Team Barry Limited v Forlong HC Auckland CIV 2003 404 5593
[2007] NZHC 1719
•18 April 2007
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2003 404 5593
BETWEEN TEAM BARRY LIMITED First Plaintiff AND
TUAMAN INC LIMITED Second Plaintiff
AND
MARTIN PUGH Third Plaintiff
AND
KEVIN BARRY Fourth Plaintiff
AND
ANTHONY J FORLONG First Defendant
AND
LUKE ANDREW BOLWELL KEMP Second Defendant
AND
MAFAUFAU SITA (AKA DAVID TUA) Third Defendant
AND
VAAIGA LELAGA TUIGAMALA Fourth Defendant
AND
SALLY FERGUSSON CROSS AND MARK GILL
Counterclaim Defendants
Hearing:
4 April 2007
Counsel: Justin Toebes for Tuaman Inc
No appearance for 1st, 3rd and 4th Plaintiffs
Murray Gilbert for 1st Defendant
Tony Molloy QC and Luke Kemp for 2nd and 3rd Defendants
No appearance 4th Defendant
No appearance Counterclaim Defendants
Judgment: 18 April 2007 at 4:00pm
TEAM BARRY V FORLONG AND ORS HC AK CIV 2003 404 5593 18 April 2007
RESERVED JUDGMENT OF WILLIAMS J
This judgment was delivered by
Hon. Justice Williams on
18 April 2007 at 4:00pm
pursuant to Rule 540(4) of the High Court Rules
……………………………..
Registrar/Deputy Registrar
Date: ……………………...
A.Mr Tua’s application to strike out the statements of defence filed by Tuaman and Mr Pugh in December 2006 to his counterclaim is adjourned part-heard to enable the filing of further statements of defence in accordance with para [15] of this judgment.
B. Mr Tua’s application to strike out or stay the statement of claim filed on
16 June 2006 is dismissed.
C.The application by Tuaman to vary the Court’s earlier orders so as to permit payment of its legal fees is dismissed other than to the extent set out in para [34] of this judgment.
D.As previously directed, the Registry is now to make arrangements for the fixture of the substantive hearing of this matter and there will be a telephone conference with counsel on Tuesday 22 May 2007 at 9:00am to check progress in that regard and, hopefully, make standard pre-trial directions.
TABLE OF CONTENTS
Paragraph Numbers
Issue [1] Relevant Facts and Pleadings [2] Submissions [8] Discussion and Decision on Striking-out Applications
(i) Statements of Defence [14]
(ii) 16 June 2006 claim [18]
Application by Tuaman Inc for orders permitting
payment of legal fees [23] Result [36]
Issue
[1] This judgment deals with a further raft of interlocutory applications filed in this claim. On this occasion the principal applications were :
a) a further application by Mr Tua either striking out the plaintiffs’ amended statement of claim filed on 16 June 2006 and entering judgment for the defendants or staying the claim;
b)striking out the defences of Tuaman and Mr Pugh to the counterclaim by Mr Tua against them and the counterclaim defendants and entering judgment on the counterclaim against Tuaman and Mr Pugh or striking out the defences unless more explicit defences are filed;
c) entering judgment on the counterclaim against Mr Barry;
d)applying pursuant to the leave reserved earlier in this case for an order amending the orders made on 20 November 2006 that no payment was to be made by Tuaman from the accumulated sale proceeds of the Pakiri land and apartment plus interest, in particular for its legal costs.
Relevant Facts and Pleadings
[2] It is unnecessary to rehearse again much of the tortuous procedural history of this claim: details appear in a number of earlier judgments.
[3] The plaintiffs’ latest claim is that dated 16 June 2006. It is pertinent to repeat the summary of that claim appearing in the judgment of 20 November 2006:
[10] The latest form of the plaintiffs’ claim contains no fewer than
13 causes of action. They are:
a) The first to fourth causes of action are claims in conversion and detinue by various plaintiffs resulting from the removal by Mr Tua and his associates of computer records from the Tuaman offices on 25 July 2003, together with some personal records claimed by Messrs Pugh and Barry, including the
former’s golf cup and the latter’s boxing memorabilia. The claim asserts that those items were ordered to be delivered up at various stages during the case but such has not occurred, or not fully occurred, and the golf cup was damaged on return. The claims are against Mr Tua’s solicitor, Mr Kemp, or against all defendants or in conversion by Messrs Barry and Pugh against Mr Tua or by Tuaman against Mr Tua for alleged theft.
