties may arise in relation to them, to supplement the agreement, unless it can be said that that conclusion would be contrary to some express or implied contractual term.

[46]     Having regard to these authorities, in the present case, it is difficult to resist the conclusion that, first and foremost, the parties’ relationship was not a fiduciary one, given that they had formalised their relationship by utilising at least two companies, Paulair and Aviation Property. This is not to say, however, that there may not be some fiduciary aspects arising from this relationship. The Joint Venture Agreement was incomplete and it is uncertain whether it was ever intended to be a contractually binding document. More importantly, the incorporation of Aviation Property and the use of Paulair did not fully eliminate the legal uncertainties that were inherent in the parties’ informal relationship, given that legal title to the shares in Paulair were vested at the time in Mr Hendra’s daughters and the respective interests in the venture were not clearly defined.

[47]     Overall, however, it seems that the outcome of this case would be much the same, regardless of whether on the one hand, a contractual or company-based approach,  or on  the  other,  an  equitable  approach  is  taken.  As  I understand  the situation, neither party claims that there has been a breach of fiduciary duty. The only issue is that of determining the parties’ entitlements to the sale proceeds.   A starting point for this assessment in my view must reflect the parties’ financial contributions to the joint venture and, if there was any profit made, the parties’ (likely) intentions or arrangements as to how any such profit would be split.

Mr Hendra’s claim for remuneration

[48]     The only potential exception to this approach is Mr Hendra’s claim that he should be entitled to a salary for his work on the hangar and in the aircraft engineering business, covering a period of about four years. Mr Hendra says that he expended in excess of 1400 hours on the hangar project alone, and that he was heavily involved in the day-to-day running of Paulair. According to Mr Underwood,

the accountant engaged by Mr Hendra, the overall amount that would appropriately reflect Mr Hendra’s services is $410,000.00.

[49]     In essence, this claim would have to be determined on a “quantum meruit” basis.  In Chirnside v Fay, the defendant fiduciary to a joint venture claimed that an allowance should be made in assessing his share of the profits for the work that he had undertaken in securing the project. The situation in that case was more complicated than in the present case, as the defendant had been  found to have breached his fiduciary obligations in excluding the plaintiff from the common enterprise, and the plaintiff then sought an account of profits. At [132], Tipping J noted as follows:

It is of relevance to the antecedent agreement point that the trial Judge in the present case found that had the Harvey Norman project proceeded with Mr Fay still involved, he, Mr Fay, would have agreed to recognise Mr Chirnside’s disproportionate contribution in a fair and reasonable way. It is a reasonable inference that this may have included an element of disproportionate profit sharing. The Judge’s finding was not of course of any actual agreement, but of what was likely to have been acceptable to Mr Fay if the project had proceeded to fruition without any breach of duty on Mr Chirnside’s part. It is a legitimate factor to be weighed in the overall discretion, but it is not, in our view, a route of itself to the determination of this aspect of the case. Mr Chirnside did not advance it as such.

[50]     The author of Equity and Trusts in New Zealand (2ed, Thomson Reuters) sums up the position on “allowance[s] for efforts expended” in the following terms (at para 17.6.10):

Where an account of profits is sought, the court may grant a fiduciary an allowance in recognition of efforts expended on a transaction. Usually such an allowance was permitted only if the fiduciary’s breach was innocent. ... However, in New Zealand a less strict approach appears to prevail. In Estate Realties Ltd v Wignall Tipping J held that an allowance is available, even if the fiduciary acted other than innocently. That approach was endorsed by the Supreme Court in the recent case of Chirnside v Fay ... It is worth noting, however, that in Chirnside most of the work in respect of which a majority of the Supreme Court was prepared to grant an allowance had occurred prior to, and independently of, the fiduciary breach in issue.

[51]     Finally,  mention  should  also  be  made  of  the  following  passage  in  Civil

Remedies in New Zealand (Brookers, 2003) at 8.2.1:

Personal restitutionary remedies developed according to the subject-matter of the enrichment sought to be recovered. The main forms of the personal restitutionary remedy are money had and received, quantum meruit, and quantum valebat. The claim for money had and received is available to reverse the defendant’s unjust enrichment where the subject-matter of the enrichment was money. The principal

circumstances in which it is used are in respect of money paid by mistake, under duress or compulsion, and where there has been a failure of basis or consideration. A claim in quantum meruit seeks to recover the reasonable value of, or reasonable remuneration for, services performed by the plaintiff for the defendant, while a claim in quantum valebat seeks to recover the reasonable value of goods supplied by the plaintiff to the defendant.

...

