PMT (2010) Limited (in liquidation) v Mark
[2023] NZHC 584
•22 March 2023
IN THE HIGH COURT OF NEW ZEALAND BLENHEIM REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WAIHARAKEKE ROHE
CIV-2018-406-010
[2023] NZHC 584
BETWEEN IAIN NELLIES as liquidator Plaintiff AND
PETER MARK and JEANETTE MARK
Defendants
CIV-2021-406-013 BETWEEN
PMT 2010 LIMITED (in liquidation) First Plaintiff
IAIN NELLIES
Second Plaintiff
AND
PETER MARK and JEANETTE MARK
First Defendants
WISHEART MACNAB & PARTNERS TRUSTEE COMPANY LIMITED and
DAVID JOHN PAUL in their capacities as the trustees of the Mark Family Trust Second Defendants
Hearing: 15 March 2023 Appearances:
D P MacKenzie for Plaintiffs in both proceedings P Morten for Defendants in both proceedings
Judgment:
22 March 2023
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
NELLIES v MARK [2023] NZHC 584 [22 March 2023]
Introduction and background
[1] These two proceedings (the “2018 proceeding” and the “2021 proceeding”) are closely related and are to be heard together. Accordingly, in this judgment, references to “the plaintiffs” and “the defendants” apply to the parties in both proceedings.
[2] The proceedings involve a claim by the plaintiffs, PMT 2010 Ltd (in liquidation) (PMT) and the company’s liquidator, Mr Iain Nellies, against the defendants, Mr Peter and Mrs Jeanette Mark, who are the company’s directors, and the trustees of Mr and Mrs Mark’s family trust, for over $2,750,000.
[3] Four causes of action are pleaded. In the end, though, all are directed at clawing back monies to which the plaintiffs say they are entitled but that the defendants have received and refused to disgorge.
[4] PMT was placed in liquidation at the suit of judgment creditors (who have still not been paid) in March 2015. The first proceeding was commenced in March 2018. It is no exaggeration to say that the company’s affairs have taken an inordinately long time to be resolved.
[5] Before the Court for determination are two interlocutory applications and a case management issue:
(a)The first application is by the plaintiffs for leave to file and serve an amended statement of claim. This is not opposed. It can be dealt with very briefly.
(b)The second application is by the defendants for further discovery pursuant to r 8.19 of the High Court Rules 2016.
(c)The determination of those issues will, as counsel say, inform the next steps in the proceedings, in relation to which counsel are seeking different directions.
[6]I will deal with those matters in the order I have summarised them.
Proposed amended pleading
[7] However awkward it may be for a defendant to face amended pleadings, and however much the defendant may feel that they are having to deal with shifting goal posts, in the absence of a direction from the Court, or the passing of a close of pleadings date, and subject to the Court’s overarching discretion in relation to costs if a party is amending pleadings excessively, there is no bar to a plaintiff (or other party) amending their pleadings.1
[8] Of course, if a plaintiff amends the claim in a way that the defendant regards as objectionable, the defendant is entitled to challenge the amendment, and if a plaintiff pleads a new cause of action after the expiry of a limitation period, it is always open to the defendant to plead that the cause of action is time-barred, even if the proceedings were originally commenced within the limitation period.
[9] In this case, I can see no basis upon which it would be appropriate for the Court to step in to bar the plaintiffs from exercising their right to amend their pleading.
[10]To the extent that they need it, they will have leave to do so.
Discovery
[11] The defendants seek an order requiring the plaintiffs to provide further discovery of:
(a)documents in the plaintiffs’ control (including electronic documents) relating to the company’s and the liquidator’s costs in the proceedings;
(b)documents in their control relating to the company’s and the liquidator’s non-litigation legal costs in the proceedings; and
(c)documents in their control relating to the company’s and the liquidator’s litigation costs in the proceeding.
1 High Court Rules 2016, r 7.77(1).
[12] The existing discovery orders against the parties were made by consent. The order was made on 2 December 2022. It directed the plaintiffs to discover documentation relating to costs and expenses.
[13] The plaintiffs have discovered a schedule of the invoices rendered by their solicitors (the provenance of which no one appears to be sure of) and copies of the invoices themselves. The defendants say that is not good enough. They want the source documentation described in their application.
[14] Mr Morten’s argument for the defendants on this point was not especially complicated.
[15] He began by pointing out that the plaintiffs rely on s 301 of the Companies Act 1993 in relation to at least one aspect of their claim, and that that provision confers on the Court jurisdiction to order a director to contribute such sums to the assets of the company by way of compensation as the Court thinks just, having regard to the director’s conduct. As he submitted, the plaintiffs are seeking costs and a contribution by way of compensation to the assets of the company pursuant to s 301 in a sum which would enable the liquidator to pay the costs and expenses of the liquidation. Mr Morton also submitted there was a second aspect of the case in relation to which the material sought may be relevant, that is to say the defendants’ affirmative defences that the claim is, or elements of it are, time-barred. In relation to both of these aspects, any documentation that may shed light on when costs were incurred, and what they were incurred for, is clearly relevant.
