Team Barry Limited v Kemp HC Auckland CIV 2003 404 5593
[2007] NZHC 1955
•30 July 2007
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2003 404 5593
BETWEEN TEAM BARRY LIMITED First Plaintiff
ANDTUAMAN INC LIMITED Second Plaintiff
ANDMARTIN PUGH Third Plaintiff
ANDKEVIN BARRY Fourth Plaintiff
ANDLUKE ANDREW BOLWELL KEMP First Defendant
ANDMAFAUFAU SITA (AKA DAVID TUA) Second Defendant
ANDVAAIGA LELAGA TUIGAMALA Third Defendant
ANDSALLY FERGUSSON CROSS AND MARK GILL
Counterclaim Defendants
Hearing: 16 July 2007
Counsel: Justin Toebes for Plaintiffs
Tony Molloy QC and Luke Kemp for Defendants
No appearance Counterclaim Defendants
Judgment: 30 July 2007 at 3:00pm
JUDGMENT OF WILLIAMS J
TEAM BARRY AND ORS V TUA AND ORS HC AK CIV 2003 404 5593 30 July 2007
This judgment was delivered by
Hon. Justice Williams on
30 July 2007 at 3:00pm
pursuant to Rule 540(4) of the High Court Rules
……………………………..
Registrar/Deputy Registrar
Date: ……………………...
A Mr Tua’s application to strike out or stay the statement of claim dated
16 June 2006 and to strike out the statements of defence of Tuaman and Mr Pugh dated 17 January 2007 and 7 May 2007 is dismissed.
BWithin 21 days of delivery of this judgment, the trustees of the Baron and Lunar Trust are to file and serve a statement of defence to Mr Tua’s counterclaims.
CWithin 21 days of delivery of this judgment, Mr Tua is either to file and serve his statement of defence to the statement of claim of Tuaman and Mr Pugh dated 25 June 2007 or file such other application concerning that document as he considers appropriate.
DThe application by Tuaman for an order paying its future legal fees in connection with the substantive hearing of this claim is adjourned part-heard on the basis set out in paras [33] and [34](d).
TABLE OF CONTENTS
Paragraph Numbers
Introduction [1] Issue [4] Striking-out application [5] Submissions [7] Payment of Tuaman’s future legal expenses: “Mixed” funds [27] Result [34]
Introduction
[1] On 28 February 2007 the principal defendant in this claim, Mr Tua, applied for orders striking out the plaintiffs’ claim in an amended statement of claim dated
16 June 2006 in entering judgment for the defendants on the issue (subject to the taking of accounts) or, alternatively, staying the claims until after Mr Tua’s counterclaim had been determined. He also sought orders that statements of defence filed by Tuaman and Mr Pugh on 17 January 2007 be struck out and judgment be given for Mr Tua on the same (again subject to the taking of accounts).
[2] Tuaman applied for an order permitting its legal costs and disbursements to be paid from accumulated funds held from the sale of land at Pakiri and an apartment in central Auckland.
[3] Those applications were dealt with in a reserved judgment delivered on
18 April 2007 which adjourned Mr Tua’s applications part-heard to enable the plaintiffs to replead. Additional information was sought concerning the costs application.
Issue
[4] This judgment thus deals with the resumed hearing on those interlocutory applications brought in a proceeding where such have been, regrettably, all too frequent a feature. Further interlocutory applications may yet be filed. There is also an outstanding appeal against part of the judgment delivered on 18 April 2007
Despite the parties’ repeated assertions of their wish to have the substantive claim determined as soon as can conveniently be arranged, the continuing interlocutory applications threaten the substantive fixture, currently set down for three weeks beginning on 18 February 2008
Striking-out application
[5] The judgment of 18 April 2007 set out the then pleading position in the following way :
[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 $15m and the sale price of $10.25m 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.
…
[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.
[6] In relation to that citation, it needs to be recorded that the plaintiffs (other than Team Barry Ltd) filed what was described as the Third Amended Statement of Claim on 25 June 2007. Further, on 7 May 2007, Tuaman and Mr Pugh filed further statements of defence to Mr Tua’s counterclaim (and Mr Barry filed an appearance reserving his rights under R 131).
