Premier Events Group Limited v Beattie HC Auckland CIV 2010-404-003178
[2011] NZHC 896
•16 August 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2010-404-003178
BETWEEN PREMIER EVENTS GROUP LIMITED Plaintiff
ANDMALCOLM JAMES BEATTIE First Defendant
ANDANTHONY JOSEPH REGAN Second Defendant
ANDCT NZ LIMITED (PREVIOUSLY KNOWN AS CARTAN GLOBAL LIMITED)
Third Defendant
ANDPARNELL PARTNERS GROUP LIMITED Fourth Defendant
ANDSPORTS HOSPITALITY MANAGEMENT LIMITED
Fifth Defendant
ANDPARNELL PARTNERS GROUP (NZ) LIMITED
Sixth Defendant
ANDCARTAN GLOBAL LLP Seventh Defendant
ANDCARTAN TOURS INC Eighth Defendant
ANDSPORTSMARK MANAGEMENT GROUP LIMITED
Ninth Defendant
CIV 2011-404-000474
AND BETWEEN ANTHONY JOSEPH REGAN First Plaintiff
AND ANTHONY JOSEPH REGAN
JENNIFER ANNE REGAN AS TRUSTEES OF THE PICCADILLY TRUST
Second Plaintiffs
PREMIER EVENTS GROUP LIMITED V M J BEATTIE & ORS HC AK CIV 2010-404-003178 16 August
2011
ANDROBERT GILL First Defendant
ANDPREMIER EVENTS GROUP LIMITED Second Defendant
ANDBA PARTNERS LIMITED Third Defendant
ANDDIGITAL PARTNERS LIMITED Fourth Defendant
ANDCPG YORK LIMITED Fifth Defendant
ANDBRAND ADVANTAGE MEASUREMENT AND CONSULTING LIMITED
Sixth Defendant
ANDDIGITAL PARTNERS (NZ) LIMITED Seventh Defendant
Hearing: 30-31 May, 14 July 2011
Counsel: Z Kennedy and M Pascariu for the Plaintiff in the First Proceeding
J Eichelbaum and N N Geiger for the First to Ninth Defendants in the
First Proceeding
J Eichelbaum and N N Geiger for the Plaintiffs in the Second
ProceedingZ Kennedy and M Pascariu for the First to Seventh Defendants in the Second Proceeding (other than those defendants who are in receivership)
Judgment: 16 August 2011 at 4:30 PM
RESERVED JUDGMENT OF WYLIE J
This judgment was delivered by Justice Wylie on 16 August 2011 at 4.30 pm
Pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Introduction
[1] I refer to my reserved judgment dated 24 June 2011. As is there noted, various outstanding interlocutory applications in these proceedings were heard on 30 and 31 May 2011. It was not possible to deal with all of the outstanding applications on those days because both parties belatedly filed documents without providing for an opportunity for consideration or response. Accordingly, I put in place a firm timetable to bring matters to a head and directed that the hearing would resume on
14 July 2011.
[2] I detailed the pleadings in my earlier judgment – [3] to [26]. It is not necessary to repeat that summary. I record that the defendants have now filed a statement of defence in proceedings CIV 2011-404-000474. That statement of defence was filed within the deadline specified by me.
A)Suppression of the names and identifying details of third party clients of the parties – CIV 2010-404-003178 and CIV 2011-404-000474
[3] At the close of the hearing on 30/31 May 2011, Mr Eichelbaum sought an order suppressing the names and any identifying details of the third party clients of the parties. I made an interim suppression order and indicated that this would be reviewed on 14 July 2011. I referred to this in my minute (2) of 31 May 2011.
[4] In the event, on 14 July 2011, Mr Eichelbaum withdrew the application. Accordingly I discharged the interim suppression order.
B) Use of documents for collateral purposes – CIV 2010-404-003178
[5] The plaintiff in proceedings CIV 2010-404-003178, Premier Events Group Limited (“PEG”) wishes to use various documents obtained by it in the course of the proceedings for collateral purposes. Initially it identified the documents sought by reference to various categories of documents. Mr Eichelbaum for the defendants objected and I indicated to Mr Kennedy that I also considered that the plaintiff’s
application was too open-ended. In response, Mr Kennedy produced a list of specific documents the plaintiff wishes to use for purposes other than the proper conduct of the present proceedings. Those documents are as follows:
Document description
Date
1
Invoices from PEG to Australia Post
August-November
2009
2
Email correspondence between Australia
Post and Mr Regan
16 February 2010
3
Email from Mr Beattie to Louise Erceg
(The Langham)21 February 2010
4
Email dated 23 February from Mr Beattie to Australia Post
23 February 2010
5
Email from Mr Beattie to Toyota
4 March 2010
6
Email from Mr Beattie to John Fowke
(Toyota)7 April 2010
7
Email from Mr Regan to Steve Skubic
(Sportsmark)
8 April 2010
8
Addendum to Hospitality Service Contract between Cartan Global Limited and Australia Post
14 April 2010
9
Email from Mr Regan to Australia Post
15 April 2010
10
Letter from Terry Hearity (Australia Post)
to Mr Beattie
16 April 2010
11
Hospitality Package and Services Agreement between PEG and Australia Post (Australia Post Agreement)
6 May 2010
12
Email from Mr Beattie to Louise Erceg
12 June 2010
13
Email from Louise Erceg to Mr Regan attaching amended Toyota Deposit invoice
12 August 2010
14
Email from Louise Erceg to Mr Beattie attaching invoices and cost breakdown
8 September 2010
15
Email from Louise Erceg to Mr Regan confirming receipt of funds
28 October 2010
16
Email correspondence between Louise Erceg, Mr Regan and Mr Beattie attaching remittance advice for remaining payment on Toyota RWC rooms
22 December 2010
[6] Mr Eichelbaum initially opposed any of the documents being used other than for the purpose of these proceedings. However, in the course of argument in relation to interim orders sought by Mr Eichelbaum’s clients, (see D below) it became apparent that the reason PEG wants to use the documents numbered 3, 12, 13, 14, 15 and 16, is to advance a claim it says it has against the Langham Hotel. It is in the interests of Mr Eichelbaum’s clients, and in particular Mr Regan, that any dispute between PEG and the Langham is resolved. Mr Eichelbaum therefore consented to PEG being able to use the documents numbered 3 and 12 to 16 (inclusive) in the above list for the collateral purpose of advancing its dispute with the Langham Hotel. Accordingly, I do not need to consider PEG’s application in respect of those documents, and, by consent, order that PEG can use those documents to advance its dispute with the Langham Hotel.