... In addition to their role as responses to causes of action based on the principle of unjust enrichment, all three arise in response to, and may therefore be used to remedy, events other than unjust enrichment. ... Quantum meruit, and probably also quantum valebat, are also appropriate remedial responses to an action based on an agreement between the parties. Where the parties have failed to specify the rate of payment, quantum meruit may be granted as a remedy for an action based on the express agreement. In such cases, not only is the event to which quantum meruit responds not unjust enrichment, but also the measure of recovery is not assessed by the defendant’s gain but by the extent to which the plaintiff should be remunerated.

...

The important point for present purposes, of appreciating the non-restitutionary role performed in many cases by quantum meruit and in some cases by money had and received, is that it cannot be inferred from the grant of one of these remedies that the cause of action must necessarily lie in unjust enrichment. While in the case of money had and received, its principal use appears to be as a restitutionary remedy, the principal application of quantum meruit is arguably as a response to a promissory obligation.

[52]     The case of MacKenzie v Thompson [2005] 3 NZLR 285 is an example of a case where the Court found established a non-restitutionary claim for quantum meruit. The Court considered that the plaintiff’s services to the defendant in relation to the subdivision of her land gave rise to an obligation by which the defendant had to pay reasonable remuneration for services provided. The Court decided that the claim did not depend on proof of enrichment, but on an implied obligation to pay reasonable remuneration for services rendered. The parties had been close to finalising a draft joint venture agreement in relation to the subdivision but, in the end, had not become contractually bound.

[53]     In Nilsen v Murcott [2008] 2 NZLR 750, the Court considered that there “remains a degree of confusion within the law as to whether quantum meruit claims are based upon a doctrine of implied contract or upon the principles of unjust enrichment” (at [31]). Regardless of which approach is adopted, however, I conclude that Mr Hendra’s claim to some form of salary here cannot succeed.

[54]     If quantum meruit is considered as a doctrine of implied contract, Mr Hendra would have to show that there was an implied agreement between he and Mr Page that he would be remunerated for his work. With one possible exception, I do not consider  that  there  was  such  an  agreement.  Although  I  accept  that  the  parties diverted significantly from their initial Joint Venture Agreement, and that none of the terms contained in the Agreement should be regarded as somehow being “set in stone”, it cannot be disregarded here that the document does not make any mention of Mr Hendra’s entitlement to be paid. The joint venture was approached on the same basis as the earlier Bell 412 helicopter project, on the understanding that Mr Page would contribute the funds and Mr Hendra would be rewarded for his efforts by way of profit sharing. There is nothing in the subsequent conduct of the parties to suggest that this understanding was displaced by a new arrangement, whereby Mr Hendra would be entitled to both a share of the profits and remuneration on uncompleted projects.

[55]     It should be noted here that the terms of the Joint Venture Agreement are far from clear. It purports to provide for equal ownership in the two (or possibly) three mentioned companies, while also stating that Mr Hendra is to purchase a half share in the hangar with his profits from the business. At the hearing, Mr Page clarified that he understood the Agreement to mean that Mr Hendra would only be entitled to a half share in the hangar if he bought into the hangar “at cost” and that, to that extent, “equal” ownership of the companies was conditional on a financial contribution from Mr Hendra. It appears to have been understood, however, that any profits would be shared equally.

[56] Having heard all of the evidence, my understanding of the parties’ arrangement is that Mr Hendra was prepared to work without payment as aircraft projects progressed (subject to the matter I note at [58] below), in return for the prospect of gaining a half share in any profits made, and Mr Page was willing to advance funds on an interest-free basis, and to share in half of the profits with Mr Hendra, in return for Mr Hendra’s work and expertise. There was, therefore, no implied agreement that Mr Page would pay Mr Hendra personally on uncompleted aircraft projects for services rendered.

[57]     For essentially the same reasons, I also conclude that there could have been no unjust enrichment by Mr Page at the expense of Mr Hendra. A claim in quantum meruit, on restitutionary grounds, seeks to recover reasonable remuneration for services performed by a plaintiff for a defendant. Here, there was adequate consideration in the parties’ arrangement. The fact that the joint venture did not turn out to make a profit cannot be used to make out grounds for unjust enrichment. Mr Hendra was willing to take the gamble of offering his services free of charge in return for the chance of a substantial windfall. He must have known that there was no guarantee that the business would ultimately be profitable, or as profitable as expected. It follows from this that the present arrangement also does not compare to the Chirnside v Fay situation, where the Court found that disproportionate profit sharing between fiduciaries was justified in recognition of the greater efforts expended by one party on the transaction.

