Tira v McLay
[2020] NZHC 2991
•12 November 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2020-404-000839
[2020] NZHC 2991
UNDER Companies Act 1993 IN THE MATTER OF
an application for Orders under s 174 of the Companies Act 1993 and Parts 32 and 33 of the High Court Rules
BETWEEN
GLENN NORMAN TIRA
Plaintiff
AND
DUNCAN BRUCE MCLAY
First Defendant
AND
DUNCAN BRUCE MCLAY, LYNN MCLAY and HARTS GAULD TRUSTEES LIMITED
Second Defendant
AND
SHOTCRETE AUCKLAND LIMITED (in
liquidation)
Third DefendantAND
WATERTITE SHOTCRETE LIMITED (in
liquidation) Fourth Defendant
Hearing: 21 July 2020 Appearances:
C T Patterson for the Plaintiff
R G Ewen & Z Mohammed for the First and Second Defendants B Pamatatau for the Third and Fourth Defendants
Judgment:
12 November 2020
JUDGMENT OF VAN BOHEMEN J [REASONS FOR DECISION MADE 21 JULY 2020]
This judgment was delivered by me on 12 November 2020 at 12.00 noon
Pursuant to Rule 11.5 of the High Court Rules
…………………………
Registrar/Deputy Registrar
TIRA v MCLAY [Reasons for decision made 21 July 2020] [2020] NZHC 2991
Introduction
[1] The first and second defendants, Duncan McLay and the trustees of the Outram Trust (Mr McLay, Lyn McLay (Mr McLay’s wife), and Harts Gauld Trustees Ltd), applied for orders discharging freezing and related orders and search and related orders made by Moore J on 11 June 2020 following a without notice application by the plaintiff, Glenn Tira.
[2] The grounds for the application were that Mr Tira had failed to disclose to the Court relevant information about the business relationship between himself and Mr McLay and about actions he had taken to seize and put to his own use assets of companies set up by Mr McLay and Mr Tira.
[3] As recorded in my minute dated 22 July 2020, at the conclusion of the hearing on 21 July 2020, I told counsel I was satisfied that if Moore J had had before him the evidence that had been before me, he would not have made the orders. I also said I was satisfied that it was not appropriate to renew the freezing and related orders that expired that day, and I ruled accordingly. I said I would issue a reasons judgment later.
[4] I also ruled that because the search and related orders had been executed and the material produced as a consequence was in the safe custody of the Court and a computer specialist, who had undertaken to keep confidential and not to disclose or use that information, I saw no need to make further orders with respect to the search and related orders.
[5] Mr Patterson, counsel for Mr Tira, said that his client accepted my decision not to renew the freezing and related orders and would not be appealing that decision. For that reason, he considered there was no need for me to issue a written judgment.
[6] Mr Ewan, counsel for the first and second defendants, requested a reasoned judgment in accordance with usual practice. He noted that the history of the application for the orders may be relevant to costs in the substantive proceeding.
[7] By memorandum dated 7 August 2020, Mr Patterson applied, in accordance with s 98 of the Evidence Act 2006, for permission to offer further evidence bearing
on questions canvassed at the hearing. Mr Ewen did not file any opposition to that application. I discuss the application later in this decision.
Background
[8] Until May 2020, Mr McLay and Mr Tira had been in business together for about 10 years. They were directors and shareholders of the third defendant, Shotcrete Auckland Ltd (Shotcrete), which specialised in spraying wet concrete, a technique used in the construction of swimming pools, retaining walls and various other applications. Fifty per cent of the shares of Shotcrete were owned by the Outram Trust. The remaining 50 per cent of the shares of Shotcrete were owned directly by Mr Tira.
[9] Mr McLay provided the initial capital for Shotcrete and managed the company’s finances, while Mr Tira conducted the operations of the company.
[10] Until May 2020, Mr McLay and Mr Tira each directly owned 50 per cent of the shares of the fourth defendant, Watertite Shotcrete Ltd (Watertite), which provided associated waterproofing services. Mr Tira had been the sole director of Watertite. As with Shotcrete, Mr McLay handled the finances of Watertite while Mr Tira carried out the operations of the company.
[11] In a statement of claim dated 8 June 2020, Mr Tira alleged that Mr McLay had devised a fraudulent scheme to take over Shotcrete and Watertite and to exclude Mr Tira from those companies. The statement of claim seeks orders under s 174 of the Companies Act 1993 valuing the shares of Shotcrete and Watertite and compensation of not less than $1.25 million.