Submissions
[7] Mr Molloy’s submissions were trenchantly critical of what he submitted was the plaintiffs’ repeated failure over the nearly four years since this claim was launched to file pleadings which complied with the Rules. There was even a hint of exasperation in Mr Molloy’s complaints of “extraordinary latitude” and the “extraordinary tolerance of the Court in the face of the evident abuse of its processes” at the opportunities given the plaintiffs to comply with the rules by amending their pleadings. He drew attention to the observations by the learned authors of McGechan on Procedure (para HR186.02(4)(d), p 1-988) that “in the era of more proactive case management … successive grants of leave to amend … cannot be expected”. The plaintiffs, Mr Molloy submitted, were “playing a game” of maintaining frivolous claims, seeking unnecessary orders, making claims which contradicted earlier affidavit evidence and seeking to use Tuaman’s money to fund or defend a claim by a person who is beneficially entitled to half its shares.
[8] On 25 June 2007 Tuaman and Mr Pugh served Mr Tua with a R 185 notice seeking further particulars.
[9] Mr Molloy submitted the plaintiffs’ R 185 notice was premature pending determination of Mr Tua’s striking-out application and his appeal, and drew attention to what he submitted were contradictions between aspects of the various pleadings, including admissions in the latest defences and passages in affidavits filed earlier. He also drew attention to contradictions between the plaintiffs’ present stance and the findings of Venning J in the application by the trustees of the Baron and Lunar Trust to remove Mr Tua’s caveat from the title to the Takapuna home then occupied by Mr Pugh and his partner.
[10] In his submissions for this hearing, Mr Molloy provided chapter and verse from the plaintiffs’ affidavits to demonstrate that all of the requested particulars were of matters which emanated from the plaintiffs but, towards the end of the hearing, as the Court understood it, Mr Molloy accepted that, as a matter of pleading, the plaintiffs may be entitled to require Mr Tua to provide an express linkage between the matters currently pleaded in Mr Tua’s counterclaim and the particulars requested, either in a further amended counterclaim or in Mr Tua’s response under R 185(3).
[11] A significant section of Mr Molloy’s submissions dealt with the particulars sought of the assertion that the plaintiffs were required to hold Mr Tua’s earnings separate. Those submissions will be considered later.
[12] In a supplementary memorandum, Mr Molloy submitted that the plaintiffs’ entitlement to have their case heard was conditional on the litigation not being vexatious, relying on Tudor Grange Holdings Limited v Citibank NA [1992] Ch 53,
71, a successful striking-out application by defendants. Mr Molloy submitted the plaintiffs conduct of the proceeding makes it vexatious litigation. Striking out the claims would not wholly defeat the plaintiffs’ claim as the relief they originally sought was the preparation of proper accounts for Tuaman and Mr Tua seeks such as part of his counterclaim. He submitted that all the plaintiffs would lose is “the possibility of further harrassment of Mr Tua over claims that they owed him no fiduciary obligations and were not in a position of influence”.
[13] In addition, Mr Molloy submitted that, part and parcel of litigants’ entitlement to have their case heard, was an obligation to plead it intelligibly (Knowles v Roberts (1888) 38 ChD 263, 270-271 per Bowen LJ).
[14] A consequence of all of that, Mr Molloy submitted, was that Mr Tua and his advisers were embarrassed within the meaning of the rules by the length of time taken by the plaintiffs to plead their case, pleadings which were, he submitted, even now unsatisfactory, particularly in the case management era. The plaintiffs pleadings now, he suggested, amounted to an abuse of process.
[15] For Tuaman and Mr Pugh, Mr Toebes, unsurprisingly, denied the plaintiffs were “playing a game”. He produced a history of the pleadings, making the point that while Mr Tua’s initial counterclaim was filed as early as 30 October 2003 with a further version, this time including a counterclaim against the Baron and Lunar Trust being filed on 30 June 2004, it was not until 2 March 2007 that a final version of Mr Tua’s counterclaim was filed. In the meantime, on a number of occasions minutes had been issued directing the filing of Mr Tua’s counterclaim but, although drafts had been produced, it was Mr Tua, Mr Toebes suggested, who was in breach of the Court’s repeated directions in that respect.
[16] In considering the various submissions, it is also helpful to take into account the statements of defence filed by Tuaman and Mr Pugh on 7 May 2007.
[17] The Court dealt with Mr Tua’s striking-out application in its 18 April judgment in the following way :
(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.