b)The fifth cause of action is by Tuaman against Mr Tua seeking damages under the EMA based on Mr Tua’s draft counterclaim plus an assertion that the 10 October 2003 notice was an election between alternative claims when, it is alleged, the notice amounts to his repudiation of the EMA. The damages sought are the payments Tuaman would have received under the EMA for the balance of its term. Tuaman also seeks an order under the Companies Act 1993, s 174, that Mr Tua’s 50% shareholding in Tuaman be transferred to Messrs Pugh and Barry equally with effect from 10 October
2003.
c) The sixth cause of action is by Tuaman against Mr Tua seeking payments from the Pakiri and apartment proceeds.
d)The seventh cause of action is also by Tuaman against Mr Tua claiming an entitlement to the proceeds of his fight against Hasim Rahman after 10 October 2003.
e) The eighth cause of action is by Tuaman against Messrs Kemp and Tua and asserts that Mr Tua’s appointment as director of Tuaman is invalid and seeks rectification of the Companies Office records of Tuaman in that regard.
f) The ninth cause of action is also by Tuaman against Mr Tua asserting that accounts prepared by Mr McLoughlin are incorrect and incomplete and, were that not the case, would result in Mr Tua being indebted to Tuaman for a sum of money.
g) The second-named ninth cause of action is by Tuaman against Mr Forlong, an accountant who prepared a set of accounts for Tuaman shortly after 25 July 2003. It asserts Mr Forlong’s accounts are negligent and incorrect, that he owed a duty to Tuaman to prepare correct accounts and, had he not been negligent, the EMA would not have been terminated, this claim would not have been commenced, and Mr McLoughlin’s accounts would have been unnecessary. Mr McLoughlin’s costs, loss of benefit of the EMA and Tuaman’s legal costs are sought.
h)In the tenth cause of action Tuaman seeks damages against Messrs Tua and Kemp for what is said to be the improper lodging of a caveat by Mr Tua against the Pakiri title. Damages sought include the difference between the sale price under a contract which Tuaman signed in September 2003 to sell Pakiri for $15 m and the sale price of $10.25 m achieved in the sale pursuant to the parties’ agreement. Interest, costs and commission are also sought.
i)In the twelfth cause of action Tuaman seeks damages for injury to its reputation by Mr Tua concerning what are said to have been untrue assertions by him to a newspaper.
j)The thirteenth cause of action is by Tuaman against Mr Tuigamala asserting that he induced Mr Tua to breach his obligations under the EMA.
[4] It is also pertinent to note that, despite this Court’s urgings and, on occasion, pleading assistance, both before and after the filing of the 16 June 2006 claim, the claim remains as it is.
[5] As mentioned in earlier judgments, one of the principal issues between these parties remains the Exclusive Management Agreement (“EMA”) signed in April
1999, the part played by Messrs Pugh, Barry, Tua and others leading up to the execution of that agreement, its terms and the way in which those parties and Tuaman acted in relation to it.
[6] On 5 March 2007 Mr Tua filed a very detailed counterclaim. (An earlier version had been filed on 18 December 2006 but was later refined). Over some
148 paragraphs, Mr Tua seeks rescission of the EMA for alleged abuse by Messrs Pugh and Barry of their claimed fiduciary relationship and obligations of confidence relating to Mr Tua and for undue influence; a declaration that Mr Tua validly terminated the EMA by notice dated 10 October 2003; damages or equitable compensation; and claims against Mr Pugh and the counterclaim defendants, Ms Cross and Mr Gill as trustees of the Baron and Lunar Trust in relation to funds allegedly wrongly taken from Tuaman by Mr Pugh and paid to the Trust with inquiries as to damages and restitution being sought.
[7] Tuaman and Mr Pugh filed defences to the 18 December 2006 counterclaim. Mr Pugh’s defence occupies less than half a page and consists of no more than the repeated words “admitted” or “denied”. Most of Tuaman’s defence was in the same terms. Where anything additional was pleaded, in the main it did little more than challenge the facts by such means as positively pleading that parties other than those listed in the counterclaim are in fact parties to the agreements mentioned, or some similar factual addition.
Submissions
[8] Mr Molloy QC presented full and comprehensive submissions in support of Mr Tua’s striking-out application. He first drew particular attention to the pleading history of this claim in support of his submission that the time had now arrived where no further opportunity should be allowed to the plaintiffs to amend their pleadings so as to comply with the rules as suggested by the Court on a number of occasions.