Application for freezing and search orders
[12]By application dated 9 June 2020, Mr Tira sought:
(a)Freezing and disclosure orders against Mr McLay and the trustees of the Outram Trust on the grounds that Mr Tira had an arguable claim against Mr McLay personally and as trustee of the Outram Trust for not
less than $1.25 million, and there were good grounds to believe that Mr McLay and the trustees of the Outram Trust would abscond or dissipate their assets so as to prevent recovery by Mr Tira; and
(b)Orders permitting a supervising lawyer, Mr Eugene St John, an investigative consultant and a computer specialist, Mr Brent Whale, to enter the home of Mr and Mrs McLay and the premises of Concrete Floors Ltd, another company owned by Mr McLay, to search for evidence relating to the transfers of shareholdings of Shotcrete and Watertite and the removal of Mr Tira as a director of those companies.
Mr Tira’s affidavit in support
[13] In an affidavit sworn on 8 June 2020, Mr Tira said that on 4 May 2020 he had been removed as a director and shareholder of both Shotcrete and Watertite without his knowledge. Mr Tira also said that on 5 May 2020, Shotcrete and Watertite had been put into liquidation.
[14]In his affidavit, Mr Tira also referred to:
(a)Discussions dating from October 2019 between himself and Mr McLay regarding a put option by which Mr McLay proposed that he and Mr Tira would end their business relationship. According to Mr Tira, nothing had been resolved and no documents had been produced.
(b)His relationship with Shane Waaka, a former Shotcrete employee, who, according to Mr Tira, had advanced him funds to purchase methamphetamine for Mr Tira and others to take while driving overnight from Auckland to Christchurch in March 2020. Mr Tira alleged that Mr Waaka, who had since gone to Australia, had falsely claimed that he had not been repaid for the money advanced to Mr Tira.
(c)The cancellation of his company phone, company email account and company credit cards after he returned from the South Island following cancellation of the New Zealand Defence Force contract he had been
intended to perform for Shotcrete. According to Mr Tira, the contract had been cancelled because of the COVID-19 Level 4 lockdown.
(d)The appearance in his letterbox during April and May 2020 of various documents (the documents) which, Mr Tira said, were not served by process server or received by courier, and which comprised:
(i)A Put Option Notice dated 23 March 2020;
(ii)A Certificate of Non-Revocation of Power of Attorney dated 9 April 2020;
(iii)Deed Granting Security Interest in Shares dated 9 April 2020;
(iv)Term Loan Agreement dated 9 April 2020;
(v)Letter from Wynyard Wood, solicitors for Mr McLay and trustees of Outram Trust, dated 16 April 2020;
(vi)Letter from Wynyard Woods dated 2 May 2020; and
(vii)A Put Option and Shareholders Agreement (POSA) ostensibly signed by Mr Tira and witnessed by Mr Waaka.
Mr Tira denied personally signing the POSA and said he believed his signature had been forged because Mr Waaka had had access to his electronic signature.
(e)Mr Tira’s exclusion from the premises shared by Concrete Floors, Shotcrete and Watertite (the business premises) when Level 3 lockdown commenced in late April 2020.
(f)Events at the business premises on or about 12 May 2020 when Mr Tira and others had loaded Shotcrete and Watertite equipment onto company vehicles, which had been removed via an “exit point” that people
accompanying Mr Tira had “managed to make” after the Police had declined to intervene and security guards had sought to prevent the removal of the equipment. Mr Tira said the equipment had been taken to Black Power premises in Mangere.
(g)Mr Tira’s wish to complete contracts entered into by Shotcrete and Watertite and his discussions with the liquidator appointed for the companies regarding the equipment that had been removed from the business premises.
[15] Mr Tira also said that on 7 June 2020 he had offered the liquidator $400,000 plus GST to purchase the plant and equipment he had taken from the business premises. He said this offer had been accepted but that the agreement for sale and purchase had not been finalised at the date of his swearing the affidavit.
Justice Moore’s minute dated 11 June 2020
[16] In a minute dated 11 June 2020, Moore J granted the orders sought by Mr Tira on a without notice basis. Paragraph 7 of the freezing order provided that the order would have no effect after 1 July 2020 unless continued or renewed on that date. Paragraph 10 of the freezing order directed Mr McLay and the trustees of the Outram Trust to file and serve on Mr Tira an affidavit listing their assets in New Zealand.