[7] Application for the remaining documents is necessary because at common law there is an implied undertaking to the Court not to use documents discovered by a deponent in litigation for any purpose other than the proper conduct of the litigation in the course of which they are discovered.1
[8] Here, I suspect that the implied undertaking has lapsed in respect of all or most of the listed documents. That is because they have been referred to in open Court in the course of hearing the various interlocutory applications filed by the parties. There was no request for confidentiality orders in respect of them. This point was not however expressly argued before me. Rather, Mr Kennedy sought an express release from the implied undertaking. For the avoidance of doubt, I go on to
consider that request.
1 Crest Homes Plc v Marks [1987] AC 829 (HL) at 853; Wilson v White [2005] 3 NZLR 619.
[9] It was common ground that the Court can release the recipients of discovered material from the implied undertaking in appropriate circumstances.2 Release can be appropriate where there are “special circumstances”, for example, where the release or modification for the implied undertaking will not occasion injustice to the person giving discovery.
[10] Here, PEG seeks leave to use the documents to pursue claims against some of its former clients, namely Toyota, Australia Post, and the Langham Hotel.
[11] I agree with Mr Eichelbaum that it is necessary for the Court to consider each document subject to PEG’s application individually and I have done so. I am satisfied that a release from the implied undertaking in respect of the documents subject to the application is appropriate and that release will not occasion injustice to the defendants. The documents were obtained by PEG either consequent on the execution of search orders or on discovery. Some of the documents, for example the invoices listed at 1 above, originated from PEG. Others were sent by Mr Regan or Mr Beattie when they were still employed by PEG. Prima facie those documents belong to PEG, and there can be no prejudice to the defendants in allowing PEG to use those documents for collateral purposes. Other documents disclose the circumstances in which existing PEG contracts were cancelled by third party entities and new contracts were put in place with entities associated with Messrs Regan and Beattie. If impropriety can be asserted, it is impropriety which involves the parties to these proceedings and it is impropriety which will clearly be in issue in the substantive proceedings. I cannot see that there is any injustice to the defendants if their own documents are put in issue in collateral proceedings as well as in these proceedings. PEG could have claims against its former clients, or indeed be subject to claims by them (in particular Toyota). In the circumstances it seems to me appropriate that PEG should be permitted to use the documents to pursue its former clients if it wishes to do so, or to resist claims made by them.
[12] Accordingly, I direct that PEG is released from the implied undertaking not to use the listed documents obtained on the execution of search orders, or on discovery,
for collateral purposes. It may use the documents detailed in the list above for the
2 Crest Homes Plc at 854; Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38
FCR 217; Wilson v White at [47].
purpose of commencing proceedings against its former clients, and/or for the purpose of resisting claims made by them.
C) Particular discovery – CIV 2010-404-003178
[13] PEG seeks an order for particular discovery under r 8.24 of the High Court Rules. It believes that the defendants have not discovered documents that should have been discovered.
Background
[14] Discovery in this matter has proved difficult.
[15] On 23 November 2010, I made various orders by consent. Inter alia, I made orders as follows:
a)directing the defendants disclose, in the manner provided for in paragraph (b) below, particulars of all contractual and proposed arrangements or obligations with the defendants and their associated entities and interests with the parties, being:
(i) Toyota New Zealand;
(ii) National Australia Bank; (iii) Australia Post;
(iv) Deutsche Bank; (v) Qantas Australia; (vi) BHP Billiton; (vii) Linklaters;
(viii) Telstra;
(ix) Cartan Tours Inc;
(x) Great Eagle Hotels (Auckland) Limited;
(xi) The New Zealand Olympic Committee; and
(xii) any entities related to the above
in respect of the Rugby World Cup 2011 programme and the London Olympics 2012 programme and their financial dealings with these parties including:
(i) the document(s) recording or evidencing the contractual arrangements or obligations;
(ii) the nature and extent of the income, revenue or other benefits to the defendants and their associated entities and interests arising out of those arrangements or obligations, whether the same be held in the names of the defendants or their associated entities or interests, separately or jointly with any other party or by any nominee or trustee or otherwise howsoever on their behalf;
(iii) identifying all bank or other accounts, whether held in the names of the defendants or their associated entities or interests, separately or jointly with any other party or by any nominee or trustee or otherwise howsoever on their behalf and the amounts standing to the credit in such accounts (the “bank accounts”);
(iv) copies of bank statements for the bank accounts from 21 January 2010 to the date of disclosure;
(v) copies of all correspondence between the defendants and their interests and the parties identified above from 28 May 2010; and
(vi) email messages from email accounts and any other documents to be specified by the plaintiff as from
1 January 2010.
(b) That continuing disclosure of the documents and information referred to in paragraph (a) be provided by affidavits sworn by the first defendant and/or the second defendant which shall be filed in this Court and served on the plaintiff’s solicitors within the next 15 days and every two months thereafter until the trial of this matter.