[16] In advancing the argument, Mr Morten addressed the four-step enquiry for applications for particular discovery outlined in the leading case, Assa Abloy New 584Zealand Ltd v Allegion (New Zealand) Ltd, summarised as follows:2
(a)Are the documents sought relevant, and if so how important will they be?
2 Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760 at [14], summarised in Lighter Quay Residents’ Society Inc v Waterfront Properties (2009) Ltd [2017] NZHC 818 at [16(d)].
(b)What are the grounds, and what is the probative value of those grounds, for the belief that the documents sought exist?
(c)Is discovery proportionate?
(d)Weighing and balancing these matters, is an order appropriate?
[17] Mr Morten submitted it was self-evident, and effectively common ground, that documentation in the categories sought exists. He contended that, having regard to the nature of the claim, the documentation was both relevant and important. As to proportionality, Mr Morten submitted that discovering the documentation would not impose a disproportionate burden on the plaintiffs in view of the relatively limited scope of material sought and its obvious relevance and importance. In any event, he submitted, the plaintiffs had not pointed, in their affidavit evidence, or in the course of argument, to any particular disproportionality. Coming to the final step, which involves striking a balance between the interests of the parties having regard to all relevant circumstances, Mr Morten invited the Court to conclude that it was in the interests of justice that the orders sought be granted.
[18] Mr MacKenzie, for the plaintiffs, submitted that the categories of documentation being sought by the defendants were, or would ultimately turn out to be, irrelevant on two bases:
(a)First, he contended that the plaintiffs’ claim was essentially for the return of monies which it is said were clearly the property of the company or the liquidator but which have been wrongfully extracted and are held by one or other of the defendants. He contended that any issues relating to the costs incurred in the course of the liquidation or in the conduct of this litigation were irrelevant to that issue (though they may become relevant at the point that the liquidators seek the Court’s approval of their costs);
(b)Second, Mr MacKenzie submitted that the defendants’ reliance on the pleaded affirmative defences that the plaintiffs’ claim is, or components
of it are, time-barred, does not assist because the limitation defences cannot succeed. This, he submitted, was because they had already been determined by Grice J in an earlier interlocutory judgment in these proceedings dated 11 February 2022 and accordingly the principle of res judicata (or issue estoppel) applied.3
[19]In my assessment, neither of those submissions withstands scrutiny.
[20]As to the first, s 301 of the Companies Act provides:
301 Power of court to require persons to repay money or return property
(1)If, in the course of the liquidation of a company, it appears to the court that a person who has taken part in the formation or promotion of the company, or a past or present director, manager, administrator, liquidator, or receiver of the company, has misapplied, or retained, or become liable or accountable for, money or property of the company, or been guilty of negligence, default, or breach of duty or trust in relation to the company, the court may, on the application of the liquidator or a creditor or shareholder,—
(a)inquire into the conduct of the promoter, director, manager, administrator, liquidator, or receiver; and
(b)order that person—
(i)to repay or restore the money or property or any part of it with interest at a rate the court thinks just; or
(ii)to contribute such sum to the assets of the company by way of compensation as the court thinks just; or
(c)where the application is made by a creditor, order that person to pay or transfer the money or property or any part of it with interest at a rate the court thinks just to the creditor.
(2)This section has effect even though the conduct may constitute an offence.
(3)An order for payment of money under this section is deemed to be a final judgment within the meaning of section 17(1)(a) of the Insolvency Act 2006.
(4)In making an order under subsection (1) against a past or present director, the court must, where relevant, take into account any action that person took for the appointment of an administrator to the company under Part 15A.
3 PMT 2010 Ltd (in liquidation) v Mark [2022] NZHC 169.
[21] If the plaintiffs were to succeed in their claims pursuant to that provision, it would be necessary for the Court to consider the amount of any order for recovery. The costs incurred by the liquidator in the course of the liquidation, and in relation to the litigation, would be a relevant consideration in this exercise.
[22] Turning to the contention founded on res judicata, in my assessment Grice J’s judgment could not possibly operate so as to preclude the defendants from relying on their defences under the Limitation Act 2010.
[23] For a start, there is a difficulty with the judgment to the extent that it is dealing with an apparent application by the plaintiffs for leave to file an amended statement of claim in this proceeding when in my view they did not need such leave.
[24]Rule 7.77 of the High Court Rules 2016 provides as follows:
7.77 Filing of amended pleading
(1)A party may before trial file an amended pleading and serve a copy of it on the other party or parties.
(2)An amended pleading may introduce, as an alternative or otherwise,—
(a)relief in respect of a fresh cause of action, which is not statute barred; or
(b)a fresh ground of defence.
(3)An amended pleading may introduce a fresh cause of action whether or not that cause of action has arisen since the filing of the statement of claim.
(4)If a cause of action has arisen since the filing of the statement of claim, it may be added only by leave of the court. If leave is granted, the amended pleading must be treated, for the purposes of the law of limitation defences, as having been filed on the date of the filing of the application for leave to introduce that cause of action.
(5)Subclause (4) overrides subclause (1).