[17]In his minute, Moore J summarised the allegations made by Mr Tira as follows:
[3] Mr Tira says that during the Level 4 COVID-19 lockdown a Put Option and Shareholders’ Agreement (“POSA”), dated 23 November 2019, was forged by the placement of a signature which purported to be, but was not, that of Mr Tira. Through the POSA, Mr McLay, or more specifically the Outram Trust (“the Trust”) acquired the right to require Mr Tira to purchase Mr McLay’s shares at the price of $1.25 million and if payment was not [made] within 14 days, then Mr Tira was deemed to have accepted vendor finance. The POSA also granted Mr McLay power of attorney to execute the necessary documents to give effect to the put option and vendor finance. The vendor finance was to be secured over Mr Tira’s shares in the company.
[4] Via the POSA, it is alleged Mr McLay purported to give notice requiring the purchase of shares, bound Mr Tira to finance and security agreements via a power of attorney, transferred all of Mr Tira’s shares to Mr McLay’s trust, removed Mr Tira as a director and then liquidated the companies. All this, it is alleged, was achieved without notice being given to
Mr Tira or Mr Tira having any knowledge of what it was he was purported to have bound himself to under the POSA.
[5] Indeed, according to Mr Tira, the first he learned that matters were awry was on 20 April 2020, the morning after New Zealand moved to Alert Level 3. Mr Tira returned to the offices situated in the yard of the companies to recommence his work. Mr McLay or someone acting under his instructions, summonsed the Police. At the Police’s request Mr Tira left the yard. The following day he returned to collect some of the companies’ equipment to complete a contract. Again the Police were called.
[18] Justice Moore recorded that, on the face of the evidence, he was satisfied that there was a good arguable case. There was evidence that Mr Tira had been excluded from the direct involvement in the operations of the company, and that there was also evidence that Mr McLay, or someone acting on Mr McLay’s behalf, had fraudulently taken Mr Tira’s shares, removed Mr Tira as a director and liquidated the companies. Justice Moore was satisfied there was prima facie evidence that Mr Tira should be compensated for the value of his shares.
[19] Justice Moore also stated that he was satisfied that there was a real and appreciable risk that assets may be removed or dealt with in a way that would frustrate any judgment. The evidence satisfied him that if Mr McLay, or any person acting on his instructions, received notice of Mr Tira’s application, there was a real risk that assets would be disposed of, removed or concealed.
Execution of orders and extension of freezing order
[20] By memorandum dated 23 June 2020, Mr St John provided a report to the Court on the execution of the search order on 15 June 2020. Annexed to Mr St John’s report was an inventory of property taken during the search.
[21] By memorandum dated 24 June 2020, Mr Patterson advised the Court that electronic information obtained during the search was being held by Mr Whale and that two boxes of paper documents had been delivered to the Registrar and addressed various other matters arising out of the search order. Mr Patterson also advised the Court that Mr Tira sought the extension of the freezing order which otherwise would lapse on 1 July 2020.
[22] By minute dated 1 July 2020, Gordon J extended the freezing order to 21 July 2020, the date set down for the hearing of the application by Mr McLay and the trustees of the Outram Trust to discharge the order.
Application by Mr McLay and trustees of Outram Trust to discharge freezing and search orders
[23] By application dated 25 June 2020, Mr McLay and the trustees of the Outram Trust applied to discharge or vary the freezing and related orders made by Moore J on the grounds that Mr Tira had failed to provide full disclosure of all material facts within his knowledge as required by r 32.2(3) of the High Court Rules 2016 when making an ex parte application.
[24] By amended application dated 3 July 2020, Mr McLay and the trustees of the Outram Trust extended the application for discharge to the search and related orders.
[25] Mr McLay and the Trustees said that, in particular, Mr Tira had failed to disclose that:
(a)At the time of applying for the freezing and search orders, lawyers for Mr Tira and for Mr McLay and the trustees had been negotiating with the liquidators to buy the business and assets of Shotcrete and Watertite;
(b)The liquidator had asked for the return of the assets of the companies that Mr Tira had taken unlawfully and used for his own commercial purposes; and
(c)Background correspondence and discussions leading up to the POSA, in particular a letter dated 2 September 2019 from Wynyard Wood in which Mr McLay put forward proposals to dissolve his business relationship with Mr Tira.
[26]The application also referred to Mr Tira’s use of methamphetamine.