[9] Secondly, he drew attention to what he submitted were contradictions between the denials in the latest defences and statements by Messrs Pugh and Barry in affidavits and in evidence.
[10] Thirdly, he was again critical of the form of the 16 June 2006 claim.
[11] Fourthly, he presented full submissions on the duties of counsel when pleading.
[12] Fifth, he presented submissions bearing on the legal merits of the counterclaim. It is not proposed to review those submissions since, as will appear, it is not the Court’s intention to strike out the defences to the counterclaim at this point and accordingly those legal submissions will require future consideration.
[13] For Tuaman and Mr Pugh, Mr Toebes was constrained to acknowledge during submissions that defences which merely stated “admitted” or “denied” fell well short of complying with R 130 prescribing the contents of statements of
defence, particularly where, as in this counterclaim, the pleadings were full and, in many cases, covered a number of aspects in single paragraphs not all of which, it would appear, Tuaman and Mr Pugh denied.
Discussion and Decision on Striking-Out Applications
(i) Statements of Defence
[14] There is significant force in Mr Molloy’s submissions concerning the defences filed by Tuaman and Mr Pugh to Mr Tua’s counterclaim. The statements of defence so far filed fall so far short of compliance with the rules that, at least in their present form, they amount to a true jeofail.
[15] Therefore, to assist in crystallising the issues and to assist the parties in preparing for and conducting a hearing and the Court in deciding the relevant issues, those plaintiffs who intend to contest Mr Tua’s 2 March 2007 counterclaim are required to file and serve statements of defence that fully comply with their obligations as to pleading and, in particular, to comply with R 130. Those statements of defence are to be filed and served within 21 days of delivery of this judgment.
[16] It would not be right to direct that any further defences harmonise in all respects with the plaintiffs’ affidavits and evidence already filed or given in this case
– discovery and the passage of time may justify variation – but, plainly enough, any significant differences between future pleadings, affidavits and evidence and that already given or filed is likely to require explanation at the hearing and risks adverse findings on matters of fact and credibility and possible further action involving either the plaintiffs or their legal advisers.
[17] Mr Tua’s application to strike out the defences filed by Tuaman and Mr Pugh to his counterclaim is adjourned part heard for further consideration following receipt of the directed further statements of defence.
(ii) 16 June 2006 claim
[18] The causes of action in the claim filed on 16 June 2006 were reviewed in the judgment of 20 November 2006.
[19] That notwithstanding, Mr Molloy submitted the claim was lacking in particulars and was infelicitously drafted or related to minor matters such as the boxing memorabilia.
[20] The Court has declined to strike out the statement of claim before. The review earlier recounted and the comments in earlier judgments show some of the causes of action look weak and revolve around what appear to be trifling issues but, that notwithstanding, the plaintiffs are entitled to have their case heard. Therefore, despite having carefully read Mr Molloy’s submissions, the Court adheres to its previous view and observes only that the apparent importance, or lack of it, of some of the issues raised led to the directions as to the order in which the disputes between these parties is to be adjudicated upon, particularly para 38(f) of the 20 November judgment.
[21] It should be noted that during this hearing the Court was advised that the claim against Mr Forlong as first defendant is likely to be discontinued and the plaintiffs are reconsidering their position as regards Messrs Kemp and Tuigamala.
[22] The plaintiffs are also urged to reconsider the eighth cause of action.
Application by Tuaman Inc for orders permitting payment of legal fees
[23] The 20 November 2006 judgment permitted payment from the accumulated sale proceeds of Pakiri and the Tuaman apartment for Horwarth Porter Wigglesworth’s costs but directed:
The plaintiffs’ applications for payment of moneys to Messrs Tua, Barry and Pugh are dismissed as premature at this stage. The Court’s view is that, apart from Mr McLoughlin’s fees, there should be no payment made from the accumulated sale proceeds and interest until such time as the overall financial rights, liabilities and obligations of Messrs Pugh, Barry, Tua and Tuaman can be definitively established.
[24] That notwithstanding, Tuaman applied for an order, in effect, permitting payment of its legal fees.
[25] In the period 5 November 2003-10 January 2006 Buddle Findlay invoiced
Tuaman for fees totalling $385,968.49 including GST and disbursements.
$165,926.66 of that sum was apparently paid from the Pakiri proceeds – though it is not immediately apparent what justification there was for that payment – thus
$220,041.83 remains owing plus an as yet unrendered account for legal fees since
10 January 2006 to and including the date of this hearing.
[26] Buddle Findlay sought authority for the outstanding accounts to be paid and for approval for future accounts, though Mr Toebes acknowledged that an application as open-ended as that was unlikely to be granted in its terms.
