Vance v Bradbury HC Wellington CIV 2008-485-1237 [2008] NZHC 2665 (31 October 2008)

High Court of New Zealand

[Index] [Search] [Download] [Help]

---

Vance v Bradbury HC Wellington CIV 2008-485-1237 [2008] NZHC 2665 (31 October 2008)

Last Updated: 11 March 2015

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

_{CIV 2008-485-1237}

BETWEEN DAVID STUART VANCE Plaintiff

AND GAYNOR NOREEN BRADBURY Defendant

Hearing: 20 October 2008

Appearances: C.L. Potter and J.R. Sumner - Plaintiff

R.C. Laurenson - Defendant

Judgment: 31 October 2008 at 4.00 pm

_{JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL}

This judgment was delivered by the Registrar on 31 October 2008 at

4.00 p.m. pursuant to r 540(4) of the High Court Rules 1985.

Solicitors: Ford Sumner Lawyers, PO Box 25 299, Wellington

The Law Connection, PO Box 2079, Raumati

DS VANCE V GN BRADBURY HC WN CIV 2008-485-1237 31 October 2008

[1] The plaintiff, Mr Stuart Vance (“Mr Vance”), as liquidator of Touchtec

Equipment Marketing Limited (in liquidation) (“Touchtec”), seeks to recover

$40,000 from the defendant pursuant to s 298 of the Companies Act 1993 (“the

Act”).

[2] Mr Vance has brought the present application seeking summary judgment for this $40,000 plus interest and costs.

[3] The defendant, Mrs Gaynor Bradbury (“Mrs Bradbury”) opposes this application.

Background Facts

[4] Mrs Bradbury is the mother of Mr Scott Anderson (“Mr Anderson”) an undischarged bankrupt. It seems that Mr Anderson was involved in a number of companies through which he would invest money advanced by other people, including Mrs Bradbury. At least four of these companies are now in liquidation.

[5] One of the companies Mr Anderson was involved with was Touchtec, previously known as Globenet Communications (1996) Limited and Globe Net Software Systems Limited. The Companies Office records show that Mr Anderson holds 50% of the shares in this company. Mr Anderson was also a director of Touchtec from 1997 to 17 September 2004. It appears Mr Anderson acknowledges that the present director, Mika Amano “was just a named director” (Affidavit of Colin Owens, dated 4 June 2008, para [7]).

[6] On 31 August 2006, Touchtec was placed into liquidation. Mr Vance and a Mr Bruce McCallum were appointed as liquidators. As I understand it, Mr Vance is also presently a liquidator of other companies in which Mr Anderson was involved.

[7] Following their appointment, the liquidators discovered that two payments each of $20,000 had been made by Touchtec to Mrs Bradbury the first on 16

November 2004 and the second on 23 December 2004 (“the two payments”). It is

Mr Vance’s position that s 298 of the Act applies to the two payments and that he can recover the payments from Mrs Bradbury.

[8] Post liquidation after 31 August 2006, correspondence as to the nature of these payments passed between Mr Vance and Mrs Bradbury. Essentially, Mrs Bradbury claimed – and claims – that over time she had invested various sums of money with her son Mr Anderson and that she did not know and was not in control of what company these monies were paid into. In particular, she alleges that on 3

March 2003 she took Mr Anderson’s advice to invest in 7,000 shares in a company called Akamai Technologies New Zealand Limited (“the Akamai shares”). Mrs Bradbury points to a cheque for $20,192.31, deposited on 5 March 2003, as being the amount she paid for these shares.

[9] Mrs Bradbury said and says that in Spring 2004 she instructed Mr Anderson to sell the Akamai shares and that she assumed that the two payments were the return of her investment and profit.

[10] Mr Vance did not accept Mrs Bradbury’s explanation, largely on the basis that there was no documentation or evidence to support her claim. A formal demand for repayment of the two payments was made on 3 December 2007. Following further correspondence between the parties and their solicitors, Mr Vance commenced the present legal proceedings to recover the two payments.

