PricewaterhouseCoopers v Walker - [2016] NZCA 338

IN THE COURT OF APPEAL OF NEW ZEALAND

CA475/2015
[2016] NZCA 338

BETWEEN	PRICEWATERHOUSECOOPERS Appellant
AND	ROBERT BRUCE WALKER AND JOHN MARSHALL SCUTTER AS LIQUIDATOR OF PROPERTY VENTURES LIMITED (IN LIQUIDATION), FIVE MILE HOLDINGS LIMITED (IN RECEIVERSHIP AND LIQUIDATION), MONTECRISTO CONSTRUCTION COMPANY LIMITED (IN LIQUIDATION), CASTLE STREET VENTURES LIMITED (IN RECEIVERSHIP AND LIQUIDATION), LIVINGSPACE PROPERTIES LIMITED (IN RECEIVERSHIP AND LIQUIDATION) AND OTHERS Respondents

Hearing:	21 June 2016
Court:	Randerson, Wild and Miller JJ
Counsel:	B D Gray QC, P M Fee and M Atkinson for Appellant J B M Smith QC and R S May for Respondents
Judgment:	19 July 2016 at 10:30 am

JUDGMENT OF THE COURT

A The appeal is dismissed.

BThe appellant must pay the respondent one set of costs for a standard appeal on a band A basis with provision for two counsel and usual disbursements.

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REASONS OF THE COURT

(Given by Miller J)

Introduction

Not for the first time in recent history, a defendant wants to stay a claim for damages because the plaintiff is sustained by a litigation funder. The agreement to provide funds in the present case is to enable the respondent liquidator to bring a claim against the appellant (PwC) for alleged breach of duty as auditor of companies in liquidation. The funding agreement was associated with an assignment to the liquidator of a secured creditor’s rights. The principal question is whether the funding agreement and the assignment are, in substance, a bare assignment of the secured creditor’s rights. A second question is whether the liquidator is acting for an improper purpose by pursuing a claim that, it is said, can benefit only the funder.

Narrative

Property Ventures Ltd (Property Ventures) is the parent company of a property development group that collapsed during the immediate aftermath of the 2008 financial crisis, leaving a large unfinished development at Queenstown.
Property Ventures’ wholly owned subsidiary, Five Mile Holdings Ltd (Five Mile), borrowed a large sum from Hanover Finance Ltd (Hanover) in 2006 against the security, inter alia, of a general security agreement (the GSA) granted by Property Ventures. The GSA granted Hanover a first charge over, among other things, choses in action. The charge extends to the claim against PwC.
Late in 2009 Hanover assigned the GSA to Allied Farmers Investments Ltd (Allied). By then Five Mile was in receivership, owing about $98.6 million to Hanover. The receivers disposed of Five Mile’s real property, leaving a balance of about $39 million owed to Allied.
On 5 March 2010 Property Ventures went into receivership and on 29 July 2010 it was placed in liquidation by court order. Robert Walker was appointed liquidator. He reported on 30 April 2012 that no realisable assets were left in Property Ventures; its balance sheet comprised advances to or investments in its own subsidiaries and in his opinion those assets were valueless as matters stood. Any realisations would be achieved through legal action.
On 12 November 2012 Mr Walker brought proceedings against PwC, alleging breach of contractual and tortious…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading PricewaterhouseCoopers v Walker

Details

AGLC: PricewaterhouseCoopers v Walker [2016] NZCA 338
Case: [2016] NZCA 338
Decision Date: 19 July 2016 at 10:30 am

CaseChat Overview and Summary

PricewaterhouseCoopers (PwC) appealed against the High Court's decision to dismiss their application to stay proceedings brought by Robert Bruce Walker, as liquidator of Property Ventures Limited and other related entities, against PwC for alleged breach of duty as their auditor. The liquidator's claim was funded by SPF No 10 Ltd, which had acquired a security interest over Property Ventures' assets and a right to receive up to 42.5 per cent of any proceeds from the litigation. The central question on appeal was whether the funding agreement and assignment were, in substance, a bare assignment of a claim in tort or personal claim, which remains unlawful in New Zealand. A secondary question was whether, assuming it was a bare assignment by the company, it was nonetheless unobjectionable on the ground that a liquidator is authorised by statute to assign a cause of action. PwC argued that the funding agreement and assignment together amounted to a bare assignment, giving the funder excessive compensation and control, and that the liquidator was acting for an improper purpose by pursuing a claim that could benefit only the funder. The Court of Appeal held that the funding agreement and assignment did not amount to a bare assignment of Property Ventures' cause of action, and that even if they did, it was not impermissible as an assignment by a liquidator. The appeal was dismissed, and PwC was ordered to pay the respondent's costs on a standard appeal basis.

Orders