[27] The difficulty with authorising further payments from the accumulated sale proceeds is that, during the period of the EMA, Tuaman received proceeds from Mr Tua’s fights of something of the order of $US20m. Evidence already before the Court shows considerable expenditure was debited against those proceeds over the period of the EMA by all those involved. Evidence also indicates there may have been lax accounting by Tuaman for those proceeds, at least in part, and it seems to be common ground that, during the life of the EMA, such records and accounts did not fully comply with recognised accounting standards.
[28] Then there is the fact that Mr Tua’s counterclaim seeks orders invalidating the EMA from the outset and the plaintiffs’ own proceedings seek the preparation of final accounts for Tuaman over a number of years according to the decisions ultimately reached at the substantive hearing on the various disputes between the parties. That re-casting of the accounts has the potential for significant variation in the amounts payable or to be paid by the various parties involved in Tuaman.
[29] A further factor which needs to be kept in mind is that one of the causes of action in the 16 June 2006 claim is by Tuaman against Mr Tua (and Mr Kemp) for losses arising from what the plaintiffs allege was the wrongful lodging of a caveat against the title to the company’s Pakiri property. That seeks damages of the
difference between the sale price under a September 2003 contract of $15m plus GST and the sale price actually achieved in December 2005, $10.25m plus GST, so that claim is of the order of just under $5m on its own.
[30] It is understood that the independent solicitors hold only something of the order of $6m plus interest pending further order of the Court. When that sum is contrasted with the matters in issue and just briefly reviewed, it is clear that at the end of this case, when all the factual and legal disputes have been resolved and Tuaman’s final accounts for the years in question prepared, there may be a deficiency in the funds available to be paid by Tuaman to whoever may be held entitled to them. Payments from the Tuaman funds before that time would therefore clearly be inappropriate.
[31] A sidelight on that conclusion is that, if not now then later, when the position described in the last paragraph has been achieved, there might conceivably be a need for Tuaman to seek payment, by litigation if necessary, from one or more of Messrs Pugh, Barry and Tua which, certainly then if not now, might place Mr Toebes and Buddle Findlay in an invidious position having acted for all plaintiffs up to this point.
[32] Conceivably, as was put to Mr Toebes during the hearing, those responsible for giving instructions to Tuaman’s legal advisers could themselves be liable which could even, though probably a remote possibility, lead to a claim being made by Tuaman on Buddle Findlay.
[33] For all those reasons, the Court adheres to the view it expressed in the
20 November judgment, at least as far as legal fees up to the present time are concerned.
[34] All parties and the Court have, however, an interest in ensuring that Tuaman
– as opposed to all plaintiffs – is properly represented at the substantive hearing so that its interests can be advanced. To assist in that regard, Mr Toebes is invited to advise the Court of the hourly rate for his and Buddle Findlay’s services which they propose to charge to prepare for and conduct the substantive hearing, coupled with a
detailed estimate of the amount of time expected to be expended in Tuaman’s interests. Consideration will then be given to the making of an order permitting payment of those fees.
[35] Apart from that, the application is dismissed.
Result
[36] In the result:
a) Mr Tua’s application to strike out the statements of defence filed by Tuaman and Mr Pugh in December 2006 to his counterclaim is adjourned part-heard to enable the filing of further statements of defence in accordance with para [15] of this judgment.
b)Mr Tua’s application to strike out or stay the statement of claim filed on 16 June 2006 is dismissed.
c)The application by Tuaman to vary the Court’s earlier orders so as to permit payment of its legal fees is dismissed other than to the extent set out in para [34] of this judgment.
d)As previously directed, the Registry is now to make arrangements for the fixture of the substantive hearing of this matter and there will be a telephone conference with counsel on Tuesday 22 May 2007 at
9:00am to check progress in that regard and, hopefully, make standard pre-trial directions.
………………………………..
WILLIAMS J
Solicitors:
Buddle Findlay, P O Box 2694 Wellington, for Tuaman Inc, 2nd Plaintiff
Kemp Solicitors, P O Box 600 Kumeu, for 3rd Defendant
Gilbert Walker, P O Box 1595 Shortland Street, Auckland, for 1st Defendant
Copy for:
A P Molloy QC, P O Box 4338 Auckland, for 2nd and 3rd defendants
Tim Frampton, Case Officer, Auckland High Court Registry
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