Walker v Forbes

[2017] NZHC 1025

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2012-409-2486 [2017] NZHC 1025

UNDER

the Companies Act 1993

IN THE MATTER

of the liquidation of Property Ventures Limited (in receivership and in liquidation)

BETWEEN

ROBERT BRUCE WALKER AND JOHN MARSHALL SCUTTER

First Plaintiffs

PROPERTY VENTURES LIMITED (in liquidation)

Second Plaintiff

FIVE MILE HOLDINGS LIMITED (in receivership and in liquidation) Third Plaintiff

CASHEL VENTURES LIMITED Fourth Plaintiff

TAY VENTURES LIMITED

(in receivership and in liquidation) Fifth Plaintiff

LIVINGSPACE PROPERTIES LIMITED (in receivership and in liquidation)

Sixth Plaintiff

BEECHNEST VENTURES LIMITED (in liquidation)

Seventh Plaintiff

TUAM VENTURES LIMITED

(in receivership and in liquidation) Eighth Plaintiff

CASTLE STREET VENTURES LIMITED

(in receivership and in liquidation) Ninth Plaintiff

LICHFIELD VENTURES LIMITED

WALKER v FORBES [2017] NZHC 1025 [18 May 2017]

(in receivership and in liquidation)

Tenth Plaintiff

92 LICHFIELD LIMITED

(in receivership and in liquidation) Eleventh Plaintiff

ST ASAPH VENTURES LIMITED (in liquidation)

Twelfth Plaintiff

MONTECRISTO CONSTRUCTION COMPANY LIMITED

(in liquidation) Thirteenth Plaintiff

AND

AUSTIN JOHN FORBES First Defendant

ALISTER SPEDDING JOHNSTON Second Defendant

GORDON LEWIS HANSEN Third Defendant

DAVID IAN HENDERSON (a bankrupt) Fourth Defendant

ADOLF de ROOS Fifth Defendant

DANIEL JAMES GODDEN Sixth Defendant

PwC (sued as a firm) Seventh Defendant

VERO LIABILITY INSURANCE Third Party

Hearing	10 May 2017
Appearances:	JBM Smith QC and N R Williams for Plaintiffs B D Gray QC and R Stewart for Seventh Defendant
Judgment:	18 May 2017

[JUDGMENT OF LANG J

[on application by seventh defendant for further and better particulars]

This judgment was delivered by me on 18 May 2017 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors / Counsel:

Justin Smith QC, Wellington Bruce Gray QC, Auckland Meredith Connell, Auckland Fee Langstone, Auckland

[1]      Price Waterhouse Coopers (PWC), the seventh defendant in this proceeding, seeks further particulars of several aspects of the current version of the consolidated statement of claim.

Relevant principles

[2]      There  is  no  dispute  regarding  the  principles  to  be  applied.    In  short,  a pleading must be sufficiently particularised to inform the opposing party of the nature of the case it is required to meet and to prevent the opposing party from being taken by surprise.  The evidence should be sufficient to enable the opposing party to

know the type of evidence it will need to prepare and to limit and define the issues.1

The particulars sought

The manner in which PWC ought to have qualified its opinion in respect of the 2006 and 2007 financial statements

[3]      PWC was engaged by Property Ventures Limited and entities associated with it (PVL) to provide audit reports in respect of the financial statements produced by the PVL group.  PWC produced audit reports in respect of the years ended 31 March

2006 and 2007.  It had begun the audit process in relation to the 2008 financial year, but this was never completed because the PVL group collapsed before the report in respect of that year had been completed.

[4]      The consolidated statement of claim contains numerous pleadings alleging that PWC ought to have qualified the opinions it gave in the audit reports produced in respect of the 2006 and 2007 financial statements.  PWC contends that these do not advise it sufficiently of the nature of the qualifications it allegedly should have placed on its opinions.   In particular, PWC says  it does not know whether the plaintiffs are alleging it should have stated that the financial statements did not show a true and fair view of the financial position of the company, or whether it should have qualified its opinion by saying that it was unable to reach a view in relation to

that issue because of the matters pleaded in the statement of claim.