(6)If an amended pleading introduces a fresh cause of action, the other party must file and serve that party’s defence to it within 10 working days after the day on which the amended pleading is actually served on the other party.
(7)When an amended pleading does not introduce a fresh cause of action, the other party may, within 5 working days after the day on which the
amended pleading is served on that other party, file and serve an amended defence to it.
(8)If an amended pleading has been filed under this rule, the party filing the amended pleading must bear all the costs of and occasioned by the original pleading and any application for amendment, unless the court otherwise orders.
(9)This rule does not limit the powers conferred on the court by rule 1.9.
(10)This rule is subject to rule 7.7 (which prohibits steps after the close of pleadings date without leave).
[25] I do not understand how, in terms of r 7.77(4), it could have been said in this case that any of the causes of action pleaded by the plaintiffs in their then-proposed amended statement of claim which they sought leave to file arose after the proceeding was commenced. As already said, the 2018 proceeding was commenced in March 2018 and the 2021 proceeding was commenced in April 2021. None of the causes of action that the plaintiffs sought to introduce in their amended statement of claim arose after the first of those dates, let alone the second.
[26] As far as I am able to discern from Grice J’s judgment, the parties, and therefore the judge, proceeded on the basis that the plaintiff needed leave. I am not at all sure that that is correct.
[27] It is hard to see how a decision which appears to have proceeded on the basis of a false premise can be treated as a final decision of the Court disposing of an issue and therefore capable of giving rise to res judicata.
[28]Second, in any event, in her judgment Grice J said:
[30] The parties have filed affidavits. Whether the liquidator knew or whether he ought reasonably to have gained knowledge of the disposition by PMT of the benefit of the vendor finance loan is a central issue for the determination on the late knowledge extension to the limitation period.
[31] It is not for the Court in this application to resolve disputed issues of fact. I rely on the assertions and allegations of the liquidator as to his inquiries and knowledge at this stage. Of course at trial with the benefit of cross-examination and the full evidence the Judge may reach a different conclusion.
[29] That is anything but a purported final determination of the type required for res judicata to apply. It is absolutely correct, as Mr MacKenzie submitted, that later in the judgment, the judge’s language suggested a more absolute conclusion. However, the two paragraphs quoted above appear to me correctly to reflect the position and qualify everything that then follows.
[30] For those reasons, I do not accept the submission the pleaded affirmative limitation defences cannot succeed. Ultimately the question of whether those defences have any legs will be a matter for the trial judge. All I need to say at this stage is that the contention cannot prevent the defendants gaining access to potentially relevant material.
Directions
[31] As already indicated, counsel take different views as to whether these proceedings are ready to be set down.
[32] It is true that there are interlocutory steps (partly as a result of this judgment) which need to be dealt with, and it is, as Mr Morten contends, conceivable that there might be further such steps.
[33] However, counsel tell me that the matter is likely to require a fixture of between five and seven days. The litigation has already been ongoing for some considerable time, and the plaintiffs — and for that matter the defendants — are entitled to expect the Court to assist in getting it resolved. Having regard to the state of the lists, it seems most unlikely that a seven-day fixture will be available for some time. In those circumstances, there is a considerable amount to be said for getting the matter in the queue. In my view, that can be done without any potential prejudice to either party.
[34]Against that background, I make the following orders or directions:
(a)the plaintiffs are to file and serve their amended statement of defence by 29 March 2023;
(b)the plaintiffs are to provide further discovery in the terms sought by the defendant by 5 April 2023;
(c)the defendants are to file and serve any defence to the amended statement of claim by 19 April 2023;
(d)any further interlocutory application arising out of an amendment by the plaintiffs of their statement of claim or the provision by them of further discovery are to be filed by 26 April 2023. In the event of any further interlocutory application being filed, it is to be prioritised and dealt with as soon as possible;
(e)the Registrar is to liaise with counsel with a view to setting this matter down for trial as soon as conveniently as possible, consistent with the terms of these directions. Seven working days are to be allowed;
(f)the close of pleadings date is to be 60 working days prior to trial;
(g)the plaintiffs are to serve their briefs of evidence together with a draft index for a trial bundle 50 working days prior to trial;
(h)the defendants are to serve their briefs of evidence and any proposed additions or alterations to the index for the trial bundle 25 working days prior to trial;
(i)the plaintiffs are to file the trial bundle, which is to comply with the Senior Courts Civil Electronic Document Protocol 2019, 15 working days prior to trial;
(j)the Registrar is to allocate a pre-trial teleconference before the trial judge in the three-week period leading up to trial; and
(k)the plaintiffs are to file and serve their opening submissions and chronology of events three working days prior to trial.
[35] I reserve leave to either party to apply further in relation to the pre-trial directions should that be necessary.
[36] Costs are reserved. I am confident counsel will be able to resolve these. If however they are not able to do so, they may file and serve memoranda in the usual way.
Associate Judge Johnston
Solicitors:
Clark Boyce, Christchurch for plaintiffs
Wisheart Macnab & Partners, Blenheim for defendants
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