West Harbour Holdings Limited v Waipareira Investments Limited
[2013] NZHC 402
•5 March 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2011-404-005801 [2013] NZHC 402
BETWEEN WEST HARBOUR HOLDINGS LIMITED Plaintiff
ANDWAIPAREIRA INVESTMENTS LIMITED First Defendant
ANDMARINA RESORT LIMITED Second Defendant
Hearing: 5 March 2013
Appearances: D Smyth for Plaintiff
P J Dale for First Defendant
Judgment: 5 March 2013
ORAL JUDGMENT OF VENNING J
Solicitors: Stephen McDonald, PO Box 28624, Auckland
Grove Darlow & Partners, PO Box 2882, Auckland
Copy to: D Smyth, PO Box 105-270, Auckland
P J Dale, PO Box 130, Shortland Street, Auckland
WEST HARBOUR HOLDINGS LIMITED V WAIPAREIRA INVESTMENTS LIMITED HC AK CIV-2011-
404-005801 [5 March 2013]
[1] In a judgment delivered on 28 November 2012 this Court directed the plaintiff West Harbour Holdings Ltd (West Harbour) to provide security for costs in the sum of $75,000 by 18 January 2013 by paying that sum to the Registrar. The Court ordered that in the event West Harbour failed to provide security its claim would be stayed and it also reserved leave for Waipareira Investments Ltd (Waipareira) to apply to strike-out the plaintiff ’s claim and to enter judgment on its counterclaim.
[2] West Harbour failed to provide security by 18 January 2013. Instead it applied for an order extending the time for compliance or, in the alternative, reviewing and varying the order for security to allow security to be given or satisfied other than by requiring payment of $75,000 cash to the Registrar.
[3] By way of response Waipareira applied to strike-out West Harbour’s claim and seeks judgment on its counterclaim. I note that no notice of opposition was filed to that application.
[4] There has been a relevant practical development. In the last day Damien Grant and Kirsten Smith were appointed on a shareholders’ resolution as liquidators of West Harbour. Mr Smyth advised the Court of that by way of memorandum dated
5 March 2013.
[5] Mr Smyth appeared in support of West Harbour’s position this morning. Of course given the liquidation he does not have formal instructions from that company anymore but conveyed to the Court the liquidators’ position. Mr Grant and his co- liquidator are present. Mr Grant also supported the position advanced by Mr Smyth, which was that the liquidators have not had the opportunity to fully consider the position and seek time to consider what if any steps they may wish to take. Mr Smyth also argued strongly that it may be, depending on the outcome of proceedings between West Harbour and Mr Tamihere which are for hearing later this month, that funds would be available to West Harbour.
[6] I have carefully considered the application for adjournment for time for the liquidators to consider their position. Normally the Court would be sympathetic to such a request. However, in relation to West Harbour’s application to extend the time for payment and/or to review or vary the existing order the liquidators can be in no better position than that of the company. I have had the benefit of full submissions from counsel in relation to West Harbour’s application, both for and against and of course I am aware of the background to this proceeding and am familiar with it because of the previous hearing.
[7] I intend to deal with West Harbour’s application as it is before the Court to
vary or extend the time for payment. I decline the application for adjournment.
Jurisdiction for the application by West Harbour
[8] The order the Court made was on an interlocutory application. The order was perfected and sealed. In the circumstances, and subject always to the inherent jurisdiction of the Court, the Rules do not provide a basis for orders for the extension of time or the variation sought by West Harbour. Generally a party’s remedy in relation to a perfected interlocutory order is to apply for a review, (under r 7.49), a variation if the circumstances change (r 7.50), for rescission if fraudulently or improperly obtained, (r 7.51), or to appeal.
[9] In the present case r 7.49 does not apply. Any application for review under that rule must be made within five working days after the order was made or decision given. Rule 7.50 only applies to orders or directions relating to the management of a proceeding. The order for security for costs is not of that nature. Nor does r 7.51 apply. The order was not obtained fraudulently or improperly.
[10] In his submissions Mr Smyth referred to the Commentary to r 5.45 to the effect the Court has inherent jurisdiction to review and set aside or vary an order for security even when made by consent where there has been a significant change in material circumstances or where the interests of justice so require: Cargill New Zealand Ltd v Palmerston North Wool Co Ltd; Stead v The ship Ocean Quest of Arne; O’Malley v Garden City Helicopters.[1]
[1] Cargill New Zealand Ltd v Palmerston North Wool Co Ltd (1997) 11 PRNZ 52; Stead v The ship Ocean Quest of Arne [1995] 3 NZLR 415; O’Malley v Garden City Helicopters (1994) 8
PRNZ 182.