1      Commerce Commission v Qantas Airways Ltd (1992) 5 PRNZ 227 (HC) at 230.

[5]      On my reading of the consolidated statement of claim, the plaintiffs do not allege that PWC ought to have qualified its opinion by saying that the financial statements did not show a true and fair view of the financial position of the PVL group.  Rather, they allege that PWC ought to have stated it was unable to reach a view regarding this issue because of the various deficiencies pleaded in the statement of claim.  Mr Smith confirmed during the hearing that this was the case.  I took Mr Gray to be satisfied with that response.

Which creditors would have taken steps to appoint receivers and/or realise assets if the audit opinions had been appropriately qualified?

[6]      The statement of claim alleges that, if PWC had appropriately qualified its opinions in respect of the 2006 and 2007 accounts, creditors would have taken steps much earlier to appoint receivers and/or realise properties that were subject to securities.  PWC seeks clarification regarding the identity of the creditors to whom these pleadings refer.

[7]      The wording used in the pleadings makes it clear that they refer to secured creditors.  Only secured creditors had the ability to appoint receivers and/or realise assets.  Mr Smith advised me from the bar that Dominion Finance Limited and the Hanover group of companies were PVL’s principal secured creditors.  There were, however, others.

[8]      I  do  not  consider  it  necessary  for  the  plaintiffs  to  nominate  particular creditors who would have taken steps to appoint receivers or realise securities earlier if PWC had qualified their audit opinions in a significant way.   It is open to the plaintiffs to allege that some or all of PVL’s secured creditors would have acted in that way if PWC had produced qualified audit opinions.  PWC knows the identity of the secured creditors.  There is no prospect that PWC will be taken by surprise at trial if the plaintiffs are not required to particularise this aspect of their claim further.

When would secured creditors have appointed receivers and/or realised securities?

[9]      As Mr Smith points out, it is difficult for the plaintiffs to particularise this pleading further given the fact that the scenario in question never occurred.  I accept

his submission that the plaintiffs are entitled to proceed on the basis that secured creditors would have taken steps to appoint receivers and/or realise securities within a reasonable time after receiving appropriately qualified audit opinions in respect of the 2006 and/or 2007 financial statements.  It will be for the Court to determine the point at which this would have occurred if it is satisfied that the audit opinions needed to be qualified in the manner pleaded by the plaintiffs.

[10]     I  anticipate  that  the  plaintiffs’ evidence  will  set  out  the  losses  allegedly suffered as a result of assets not being realised or receivers appointed within a reasonable time after the release of both the 2006 and 2007 audit reports.

[11]     I do not consider the pleadings need to be refined further to address this issue.

When would PVL have been wound up if PWC had appropriately qualified its audit opinions?

[12]     I do not consider this issue needs to be explored further because the date upon which the PVL group would have been placed in liquidation is irrelevant to the issue for decision at trial.  The issue will be when creditors would have acted so as to ensure that they maximised the value to be obtained for secured assets.   Secured creditors are entitled to act on their securities well before a company is placed in liquidation.    The  date  upon  which  the  PVL group  would  have  been  placed  in liquidation  if  appropriately qualified  audit  opinions  had  been  given  is  therefore immaterial to that issue.  I am therefore not prepared to require further particulars to be provided in relation to the likely date upon which the PVL group would have been wound up.

Result

[13]     I have not made any of the orders sought by PWC.   For that reason the application for further particulars is dismissed.

Costs

[14]     The plaintiffs have succeeded in relation to each of the matters in respect of which PWC sought further particulars.  For that reason my tentative view is that the

plaintiffs are entitled to an award of costs on a Category 3B basis.  I do not consider the complexity of the present application was such that Band C is justified.  If either party has a different view regarding the incidence and/or quantum of costs, counsel for the party seeking costs should file a concise memorandum within 14 days and I

will give directions for the filing of memoranda in response and reply.

Lang J