[58]     I have noted above that I consider there to be one exception to this analysis. In his evidence, Mr Page appeared to accept that the “Base Rate” that was to be established at the outset for each helicopter/aircraft project as part of the “project outline” in each case was to include “skill and expertise” of Mr Hendra.  In addition, it was envisaged that, once the projects were sold, each party would be reimbursed for their “costs”. I take that to mean that Mr Hendra might have been entitled to some reimbursement for his labour in addition to his share of the profits.  Although, as I understand it, that is what happened in the Bell 412 project which formed the model for this present arrangement, before me there was really no clear evidence on this.   Mr Hendra did not keep accounts of the time that he spent on these projects, and there is no indication of the actual cost of Mr Hendra’s skill and expertise that would have been included in the “Base Rate”.    In addition of course, it seems that none of the aircraft/helicopter projects were completed prior to termination of the relationship.

The parties’ contributions

[59]     As mentioned previously, Mr Page claims that he is entitled to all the funds from the sale of the hangar, “to restore him to the position he would have been in had the Joint Venture not proceeded”. He appears to accept that, if there was a “profit”,

this should be split in terms of the Joint Venture Agreement.   Under cross- examination, Mr Page also contended that the hangar is not an asset of Paulair, but that, as is set out in the Joint Venture Agreement, it was always intended that Aviation Trading Company Limited would be used to own the hangar.   As I have noted above, his earlier evidence in his written brief, however, confirmed that it was actually Aviation Property which was to own the hangar.

[60]     Turning first to the dispute concerning ownership of the hangar, at the outset I need to say that I reject Mr Page’s belated insistence that the hangar belongs to Aviation Trading Company Limited.   Although originally the Joint Venture Agreement did suggest that this company would “control ... the ownership of buildings and property”, clearly the parties varied this arrangement and used a new entity.  This was probably because the earlier company owned other valuable assets belonging to Mr Page such as a restored spitfire aircraft, and thus was inappropriate to own the hangar here.  Instead, there can be no doubt that ultimately, the hangar was clearly an asset of Aviation Property, although the company records did not appear to indicate that this was the case. The hangar was sold to the Helipro interests by that company, Aviation Property.  It was Aviation Property that had entered into the ground lease for the hangar site with Palmerston North Airport. In these circumstances, it is inconceivable that title to the hangar was somehow vested in some other company.  And to suggest alternatively that this other company might be Paulair, and that all of the sale proceeds should thus be treated as Paulair’s property as I see it is similarly untenable.  In my view, this conclusion also accords with the parties’  original  intention  of  keeping  the  hangar  separate  from  the  business  of Paulair.

[61]     Nonetheless, it cannot be disregarded that it was Paulair that funded the construction of the hangar, not Aviation Property. The construction costs were itemised at $779,615.29 in Document 10 in the bundle being a document dated 15

March 2005, headed “Actual Hangar costs paid by Paulair Limited on Behalf of Aviation Property Developments”.  As I understand the position, this document was prepared by Mr Hendra, a copy was provided to Mr Page and the final figures are generally accepted.  It is my view, therefore, that Paulair should now be repaid for its advances to Aviation Property, and that Paulair must then use those funds to satisfy

its creditors’ and shareholders’ claims to the extent that this is possible.  Also, based on Mr Underwood’s evidence, the total cost of the hangar is confirmed at generally around this $779,615.29 figure.  A question does arise as to whether ground rent paid by Paulair for the hangar site should be added to this as another expense that Paulair incurred and paid on Aviation Property’s behalf.  Given, however, that Paulair had full use of the completed hangar, there seems to be no reason why it should not bear this ground rental obligation with the Palmerston North International Airport as well. It paid no other rental for the completed hangar to Aviation Property as the ultimate owner which might equate roughly to an amount for ground rental it had paid during the hangar construction period.  According to Mr Underwood’s evidence, these total ground rent expenses were $39,212.00.  For these reasons, I am satisfied no amount for ground rent should be reimbursed to Paulair here.

[62]     This brings me to the claims of outside creditors of Paulair and the question whether  these  claims  should  be  deducted  from  the  sale  proceeds  or,  more particularly, the Aviation Property repayment of $779,615.29 to Paulair. In my view, Mr Page’s argument that his entitlement should somehow be separated from the creditors’ claims is untenable. I accept that originally the parties may have intended to provide hangar construction funds to Aviation Property directly, without involvement of Paulair. However, this is not what occurred. The advances were made to Paulair, and Mr Page must have been aware of this. He did not object to the arrangement. It follows that a portion of Aviation Property’s sale funds should flow back to Paulair to repay the advances before those funds can be used to repay Paulair’s creditors and reimburse the parties to this proceeding. Those creditors’ claims constitute debts of Paulair, and the outside creditors in my view are entitled to be paid before the shareholders here.   And, although Mr Page and Mr Hendra are also notionally creditors of Paulair as they made loan advances to that company, these loans for present purposes, as I see it, should be treated effectively as shareholders’ equity so that the claims of innocent third party creditors are not diluted.  If dilution was to occur, that might necessarily involve further action and enquiry on the part of Mr McKenzie as liquidator which the parties here no doubt would wish to avoid.   The overall amount of the outside creditors’ claims is uncontested at the figure of $49,943.25 as confirmed by the liquidator Mr McKenzie

in his letter of 27 April 2010 at Document 14 in the Bundle.  Once paid, this leaves

$729,672.04 (being $779,615.29 minus $49,943.25).

