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Reynolds v Calvert

Reynolds v Calvert

Case [2015] NZHC 400 9 March 2015

Unconscionable Conduct

Fraud

Commercial Law

Corporate Law & Governance

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IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

CIV-2012-412-000910 [2015] NZHC 400

BETWEEN
GRANT BRUCE REYNOLDS as

liquidator of JAMES DEVELOPMENTS LIMITED (in liquidation)

Plaintiff

AND

HILARY JANE CALVERT and HGW TRUSTEES LIMITED as Trustees of Frongopoulos Trust

First Defendant

AND

CHRIS JAMES Second Defendant

Hearing:
18 - 22 August 2014

Further submissions received on 29 September 2014

Appearances:

M J McCartney QC and A Sorrell for Plaintiff
M R Sherwood King and M Gilkison for Defendants

Judgment:

9 March 2015

JUDGMENT OF DUNNINGHAM J

REYNOLDS v CALVERT [2015] NZHC 400 [9 March 2015]

Contents

Introduction .......................................................................................................... [1] Procedural housekeeping................................................................................... [11] How did the disputed transaction occur? ........................................................ [15] What happened when JDL went into liquidation? [30] The issues ............................................................................................................ [50] First cause of action in contract ........................................................................ [51] Was there an advance from JDL to the Trust? [51] When was the advance made? [52] What was the nature of the advance? [58]
Was there acknowledgment of the debt by the Trust to extend the limitation
period? [67] Was there concealment of the cause of action? [77] When was the fraud reasonably discoverable? [87] Conclusion [97]
Did the advance create a constructive or resulting trust in the Jacks Point land? ....................................................................................................................[99]

Does a claim for compensation arise under the Property Law Act 2007? ..[101]

Has there been a breach of fiduciary duty by Mr James?............................[107]

Has there been knowing and dishonest assistance of the breach of fiduciary duty by the trustees? ........................................................................................ [112]

Have there been breaches of the Companies Act 1993 by the first defendant?........................................................................................................ [114]

Is interest payable? ..........................................................................................[121] No loss established............................................................................................[131] Is the proceeding an abuse of process?...........................................................[133] Conclusion.........................................................................................................[135] Costs ..................................................................................................................[137]

Introduction

[1] Mr Chris James is a successful businessman with interests in property in Dunedin and Central Otago. In early 2006, the Frongopoulos Trust (Trust) was settled by Mr James for the benefit of his family. Soon after, the Trust acquired land at Jacks Point in Queenstown on which it constructed a substantial family home.

[2] Professional trustees with accounting and legal expertise were appointed as trustees of the Trust. The first defendants are the current trustees.

[3] One of Mr James’ companies, James Developments Limited (JDL), advanced

$740,000 to the Trust to assist it with purchase of the Jacks Point land. That advance was recorded as an asset in JDL’s accounts.

[4] On 8 April 2009, summary judgment was entered against JDL for a sum exceeding $4 million. JDL appealed the judgment but the shareholders also resolved to place JDL into liquidation.

[5] Shortly before liquidation, Mr James, as director of JDL, resolved to amend the company records to “correctly record the $740,000 withdrawal” as “repayment” of earlier advances from him and another of his companies. The Trust’s accounts were also amended so that the $740,000 became part of the debt owed to Mr James, and the liability to JDL was removed.

[6] When the plaintiff was appointed as liquidator, he made enquiries which eventually revealed the history of…

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 Reynolds v Calvert

Details

AGLC: Reynolds v Calvert [2015] NZHC 400
Case: [2015] NZHC 400
Decision Date: 9 March 2015

CaseChat Overview and Summary

This case involved a claim by the liquidator of James Developments Limited (JDL) against the trustees of the Frongopoulos Trust and Mr Chris James, who was the director of JDL and a beneficiary of the Trust. The liquidator sought to recover an advance of $740,000 made by JDL to the Trust in 2006. The Trust used the funds to purchase land at Jacks Point in Queenstown. The liquidator argued that the advance created a debt which was not repaid before JDL went into liquidation in 2009. The defendants denied liability, and the key issue was whether the claim was statute barred under the Limitation Act 1950. The court found that the advance was made on 3 October 2006, and the limitation period would have started to run on that date. However, the court also found that the cause of action was concealed by fraud, and the limitation period did not begin to run until the fraud was reasonably discoverable, which was found to be 6 January 2011. As the proceedings were filed on 16 November 2012, the claim was not statute barred. Judgment was therefore entered in favour of the liquidator for $740,000 plus interest from 27 June 2012. The alternative claims for relief under the Property Law Act 2007 and for breaches of fiduciary duty and the Companies Act 1993 failed as there was no loss suffered by the plaintiff. Costs were reserved.

Orders