New Zealand Venue and Event Management Ltd v Worldwide NZ LLC [2013] NZCA 130; [2013] 3 NZLR 329; [2013] NZCCLR 20 (2 May 2013)

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In a judgment delivered orally on 16 April 2008, this Court answered issue (a) by declaring:^[7]

... that the consideration to be paid for WWNZ’s units and shares is to be their fair market value to be assessed if necessary by the court.

Interest on the sum payable from 26 April 2006 at the rate of 7.5% per annum under section 87 Judicature Act 1908 (“the total sum payable”).

I determine that the fair market value of the 25 per cent interest of WWNZ in the “B” units in the QPAM trust and the “B” shares in QPAM as at 26 April 2006 is $2.69m (see [244] above and appendix E3).

(a) pay interest on the amount determined as the fair market value of the “B” units and shares ($2.69m):

(i) at the rate of 7.5 per cent from the valuation date 26 April 2006 to 30 June 2011; and

(The fair market value of the “B” units and shares as determined ($2.69m) together with interest thereon being “the total sum payable”); and

(b) [p]ay the total sum payable by tendering payment of the total sum payable in cleared funds at the address for service of WWNZ in this proceeding; and

Issue (1) – interest: did Potter J err in awarding WWNZ interest on the value of the “B” shares she determined?

(1) In any proceedings in the High Court, the Court of Appeal, or the Supreme Court for the recovery of any debt or damages, the court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest at such rate, not exceeding the prescribed rate, as it thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment:

(b) apply in relation to any debt upon which interest is payable as of right, whether by virtue of any agreement, enactment, or rule of law, or otherwise

[273] The contractual obligation to pay the consideration for the units and shares arose in terms of the unit trust deed at the point the pre-emptive rights were exercised. While actual payment must be deferred until the fair market value is known (either by agreement or determination of the court), the legal obligation to pay the consideration for the units and shares was not dependent on determination of the amount of the consideration to be paid. Accordingly in terms of s 87 the plaintiffs’ cause of action arose at the point the pre-emptive rights were exercised.

[275] Section 87 does not require that the amount of the debt be known. For s 87 to apply there must be a cause of action giving rise to a debt that a party seeks to recover. Since WWNZ has established a cause of action and is pursuing payment of the debt which JVMNZ is contractually bound to pay, s 87 can properly be applied, notwithstanding that the amount of the debt was not known at the time the cause of action arose.

A “debt” is something owed by one person to another. In legal (and common) usage, it refers to what arises between the parties by reason of a prior obligation, whether contractual, or statutory. The debtor has an obligation to pay “the debt”, and can be sued on it.