[63]     Similarly,  I consider that  the liquidator’s  fees  and  costs,  also  effectively uncontested in any real way, as set out in his 27 April 2010 letter amounting to

$24,399.00 should be paid from the Paulair proceeds. I accept that Mr Hendra’s decision to liquidate the company was entirely unilateral, and that there is therefore an argument to be made that Mr Page should not be disadvantaged financially on account of that decision. In fact, Mr Hendra’s approach may not have accorded with Tipping J’s view that “previous joint venturerers must act equitably towards each other in the steps necessary to bring the affairs of the joint venture to a conclusion which is fair to all concerned” (at [93]).

[64]     Nevertheless, it has not been suggested that Mr Hendra’s conduct was in breach of his fiduciary obligations (assuming that he owed such obligations), and the question of who was “at fault” for terminating the joint venture was never really in issue here. It appears to be accepted by both parties that the joint venture had simply become unworkable, given the deterioration in the parties’ relationship, and that the situation needed to be resolved.   Placing Paulair into liquidation was one way of ending the venture. In these circumstances, in my view, it is appropriate that the costs of the liquidation come out of the remaining funds of Paulair. This leaves

$705,273.04 (being $729,672.04 minus $24,399.00).  This $705,273.04 I will refer to hereafter in this judgment as the “Remaining Paulair Funds”.

[65]     Turning  now  to  the  contributions  to  Paulair  made  by  Mr  Page  and  Mr Hendra, I reiterate my view that the only conclusion that can be reached as to the parties’  arrangements  here  must  result  in  a  division  of  the  Paulair  funds  in accordance  with  their  total  financial  contributions.  As  such,  I consider  that  Mr Hendra and Mr Page are entitled to receive back from Paulair their financial contributions  on a pro rata basis but subject to the matter I note at [72] following. I accept that Mr and Mrs Hendra contributed $157,640.00 to Paulair, they say being towards  construction  of  the  hangar,  and  that  Mr  Hendra  incurred  a  further

$10,086.76 expenses on his credit card.  None of this was disputed in any reasoned

way by Mr Page.  Mr and Mrs Hendra’s total cash contribution to Paulair, therefore, is $167,726.76.

[66]     Mr Page, on the other hand, claims that he and his interests contributed a total amount of $1,475,411.81.   Whilst the initial payment of advances totalling that figure is not the subject of any real dispute by Mr Hendra, a number of issues concerning first, the purpose and destination of some of those “loan” payments, and secondly, possible part repayments of the loan (in cash or kind) have been raised.  I now turn to address these:

(a)The first issue raised for Mr Hendra by Mr Underwood at para 47(a) of his brief of evidence relates to the sum of $40,693.00.  He contends that although this represents amounts clearly forwarded by Mr Page or his interests to Paulair, they were effectively for Paulair to simply make payments on Mr Page’s behalf for his personal debts, first, for a transmission overhaul on a Robinson R22 helicopter owned by Mr Page quite outside the venture ($17,500.00), secondly, for an invoice for  equipment  owned  by  Mr  Page  and  shipped  by  him  to  New Zealand ($9,343.00) and thirdly, on 15 February 2005 for the cost of a further freight container for expenses incurred on Mr Page’s behalf by Paulair ($13,850.00).  These total $40,693.00.  On 23 May 2008 Mr Underwood advised accountants acting for Mr Page in Christchurch, Crichton Horne & Associates that an adjustment to deduct these amounts from the advance to Paulair needed to be made.   As I understand the position this was agreed by Crichton Horne & Associates either specifically or by implication.   I am satisfied therefore that this $40,693.00 adjustment needs to be made by deducting this sum from Mr Page’s loan advance to Paulair on the basis that it was simply reimbursement of his personally incurred expenses paid at his request by Paulair.