[16] Although they were late in doing so, pursuant to this order the defendants filed a number of affidavits of documents in December 2010 and in February 2011. PEG was not satisfied and on 8 March 2011 it sought orders for particular discovery. The documents which PEG alleged were missing were particularised in a schedule attached to that application. The defendants filed a notice of opposition to that application on 29 March 2011. On the same day Mr Regan filed a further affidavit discovering additional documentation and also asserting that many of the documents PEG asserted were missing had in fact already been discovered. He annexed a
schedule to his affidavit dealing individually with the documents listed in PEG’s
schedule.
[17] PEG continued to maintain that there were missing documents which should have been discovered. When the matter came before the Court on 30/31 May 2011, it produced an amended schedule detailing documents it said had still not been discovered.
[18] In response, Mr Regan filed a further affidavit on 24 June 2011. That affidavit purported to list documents from his own computer which were under his control. The list of documents is unusual. It appears to comprise a printout of the inbox on Mr Regan’s computer, showing who documents were received from, who documents were sent to, what the emails were about, the date they were received, and the size of the document in kilobytes. The documents are not enumerated. There appears to have been no attempt to weed out the relevant from the irrelevant. A number of the documents appear simply to be pro forma emails which are circulated to multiple addresses. By way of example, there is an email listed from the Vodafone Warriors, concerning “Vodafone Warriors E-news”. There are other emails listed from Hotels.com New Zealand relating to “48-hour sales” and offering savings, and from ASB Bank relating to morning briefs on securities.
Submissions
[19] Mr Kennedy for PEG submitted first that Mr Regan’s affidavit dated 24 June
2011 fails to comply with the High Court Rules. He noted that it lists some 4,300 documents, but that it makes no attempt to distinguish the relevant from the irrelevant. Mr Kennedy submitted that much of it is simply the “flotsam” which one would expect to see in a computer inbox. He noted that the documents have not been enumerated, and it is all but impossible for the plaintiff to try and make sense of the same. He sought that Mr Regan file a further affidavit listing relevant documents, and which complies with the High Court Rules. Secondly, he pursued the plaintiff’s application for particular discovery. He referred to an affidavit filed by Mr Gill dated 23 June 2011 where Mr Gill set out why he considers that the defendants’ discovery is deficient in certain areas. Mr Gill acknowledged that the defendants have provided copies of some of the documents in issue, but asserted that
a number remain outstanding. He referred by way of example to three documents which have been discovered. Those documents were all emails. Each recorded that it had attachments, but Mr Gill deposed that none of the attachments had been made available. Mr Gill also submitted that the defendants have not discovered all financial records relating to the Rugby World Cup and London Olympic programmes, and that bank account statements and other relevant financial information have not been provided. He deposed that such financial records are plainly within the possession or control of the defendants, and noted that some of the defendants are making payments for hotel accommodation in respect of the London Olympics 2012 programme, and that others are parties to agreements or draft agreements which record bank account details and provide for payments to be made to those accounts. He expressed concern that the defendants are persistently refusing to discover all relevant financial information.
[20] I note that no affidavit has been filed in response denying Mr Gill’s
assertions.
[21] Mr Eichelbaum responded by asserting that it was simply too onerous for
Mr Regan to be asked to go through all of the documents listed in his affidavit of
24 June 2011 and advise which documents are relevant. He submitted that it was appropriate for the defendants to provide a full list of all documents to the plaintiff, and to make them all available in electronic form so that the plaintiff could then undertake the requisite checking and determine their relevance using “word search” tools. In relation to Mr Gill’s affidavit, he submitted that all of the documents sought by Mr Gill have in fact already been discovered. He accepted that Mr Regan should provide details explaining where the documents have been discovered. He also confirmed that the defendants were happy to provide up to date financial information. He did however query whether or not the defendants should be required to provide the invoices sought by Mr Gill at this stage.
Analysis
[22] It is clear that the defendants are in breach of the consent orders made by me in November 2010. Their affidavits of documents were provided late. They have
not provided ongoing discovery. Moreover, it appears from Mr Gill’s unchallenged
affidavit that there are deficiencies in the discovery which has been provided.
[23] I deal first with Mr Regan’s affidavit of 24 June 2011. It does not comply with the High Court Rules. Under r 8.20, any affidavit of documents must identify or list documents required to be discovered in a schedule that complies with r 8.21. Rule 8.21 requires that a schedule be annexed to an affidavit identifying or listing all discoverable documents. Discoverable documents are documents which are relevant to a matter in issue in the proceedings, and not simply documents in a party’s possession. There was clearly in my view, an obligation on Mr Regan as the discovering party to exclude the irrelevant and only to identify or list the relevant. If a party impedes the process of discovery and inspection by including documents in an affidavit that are not required to be included, a Judge may order the party to pay
costs.3 Further, documents in an affidavit should be enumerated in a convenient
sequence, and described sufficiently so as to enable the Court and the party requiring discovery to identify the document or group of documents.4 Each individual email in the chain of emails is a separate document for listing purposes.5
[24] I order that Mr Regan file a further affidavit of documents complying with the High Court Rules. The further affidavit must be filed and served within 10 working days of the date of this judgment.
[25] Further, on the basis of Mr Gill’s affidavit, I am satisfied that at least in some respects discovery has not been satisfactorily attended to by the defendants, and that there are grounds for believing that the defendants have not discovered documents that ought to have been discovered. Accordingly, I order as follows:
(a) The defendants are to file and serve within 10 working days of the date of this judgment an affidavit of documents discovering the
following:
3 High Court Rules, r 8.29.
4 Hunyady v Attorney-General [1968] NZLR 1172 (CA).
5 Todd Pohokura Ltd v Shell Exploration NZ Ltd (2008) 18 PRNZ 1026; see also Vanda
Investments Ltd v Logan HC Dunedin CIV 2009-412-219, 27 November 2009.