Case	Summary
OPC Managed Rehab Ltd v Accident Compensation Corporation [2005] NZCA 322; [2006] 1 NZLR 778 (CA).	ACC had overpaid OPC $334,000. This Court held that ACC was entitled to make a statutory demand under s 289 of the Companies Act 1993 for that sum. ACC’s cause of action for money had and received had such similarity to an action for recovery of a debt that OPC’s obligation to repay could be treated as “a debt that is due” for the purposes of s 289. So, in this case the sum treated as a “debt” was a sum certain – $334,000.
Holdgate v Holdgate CA166/02, 24 July 2003.	For decision was whether one partner to a dissolved partnership had to pay the other interest on monies owed. At [2] the Court held that would be the case “only if the monies in question amount to ‘moneys owing’ or ‘any other indebtedness’”. In the course of his judgment for the Court, Tipping J stated:^[16] ... It is of the essence of a cause of action for a debt that the amount owing be a liquidated sum. There must be no basis for any argument about quantum as opposed to liability. That is one of the principal reasons why there cannot be indebtedness between partners on a dissolution until accounts have been taken and the precise amount owing by the partner in debit is thereby ascertained. The “no useful purpose” exception must be read against that starting point. This is a firm statement that there can only be a cause of action for a debt if the amount owing is a sum certain (which is what is meant by “liquidated”), and not in dispute.
Westpac Banking Corp v Nangeela Properties Ltd [1986] 2 NZLR 1 (CA).	The issue was whether a payment of $25,599.59 made by a company to its bank (Westpac) was a voidable preference under s 309 of the Companies Act 1955. Three separate judgments were delivered. The Court unanimously held that the payment was recoverable by the liquidator as a voidable preference. McMullin and Somers JJ both held that the Court could also make an award of interest under s 87, as the liquidator’s action for monies had and received was “analogous to a debt”^[17] or had “the characteristics of a debt; it would be a sum payable in respect of a liquidated money demand and would be recoverable by action”.^[18] Again, the sum treated as a debt was a sum certain. Interest under s 87 could therefore be awarded on it.
Re F P & C H Matthews Ltd (in liq) [1982] Ch 257 (CA).	Similar to Westpac v Nangeela. The English Court of Appeal held that the liquidator’s claim for £10,702.30 was a claim for a debt. That debt arose, not on the making of the order avoiding the transaction, but upon the liquidation. Thus, another case where the sum treated as a debt was a sum certain.
K v K (Divorce Costs: Interest) [1977] Fam 39 (CA)	Involved a claim by a wife for interest on costs and disbursements ordered in her favour on 17 May 1974. Those costs and disbursements were fixed by the taxing master and, on 18 August 1975, the husband was ordered to pay within 28 days the sum of £16,651.67. He paid well within the 28 days. The Court was unanimous in dismissing the wife’s claim. In the course of his judgment Lord Denning MR said:^[19] ... In the further alternative, we are entitled to apply a little common sense. Interest should be payable whenever money is “wrongly withheld” from the one who is entitled to it: see Jefford v Gee [1970] EWCA Civ 8; [1970] 2 QB 130, 140–146. When the sum is unascertained, the debtor cannot be expected to pay it until it is quantified. He cannot make a tender until he knows how much it is. He cannot be said to be “wrongfully withholding” the money until it is fixed. So in all fairness interest should only run from the date of quantification: see the instances given in Jefford v Gee at p 145. If he is given time to pay, it should only run from the time when payment falls due. ...
McMiken v Clark (No 3) HC Auckland CIV-2003-404-6621, 23 April 2007 at [15]–[21].	Cooper J allowed interest under r 538 of the – then – High Court Rules only from the date when the High Court gave judgment, because it was only then that a “judgment debt” arose. At [21] Cooper J held that a debt must be for an ascertained amount or an amount immediately calculable, that is where “all the issues necessary to enable calculation of the amount owing have been determined in a judgment”. The Judge supported this by referring to Parsons v Mather & Platt Ltd [1977] 1 WLR 855 (QB) at 859 where Ackner J stated: [S]tatutory interest (under s 17 of the Judgments Act 1838 of the United Kingdom) runs from the date on which the judgment is pronounced, so long, of course, as that judgment quantifies the amount. Ackner J then cited the passage from Lord Denning’s judgment in K v K, which we have set out above.
Holdgate v Official Assignee HC Auckland B1545/96, 25 July 2002.	The issue was whether a debt owing by one partner to another was in existence at the date when the debtor partner was adjudicated bankrupt. Priestley J at [62] held that a “debt” was not created until, amongst other things, the amount owing had been determined, by agreement, at $127,300. This case held that no debt was created until the amount owed was fixed.
Jordan v Vorwerk HC Napier CIV-2003-441-723, 23 April 2004.	Dealing with an application to enforce a foreign judgment, Master Gendall held it is enforceable if it is, amongst other things, an order to pay “a debt or certain sum” of money.^[20] Master Gendall held that such a sum would be “sufficiently certain if it can be ascertained by a simple arithmetical calculation”. This case held that there was a debt because the sum due was immediately, readily ascertainable.

[T]here cannot be any general rule that, whenever the amount of any debt or damages payable by one party to an action to the other cannot be ascertained until judgment is given, the court should never, in the exercise of its discretion, award interest from a date earlier than the date of such judgment.

The issue in BP Exploration was whether the trial Judge was correct in awarding interest under the English equivalent of s 87 on two substantial awards he had made pursuant to the Law Reform (Frustrated Contracts) Act 1943. Although those awards were analogous to damages, they were not in respect of debts. Further, at all material times those two sums were sums certain, so the issue that concerns us was not before the House of Lords. Nor did their Lordships need to decide whether interest could pre-date the accrual of a cause of action, because the trial Judge had awarded interest only from a date about two and a half years after BP’s cause of action arose. Insofar as Lord Brandon extended his general statement to “any debt” it is, strictly, obiter, and we respectfully disagree with it.