…
[18] Looking at the matter more broadly, the Court has observed on a number of occasions that the pleadings in this case have followed an unconventional course. First, in a very real sense they are “back to front” in that the plaintiffs initially sought little more than the preparation of accounts for Tuaman and it was only in Mr Tua’s counterclaims that the major issues between the parties emerged. Secondly, the parties initially agreed to deal with the major matters between them on an issue by issue basis. That led to the separate hearing on Mr Tua’s express trust claim relating to the Pakiri land. But it rapidly became apparent after that hearing, as a perusal of the minutes which followed delivery of the judgment would demonstrate, that dealing with the major items in contention seriatim would postpone final determination of the claim. Accordingly, in the judgment of 20 November 2006, it was ordered that all the remaining issues of substance between the parties be dealt
with sequentially at the one hearing. It is that fixture which is scheduled to begin on
18 February 2008.
[19] Reviewing the present pleading position, the Court’s view is that, despite Mr Molloy’s strong submissions to the contrary, other than in one or two respects, Mr Tua’s counterclaim and the statements of defence filed by Tuaman and Mr Pugh on 7 May 2007 do adequately comply with the rules and delineate the matters in issue between the parties.
[20] Perhaps the most significant respect in which the latest defences may not fully comply with R 130 is the defence to paragraph 51 of the counterclaim, but since the plaintiffs in their latest pleading clearly implead and rely on the EMA in its entirety and contest the circumstances leading up to its execution, their failure to respond in a more detailed way to the pejorative assertions in that paragraph are of no great significance.
[21] To put the matter shortly, Mr Tua and his advisers now know what is in issue. The Court knows what is in issue. Against the background and history of this claim, any failure to comply to the fullest extent with R 130 is therefore of no great consequence. It follows that the Court’s view is that the opportunities afforded the plaintiffs for re-pleading and amending their claims and defences have borne adequate fruit.
[22] Mr Tua’s striking-out application was initially directed towards the Tuaman and Mr Pugh defences filed on 17 January 2007. For the reasons outlined in the
18 April 2007 judgment, that application was soundly based. Though they may have been true jeofails, their deficiencies have been rectified in the statements of defence filed on 7 May 2007 in all but inconsequential respects.
[23] Mr Tua’s striking out application must therefore be dismissed, whether regarded as directed still at the 17 January 2007 defences or those filed on 7 May
2007.
[24] There are two additional reasons for reaching that conclusion.
[25] The first is that Mr Tua’s counterclaims in their final form were not filed and served in their final form until 2 March 2007. Until that occurred, the plaintiffs would have had difficulty in formulating defences which complied with the rules. There is a certain force in Mr Toebes’ chronology detailing Mr Tua’s delays in reaching that point. Now the counterclaims have been filed and, in the latest defences, essentially properly pleaded to, there would be no warrant to strike out either of the latest defences.
[26] The second is that although Mr Tua originally sought orders striking out or staying the plaintiffs’ claims dated 16 June 2006 until after determination of Mr Tua’s counterclaim, the claim filed by Tuaman and Mr Pugh dated 25 June 2007 is a much more comprehensive document and one which – though Mr Tua has yet to plead to it or decide what stance he will take in relation to it – appears much more closely to comply with the pleading rules. It makes the circumstances leading up to the execution of the EMA, the terms of the document and the way in which the parties operated under it central to the dispute. Mr Tua’s counterclaim does likewise. It would accordingly appear to be inappropriate to strike out or stay the latest claim since that would deprive the plaintiffs of the opportunity to put their side of the case on what is a major issue between all parties. If the claims made concerning the conduct of Messrs Pugh and Barry of undue influence and like are to be made out, the Court’s view is that they should only be held to be made out after a proper assessment of all the available evidence.
Payment of Tuaman’s future legal expenses : “Mixed” funds
[27] For the reasons set out in the judgments of 20 November 2006 and 18 April
2007, the Court tentatively concluded that all parties and the Court might have an interest in ensuring that Tuaman is properly represented at the substantive hearing and invited Mr Toebes to provide certain material on which a decision in that respect might be made.