(i)The attachments identified as Regan AJ.pdf; 2012 Exec Overview updated 260510.xls and Beattie NJ.pdf, referred to in the email from Mr Regan to [email protected] sent on
26 May 2010, which email is annexed as Exhibit A to
Mr Gill’s affidavit dated 23 June 2011.
(ii)The document annexed as attachment NZL.pdf to the email from a Mr Greg Harney to a Mr Williams and a Mr Karolick, and copied to Mr Regan, which email is dated 8 December
2010, and is annexed as Exhibit B to Mr Gill’s affidavit of
23 June 2011.
(iii)The document referred to as NBA Tickets.xls referred to in an email from Mr Regan to [email protected] which email is dated 20 October 2010, and is annexed as Exhibit C to Mr Gill’s affidavit dated 23 June 2011.
(iv)If other documents have been discovered which had annexures or attachments, those annexures or attachments.
(v)All bank statements for all accounts held by the third to seventh defendants (inclusive) for the period February 2011 to
30 June 2011.
(vi)All accounting and/or management records kept by the third to seventh defendants (inclusive) for the period 28 May 2010 to
30 June 2011.
(vii) All invoices issued by the third to seventh defendants
(inclusive) during the period 28 May 2010 to 30 June 2011.
(b)If any of these documents have already been discovered by the defendants, then within the same 10 working day timeframe the defendants are to file and serve an affidavit identifying where the document(s) has been discovered.
(c) The defendants are to make hard copies of discovered documents available to the plaintiff for inspection on request and as required by r 8.33. The costs of complying with this direction are to be addressed at the conclusion of the substantive hearing.
(d)For the avoidance of doubt, I record that the orders made by me in November 2010 remain in place. In particular, the order requiring continuing disclosure remains in place.
(e) If there are any ongoing difficulties with discovery or inspection, I
reserve leave to the parties to come back and apply for further orders.
D) Interim Orders – CIV 2010-404-003178 and CIV 2011-404-000474
Background - Pleadings
[26] The applications had their genesis in proceeding CIV 2010-404-003178.
[27] On 25 February 2011, the fourth defendant in proceedings CIV 2010-404-
003178 applied for a property preservation order under r 7.55 of the High Court Rules. Specifically, it sought that a commission payment, said to be payable by The Langham Hotel, Auckland, and said to be between $150,000 and $220,000, remain in the trust account of Simpson Grierson, who were acting on behalf of the Langham, or alternatively that it should be paid into Court pending the resolution of the disputes between the parties. That application was accompanied by an affidavit from Mr Regan.
[28] On 28 February 2011, Priestley J made a preservation order on a Pickwick basis under r 7.55 directing that the monies should remain in Simpson Grierson’s trust account. The order was not then opposed by Mr Kennedy’s clients.
[29] Shortly thereafter, PEG filed a notice of opposition which asserted that there was commission payable by Great Eagle Hotels (Auckland) Limited, trading as The Langham, Auckland, to PEG, but that there was no claim against that commission payment made by the fourth defendant in its statement of defence or in its
counterclaim. The notice of opposition asserted that the fourth defendant was not a party to the agreement between Great Eagle Hotels and PEG, and that the fourth defendant was not an intended beneficiary under that agreement.
[30] The matter was called before Lang J on 14 March 2011, and he directed that it should be heard together with the other outstanding interlocutory applications on
30 May 2011.
[31] In response to the notice of opposition filed by PEG, a first amended notice of application under r 7.55 was filed. It was made in both proceedings. The applicants were the fourth defendant and Mr Regan in proceedings CIV 2010-404-003178, and Mr Regan personally and Mr and Mrs Regan as trustees of the Piccadilly Trust in proceedings CIV 2011-404-000474. Again, the amended application was accompanied by an affidavit from Mr Regan.
[32] As Mr Eichelbaum acknowledged, strictly, there should have been a separate application filed in CIV 2011-404-000474 and a further filing fee should have been paid. This did not happen. This is an issue the Registrar may wish to follow up.
[33] A further notice of opposition was filed by PEG and Mr Gill filed a supporting affidavit.
[34] A further affidavit was filed on behalf of the applicants from a Nicola Wagner, and Mr Gill responded with an affidavit in response the following day.
[35] On 17 June 2011, Mr Eichelbaum filed another application, this time purporting to rely on rr 7.53 to 7.58, and rr 30.2, 30.4 and 32 of the High Court Rules. I say “purporting” because those numbers do not altogether tie in with the High Court Rules and because some of the rules cited are irrelevant. This application was made only by the second plaintiff, the Piccadilly Trust, in CIV 2011-
404-000474 and only in those proceedings. It sought an order that commission payable by The Langham, Auckland, said to be approximately $230,000, be paid direct to the Bank of New Zealand care of Buddle Findlay, or alternatively frozen, or
alternatively remain in Simpson Grierson’s trust account, or be paid into Court pending resolution of the disputes between the parties.
[36] This latest application was accompanied by a further affidavit sworn by Mr Regan dated 17 June 2011. It was filed on that day, but for some reason it was not served on the parties represented by Mr Kennedy until 8 July 2011.
[37] Mr Kennedy initially opposed the filing of the late application and affidavit. However, he confirmed that he was not prejudiced by the filing of the documents, and that he was in a position to fully respond to them. On that basis, I permitted Mr Eichelbaum to proceed in reliance on those documents, and notwithstanding that at least in regard to service of the affidavit on Mr Kennedy and his clients, he had not complied with my minute of 31 May 2011. I did indicate that I would take account of this breach when considering costs.