The meaning of the word debt depends very much on its context. It is capable of including a contingent debt which may never become payable: see Mortimore v Inland Revenue Comrs.^[24] It is also capable of including a sum of which the amount is not ascertained: see O’Driscoll v Manchester Insurance Committee.^[25] But I agree with Slade J and with Templeman LJ, both of whom held that the word “debt” in para 11 does not apply to the obligation of the purchaser under this agreement, which was described by Templeman LJ ... as “a possible liability to pay an unidentifiable sum at an unascertainable date” ...

The latter part of that passage summarises the ratio of Marren: the word “debt” in the relevant legislation did not include a possible liability to pay an unidentifiable sum at an unascertainable date. That ratio is not at variance with our view.

... Here there is a debt, uncertain in amount, which will become certain when the accounts are finally dealt with by the Insurance Committee. Therefore there was a “debt” at the material date, though it was not presently payable and the amount was not ascertained. ...

(a) ... [N]o cause of action arose until the arbitrator’s award [fixing rental under a lease] was published as it was only at that point that the existence of a debt was established, irrespective of its amount. As the Court of Appeal observed, it was only when there was an award that established a new rent in excess of the old that any liability or debt was established.

(b) ... [T]he obligations of the lessor and lessee to each other were fully provided by the terms of the lease and the relevant statutes, in particular the Public Bodies Leases Act [1969]. There was specific provision for the rent review and the process by which it would be carried out. The lessee was not contractually bound to pay a rent increase until the review was complete and the determination resulted in an increase in rent.

It is apparent from the award that after the arbitrator had drawn counsel’s attention to an earlier award he had made ... the lessors did not pursue the claim for interest and so no order was made. In this earlier award, the arbitrator had concluded that what he was called upon to do under the submission was to make a declaration of the rent payable under the lease; not to award a sum of money. Therefore the power to award interest conferred by s 87 Judicature Act 1908 and which may be exercised by arbitrators ... but which is limited to proceedings for the recovery of any debt or damages, was not available.

... the cause of action here did not arise until the award was published. The lessors could not establish their claim to arrears of rent unless and until the review process had resulted in the fixing of a new rent in excess of the old. To make out their claim, they had to establish a valid binding award. This they could not do until 28 November 1991. It is true that their liability to pay any increase existed from the commencement of the lease, but that was an inchoate liability until the amount of the increase was fixed. The lessors may have been able to come to the Court for a declaration as to that liability, and may to that extent have had a cause of action. But s 87 does not cover a claim of that kind. It covers proceedings for the recovery of debt or damages; and an essential aspect of the right to recover debt here was not just an award but an award in excess of the old rental, which the Court is not entitled to assume would follow as of course.

Thus, WWNZ’s claim is most accurately described as a proceeding seeking a declaratory judgment as to the amount payable under an executory contract.

... order that there shall be included in the sum for which judgment is given interest ...

Potter J was not asked to and did not give judgment in any sum. All the Judge did was determine the fair market value of the “B” shares, and make a series of declarations.

Issue (2) – value of the derivative proceeding: did Potter J err in placing a nil value on the derivative proceeding, for the purposes of determining the fair market value of the “B” shares?

... As at the valuation date it was not available to, and not obtainable by, a willing purchaser of the “B” ... shares, to add to the information such a purchaser may have had about the derivative proceeding.

As the Court of Appeal said, the right of action in the derivative proceeding is simply a valuation issue. To attempt in the course of this proceeding to inject into the valuation process, documentary evidence which was not available at the valuation date and had not been pursued in the proceeding in which it could have been obtained is a blatant attempt to introduce hindsight information.

In summary, my assessment is that the additional documentation, even if admissible, would not have enabled the Court to draw firm conclusions about QPAM’s arrangements with Ticketmaster to inform an assessment of the value of the derivative proceeding.

... the possibility of such a claim was likely to create an overall negative view of the risk attaching to the potential investment and was likely therefore not to be disclosed to potential purchasers of the 25 per cent interest, who would have to work with the very parties who were the defendants in the derivative proceeding.