[11] Lastly, it is useful to note here that the parties all appear to accept that the records of the companies Mr Anderson was involved with, including Touchtec, can only be described as messy and incomplete. As a result, the liquidators of these companies have been confronted with significant problems in analysing actions that were taken. This has been exacerbated by what has seemed to be a lack of co- operation from Mr Anderson (see Affidavit of Mr Vance, dated 5 September 2008, para [16]).

[12] The power to grant summary judgment is contained in r 136 (1) of the High

Court Rules, which provides:

(1) The Court may give judgment against a defendant if the plaintiff satisfies the Court that the defendant has no defence to a claim in the statement of claim or to a particular part of any such claim.

[13] Mr Vance has the onus to satisfy this Court that Mrs Bradbury has no defence to his application. Thus, Somers J said in the leading case of Pemberton v Chappell [1986] NZCA 112; [1987] 1 NZLR 1 at 3:

“At the end of the day Rule 136 requires that the plaintiff “satisfies the Court that a defendant has no defence”. In this context the words “no defence”

have reference to the absence of any real question to be tried. That notion

has been expressed in a variety of ways, as for example no bona fide defence, no reasonable ground of defence, no fairly arguable defence. ... On this the plaintiff is to satisfy the Court; he has the persuasive burden. Satisfaction here indicates that the Court is confident, sure, convinced, is persuaded to

the point of belief, is left without any real doubt or uncertainty.”

[14] However, where prima facie there appears to be no defence to the plaintiff’s case, an evidential burden to raise a defence is imposed on the defendant. This is explained by Somers J in Pemberton v Chappell (at 3) in the following way:

“If a defence is not evident on the plaintiff’s pleading, I am of the opinion that if the defendant wishes to resist summary judgment, he must file an affidavit raising an issue of fact or law and give reasonable particulars of the matters which he claims ought to be put in issue. In this way a fair and just balance will be struck between a plaintiff’s right to have his case proceed to judgment without tendentious delay and a defendant’s right to put forward a real defence.”

[15] On an application for summary judgment, the Court will not normally “attempt to resolve any conflicts in evidence contained in affidavits or to assess the credibility or plausibility of averments in them”: Attorney-General v Rakiura Holdings Ltd (1986) 1 PRNZ 12, 14. Nor will the Court determine real issues of credibility because the determination of such issues requires examination and cross- examination of witnesses not possible under the summary judgment procedure: Busch v Dive & Marine Tours Ltd HC AK CP1587/86 19 February 1987; McGechan on Procedure at HR136.03.

[16] However, Somers J commented in Pemberton v Chappell at 3:

“Where the defence raises questions of fact upon which the outcome of the case may turn it will not often be right to enter summary judgment. There may however be cases in which the Court can be confident – that is to say,

satisfied – that the defendant’s statements as to matters of fact are baseless.”

[17] Adopting this statement, Wylie J stated in S H Lock (New Zealand) Ltd v

Oremland HC AK CP641/86 19 August 1986 at 11:

“Clearly the onus of showing there is no defence lies with the plaintiff, but the discharge of that onus is not in my view, to be frustrated by a defendant raising hypothetical possibilities in vague terms unsupported by any positive assertions or corroborative documentation.”

[18] Thus, in Eng Mee Young v Letchumanan [1980] AC 331 at 341 the Court held that a Judge will not be bound:

“...[t]o accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit, however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be.”

[19] Similarly, the Court in Bilbie Dymock Corporation Ltd v Patel (1987) 1

PRNZ 84 observed (at 85-86) that a Judge is entitled to take a robust approach to cases involving summary judgment, and to dismiss defences which do not stand up to scrutiny – that:

“... the need for judicial caution has to be balanced, when considering a summary judgment application, with the appropriateness of a robust and realistic judicial attitude when that is called for by the particular facts of the case. In the end it can only be a matter of judgment on the particular facts.”