(b)Mr Underwood also at para 47(a) of his brief of evidence identifies a further amount of $107,911.00 which he states represents funds in reality provided for Page matters and not for the Paulair or hangar

business   as   previously   detailed   to   Mr   Page’s   Christchurch accountants, Crichton Horne  & Associates  Limited.   This amount apparently  is  made  up  of  payments  on  25  February  2005  of

$45,000.00,  on  29  April  2005  of  $13,000.00  on  5  May  2005  of

$23,500.00, on 1 August 2005 of $5,411.00 and on 8 August 2005 of

$21,000.00.  There is no evidence before the Court from Crichton & Associates of any kind nor was Mr Underwood questioned in any way over these amounts in cross-examination.   This evidence of Mr Underwood   advanced   on   behalf   of   Mr   Hendra   is   therefore uncontested and the Court can reach no other conclusion but that a deduction of this $107,911.00 should also be made from Mr Hendra’s loan advances to Paulair.

(c)Next, at para 47(a) of his brief of evidence, Mr Underwood refers to a GST refund claimed and presumably paid to Mr Page in error which needs to be deducted from his loan advances to Paulair.   This GST refund  totals  $91,087.00.    Again,  this  is  not  the  subject  of  any evidence advanced on behalf of Mr Page, nor is it contested in any way by him.   Further, Mr Underwood was not questioned in cross- examination on this GST refund aspect.  Again the Court is left with no other alternative but to proceed on the basis that this $91,087.00

GST refund is a proper deduction to be made from Mr Page’s loan advances to Paulair.

(d)Also at para 47(a) of Mr Underwood’s brief of evidence, he refers to a sum of $NZ81,902.00 for “parts alleged to have been converted” by Mr Page or his interests at the conclusion of the venture ($US50,000) and the purchase of other parts by Paulair ($NZ8,373.00) also taken by Mr Page.  I have already made reference to these at [32] and [33] above.  Mr Underwood in his evidence, to his credit, acknowledges that “there is no way of knowing whether (these) claims are correct” but notwithstanding this, there is also no evidence of any kind advanced for Mr Page as to the parts he “repossessed” at the conclusion of the venture or their value.   As I have noted at [31]

above, in his evidence Mr Page did state that the parts were worth a “number” but made no reference to what that number might be. Further, Mr Underwood was not questioned or cross-examined in any way on his evidence concerning the value of these parts.  Although this particular matter is also rather unsatisfactory, in my view the Court is left with no alternative but to make a broad compensatory award to represent first, an estimate of the enhanced value of the Page-supplied parts, and secondly, the price for the purchase in New Zealand of the Paulair parts, all of which Mr Page acknowledges he obtained the benefit of when the venture terminated.   I reject the evidence of Mr Page where he claims that the parts which had been worked on by Paulair for several years had not increased in value and that he should not be required to account at least for the price of the New Zealand purchased parts.   I conclude therefore that deducted from Mr Page’s loan advance to Paulair is to be $8,373.00 being the purchase price for the New Zealand parts and the sum of $35,000.00 representing an estimated increase in value of the Page parts, repossessed at the conclusion by Mr Page or his interests.

[67]     I reach these conclusions bearing in mind that Mr Page has accepted in his evidence that he is in possession of the inventory of Paulair and the aircraft and helicopter parts that he himself “purchased” and sent to New Zealand.  In addition I am satisfied that there is a strong likelihood that considerable work had been done at Paulair towards turning these aircraft and helicopter parts into saleable assets.   I cannot accept Mr Page’s contention that he received back the helicopter and aircraft parts “with no benefit”.   In fact, it was Mr Page’s own evidence that two of the projects were ultimately finished (albeit with significant additional cash input from him)  after  Mr  Hendra  had  left  Paulair.    Mr  Page  was  then  the  owner  of  two completed helicopters that no doubt were sold presumably for a profit.  Moreover, some portion of Mr Page’s funds advanced to Paulair would have been applied to purchasing the $8,373.00 of New Zealand inventory parts, which are now in his possession.

[68]     As an aside, I note that additional items which Mr Underwood in his brief of evidence at para 47(a) purported to deduct from Mr Page’s loan advance (being

$334,311.00 for work done by Paulair for Mr Page on his aircraft/helicopters as outlined at para 23 of his brief of evidence, and $32,617.00 being what he refers to as an “inwards transfer”) must be rejected.  The first relates to what Mr Underwood quantifies as costs in the Paulair company records for “some of the work that was done for Mr Page or his associated companies”.  But the difficulty here is that the arrangement between the parties was probably not for Mr Page to be individually billed for this work.  It was to be part of the “project outline” to be established for each joint venture aircraft project and reflected in the “Base Rate” for “engineering charges to each project”.  But, as noted above, none of this ever happened and Mr Page’s loan advances simply funded Paulair’s wages, expenses and overhead costs on a global basis.  And, in addition, no further evidence is provided of these amounts and,  in  any  event,  I  would  therefore  have  very  little  ability  to  verify  and appropriately assess the items.   The “inwards transfer” amount of $32,617.00 similarly is unverified here and I take the view that it cannot satisfactorily be taken into account in my present calculations.  These two amounts are not to be deducted from Mr Page’s loan advance.