[28] Mr Toebes provided the material requested but Mr Molloy strongly objected to any order being made permitting Tuaman to use its funds to meet its legal expenses on the basis that the funds held on Tuaman’s behalf following the sale of
the Pakiri land and the Auckland apartment were “mixed funds” derived partly from funds received by Tuaman pursuant to the EMA and partly of Mr Tua’s own funds.
[29] At an early stage of this case, the Tuaman accounts were referred to a chartered accountant, Mr McLoughlin, to enable him to prepare draft accounts for Tuaman. He did that on three differing bases and one of the matters which will need to be dealt with after the substantive hearing is a recasting of those accounts in accordance with the Court’s determination so Mr McLoughlin can produce accounts for Tuaman which accurately reflect both the information he has had to date and the decisions made by the Court.
[30] On 9 July 2007 Mr Tua applied for an order that Mr McLoughlin identify what portion of the sums held on Tuaman’s behalf is outside the EMA and is the property of Mr Tua. As noted, Mr Molloy took the view that a R 185 notice was premature. That notwithstanding, in his detailed response to the request for particulars of the paragraph in Mr Tua’s counterclaim asserting the EMA made it possible for the plaintiffs to gain control of Mr Tua’s earnings not subject to the EMA and to which they had no rights and instead of holding them separately to take those earnings into Tuaman’s bank accounts, Mr Molloy filed several sets of comprehensive submissions to the effect that, were the Court to authorise Tuaman to pay its solicitors that would amount to the Court condoning or promoting a breach of trust. That was because the funds held on Tuaman’s behalf were mixed funds, part of which were impressed with a fiduciary obligation on Tuaman’s behalf to keep the funds separate for Mr Tua.
[31] Mr Toebes submitted that Tuaman had some $7.25m in its own name, it should have had $7.47m in its own name according to the McLoughlin accounts, and accordingly there was no “missing money”, no failure to account and no need to consider the question of equitable tracing because there were no mixed funds.
[32] The Court does not intend to traverse those submissions and counter- submissions in detail at this stage for the simple reason that if Mr McLoughlin certifies there are no funds held on Tuaman’s behalf at the present time which are outside the EMA and are Mr Tua’s own property, then that will obviously impact on
whether the order for payment of Tuaman’s legal expenses should be made. To the contrary, if Mr McLoughlin certifies that the funds held on Tuaman’s behalf do include a specified amount which is Mr Tua’s own money, that result, too, may impact on the outcome of Tuaman’s application for payment of its legal expenses.
[33] Therefore, all the Court intends to do at this stage of the matter is to request Mr McLoughlin to advise what, if any, part of the funds currently held on Tuaman’s behalf are outside the EMA and Mr Tua’s property. Once that information is to hand, the Court will decide the appropriate means of dealing with the application by Tuaman to pay the legal expenses it incurs in meeting a claim against it by someone who is beneficially entitled to half its shares.
Result
[34] In the result, the Court’s formal orders are:
a) Mr Tua’s application to strike out or stay the statement of claim dated
16 June 2006 and to strike out the statements of defence of Tuaman and Mr Pugh dated 17 January 2007 and 7 May 2007 is dismissed.
b)Within 21 days of delivery of this judgment, the trustees of the Baron and Lunar Trust are to file and serve a statement of defence to Mr Tua’s counterclaims.
c) Within 21 days of delivery of this judgment, Mr Tua is either to file and serve his statement of defence to the statement of claim of Tuaman and Mr Pugh dated 25 June 2007 or file such other application concerning that document as he considers appropriate.
d)The application by Tuaman for an order paying its future legal fees in connection with the substantive hearing of this claim is adjourned part-heard and Mr McLoughlin is asked to advise, as soon as practicable, what, if any, part of the funds held on Tuaman’s behalf are outside the EMA and Mr Tua’s property. Once that information is
received, a minute will be issued as to the future disposal of that application.
………………………………..
WILLIAMS J.
Solicitors:
Buddle Findlay (Justin Toebes) P O Box 2694 Wellington, for plaintiffs
(justin[email protected]m)
Kemp Solicitors (Luke Kemp), P O Box 600 Kumeu, for third defendant
Minter Ellison Rudd Watts (Zane G Kennedy) P O Box 3798 Auckland
(zane[email protected])
Copy for:
A P Molloy QC, P O Box 4338, Auckland, for third defendant
Tim Frampton, Case Officer, Auckland High Court
(Tim[email protected])
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