[38] It is not clear whether the June 2011 application was intended to replace the earlier first amended application. I proceed on the basis that there are two extant applications – the first amended application made under r 7.55 in both sets of proceedings, and the 17 June 2011 application in proceedings CIV 2011-404-
000474.
Background - Facts
[39] The factual background to this matter is in some respects straightforward. There are however some significant gaps in the materials before me.
[40] The monies that are the subject of the application relate to a commission entitlement payable by Great Eagle Hotels (Auckland) Limited, trading as The Langham, Auckland, to PEG pursuant to an agency agreement dated 28 March 2008. Relevantly, the agency agreement reads as follows:
All accommodation rates charged under the terms and conditions of the contract for [Toyota NZ Limited] will be commissionable at 10 per cent to Premier Events Group Limited.
[41] PEG says that on or about 16 May 2008, it secured in its own right but on behalf of Toyota, an agreement with The Langham to provide 250 hotel rooms for
Toyota’s use over the 2011 Rugby World Cup. Following the departure of Messrs Beattie and Regan, PEG was no longer able to fulfil its obligations under the agency agreement and the Langham and Toyota entered into new arrangements with Parnell Partners Group Limited, a company set up by Messrs Beattie and Reagan. According to the affidavits filed, The Langham has invoiced Toyota for the hotel rooms. The commission is now payable. The Langham has paid the amount it believes is payable by way of commission to Simpson Grierson. According to Mr Regan, the Langham has indicated that it does not wish to bear the cost of interpleader proceedings.
[42] If the Langham has contemplated interpleader proceedings, this must suggest that it is unsure who it should pay the commission to. Unfortunately, there is no affidavit from any individual on behalf of the Langham and its position is unknown. Presumably it is unsure whether it should be paying PEG or Parnell Partners Group Limited.
[43] As I understand it, PEG asserts that The Langham became liable to pay the commission to it once it received the deposit from Toyota, and that that deposit has been paid. PEG claims commission in accordance with the agency agreement.
[44] The substantive proceedings suggest that Parnell Partners Group believes that there was nothing to stop it entering into new arrangements with the Langham and Toyota and that it is entitled to the commission. To this extent, the application dated
17 June 2011 seems to be at odds with the substantive proceedings insofar as it seeks a freezing order or an order that the monies be paid to the BNZ. These aspects of the application seem to be predicated on the basis that PEG is entitled to receive the commission.
[45] There are other puzzling aspects to the application(s):
(a) There is no evidence before me as to the amount of monies being held by Simpson Grierson.
(b)The Langham has paid the amount it believes is payable by way of commission into the trust account of its lawyers, Simpson Grierson.
PEG disputes the quantum of the commission payment. I do not know if Parnell Partners Group Limited disputes the amount of commission payable.
(c) There is nothing before me explaining to whose account the funds are being held by Simpson Grierson.
The basis for the applications
[46] The 17 June application refers to seven affidavits filed by Mr Regan. It originally referred to a number of affidavits filed by other parties, but Mr Eichelbaum advised me in the course of the hearing that he was not relying on those affidavits and that the references to them could be ignored.
[47] I have read each of the affidavits sworn by Mr Regan. Most were filed in proceedings CIV 2010-404-003178. Others were filed in proceedings CIV 2011-
404-000474. There has been no application under r 7.32 for leave to refer to affidavits filed in one proceeding when considering the application made in the other proceeding, but this issue aside, in summary, Mr Regan is asserting as follows:
(a) he has given a guarantee, limited to $100,000, in respect of the liabilities of the group companies, including CPG York Limited;
(b) PEG also guaranteed the debts of CPG York Limited;
(c) the BNZ advanced monies to CPG York Limited. Those monies have not been repaid and the BNZ has now made demand on him and on PEG;
(d) PEG is insolvent, and is unable to pay its debts;
(e) Mr Gill, along with PEG and other companies in the corporate group, has been stripping assets out of the various group companies;
(f) most of the companies from which the assets have been stripped are owned 80 per cent by Mr Gill, and 20 per cent by Mr Regan through his family trust, the Piccadilly Trust;
(g)the Piccadilly Trust, as a minority shareholder, has been oppressed and disadvantaged by the asset stripping;
(h)the companies that have been stripped no longer have the ability to repay the bank;
(i)given the behaviour of Mr Gill and PEG, there is a real risk that should the funds in Simpson Grierson’s trust account be released to PEG, they would be misapplied or misappropriated by Mr Gill/PEG;
(j)that Mr Gill has persuaded the BNZ to call up the guarantee in order to gain leverage or traction to settle the litigation.
[48] To support his allegation of asset stripping, Mr Regan refers specifically to:
(a) attempts he says were made by Mr Gill to put a proposed joint venture agreement with Cartan Tours into his own family investment company, Bourne Street Investments Limited;
(b)a contract with Netball New Zealand which he says Mr Gill removed from BA Partners Limited and placed into the hands of another company, Brand Advantage Measurement and Consulting Limited;
(c) intellectual property and tools which he says were taken out of a company called Digital Partners Limited and placed into a new company, Digital Partners NZ Limited.
He asserts that Brand Advantage Measurement and Consulting Limited and Digital Partners NZ Limited are not subject to the bank guarantee, whereas both of the previous companies, BA Partners Limited and Digital Partners Limited, were
subject to the bank guarantee. Mr Regan asserts that there is nothing left to repay the
BNZ loan other than the Langham commission.
