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Reforma Limited v Brown

Reforma Limited v Brown

Case [2024] NZHC 1349 27 May 2024

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-2190

[2024] NZHC 1349

BETWEEN
REFORMA LIMITED

Plaintiff

AND

DAVID BROWN

First Defendant

DAVID BROWN as Trustee of the Kairara Trust

Second Defendant

Hearing: 23 April 2024

Counsel:

D M Hughes / N E Jirkowsky for the Plaintiff J T Burley / E Iliev for the Defendants

Judgment:

27 May 2024

INTERIM JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

This judgment was delivered by me on 27 May 2024 at 4 pm Pursuant to r 11.5 of the High Court Rules.

…………………..
Registrar/Deputy Registrar

Solicitors/Counsel:
Anthony Harper, Auckland McVeagh Fleming, Auckland

REFORMA LTD v DAVID BROWN [2024] NZHC 1349 [27 May 2024]

Contents

Introduction................................................................................................................. 2

Summary judgment principles...................................................................................... 5

The alleged overpayment by KVCC to the construction company engaged by KVCC to build the medical centre.............................................................................................................. 6
KVCC’s refusal to allow Mr Brown to purchase two apartments in the development 7 The interest rate under the RC agreement........................................................................................ 7

Reforma’s payments of $105,884.59 to unsecured creditors of KVCC 8
KVCC’s appointment of the receiver........................................................................... 8
The receiver’s sale process......................................................................................... 10

The receiver’s duties when exercising the power of sale...................................... 10

Responsibility of the lender................................................................................... 11

The receiver’s decision to sell the substantial part of the development as a going concern rather than selling separate titles as separate lots............................................................. 16
The failure to complete the medical centre before sale......................................... 17
The treatment of the infrastructure assets included in the development............... 17
The receiver’s failure to engage with an alternative purchaser of the development who was prepared to pay more than Reforma...................................................................... 19
The receiver’s payment of $99,696 to the liquidators of KVCC............................... 22
Payment of the receiver’s own costs and Reforma’s legal costs................................ 23
The exercise of the Court’s discretion........................................................................ 24
Costs........................................................................................................................... 25

Introduction

[1] The defendant, David Brown, and Graham Viall established Kaukapakapa Village Centre Company Ltd (in liquidation) (KVCC) to undertake a commercial and residential development in Kaukapakapa, known as the Kaukapakapa Village Center. Mr Brown and Mr Viall were appointed directors of KVCC, together with Mr Hobman.

[2] Mr Viall is a shareholder and the sole director of the plaintiff, Reforma Ltd (Reforma). Reforma provided funding for the development pursuant to a revolving credit facility agreement between Reforma and KVCC. The parties agree that the relevant written agreement is dated 16 February 2021 (the RC agreement).

[3] The RC agreement recorded that Reforma had advanced $6,931,898 to KVCC, due for repayment by 31 October 2021. Reforma’s advance was secured by:

(a)a general security agreement dated 14 December 2017 (GSA) over all present and after acquired property of KVCC, including the development; and

(b)registered mortgages over the development land.

[4] By a written guarantee dated 1 December 2020 (the guarantee), Mr Brown guaranteed KVCC’s obligations to Reforma, limited to 50% of KVCC’s debt. He did so in his personal capacity and as a trustee of the Kairara Trust.

[5] Between 18 March 2021 and 20 September 2021, Reforma advanced an additional $1,214,000 to…

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 Reforma Limited v Brown

Details

AGLC: Reforma Limited v Brown [2024] NZHC 1349
Case: [2024] NZHC 1349
Decision Date: 27 May 2024

CaseChat Overview and Summary

In the High Court of New Zealand, Reforma Limited sought summary judgment against David Brown, who had guaranteed a debt owed by Kaukapakapa Village Centre Company Ltd (KVCC). Brown opposed the claim, arguing various issues related to the conduct of the development, the validity of the receiver's appointment, and the receiver's sale process. The court found that Brown had not discharged the evidential onus on him for several of his arguments, such as the alleged overpayment to the construction company and KVCC's refusal to allow Brown to purchase apartments. However, the court held that it was arguable that the receiver breached his duty by failing to engage further with an alternative purchaser who offered more than Reforma, potentially reducing Brown's liability. The court also found that it was arguable that the costs claimed by Reforma and the receiver were not properly incurred or were unreasonable. The court exercised its discretion to enter judgment for part of Reforma's claim, with deductions for certain costs and a potential shortfall in the sale price. The court ordered further evidence regarding interest calculations before finalizing the judgment amount. Costs were to be determined based on written submissions from both parties.

Orders