[69] That, however, leaves the deductions noted at [66] above to be made from the original $1,475,411.81 Page loan advance to Paulair:

•     $40,693.00

•     $107,911.00

•     $91,087.00

•     $43,373.00

[70]     Those amounts total $283,064.00.   When deducted from the original loan advance of $1,475,411.81 it leaves a net loan advance from Mr Page and his interests of $1,192,347.81.  What appears to be clear is that about $613,000.00 of that amount was applied to construction costs for the hangar and the balance to the Paulair aircraft engineering business generally.

[71]     The final net loan advances to Paulair at the conclusion therefore totalled

$1,360,074.57   (being   $167,726.76   advanced   by   the   Hendra   interests   plus

$1,192,347.81 advanced by the Page interests).  The pro rata share of this total of Mr Hendra and the Hendra interests is therefore 12.3% and the pro rata share of Mr Page and the Page interests is 87.7%.

[72]     One additional matter requires consideration here.  It is a claim by Mr Hendra (at para 5.8.12 of his brief of evidence) for $6,000.00 as a “conservative” estimate of the value of certain items of expensive equipment he made available for use by Paulair (listed in Document 8 of the bundle) presumably removed when the venture collapsed and kept by Mr Page once Mr Hendra left the premises.   This claim is uncontested by Mr Page in his evidence, nor was doubt cast upon it in any way in cross-examination of Mr Hendra.  I find that Mr Hendra is to be reimbursed from the Remaining Paulair Funds for this $6,000.00.

[73] From [64] above the balance Paulair fund left for distribution between Mr Hendra and Mr Page (“the Remaining Paulair Funds”) is noted at $705,273.04. From this amount is to be deducted the sum of $6,000.00 to be first reimbursed to Mr Hendra as noted at [72] above. This leaves a balance of $699,273.04. This should be divided between Mr Hendra and his interests as to 12.3% (being

$86,010.58) and Mr Page and his interests as to 87.7% (totalling $613,262.45).   I accept that there may well be some argument as to whether these allocations can be considered “fair”, or whether they may adequately reflect the parties’ overall contributions  to  the  joint  venture.    Under  the  circumstances  here  in  my  view, although that arrangement might be seen broadly speaking to favour Mr Page and his interests, given that Mr Hendra has effectively worked with little or no income for several years, Mr Page too has provided substantial capital for the project interest free.  And Mr Hendra himself in his brief of evidence at para 23 has captured the problem when he states:

“With the benefit of hindsight, I can now see that there should have been much clearer and more formal arrangements between Paulair Limited and Paul Page and his companies in respect of our business relationship. Unfortunately things were left on a loose basis which I think is something for which both Paul Page and I have to each take responsibility.”

[74]     That deals with the assets and liabilities of Paulair following repayment of its loan advance to Aviation Property.

Profit of Aviation Property

[75]     Turning now to the assets of Aviation Property which are left, I have come to the conclusion that those remaining hangar sale proceeds (when received) of about

$370,384.71 (being the $1,150,000.00 sale price less repayment of the Paulair advances   for   construction   costs   of   $779,615.29),   after   payment   of   agents’ commission and reasonable legal costs on the sale, are profit of Aviation Property. In my view, this profit must be split equally between Mr Page and Mr Hendra. Equal division of these proceeds is, of course, contrary to Mr Page’s contention that he is entitled to be reimbursed for his entire investment. It is not clear whether the parties initially intended that any profits arising from sale of the hangar should be split. The Joint Venture Agreement provided that ownership of the hangar would be shared, and that Mr Hendra would “purchase” half of the hangar with his share of profits. In effect, therefore, it seems that originally an arrangement may have been intended whereby the parties would have contributed to the cost of the hangar in equal parts.

[76]     It is clear, however, that this is not what occurred here. Aviation Property was incorporated to acquire the hangar site, to own the hangar and site lease and ultimately to sell it.  The shareholding in that company is owned by Mr Hendra and Mr Page in equal shares. All parties including Mr Page were well aware of this.  In my view, there is nothing in the evidence that would allow me to go behind these formalised arrangements between the parties to enable Mr Page to recover a greater share of his advances. And Mr Page’s insistence in his evidence on cross- examination that it was always his company Aviation Trading Company Limited that was to own the hangar in my view can only be seen as self-serving and wrong, and as I have noted earlier, it must be rejected.   The advances from Mr Page and Mr Hendra were made to Paulair, and not to Aviation Property.   Although Mr Page’s financial contributions to the hangar (through the Paulair loans) were greater than those  of  Mr  Hendra,  the  parties  clearly  agreed,  when  incorporating  Aviation Property, that the shareholding in the company would be owned equally.  Mr Page and Mr Hendra both signed the company’s incorporation documents to this effect

and later, both signed the hangar site lease in the name of Aviation Property. With the exception of Paulair’s advances to Aviation Property for construction costs, it was never intended that Paulair’s business would form part of Aviation Property. It follows that Mr Page cannot now expect to be reimbursed for his total contributions to the joint venture from the sale of the hangar.