[49] Mr Gill has filed affidavits in support of the notices in opposition. He denies dealing with Mr Regan and the Piccadilly Trust in bad faith. He asserts that he has done nothing to trigger Mr Regan’s liability under the guarantees provided to the bank, or to financially disadvantage the Piccadilly Trust as a shareholder in PEG and in other group companies. He acknowledges that there has been some restructuring within group companies, but asserts that this restructuring was necessitated by the actions of Messrs Regan and Beattie which are at the heart of proceedings CIV 2010-
404-003178. He deals with the asset stripping allegations in some detail. In brief he asserts that the decisions made in relation to the proposed joint venture with Cartan Tours were because of financial constraints being suffered at the relevant time by PEG. He also asserts that PEG would not have been prejudiced if the joint venture had been entered into by Bourne Street Investments. He denies Mr Regan’s assertions regarding the New Zealand Netball contract and the Digital Partners arrangement, and says that the restructuring was undertaken with the intention of preserving at least some of the equity for the shareholders, including the Piccadilly Trust.
Analysis
[50] I start with some general observations: [51] I note that:
(a) the bank has taken no steps to intervene in the proceeding. The affidavits however make it clear that a demand has been made on both PEG and Mr Regan. Correspondence annexed to the affidavits shows that the bank is threatening enforcement action.
(b) there is nothing before me from the Langham.
[52] The first amended application sought property preservation orders under r 7.55. The application filed on 17 June 2011 sought a freezing order, or a mandatory injunction, or a preservation order.
[53] Insofar as the 17 June application seeks a freezing order, in my judgment it must fail. My reasoning is as follows:
(a) Pursuant to r 32.2(2), a freezing order can restrain a respondent from removing any assets located in or outside New Zealand, or from disposing of, dealing with, or diminishing the value of those assets. There is nothing in the affidavits filed which establishes that the monies held by Simpson Grierson are monies which PEG can control. Rather, the affidavits disclose that the monies have been paid to Simpson Grierson by the Langham on account of its potential liability for a commission payment. The affidavits suggest, although they do not state, that the Langham is uncertain who to pay the commission to. There is nothing to suggest that PEG is in a position to unilaterally call for the release of the monies from Simpson Grierson’s trust account. Nor is there anything to suggest that PEG can dispose of, deal with, or diminish the fund held by Simpson Grierson. Insofar as I am aware, the monies in the trust account are not held to PEG’s account. It seems that all PEG has is a chose in action – a claim to a commission payment from the Langham. Put bluntly, there is no fund under PEG’s control to freeze and there is no asset belonging to PEG within the Court’s jurisdiction to which any order could apply.
(b)I am not satisfied that there is a good arguable case made by the Piccadilly Trust against PEG which justifies the grant of the order sought. This is a fundamental requirement before any freezing order can be issued. It is an onerous requirement.6 I accept that there are express claims to the commission payment in proceedings CIV 2011-
404-000474. However, I have some difficulty with the assertion that a
claim under s 174 of the Companies Act can lead to an express claim
6 BNZ v Hawkins (1989) 1 PRNZ 451; Euro-National Corporation Ltd v Petricevic Financial
Services Ltd (1989) 2 PRNZ 351.
to the commission payment. The Piccadilly Trust is a 20 per cent shareholder in PEG and its entitlements arise from that shareholding. Moreover, the trust’s claim depends on its assertion of asset stripping being upheld by the Court. The parties have filed competing affidavits. An interlocutory application is not the appropriate forum to resolve those competing claims. They can only be determined at trial. Finally, in this regard, the application seeks an order requiring payment of the total sum held by Simpson Grierson to the BNZ. The funds held by Simpson Grierson are thought to be about $230,000. Mr Regan is only liable under his guarantee for a maximum sum of
$100,000. I cannot see that the trust has a good arguable case to require payment of the total sum to the BNZ.
(c) The risk of dissipation is central to the freezing order jurisdiction.
Here, Mr Regan does no more in his affidavits than assert his belief that PEG might dissipate the commission payment, if that payment comes into PEG’s hands. He makes that assertion because he believes that Mr Gill, as a director of PEG and of other companies in the group, has conducted the group’s affairs in a manner that is oppressive, unfairly discriminatory, or unfairly prejudicial to the Piccadilly Trust as a shareholder. All allegations of wrongdoing are denied by Mr Gill. Mr Gill’s explanations cannot be dismissed as spurious. Looking at the matter as a prudent or sensible commercial person would, I cannot see that there is any proved risk of dissipation. There is simply an assertion of a belief that PEG might dissipate its
assets, and that is insufficient.7
(d) There are no satisfactory undertakings given by the applicant.
Undertakings are required pursuant to r 32.2(5). In an affidavit filed in proceedings CIV 2010-404-003178, Mr Regan stated that Parnell Partners Group Limited would provide an undertaking. However, insofar as I can see from the Court file, no such undertaking has been
filed. Nor is there any evidence as to the assets of the company to
7 BNZ v Hawkins (1989) 1 PRNZ 451.
back up that undertaking. Mr Regan did file a personal undertaking on 18 April 2011 in the same proceedings. Once again, there is no evidence as to Mr Regan’s ability to meet the undertaking. Mr Eichelbaum did offer to file a further affidavit in that regard. However, insofar as I am aware, no further affidavit has been filed. There is no undertaking by the Piccadilly Trust in proceedings CIV 2011-404-000474 and the freezing order is sought in those proceedings.
(e) Finally, pursuant to r 32.2(3), an applicant for a freezing order must fully and frankly disclose to the Court all material facts. I am not satisfied that has been done. Mr Regan has made a number of assertions in his affidavits, but it does not seem to me that he has made any conscientious attempt to fully and fairly disclose all material facts. By way of example, I note that he did not disclose that the Piccadilly Trust has a 15 per cent interest in Brand Advantage Measurement and Consulting Limited. Given that the trust’s claim is made in reliance on s 174 of the Companies Act 1993, it seems to me that that must be a relevant factor, and that it should have been disclosed.