[27] The application said the order to file and serve an affidavit of assets in New Zealand was without merit and unreasonable.
Mr McLay’s affidavit in support
[28] In his affidavit sworn on 25 June 2020, Mr McLay said neither he nor anyone else had forged Mr Tira’s signature and that the background to the forgery allegation was that since early 2019 his business relationship with Mr Tira had deteriorated to the point of no return.
[29] In his affidavit, Mr McLay discussed Mr Tira’s use of methamphetamine, which he believed to be the cause of Mr Tira’s unacceptable behaviour, and measures he said he had taken in early 2019 to try to improve the relationship with Mr Tira following discussions with Wynyard Wood. Mr McLay also discussed and annexed a copy of the letter dated 2 September 2019 from Wynyard Wood, which set out Mr McLay’s concerns about the behaviour of Mr Tira and his wife, Alexia Tira, and proposed a formal meeting with Mr Tira and his legal advisers and mediator to reach a solution that did not involve Mr McLay and Mr Tira being in business together.
[30] Mr McLay said Mr Tira contacted him on 6 September 2019 and was willing, in principle, to consider a contract and shareholders agreement for a buyout of Mr McLay’s shares for $1.25 million. According to Mr McLay, he and Mr Tira had met on 13 September 2019 and had discussed proposals suggested by Mr McLay. He also said that, on his instructions, Wynyard Wood had prepared a draft of the POSA which he had discussed with Mr Tira on 19 September 2019. Mr McLay said a revised draft of the POSA had then been prepared by Wynyard Wood to reflect minor changes suggested by Mr Tira.
[31] Mr McLay said Mr Tira signed the POSA on 24 September 2019 at the business premises after they had had a private meeting in the lunchroom, and that Mr Waaka had witnessed Mr Tira’s signature in the office of Mr Tira and Mr Waaka. Mr McLay also said that on 2 October 2019, Mr Tira had initialled amendments to the POSA that had been made to the version signed on 24 September 2019. The amendments corrected the name of Mr McLay’s family trust, namely the Outram Trust. Mr McLay
annexed, as exhibits, copies of both versions of the POSA as apparently signed and initialled by Mr Tira.
[32] Mr McLay said that on 25 March 2020, he emailed Mr Tira a notice dated 23 March 2020 exercising the put option in the POSA and left a copy of the notice on Mr Tira’s desk. Mr McLay also said that the copy he placed on Mr Tira’s desk was not there the following day. Mr McLay annexed, as an exhibit, a copy of his email dated 25 March 2020 which referred to a telephone conversation with Mr Tira that day and stated:
As discussed this morning attached is a copy of notice to action my Put option if you could email back to confirm you have received this and will also place a copy on your desk.
[33] Mr McLay said that, on 28 March 2020,1 he handed Mr Tira another copy of the notice exercising the put option when Mr Tira visited Mr McLay’s home that day. According to Mr McLay, Mr Tira asked questions about what would happen if Mr Tira did not buy out Mr McLay’s shares for $1.25 million as agreed.
[34] Mr McLay discussed other interactions between himself and Mr Tira including an incident at the business premises on 4 May 2020 when, according to Mr McLay, Mr Tira and associates had damaged security cameras, loaded equipment onto company vehicles and had smashed their way through the fence in order to exit the business premises. In so doing, they had torn down a section of the fence, taken out a plinth supplying power to the business premises and damaged three cars parked in the vicinity. Mr McLay said the Police had subsequently attended the premises.
[35] Mr McLay also discussed various communications he, Ms McLay, and others had with Mr Tira which, according to Mr McLay, indicated that Mr Tira was under the influence of methamphetamine.
[36] Mr McLay said he and the trustees did not want to disclose their assets because they feared Mr Tira or people associated with him would act against those assets if they were identified.
1 In his affidavit sworn on 14 July 2020, Mr Tira amended this date to 29 March 2020.
Other evidence
[37] A number of other affidavits were filed in support of or in opposition to the application to discharge the freezing order. For present purposes, it is sufficient to note the following.
Affidavit of Ms McLay
[38] In an affidavit sworn on 29 June 2020, Ms McLay said that Mr Waaka had contacted her on or around 31 March 2020. Ms McLay referred to various text message exchanges she had had with Mr Waaka whom, she said, had been staying with his father at that time because he was in fear of Mr Tira. Ms McLay set out in her affidavit, and annexed as an exhibit, an exchange of text messages with Mr Waaka on 5 April 2020. In that exchange, Ms McLay forwarded to Mr Waaka a text message she said she had received from Mr Tira in which threatening and uncomplimentary remarks were made about various people, including Mr Waaka. According to Ms McLay, Mr Waaka replied:
Could it all be over the contract I witnessed the signing of between Duncan and Glen? How reputable is that document if I go missing?