[77]     This leaves $370,384.71 less $37,125.00 agents’ commission and the claim of $25,097.22 for legal costs on the sale (subject to the matter I note at [78] and [79] below) to be divided equally between the parties, on top of Mr Hendra’s and Mr Page’s reimbursements of about $71,937.85 and $633,335.19 respectively. I should note at  this  point  that  some further  costs  are  likely to  be deducted  from  these amounts that are as yet unquantified, namely any additional legal fees incurred on final settlement in 2012 of the sale and, pursuant to cl 5 of the Deed of Arrangement between the parties, the costs of the present proceeding.

[78]     One final matter needs to be addressed.  This relates to a tax invoice for legal expenses on the sale of the hangar totalling $25,097.22 which have been claimed by Fitzherbert Rowe, Solicitors, Palmerston North.   As I understand the position, Fitzherbert Rowe acted on the sale of the hangar presumably for Aviation Property. These legal expenses are disputed by Mr Page and his interests who claim first, that Fitzherbert Rowe were not instructed by him and secondly, that in any event the invoice is excessive.  As I understand the position, Mr Hendra takes a different view and contends that these legal expenses are appropriate and properly payable.   The parties to the matters presently before this Court (Mr Page and Mr Hendra) have requested that I make a ruling regarding this claim for legal expenses by Fitzherbert Rowe.  Whilst I am happy to do so, before completing this, obviously I need to hear submissions from all affected parties, including Fitzherbert Rowe.  At the hearing of this matter little was advanced to me by way of submissions on these expenses on behalf of Mr Page or Mr Hendra.  In addition, I did not hear from Fitzherbert Rowe.

[79]     That said, obviously I am in no position to make a ruling now regarding these legal expenses.  Therefore, I make the following directions:

(a)The amount for these claimed legal expenses of $25,097.22 is to continue to be retained in the solicitor’s trust account in question until the issue is fully resolved.

(b)In the meantime Fitzherbert Rowe are to have a period of fifteen (15) working days from the date of this judgment to file and serve in this Court any Memorandum of Submissions they may wish regarding the

$25,097.22 invoice and the matters to which it relates.

(c)Mr Hendra and his interests are then to have a period of 10 working days from that date to file and serve any Memorandum they may wish regarding this costs question.

(d)Mr Page and his interests are then to have a period of a further 10 working days from that date to file and serve any Memorandum they may wish regarding this costs issue.

(e)      Fitzherbert Rowe are then to have a further period of 5 working days from that date to file and serve any Memorandum they may wish which is strictly in reply.

(f)Those Memoranda are then to be referred to me and, in the absence of any party indicating they wish to be heard on the matter, I will decide the issue concerning those claimed legal expenses at that point.

Conclusion

Paulair

[80] It follows from my assessment that, once Paulair’s outside creditors and the liquidation costs are paid and Mr Hendra receives the reimbursement of $6,000.00 noted at [72] above, Mr Page and Mr Hendra will split the remaining reimbursement for construction costs advanced by Paulair in shares of 12.3 per cent and 87.7 per cent respectively. On my broad calculations noted above, Mr Page and his interests

would receive ultimately $613,262.45 and Mr Hendra and his interests would receive ultimately $86,010.58 (plus the $6,000.00 reimbursement), a total of $92,010.58.

Aviation Property

[81]     Profit of Aviation Property would then ultimately be shared equally between the parties (and I estimate this above at a gross amount totalling $370,384.71) after the claimed costs of the sale and of this proceeding have been deducted.

[82]     I use the word “ultimately” in [80] and [81] above because at this point the only fund from the hangar sale available for distribution, for payment to creditors and the liquidator and for payment of costs is the deposit of $200,000.00.   The balance sale proceeds of $950,000.00 are not due for payment until August 2012.

Orders

Paulair Distribution Entitlements

[83]     Orders are now made as to entitlement to the Paulair funds as follows:

(a)From the funds presently held notionally for Aviation Property in the trust account of the solicitors in question (but excluding interest earned) together with the $950,000.00 balance hangar sale proceeds to be paid on 31 August 2012, the total sum of $779,615.29 (as outlined at [61] above) is to be repaid and transferred to the benefit of Paulair presumably by payment/s to Paulair and/or initially the liquidator.