[11] Even though rr 7.49-7.51 prescribe the limits of review or variation of interlocutory orders short of an appeal, where the order is regarded as of an ongoing nature or obligation, as in the case of an injunction, the Court has accepted it has inherent jurisdiction to rescind or vary the order should circumstances change so that the order of the interests of justice require it. It appears that the orders setting aside or varying orders for security have been made in the exercise of the Court’s jurisdiction on a similar basis.
[12] However, the inherent jurisdiction of the Court does not extend to the review of interlocutory orders even on the ground of error on the face of the order nor on the ground of discovery of fresh evidence: Re Barrell Enterprises; and Foodtown Supermarkets Ltd v Tse.[2]
[2] Re Barrell Enterprises [1972] 3 All ER 631; Foodtown Supermarkets Ltd v Tse (1987) 2 PRNZ
545.
[13] What is required is a significant change in the material circumstances or that the interests of justice so require it. In Cargill Smellie J increased the order for security which had been agreed by consent because of the change in circumstances, particularly the increase in the damages claimed from $530,000 to $1.3 million and the need to call evidence from witnesses in China.
[14] In Stead Thomas J held the circumstances had changed significantly because of the amendments to the plaintiff’s pleading, including an alternative basis of seeking damages and expanded causes of action.
[15] In O’Malley v Garden City Helicopters Ltd Tipping J was prepared to review the order for security where, since the order had been made Mr O’Malley had applied for and been granted legal aid. Again, there had been a material change in the circumstances. In Tasman Charters Inc (in liq) v Kamphuis[3] Associate Judge
Abbott referred to and applied the above principles.
[3] Tasman Charters Inc (in liq) v Kamphuis HC Auckland CIV-2003-404-001642, 13 February
2006; [2006] BCL 249.
[16] The difficulty for West Harbour in the present case is that there has not been any such material change in circumstances since the order for security. No steps were taken on this file after the order was made until the application to extend the time for payment and/or variation.
[17] West Harbour’s application is supported by the affidavit evidence of Mr Brent Ivil and Daniel Ivil. Mr Brent Ivil refers to an affidavit of Mr Tamihere, a director of Waipareira in separate proceedings between West Harbour and Mr Tamihere. Mr Tamihere accepts that he owes $290,000 either to Mr Ivil or to interests associated with him. However, he is concerned at the liquidity of those interests and has paid that sum of money into a solicitor’s trust account. That is the matter that is for hearing later this month. I record Mr Smyth’s submission to the Court that the claim was for more than the $290,000 and his confirmation that while the claim is by West Harbour, West Harbour is claiming as a bare trustee. Nevertheless, it is Mr Ivil’s evidence that the beneficiaries of the relevant trust authorise the release of $25,000 to West Harbour to enable it to meet the security. I refer to the balance $50,000 shortly.
[18] However, the relationship between Mr Tamihere and Mr Ivil and their dealings in 2007, which give rise to those proceedings, were referred to, albeit briefly, in the application for security for costs before the Court. They are not fresh matters or a change in circumstances. Next, as noted, it is by no means clear that the money will find its way to West Harbour and it does not appear that the money would solve West Harbour’s obvious financial difficulty which has been confirmed by its recent liquidation.
[19] Apart from the voluntary liquidation there is evidence from Mr Morrison, solicitor for Waipareira, confirming that his firm has been served with an interlocutory application to freeze the funds paid in by Mr Tamihere. Corban Revell, Solicitors, who formerly acted for West Harbour, have lodged a claim to those funds. Mr Morrison is also aware that the body corporate of which West Harbour is a member, has not paid the insurance due in respect of Clearwater Apartments.
[20] Further, the Inland Revenue Department has apparently applied to liquidate
West Harbour. Mr Dale advised the Court he understood the claim was for
$100,000. He noted that Mr Ivil had not put the precise claim or details of that claim before the Court.
[21] Next, Mr Brent Ivil refers to an affidavit he swore in separate proceedings between West Harbour and Mr Tamihere on 18 December 2012. In it he says that he had previously sought $50,000 on behalf of West Harbour. He says that although West Harbour has been charged with receipt of that sum it has never received it. He argues that that is money that should be available to West Harbour and would again be available as a sum to contribute towards security. However, again, those are all matters that arose quite some time ago. I note also that Ms Wu, the accountant for Waipareira has deposed that the $50,000 referred to was advanced to Mr Ivil as a further loan on 15 August 2007. It is not for this Court to resolve those issues between the parties. It is sufficient to record that again that is a matter that obviously both Mr Ivil and West Harbour must have been aware of for a considerable period of time.
[22] The application is also supported by an affidavit sworn by Mr Ivil’s son Daniel who has undertaken a review of West Harbour’s financial dealings with Waipareira. In summary, Mr Daniel Ivil’s opinion is that Waipareira has contributed approximately $367,000 towards the joint venture referred to in the judgment whereas West Harbour has contributed $374,000 to the joint venture. He seeks to answer the allegation by Waipareira that it contributed $500,000 more than West Harbour into the joint venture that Woodhouse J noted in dismissing West Harbour’s application for summary judgment. Daniel Ivil calculates Waipareira contributed approximately $440,000 but it owed the joint venture just under $73,000 in rentals from Waipareira Trust employees or associates that were underpaid.