Affidavit of liquidator, Grant Reynolds
[39] In an affidavit sworn on 29 June 2020, Mr Reynolds said he was appointed liquidator for both Shotcrete and Watertite on 5 May 2020. Mr Reynolds said that, at liquidation, with the exception of three vehicles, all of the fixed assets of significance of the companies were in the possession of Mr Tira. Mr Reynolds said he had reported Mr Tira’s taking of company assets to the Police.
[40] Mr Reynolds also said he had had communications with Mr Tira and Mr Tira’s solicitors about the return of the assets, and with Mr Tira and Mr Tira’s counsel about Mr Tira’s interest in purchasing the assets or the companies as going concerns. This included the offer made on 7 June 2020 on behalf of Mr Tira to purchase the plant and equipment of Shotcrete and Watertite for $400,000 plus GST.
[41] Mr Reynolds said in his affidavit that he had consulted Mr McLay who was not opposed to accepting the offer but that no final agreement had been reached
because of proposals by Mr Tira about how the agreement should be structured. He also noted that Mr Tira continued to use the assets of Shotcrete and Watertite without his authority as liquidator.
Further affidavit of Mr Tira
[42] In an affidavit sworn on 6 July 2020, Mr Tira said he had never seen and did not believe he had ever received the Wynyard Wood letter of 2 September 2019. Mr Tira agreed that he had a conversation with Mr McLay on 6 September 2019 where they had discussed Mr Tira buying out Mr McLay for $1.25 million, but he said that Mr McLay did not refer to the Wynyard Wood letter in that conversation.
[43] Mr Tira also said he did not recall meeting Mr McLay on 19 September 2019, denied signing the POSA on 24 September 2020 and said that Mr Waaka had not witnessed his signing the POSA. Mr Tira also denied that he had signed amendments to the POSA on 2 October 2019.
[44] Mr Tira also said he did not receive Mr McLay’s email of 25 March 2020 because he had no access to email and that he did not receive a copy of the POSA on his desk. Mr Tira agreed he was at the McLays’ home address on 29 March 2020 but denied that he was handed a copy of the POSA while there.
[45] Mr Tira said Mr McLay’s accusations concerning events at the business premises on 4 May 2020 were false, but he agreed that he and others loaded tools onto trucks over a seven-hour period and did not deny that the vehicles exited the premises via a hole his men had made in the fence, although he admitted damage to only one vehicle and denied taking out the power plinth.
Further affidavits of Mr McLay
[46]In an affidavit sworn on 14 July 2020, Mr McLay:
(a)Exhibited a screenshot of Mr Tira’s email inbox showing receipt of an email from Ms Lorna Davis of Wynyard Wood on 2 September 2019 forwarding a letter from Mr Richard Osborne of Wynyard Wood;
(b)Exhibited an exchange of text messages that he said was between himself and Mr Tira on 18 September 2019, and in which the parties to the exchange had agreed to meet at 7 am on 19 September 2019;
(c)Exhibited copies of text messages he sent to Mr Tira on 18 March 2020 and 28 March 2020, in which Mr McLay referred specifically to his intention to present the put option to Mr Tira and Mr McLay’s wish to discuss the put option with Mr Tira; and
(d)Said Mr Tira had access to his office email account until 5 April 2020, when all passwords were changed.
[47] In an affidavit sworn on 16 July 2020, Mr McLay said that, on his instructions Wynyard Wood had sought a report from an Australian handwriting expert, Dr Steven Strach, in response to Mr Tira’s allegations that his signatures and initials on the POSA had been forged. Mr McLay exhibited to this affidavit:
(a)A copy of Wynyard Wood’s letter dated 3 July 2020 to Dr Strach, in which Dr Starch was asked for his opinion about whether Mr Tira’s signatures on the POSA had been forged. In their letter, Wynyard Wood said they had been unable to find an original copy of the POSA but sent Dr Strach a colour copy of the document as amended on 2 October 2019 to correct the name of the Outram Trust. The Wynard Wood letter stated that 32 pages of original signatures of Mr Tira were also enclosed.