[20] Ultimately, “[t]he Court must be satisfied there is no defence”. The “critical” question under r.136 will generally be whether the Court is satisfied that the plaintiff’s case is unanswerable and the Court will not reach that conclusion if it can see an arguable defence”: McGechan on Procedure at HR136.06, citing Towers v R & W Hellaby Ltd (1987) 3 NZCLC 100,064.

Preliminary Issue

[21] In a memorandum dated 22 October 2008 counsel for Mr Vance submitted that the key defence raised by counsel for Mrs Bradbury at the hearing before me had not previously been raised and, particularly, was not averted to in the notice of opposition to summary judgment. Moreover, counsel stated that they had since received further evidence in relation to this alleged defence. As such, counsel sought leave to introduce this evidence for the Court’s consideration.

[22] This was opposed by Mr Laurenson for Mrs Bradbury on two principal grounds. First, that it is Mr Vance’s obligation to establish his case from the outset – that irrespective of the notice of opposition and evidence filed by Mrs Bradbury, it is incumbent on Mr Vance to show that there is no available defence to his claim, and that this should have been fully pleaded from the start. Secondly, Mr Laurenson submitted that the alleged defence was not a new or surprise defence but is readily apparent from the affidavits filed by Mrs Bradbury.

[23] In that I have found in my decision for Mr Vance, for the reasons that follow, I find it unnecessary to decide this preliminary issue application. I do not propose to address it further.

Section 298 Companies Act 1993

[24] As I have noted, Mr Vance seeks to recover the two payments pursuant to s

298 of the Act. Section 298 provides as relevant:

298 Transactions for inadequate or excessive consideration with directors and certain other persons

...

(2) (a) Where, within the specified period, a company has disposed of a business or property or provided services, or issued shares, to

...................;

(b) A person or a relative of a person, who, at the time of the disposition

... had control of the company; ............

the liquidator may recover from the ... relative ... any amount by which the value of the ... property... at the time of the disposition ... exceeded the value of any consideration received by the company.

(3) For the purposes of this section,—

(a) The value of ... property includes the value of any goodwill attaching to the ... property;

(b) The provisions of section 7 of this Act apply with such modifications as may be necessary to determine control of a company.

(4) For the purposes of subsections (1) and (2) of this section, specified period means—

...

(b) In the case of a company that was put into liquidation by the Court, the period of 3 years before the making of the application to the Court together with the period commencing on the date of the making of the

application and ending on the date on which, and at the time at which, the order of the Court was made; ...

[25] Brookers Company and Securities Law Vol. 1 at paras. 298.01 and 298.02 describes the general purpose of s 298 in the following way:

“CA298.01 Relationship with other sections of the Act

Section 298 gives the liquidator additional powers of recovery to augment the estate of the company available to creditors generally. Section 292 (transactions having preferential effect) and s 293 (voidable charges) have the same basic functions. However, the closest counterpart to s 298 is s 297 (transactions at undervalue). Both are specifically concerned with the recovery of assets disposed of on terms that involve an unequal exchange of benefits to the detriment of the company. However, s 298 applies only to dealings between a company and various classes of connected persons. Section 297 does not contain any similar form of limitation.

.................................

CA298.02 Scope of the Section

Section 298 deals with transactions involving the acquisition of property and the disposition of property to persons connected with the company or to persons who are connected to persons who in turn have a connection with the company. Only the liquidator has standing to act under s 298.

[26] To succeed in his present application under s 298 it is clear Mr Vance needs to show, to the standard required in an application for summary judgment, that:

(1) The two payments are “property”;

(2) Touchtec disposed of the two payments to Mrs Bradbury; (3) This disposition occurred within the “specified period”; (4) Mrs Bradbury is a relative of Mr Anderson;

(5) Mr Anderson “had control of” Touchtec at that time; and

(6) The value of the two payments – $40,000 – exceeded the value of any consideration received by Touchtec.

