Reynolds v Finnigan - [2021] NZHC 2668

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-2717

[2021] NZHC 2668

BETWEEN
GRANT BRUCE REYNOLDS, Liquidator First Plaintiff

JOANNE LEE YOUNG

Second Plaintiff

THE LEARNING LADDER LIMITED (IN LIQUIDATION)

Third Plaintiff

AND

PERI MICHAELA FINNIGAN and BORIS VAN DELDEN

First Defendants

RED 9 LIMITED
Second Defendant

THE LEARNING LADDER (2018) LIMITED

Third Defendant

PEAT JOHNSON MURRAY LIMITED

Fourth Defendant

Hearing: 10 September 2021

Appearances:

Karl J M Robinson for the Plaintiffs

Virginia Wethey for the First Defendants
M J Fisher and James Ryan for the Second and Third Defendants Sophie Pasley for the Fourth Defendant

Judgment:

6 October 2021

JUDGMENT OF ASSOCIATE JUDGE BELL

This judgment was delivered by me on 6 October 2021 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar

REYNOLDS v FINNIGAN and VAN DELDEN [2021] NZHC 2668 [6 October 2021]

[1] This case has a fixture for two weeks beginning 8 August 2022. The plaintiffs are suing for $290,000 plus costs and interest. The second and third defendants say that that amount does not warrant a two week hearing. The costs of trial would be uneconomic for all parties. Instead, they have a proposal to save costs and time: a preliminary question decided ahead of the trial is likely to resolve the major issue in contention. They say that the plaintiffs’ $290,000 damages claim is excessive. Establishing the damages properly claimable by the plaintiffs is likely to lead to a prompt settlement and the two week hearing will not be required.

[2] The case is about a licensed early childhood centre in Howick. The Learning Ladder Ltd was incorporated to carry on the business. It had two shareholders and directors: Mrs Joanne Young, the second plaintiff, and Mrs Dayle Walker. Mrs Walker’s husband is a chartered accountant at Peat Johnson Murray Ltd, the fourth defendant. He provided accounting services to The Learning Ladder Ltd and Red 9 Ltd, the second defendant.

[3] Red 9 Ltd provided the funds to buy the business. Mrs Walker and her husband are the directors of the company. They and people associated with them are the shareholders. Red 9 Ltd borrowed funds from the Walkers’ bank and on-lent them to The Learning Ladder Ltd taking security under a registered general security agreement. The amount advanced was $430,000. It was a term loan, with monthly repayments set to equal the Red 9 Ltd’s repayments to its bank. The plaintiffs say that The Learning Ladder Ltd never defaulted in paying Red 9 Ltd.

[4] There were differences between Mrs Walker and Mrs Young. Red 9 Ltd considered that The Learning Ladder Ltd was insolvent and made demand for repayment in full of the loan. On 9 March 2018, the day after it made demand, it appointed insolvency practitioners, Ms Finnigan and Mr van Delden, as receivers. On the day they were appointed the receivers sold the business to The Learning Ladder (2018) Ltd, the third…

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.

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Details

Case: [2021] NZHC 2668
Decision Date: 6 October 2021

CaseChat Overview and Summary

This case involves a dispute over the sale of a licensed early childhood centre in Howick. The plaintiffs, the liquidator of The Learning Ladder Ltd, are suing for $290,000 plus costs and interest. The plaintiffs claim that the receivers sold the business for less than its true market value. The defendants, including the receivers and the company that purchased the business, argue that the sale price was fair. The legal issues in the case include whether the receivers acted in good faith and for a proper purpose, whether they obtained the best price reasonably obtainable for the business, and whether the liquidator can claim damages for loss of profits.

The court considered the application for a separate hearing on the issue of damages. The defendants argued that deciding the value of the business would likely resolve the major issue in contention and lead to a prompt settlement. The court noted that a separate hearing on damages could offer significant time savings and potentially bring the proceeding to an end. The court also considered the potential for appeals and other practical considerations. The court concluded that it was appropriate to order a separate hearing on the value of the business, subject to certain conditions.

The court ordered a separate hearing on the value of the business to be held on 30 November and 1 December 2021. The plaintiffs were directed to serve their statements of evidence, including expert evidence, and list of documents for the bundle by 29 October 2021. The defendants were directed to serve their statements of evidence, including expert evidence, and lists of documents by 12 November 2021. The experts were to confer and file and serve reports setting out the matters they agree and disagree on and the reasons for their disagreement by 19 November 2021. The plaintiffs were to file and serve the common bundle of documents by 19 November 2021. The plaintiffs were to file and serve their opening by 23 November 2021. The defendants were to file and serve their openings by 29 November 2021. Costs on the application for a separate hearing were reserved.

This case highlights the importance of considering the most efficient way to determine the issues in a dispute. A separate hearing on the issue of damages can offer significant time savings and potentially bring the proceeding to an end. However, the court must also consider the potential for appeals and other practical considerations. In this case, the court concluded that a separate hearing on the value of the business was appropriate. The court's order is subject to certain conditions, including the possibility that the plaintiffs may require the case to go to hearing in August 2022, regardless of any appeal by the defendants.

Orders