(b)A letter dated 15 July 2020 from Dr Strach, in which Dr Strach explained that because of time constraints, including delays caused by COVID-19 measures in Australia, he had focused on three of the 11 questioned signatures and initials on the POSA, namely three ink initials made by a ballpoint pen. Dr Stach’s conclusion was that there was strong support for the conclusion that each of the three sets of initials had been written by the writer of the specimen initials and signatures, namely Mr Tira, rather than the alternative proposition that the initials were not written by that person.
Submissions of counsel
[48] Mr Ewen, counsel for Mr McLay and the trustees of the Outram Trust, said that there had been no full and proper disclosure by Mr Tira as required by rr 32.2(3) and 32.5(4) of the High Court Rules 2016.
[49] Mr Ewen pointed to the failure to disclose the series of efforts by Mr McLay to reach an agreed parting of ways with Mr Tira, as evidenced, in particular, by the Wynyard Wood letter of 2 September 2019, the signing of the POSA on 24 September 2019 and its amendment on 2 October 2019. He referred to the report from Dr Strach which, he said, refuted Mr Tira’s claims that his signatures had been forged.
[50] Mr Ewen submitted that if the Court had been given this background, an ex parte order would never have been made.
[51] Mr Ewen said that Mr Tira had failed to provide any evidence of a risk of dissipation of assets and said there had never been any real risk of dissipation because Mr McLay was operating a family business in Auckland with on-going contracts and developments, as Mr Tira well knew. He also said it was unreasonable to require Mr McLay and the trustees to provide a list of assets in such circumstances.
[52] Mr Ewen also said Mr Tira had failed to provide any evidence of his financial stability when applying for the freezing and search orders and referred to Automatic Parking Coupons Ltd v Time Ticket International Ltd, where Tipping J had refused to continue a Mareva injunction because there appeared to have been a selective presentation of material when the ex parte order was obtained and because the plaintiff had not given any financial information to back the possible continuation of the order.2
[53] Mr Ewen acknowledged that the Court may consider it of no benefit to discharge the search order if no practical consequences ensue. However, he noted that in Lock International plc v Beswick, Hoffman J had discharged an Anton Piller order,
2 Automatic Parking Coupons Ltd v Time Ticket International Ltd (1996) 10 PRNZ 538 (HC), at 541.
which he considered should never have been made because of inadequate disclosure, in order to make it clear that no prima facie case of dishonesty had been shown.3
[54] Mr Patterson, counsel for Mr Tira, said that it was not disputed that the relationship between Mr McLay and Mr Tira had broken down irretrievably or that Mr McLay wanted to terminate the relationship. However, Mr Tira disputed Mr McLay’s account of events after Mr McLay had indicated in October 2019 an interest in selling his shares to Mr Tira.
[55] Mr Patterson admitted that the Wynyard Wood letter of 2 September 2019 was relevant but said that it was for the defendants to prove that Mr Tira had read it. In his written submissions, Mr Patterson said it was arguable that Mr Tira had never received the letter and raised questions about the authenticity of the screenshot exhibited to Mr McLay’s affidavit of 14 July 2020. However, in oral submissions, Mr Patterson accepted that the screenshot established that the email attaching the letter had been sent to Mr Tira’s email address.
[56] Mr Patterson also questioned the authenticity of the text message exchange of 18 September 2019 but submitted that, in any event, the exchange was more consistent with Mr Tira’s account of his discussions with Mr McLay. Mr Patterson did not address the text messages Mr McLay sent to Mr Tira on 18 March 2020 and 28 March 2020, which refer specifically to the put option. Mr Patterson noted that Dr Strach’s report had not been based on an original version of the POSA and invited the Court to infer that there was something untoward in the inability of Mr McLay to produce the original document.
[57] Mr Patterson said that while Mr Tira denied signing the POSA, even if he did, he could amend his pleadings and still establish a strong arguable case against Mr McLay and the trustees of the Outram Trust based on a failure to comply with the requirements of the POSA.
3 Lock International plc v Beswick [1989] WLR 1268 (Ch D) at 1285.
[58] Mr Patterson accepted that Mr Tira had an onus to establish a risk of dissipation of assets but submitted that this had been adequately discharged by the evidence of the steps Mr McLay had taken in execution of the POSA and related arrangements.