[23] Again, however, that is an attempt to present evidence that could or should have been available when the matter was before Woodhouse J on the application for summary judgment or, for that matter, when the matter was before this Court on the application for security.
[24] West Harbour also purported to serve a settlement notice on 22 January 2013.
Waipareira’s solicitors reject the validity of that settlement notice. The issue in
relation to that is whether the remedial works had been completed to a reasonable standard, but again that matter was in issue at earlier stages of the proceedings.
[25] As Greig J confirmed in Foodtown Supermarkets v Tse, the inherent jurisdiction of the Court which West Harbour seeks to rely on in this case does not extend to reviewing an order on the ground of error on the face of it or the ground of discovery of fresh evidence. The present case is not even one of fresh evidence. It is a case of West Harbour seeking to re-argue its opposition to the application for security for costs by putting forward evidence that would have been available to it at the last hearing. That is not permitted. There has been no significant change in material circumstances that would warrant this Court revisiting the order for security.
[26] The order for security was made because the Court was satisfied West Harbour would be unable to pay costs and that the sum of $75,000 was an appropriate figure to require for security. There is nothing in the further material now before the Court that alters that conclusion or supports revisiting it. There is no relevant change in circumstances and the interests of justice do not require it. Indeed, if anything, the further recent information before the Court of the liquidation confirms that West Harbour’s financial position is bleak.
[27] I decline West Harbour’s application to extend the time for payment of security and/or to vary or discharge the order requiring security.
The application to strike-out
[28] That leaves Waipareira’s cross-application to strike-out the claim and for judgment on the counterclaim.
[29] Mr Smyth made the point that the limitation period has not expired and that West Harbour’s claim will now be a claim for damages rather than specific performance.
[30] The liquidators could, once they have the opportunity to review the position, bring the claim again if they consider there is sufficient merit in the claim for
damages.
[31] I agree with that analysis but I do not consider that it provides a compelling reason why the application to strike-out the claim at this stage should not be granted. At the end of the day, at most, there may be further costs incurred in re-pleading the claim. But, as Mr Smyth accepted, the liquidators will have to consider the matter afresh and take independent advice about it. It may well be that even if a damages claim were to be pursued by West Harbour it will be in a different form in any event.
[32] As the application to strike-out is a response to the claim by West Harbour it does not seem to me that s 248 of the Companies Act 1993 is engaged. However, if necessary, I grant leave to Waipareira to pursue its application to strike out in the circumstances of this case.
[33] I do not consider there to be any point in further extending the time to allow
West Harbour to make payment for security. Following the decision delivered on 28
November 2012 West Harbour had until 18 January 2013 to pay security. Since filing the application on 18 January 2013 a further six weeks has passed without payment. It is apparent from the liquidation and other claims that West Harbour is obviously in severe financial circumstances.
[34] I also agree with Mr Dale’s submission that the Court could draw an inference the shareholders’ resolution placing West Harbour into liquidation is, in the circumstances, a strategy to attempt to buy more time for West Harbour. I emphasise that in making that observation and drawing that inference I make no criticism whatsoever of Mr Grant and his fellow liquidator. I accept of course their independence. However, I see no reason to leave the current claim by West Harbour on foot. The claim by West Harbour against Waipareira is struck out. Judgment is entered for Waipareira on its defence to that claim.
[35] For the avoidance of doubt the previous interim injunction orders of the Court are discharged and Waipareira and its solicitors are released from the undertakings that solicitors and counsel have provided to the Court in relation to the previous injunction orders.
The counterclaim
[36] That leaves the issue of the counterclaim. I apprehend that Mr Dale did not seek to pursue the counterclaim today. Leave would be required in relation to that. I adjourn that matter through to a case management conference to review the proceeding in early April, with the date to be allocated by the Registrar. If necessary, at that stage leave could be sought to pursue a counterclaim with the matter allocated a hearing with any further directions necessary. It may be, however, that there will be no need for the matter to be pursued. Indeed if the liquidators, after reviewing the matter, decide to pursue a claim for damages the counterclaim could be brought in those proceedings. I leave that matter open.
Costs
[37] That leaves the issue of costs. For what it is worth I make an order for costs on a 2B basis against West Harbour on both applications.
[38] Mr Dale has also sought costs against Mr Ivil personally. I am not prepared to deal with such an application on the basis of memoranda. If any application is to be made against Mr Ivil personally then a formal application should be filed and
served and the matter dealt with at a formal and full hearing if necessary.
Venning J
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