Reynolds v Calvert - [2013] NZHC 1159

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

CIV-2012-412-000910 [2013] NZHC 1159

BETWEEN GRANT BRUCE REYNOLDS AS LIQUIDATOR OF JAMES DEVELOPMENTS LIMITED (IN LIQUIDATION)
Plaintiff

ANDHILARY JANE CALVERT AND HGW TRUSTEES LIMITED AS TRUSTEES OF FRONGOPOLUS TRUST
Defendants

Hearing: 6 May 2013
(and with additional submissions in writing dated 14 and 20 May
2013)
(Heard at Dunedin)

Appearances: J McCartney QC for Applicant/Plaintiff
M R Sherwood King for Respondents/Defendants

Judgment: 21 May 2013

JUDGMENT OF ASSOCIATE JUDGE OSBORNE [as to plaintiff ’s summary judgment application]

A loan is re-documented

[1] In 2006, things were going well for the fortunes of Chris James. He had a family trust, the Frongopolus Trust. The trustees (the defendants in this case) decided to purchase an 8,925 m² block of land, at Jacks Point, Queenstown, in order to build there a very substantial home for the James family.

[2] To finance the purchase, Mr James had his company, James Developments

Limited (“JDL”), advance $740,000 on 3 October 2006 to the trustees. The money

was cleared through another company (Campbell’s Stores Limited), but went to the trustees on the same date.

[3] The advance and credit were recorded in the financial statements of JDL and the Trust respectively for the financial year ending 31 March 2007. And so, too, for the year ending 31 March 2008.

[4] By mid-2009, JDL was heading towards liquidation. It had received an adverse High Court civil judgment in April 2009.

[5] The firm of Harvie Green Wyatt were the accountants for the James family and their entities. Todd Miller, of that firm, was the partner responsible for the James’s entities. He was also, and remains, a director of the firm’s trustee company, HGW Trustees Limited, which as a co-trustee of the Frongopolus Trust is the second-named defendant in this proceeding.

[6] By July 2009, Mr Miller had draft financial statements ready for JDL for the year ending 31 March 2009.

[7] A meeting was convened in relation to JDL on either 1 or 2 July 2009. Present were Mr James and his accounting and legal advisers. They were Mr Miller (accountant), Michael Van Aart (solicitor) and Colin Withnall (Queen’s Counsel). For discussion were issues associated with JDL's imminent liquidation. The shareholders shortly afterwards, on 6 July 2009, placed JDL in liquidation.

[8] At the meeting, the discussion included recognition that the $740,000 debt of the Trust was liable to be called up by a liquidator of JDL. It was one of the assets of JDL which could be “a problem”. A decision was made to re-document the transaction. The re-documentation which ensued was through a resolution of the director which Mr James signed and dated 1 July 2009. The resolution recorded:

James Developments Limited Resolution of Director
Background:
On 3 October 2006 a cash withdrawal of $740,000 was made from the company bank account. This withdrawal was incorrectly
narrated in the company computer ledger, and subsequently in the company financial statements, as an advance to the Frongopolus Trust.…

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 [2013] NZHC 1159
Case: [2013] NZHC 1159
Decision Date: 21 May 2013

CaseChat Overview and Summary

The plaintiff, Grant Bruce Reynolds, liquidator of James Developments Limited (JDL), sued the defendants, Hilary Jane Calvert and HGW Trustees Limited, for the recovery of a debt of $740,000, plus interest. The plaintiff brought his claim on three bases: (a) a contractual claim for repayment of the debt; (b) a claim for payment of the debt pursuant to the terms of a resulting trust; and (c) an order under s 348 Property Law Act 2007 requiring payment of the debt as reasonable compensation for a prejudicial disposition. The defendants argued that the claim was statute-barred and that the plaintiff had no standing to bring the claim. The court had to determine whether the plaintiff had established, beyond argument, that he was entitled to judgment in his favour on each of the three bases. The court dismissed the plaintiff’s application for summary judgment. It found that the claim for contractual repayment of the debt was not statute-barred, but it was not beyond argument that the debt was repayable on demand. The court further found that the plaintiff had not established, beyond argument, that the trustees acknowledged the debt. The court was also not satisfied, beyond argument, that the debt had been concealed by the trustees’ fraud. The claim in resulting trust was not pursued. The court held that the plaintiff had standing to bring the claim for compensation for a prejudicial disposition under the Property Law Act 2007. However, the court found that it was arguable that the “compensation” available under s 348(2)(b) of the Act was not applicable in this case because the plaintiff’s case was based on the premise that the debt of the trustees to JDL had remained a debt. The court held that it was not satisfied, beyond argument, that the plaintiff was entitled to summary judgment on any of the three bases. The plaintiff’s application for summary judgment was dismissed, and the costs of the application were reserved.

Orders