[59] In his memorandum dated 7 August 2020, Mr Patterson sought permission to file an affidavit sworn by Mr Waaka on 7 August 2020, in which Mr Waaka, who had been residing in Australia, said that the document Mr McLay had asked him to sign and fill out the witness details for did not have any signatures on the page Mr Waaka signed. Mr Patterson submitted that Mr Waaka’s affidavit was the best evidence of whether Mr Tira signed the POSA. Mr Patterson made it clear that in putting forward this evidence he was not seeking to extend the freezing order.
[60] Mr Pamatatau, counsel for the liquidator of Shotcrete and Watertite, said the liquidator saw no reason for the orders to continue to apply to the companies in liquidation but would abide the decision of the Court.
Analysis
Mr Waaka’s affidavit
[61]Section 98 of the Evidence Act 2006 provides, in relevant part:
(1)In any proceeding, a party may not offer further evidence after closing that party’s case, except with the permission of the Judge.
(2)In a civil proceeding, the Judge may not grant permission under subsection (1) if any unfairness caused to any other party by the granting of permission cannot be remedied by an adjournment or an award of costs, or both.
…
[62]Under s 98(5), in a civil proceeding a judge may grant permission under subs
(1) at any time until after the judgment is delivered.
[63] I am satisfied that no unfairness that cannot be remedied by costs will result to Mr McLay and the trustees if I grant permission for Mr Waaka’s affidavit to be admitted in evidence. Accordingly, I have read and taken in consideration that
affidavit. For the reasons set out below, I do not consider that Mr Waaka’s affidavit makes any material difference to my decision.
Did Mr Tira discharge his obligations under r 32.2(3) of the High Court Rules?
[64]Rule 32.2(3) of the High Court Rules provides:
(3)An applicant for a freezing order without notice to a respondent must fully and frankly disclose to the court all material facts, including—
(a)any possible defences known to the applicant;
(b)information casting doubt on the applicant’s ability to discharge the obligation created by the undertaking as to damages.
[65] I am satisfied that the evidence establishes that, when applying for the freezing and search orders, Mr Tira failed to discharge the obligation to disclose all material facts in two significant respects:
(a)He failed to disclose the true extent of the previous discussions with Mr McLay regarding Mr McLay’s wish to sever their business relationship, including discussions regarding the conclusion of the POSA; and
(b)He failed to disclose that he had forcibly seized most of the assets of Shotcrete and Watertite, had put the assets to his own use and had failed to return the assets despite the request for their return by the liquidator of the companies.
[66] I am satisfied that, notwithstanding the evidence in Mr Waaka’s affidavit, it is more likely than not that Mr Tira signed the POSA in September 2019. Although neither Mr Tira nor Mr McLay nor Mr Waaka were cross examined on their affidavits, I reach that conclusion on the basis of the following:
(a)Mr Tira’s denial of having received or seen the Wynyard Wood letter of 2 September 2019 lacks credibility. As Mr Patterson acknowledged, the screenshot of Mr Tira’s email account establishes an email forwarding the letter was sent to that account that day. Given that
acknowledgement, I consider it more likely than not that Mr Tira read the letter and was aware of the proposals in it.
(b)Despite Mr Tira’s denials of having seen or signed the POSA, I do not accept that Mr Tira failed to receive the email Mr McLay sent on 25 March 2020 giving notice of the exercise of the put option; that he failed to receive and read the copy of the notice left on his desk as indicated in Mr McLay’s email of 25 March 2020; or that he failed to receive the further copy of the notice that Mr McLay said he handed to Mr Tira on 29 March 2020 at the McLay’s home, even though Mr Tira admits he was present at the home that day. Notwithstanding Mr Tira’s denials, I consider it much more likely that he received those documents than Mr Tira’s counter-narrative of having been the victim of an elaborate scheme, involving the preparation of solicitors’ letters and formal agreement, in order to deprive him of his shareholding in Shotcrete and Watertite.
(c)I consider Mr Tira was either deliberately or inadvertently inaccurate in his assertion that his email accounts and phone had been cut off after he returned from the South Island in late March 2020 following the COVID-19 induced cancellation of the Defence Force contract. I consider Mr McLay’s account that all passwords to work email accounts were changed on 5 April 2020 after the companies were put into liquidation to be more likely to be accurate.
(d)Given the above considerations, Mr Tira’s assertions that his signatures and initials on the POSA were forged lack credibility, particularly when, in his affidavit of 8 June 2020, he sought to place responsibility for the forgery on Mr Waaka, whose affidavit his counsel then said supported his assertion that he did not sign the POSA. Mr Waaka’s affidavit stands in some contrast with the exchange of text messages exhibited to Ms McLay’s affidavit.