[54] Accordingly, the application by the Piccadilly Trust for a freezing order is declined.
[55] I now turn to the application made by the Piccadilly Trust for an injunction under r 7.53.
[56] Effectively, the trustees are seeking a mandatory injunction. They want the
Court to order that the monies held by Simpson Grierson should be paid to the BNZ.
[57] Mandatory injunctions are relatively rare. They are only granted on an interlocutory basis in special circumstances where the Court thinks that the matter ought to be decided immediately or where the injunction is directed at a simple and summary act which could be easily remedied or where the defendant has attempted to steal a march on the plaintiff. Before granting a mandatory injunction, the Court
must feel a high degree of assurance that at trial, it will appear that the injunction has rightly been granted. This is a different and higher standard that is required for a prohibitory injunction restraining conduct prior to trial.8 The position is even more difficult in the present case, because the application is made on a quia timet basis. The wrongful acts by PEG are anticipated rather than actual. Moreover, the injunction sought would have final effect.
[58] In my judgment, the injunction sought by the trust must be declined. I note the following:
(a) The Langham is not a party to these proceedings; (b) The BNZ is not a party to these proceedings;
(c) The injunction would have the effect of a final order. It would require payment of an unknown sum of money to the bank in either full or partial satisfaction of the debt owed to it.
(d)Third parties would be affected by the grant of the interim relief sought. I refer to the BNZ and The Langham in particular.
(e) PEG’s rights could be affected. PEG disputes the quantum of the commission payment it says it is entitled to. The order sought by the trustees would require the Langham to make payment to the bank in satisfaction of PEG’s liability as a co-surety of a debt owed by another entity. That could affect PEG’s ability to claim further monies from the Langham.
[59] The decision whether to grant an interim injunction should be based on a two-stage approach – first, is there a serious question to be tried and secondly, does the balance of convenience lie in favour of the applicant.9 Ultimately, the Court has
to consider where the interests of justice lie.10
8 Locabail International Finance Ltd v Agroexport [1986] 1 WLR 657.
9 American Cyanamid Co v Ethicon Ltd [1975] AC 396.
10 Klissers Farmhouse Bakery v Harvest Bakeries Ltd [1985] 2 NZLR 129 at 142.
[60] I accept that there is a serious question to be tried as between the PEG/Gill interests, and the Regan/Piccadilly Trust interests. In proceedings CIV 2011-404-
000474, the primary question to be determined at trial is whether Mr Gill and the defendants have oppressed the Piccadilly Trust as a minority shareholder. I am not persuaded that this question extends to require an order in the terms sought by the Piccadilly Trust. The trust has no direct interest in the commission payment. Its interest arises from its shareholding and that cannot give it a proprietary interest in any commission payment owing to PEG.
[61] The application is prefaced on harm accruing to Mr Regan. Mr Regan has no direct interest in the commission payment either. His interest is in avoiding or minimising his liability as a co-guarantor of CPG York Limited’s debt. A guarantor who has paid more than his share of a common liability is entitled to compel contributions from his/her co-guarantors. Here, Mr Regan has paid nothing himself and in general, a guarantor’s right to contributions from co-guarantors does not arise
until the guarantor has paid more than his/her total share of the common liability.11 I
accept that a guarantor’s right to contribution from co-guarantors can arise before the guarantor has fulfilled the guarantee.12 Where the creditor has obtained judgment against the guarantor, or something equivalent to judgment, the guarantor can bring an action against co-guarantors to compel them to contribute to the common liability. In such an action, the guarantor may obtain a declaration of his/her right to contribution from co-guarantors. If the creditor is a party to the action, the guarantor may obtain an order for the co-guarantor to pay the creditor the co-guarantor’s proportion of the guaranteed debt. If the creditor is not a party to the action, the guarantor may obtain an order directing the co-guarantor, upon payment by the
guarantor of the guarantor’s own share of the common liability, to indemnify the guarantor against further liability.13 I am not aware of any authority for the proposition that a guarantor can obtain a mandatory injunction on an interlocutory basis requiring his co-guarantor to pay the whole of the guaranteed debt, where the guarantor has not made any payment pursuant to the guarantee himself and where the guarantor’s liability is limited to only part of the guaranteed debt. Nor am I
aware of any authority suggesting that a family trust which has a 20 per cent
11 Plant v Calderwood [1969] NZLR 752.
12 Patterson v Arcade Building Ltd [1930] GLR 312; Fuller v Perano [1941] NZLR 44.
13 Wolmershausen v Gullick [1893] 2 Ch 514; and see the Laws of New Zealand Guarantees and
Indemnities [157] et seq.
shareholding in the co-guarantor but which itself has not given a guarantee can seek a mandatory injunction requiring repayment of a debt incurred by another. In this regard it seems to me that the application for a mandatory injunction is misconceived.
[62] Further, in my judgment, the balance of convenience does not lie in favour of the Piccadilly Trust. The evidence suggests that PEG is unable to pay its creditors, but Mr Gill is personally a defendant in the proceedings. The evidence of Mr Regan is that Mr Gill is a very wealthy man. If Mr Regan and the trust are right in their allegations, damages are an adequate alternative remedy for them. There is nothing to suggest that any award of damages could not be paid.