[185] I am persuaded by Mr Hussey’s evidence on this aspect. The reality is that as a matter of fair market value, the right of action in the derivative proceeding has no value unless a notional purchaser could be persuaded to pay something for the chance of the benefit. The only chance of deriving a benefit would depend on the derivative action proceeding with the support of the purchaser of the 25 per cent interest against parties representing the holders of the 75 per cent majority interest, the very persons on whom the purchaser of the 25 per cent interest would be dependent for co-operation in preserving and enhancing the value of the purchaser’s investment.

[187] In my view that reality has to be appropriately reflected in the valuation and I consider the consequence of recognising that reality is, as Mr Hussey insisted, that no rational buyer would pay anything for the right of action represented by the derivative proceeding. A willing, but not anxious, seller would have to acknowledge that reality, notwithstanding the item technically forms part of the seller’s asset base.

[189] Accordingly I conclude that the derivative proceeding has a nil value in assessing the fair market value of QPAM and the “B” shares and units.

Solicitors:
Stewart Germann Law Office, Auckland for Appellant
Brookfields, Auckland for Respondent

^[1] Worldwide NZ LLC v QPAM Ltd HC Auckland CIV-2006-404-1827, 24 November 2011.
^[2] The precise parties to the derivative proceeding are set out below at [9].

^[3] These holdings are set out in the Schedule to a Unit Subscription Agreement also dated 9 March 2004.
^[4] Worldwide NZ Ltd LLC v QPAM Ltd HC Auckland CIV-2006-404-1827, 26 May 2006.
^[5] Worldwide NZ LLC v QPAM Ltd CA122/06, 10 November 2006.
^[6] At [36].

^[7] Jacobsen Venue Management New Zealand Ltd v Worldwide NZ LLC [2008] NZCA 105 at [57].
^[8] Second amended statement of claim, 22 March 2007 at 11 (prayer for relief A(g)).
^[9] Fourth amended statement of claim, 15 July 2009 at 9 (prayer for relief B).
^[10] At [324]–[325].
^[11] Body Corporate No 95035 v Auckland Regional Council (1993) 6 PRNZ 559 (CA).
^[12] At [262].

^[13] Colonial Mutual Life Assurance Society Ltd v Commissioner of Inland Revenue (1999) 19 NZTC 15,375 (HC) at [109].
^[14] At 563.
^[15] Glaister v Amalgamated Dairies Ltd [2003] 1 NZLR 829 (HC) at [133].
^[16] At [9].
^[17] At 9 per McMullin J.
^[18] At 11 per Somers J.
^[19] At 48–49.
^[20] At [20].
^[21] BP Exploration Co (Libya) Ltd v Hunt (No 2) [1983] 2 AC 352 (HL) at 374.
^[22] Marren (Inspector of Taxes) v Ingles [1980] 1 WLR 983 (HL).
^[23] At 990.

^[37] QPAM treated NZVEM as the owner of the “B” shares from 27 April 2006, when it received NZVEM’s notice that NZVEM had exercised its pre-emptive rights. The transfer of the “B” shares from WWNZ to NZVEM was entered in QPAM’s share register on or about 5 May 2006. These details are recorded in an affidavit sworn by the finance manager of QPAM, Mr Brendan Hines, in the appeal CA122/06 referred to in [13] above.
^[38] At [149].
^[39] At [154].
^[40] At [164].
^[41] At [166].
^[42] At [169].
^[43] At [176].
^[44] At [179].
^[45] At [180].
^[46] At [183].
^[47] Particularly at [185]–[187].

Introduction	Para No. [1]
Background	[4]
The judgment under appeal	[18]
Issue (1) – interest: did Potter J err in awarding WWNZ interest on the value of the “B” shares she determined?	[20]
Issue (2) – value of the derivative proceeding: did Potter J err in placing a nil value on the derivative proceeding, for the purposes of determining the fair market value of the “B” shares?	[52]
Result	[65]

Unit Holder	Number and Class of Units	Percentage Interest
Jacobsen Venue Management New Zealand Ltd	33 “A” Units	55 per cent
Jacobsen FT Pty Ltd	12 “A” Units	20 per cent
Worldwide NZ LLC	15 “B” Units	25 per cent

Court of Appeal of New Zealand

New Zealand Venue and Event Management Ltd v Worldwide NZ LLC [2013] NZCA 130; [2013] 3 NZLR 329; [2013] NZCCLR 20 (2 May 2013)