(e)Dr Strach’s report casts further serious doubt on the credibility of Mr Tira’s claims that his signatures and initials on the POSA were forged. Dr Strach’s analysis was based on three original ink initials, not electronic signatures which Mr Tira said were the basis of the alleged forgery. Dr Strach’s conclusion was clear: there was strong support for the conclusion that the initials were those of Mr Tira.
[67] My doubts as to Mr Tira’s credibility are reinforced by Mr Tira’s evidence about his seizure of the plant and equipment of Shotcrete and Watertite, which I accept took place on 4 May 2020, the day before the companies were put into liquidation, and not on 12 May 2020 as Mr Tira said in his affidavit of 8 June 2020.
[68] Mr Tira’s affidavit of 8 June 2020 conveyed the impression that he had been responding to intimidatory behaviour on the part of Mr McLay and security guards that had come to the business premises and that he and the people with him had been forced to depart the premises through an “exit point” they had made because their egress from the premises had been unreasonably denied.
[69] I am satisfied, however, from the affidavits of Mr McLay and Mr Reynolds that Mr Tira acted unilaterally in seizing plant and equipment that were assets of Shotcrete and Watertite and over which he had no right of possession. I am also satisfied that Mr Tira acted destructively in forcing an exit through the fence, thereby causing damage to the property of others.
[70] In taking possession of the plant and equipment, Mr Tira had taken possession of most of the assets of Shotcrete and Watertite, as confirmed by Mr Reynolds’ affidavit. In doing so, Mr Tira removed any real risk of dissipation of the assets of those companies. Mr Tira would also have been aware from his close engagement with Mr McLay over the preceding 10 years that there was little risk of Mr McLay and the trustees of the Outram Trust dissipating other assets so as to make them ‘judgment proof’ in the sense described by Henry J in Tranquil Holdings Ltd v Hudson.4
4 Tranquil Holdings Ltd v Hudson (1987) 2 PRNZ 551 (HC) at 552.
[71] I am satisfied that if these matters had been properly disclosed at the time of the application, Moore J would have been unlikely to have:
(a)Concluded that:
(i)Mr Tira had a good arguable case based on evidence of Mr Tira’s exclusion from the operations of Shotcrete and Watertite, and of Mr McLay or someone acting on his behalf fraudulently taking his shares, removing him as a director, and liquidating the companies; or that
(ii)There was a real and appreciable risk that assets may be removed or dealt with in a way that would frustrate any judgment; and
(b)Granted the freezing and related orders and the search and related orders on a without notice basis.
[72] Mr Patterson’s submissions about Mr McLay’s alleged non-performance of the POSA do not bear on these conclusions. Non-performance of the POSA was not the basis on which Mr Tira sought the freezing and search orders.
[73] For these reasons, I declined to extend the freezing and related orders beyond 21 July 2020 when they ceased to have effect. For the avoidance of doubt, I record that Mr McLay and the trustees are not required to provide the affidavit of assets directed in para 10 of the freezing order because I am satisfied that the order would not have been made had there been the requisite disclosure.
[74] I saw no practical purpose, however, in discharging the search and related orders given that those orders had been executed and that the information produced by the search had been filed in court or was in the custody of the computer specialist who has provide an undertaking to keep the information confidential and not to disclose or use the information except as directed by the Court.
Costs
[75] As the successful parties, the defendants are entitled to costs on a 2B basis. If counsel cannot agree on costs, counsel for the defendants may submit memoranda of no more than four pages by 3 December 2020. Counsel for Mr Tira may reply by memorandum of no more than four pages by 17 December 2020.
Next steps
[76] In his memorandum of 7 August 2020, Mr Patterson requested that I make the directions sought in his memorandum of 24 June 2020 for inspection of the yield produced by the search, with an adjustment of dates to take account of the date of judgment.
[77] I do not consider that I should make directions on those questions in this decision. Rather, I direct that the proceeding be called in the duty list in the week of 30 November 2020 and that counsel file and serve in advance a memorandum, or memoranda if they cannot agree, on next steps, including inspection.
G J van Bohemen J
Solicitors/Counsel: Glaister Ennor, Auckland Wynyard Wood, Auckland
Malcolm Whitlock, Auckland C T Patterson, Auckland
B Pamatatau, Auckland
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