[63] Nor do the interests of justice require that the orders sought by the trust should be made. The trust is seeking a mandatory injunction, which would have final effect, on a quia timet basis. To grant the orders sought would be to deprive PEG and Mr Gill of the opportunity to a fair hearing not only in relation to the commission payment but also in relation to the wider litigation because the underlying assertion of asset stripping is central to the relief sought by the plaintiffs/ applicants. Were I to grant the order, I would effectively be accepting Mr Regan’s and the trust’s arguments, without a full hearing, without testing the evidence, without cross-examination, and without hearing full submissions. In my view, there would be a far greater likelihood of an injustice were a mandatory interim injunction to be made in the circumstances of this case. I cannot see that there is any
compelling justification for the interlocutory orders sought.14
[64] Finally, I note that r 7.54 requires an applicant to file a signed undertaking as to damages. As I have noted above [53(d)], there is no undertaking from the Piccadilly Trust in the present case. The only signed undertaking on the Court file is one by Mr Regan. That undertaking was given in proceedings CIV 2010-404-
003178. It was not given in the proceedings CIV 2011-404-000474 and, in any event, there is no material to satisfy me that Mr Regan has the ability to meet the
undertaking were he to be called upon to honour it.
14 Soft-Tech International Pty Ltd v Ball (1990) 3 PRNZ 683.
[65] Accordingly, I decline the trustees’ application for interlocutory orders under r 7.53.
[66] I now turn to consider the applications for orders for the preservation of property made under r 7.55. As I noted at the outset of the discussion in relation to the interim orders sought, applications under r 7.55 have been made in both sets of proceedings, and by a number of applicants. The orders made by Priestley J on
28 February 2011 were made pursuant to this rule.
[67] Rule 7.55 provides that a Judge may at any stage in a proceeding make orders, subject to any conditions specified by the Judge, for the detention, custody or preservation of any property. Inter alia, the Judge may order that a fund be paid into Court or otherwise secured if the proceeding concerns the right of a party to the fund.
[68] The purpose of the rule is to facilitate the interlocutory preservation of property or a fund involved in litigation, so that claims are not rendered nugatory prior to substantive hearing.15
[69] Here I accept Mr Eichelbaum’s submission that there is a fund. Monies payable on account of a commission payment due to either PEG or to Parnell Partners Group Limited have been paid by the Langham as the debtor into their solicitor’s trust account on account of their liability for the payment. There is an aggregation of money, and the money is held and allocated for a specific purpose.16
[70] While there is no specific claim in proceedings CIV 2010-404-003178 to those funds, the thrust of the statement of defence filed by the defendants is that they have not breached any duties owed to the plaintiff, and they were entitled to treat with and enter into business arrangements with PEG’s former clients. I accept that
these proceedings concern the right of parties to the fund held by Simpson Grierson.
15 Rapid Metal Developments (NZ) Ltd v Rusher (1987) 2 PRNZ 85; Investors Protection Co Ltd v
Ray Courtney Architects Ltd (1993) 7 PRNZ 1 (CA).
16 Rapid Metal Developments (NZ) Ltd v Rusher (1987) 2 PRNZ 85.
[71] There is a specific claim to the commission payment in proceedings CIV 2011-404-000474 but as I have noted above, it seems to me that that claim is misconceived. I do not consider that these proceedings can properly be said to concern the right of the plaintiff to the commission payment.
[72] There is no requirement in r 7.55 of an intention to defeat creditors, or a risk of disposal of property,17 although I accept the risk of dissipation will be an important matter to take into account.
[73] Here, were the fund to get into the hands of either PEG or Parnell Partners Group Limited, then there must be a risk of dissipation by either entity. The plaintiff, PEG, is in financial difficulty. The evidence establishes that it is unable to pay its creditors. Were the fund to fall into its hands, there would be a risk of dissipation. Conversely, PEG asserts that Messrs Regan and Beattie, and Parnell Partners Group Limited, have usurped its business, and taken that business offshore to avoid obligations which it says are owed to it.
[74] In the circumstances, in my view it is appropriate to make orders in proceedings CIV 2010-404-003178 for the preservation of the fund held by Simpson Grierson. I decline an order in proceedings CIV 2011-404-000474.
[75] The fund is currently being held by Simpson Grierson. A letter attached to one of Mr Regan’s affidavits suggests that Simpson Grierson is happy to continue holding the monies. Presumably they are on deposit.
[76] I order that the monies paid by the Langham on account of the commission payable to either PEG or to Parnell Partners Group Limited remain with Simpson Grierson pending final determination of proceedings CIV 2010-404-003178. The monies are to be placed on interest bearing deposit and the interest is to be added to the principal sum when it accrues. If the parties consider that any further conditions are required or if Simpson Grierson require further directions, then I reserve leave to the parties and to Simpson Grierson to come back before the Court on three working
days’ notice.
17 Helicarr Helicopters Ltd v Watts (1992) 6 PRNZ 61 (HC).
E) Costs
[77] PEG is entitled to its costs and disbursements in respect of the applications dealt with under headings B and C above. It is also entitled to its costs in resisting the application made by the Piccadilly Trust for a freezing order and an interlocutory injunction under r 7.53. It is not entitled to costs for resisting the application for a preservation order under r 7.55 made in proceedings CIV 2010-404-003178. Rather, Parnell Partners Group Limited and Mr Regan are entitled to costs in that regard.
[78] Further, Mr Kennedy earlier signalled that PEG seeks indemnity costs in relation to subpoenas which were issued and then withdrawn by Mr Eichelbaum some time ago. I refer to my minute dated 31 May 2011.
[79] PEG is to file and serve a memorandum in support of its application for costs and disbursements within 10 working days of the date of this judgment. A reply and an application for costs in relation to the preservation order made under r 7.55 by Mr Eichelbaum’s clients is to be filed and served within a further 10 working days thereafter. PEG is to file and serve any reply to Mr Eichelbaum’s clients’ application for costs in relation to the r 7.55 preservation order within a further five working days thereafter. I will then deal with the issue of costs on the papers, unless I require
the assistance of counsel.
Wylie J
Distribution:
Z Kennedy: [email protected]
M Pascariu: miha[email protected]
J Eichelbaum: [email protected]
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