(b)From the $779,615.29 Paulair funds, the following payments are ultimately to be made:

(i)        The liquidator’s fees and costs as set out in Mr McKenzie’s 27

April 2010 letter amounting to $24,399.00.

(ii)       Outside creditors’ claims for Paulair totalling $49,943.25.

(iii)      Any final costs  and disbursements properly payable to Mr

McKenzie as liquidator of Paulair.

(iv)A reimbursement payment to Mr Hendra or his interests as he directs of the sum of $6,000.00 noted at [72] above.

(v)       As to the balance, this is to be paid on a pro-rata basis as to

87.7% to Mr Page and/or his interests as he may direct and as to 12.3% to Mr Hendra and/or his interests as he may direct. (Subject to adjustments outlined above, that balance noted at [73] is estimated ultimately at $699,273.04 which would be finally distributed on this pro-rata basis as to $613,262.46 to Mr Page and his interests and $86,010.58 to Mr Hendra and his interests.)

Aviation Property Distribution Entitlements

[84]     As to the remaining monies to be held by Aviation Property as its funds, orders are now made as to entitlement as follows:

(a)These funds which total approximately $370,384.71 as outlined at [75] above, (together with all interest first, earned on the amount retained by the solicitors in question and secondly, to be paid under the hangar sale agreement), are to be treated as the overall gross profit on Aviation Property’s sale of the hangar and are to be applied as follows:

(i)If this has not already occurred, the sum of $37,125.00 is to be paid to the land agents in question as their commission on sale of the hangar.

(ii)As to $25,097.22 representing the disputed legal costs claimed to date by Fitzherbert Rowe for the sale of the hangar, this amount is to continue to be retained in the trust account of the

solicitors in question, until the issue of these costs is resolved as outlined at [78] and [79] above and an order of this Court for disbursement of these funds is made.

(iii)Although this should not amount to a significant sum, a reasonable estimate is to be made of the future legal costs which are likely to be incurred on ultimate settlement in 2012 of the sale of the hangar, and this amount is also to be retained in the trust account of the solicitors in question to meet these fees when due.

(iv)The costs of the present proceeding, as set out at cl 5 of the parties’ Deed of Arrangement and noted at [77] above are to be paid. (This will mean that these costs, deducted from Aviation Property Funds, are effectively shared equally by Mr Page and Mr Hendra which I regard as appropriate here.)

(v)The balance remaining, together with all interest earned, is to be divided into two equal parts and:

(a)       As to one such part, this is to be paid to Mr Hendra and/or his interests as he may direct; and

(b)As to the other such part, this is to be paid to Mr Page and/or his interests as he may direct.  Those payments of course will not be made until final settlement of the sale of the hangar in August 2012.

At this point a broad estimate as to the amount of the one half shares in the balance Aviation Property profit to be paid in

2012 would amount to $154,081.24 each (subject to payment of the costs of this proceeding noted at [84](iv) above and the estimate of additional legal costs for final settlement in 2012).

[85]     The general entitlement of all parties to the total Paulair funds and Aviation Property funds  is  set  out  in  the  orders  made  at  [83]  and  [84]  above.    For  the avoidance of any doubt, however, I set out the payments and part-payments (and their general priority) to be made now from the $200,000.00 deposit paid on the hangar sale, part of which remains held in the solicitors’ trust account in question:

(a)       From Aviation Property funds, Real

Estate Agent’s commission (probably

already deducted)  $37,125.00 (b)   From Paulair’s funds, liquidator’s costs  $24,399.00

(c)       From Paulair’s funds, any liquidator’s

final costs and disbursements  Unknown

(d)       From Paulair’s funds, outside Paulair

creditors claims  $49,943.35

(e)From Aviation Property funds, retention in solicitors trust account for

Fitzherbert Rowe’s costs on sale

($25,097.22) and for final 2012 hangar  $25,097.22 sale settlement costs estimate  and unknown

(f)       From Aviation Property funds, the

Costs of the present proceeding as set

Out at [84](iv) above.  Unknown

(g)       From Paulair’s funds, reimbursement Hendra

interests as set out at [72] above, $ 6,000.00

Costs

(h)       From Paulair’s funds,

any balance - 87.7% to Mr Page and/or his interests

- 12.3% to Mr Hendra and/or his interests

[86] Costs on this proceeding are dealt with at [84](iv) above. They are to be shared equally between the parties and paid as outlined at [85](f) above.

[87]     Leave is reserved for any party on 48 hours notice to approach the Court for further directions if any calculations or other matters in this judgment may require further clarification.

‘Associate Judge D.I. Gendall’