[27] The following elements were not in dispute before me:

(1) That the two payments were “property” in that the payment of money has been deemed to be “property” for the purposes of the Act (see Chapman & Anor v Effective Fencing Ltd HC AK CIV-2004-404-005905

21 April 2005 at [31] to [34], upheld on appeal: Effective Fencing Limited v Chapman & Anor [2007] NZCA 12).

(2) That the two payments were made within the specified period (per s

298(4)), being made within three years of the application to put Touchtec into liquidation. This was filed on 4 July 2006 (see Mr Vance’s affidavit dated 4 June 2008, exhibit A), being less than three years after November/December 2004.

(3) That Mrs Bradbury is the mother of Mr Anderson, and is therefore a relative of Mr Anderson as defined in s 2(1) of the Act.

(4) That Mr Anderson had control of Touchtec at the relevant time first by virtue of being a 50% shareholder in Touchtec and a named director until September 2004 and secondly, evidenced by his instructions to Touchtec’s solicitor, Mr Peter Brinsley (“Mr Brinsley”), (as attached to the affidavit of Mr Vance dated 4 June 2008), including in relation to the two payments made to Mrs Bradbury, which were complied with and made after his resignation as a director.

(5) That the payments were valued at $40,000, that Mrs Bradbury did not provide any consideration to Touchtec for these payments and, therefore, the amount by which the payments exceeded the value of any consideration from Mrs Bradbury to Touchtec was $40,000.

[28] As such, effectively the sole issue before me is whether Touchtec “disposed of” the two payments to Mrs Bradbury. Before me there was a vague submission alluded to on behalf of Mrs Bradbury that some consideration from Mr Anderson was provided to Touchtec for the payments but this was not pursued to any extent. I will however deal with this later in passing.

[29] On this main issue of opposition, Counsel for Mrs Bradbury, Mr Laurenson, submitted that the payments were not a disposition of property for the purposes of s

298. Instead, he suggested the payments were advances made for or on account of Mr Anderson – that the two payments were not a disposition of property qua Touchtec, but, at best, a disposition of property qua Mr Anderson. Mr Laurenson contended that Touchtec owed money to Mr Anderson and evidence of this included:

• An email from Mr Brinsley to Mr Anderson, dated 20 November 2006, which states that Mr Brinsley “receipted $300,000.00 to Touch-Tec on

25 Nov 04 as ‘funds for advances’”. I note that this amount is shown on a payment spreadsheet detailing Touchtec’s accounts as attached to Mr Vance’s affidavit (“the spreadsheet”). It is described as being “From Touctec” [sic].

• An email from Mr Anderson to Mr Brinsley, dated 30 November 2004, in which Mr Anderson instructs Mr Brinsley to make cheques available to, for example, Aztec Securities Limited, “documented ‘Touchtec – Anderson – Aztec (on account of S Anderson’s guarantee” and similarly “on account of S Anderson debt”. Mr Laurenson submits that this is evidence of Mr Anderson having loan accounts with Touchtec.

[30] Mr Laurenson submits that Mrs Bradbury was entitled to the payments from Touchtec or from Mr Anderson on the basis that her dealings were with Mr Anderson as opposed to any particular company which he controlled and that she had no control over where the money she invested with Mr Anderson was paid to or where the money she received was paid from.

[31] Mr Laurenson notes that s 298 is directed at preventing insider benefit. He contends that it has an overlay of the controller of a company using a relative to

benefit the controller. Mr Laurenson argues that there is no such improper arrangement here – that Mrs Bradbury advanced monies to the group through her son and thus was entitled to a repayment from the group. Thus, it is contended that even if the $40,000 is accepted as being paid by the company to Mrs Bradbury, it did not benefit the controller, Mr Anderson.

[32] Mr Laurenson cites Re An Ying International Financial Ltd (in liq); Cheng v McCullagh & Anor HC AK CIV-2006-404-007843 18 April 2007 for the proposition that on a summary judgment application in relation to s 298, the Court needs to be satisfied that there is no doubt as to who is making the payment. Lastly, Mr Laurenson refers to the statement of Heath J in Benton v Priore [2003] 1 NZLR 564 at [50] as a recognition that equitable defences may continue to apply, as follows:

“There is no authority which discusses the scope of the provisions contained in ss 297 and 298 of the Act. It is, at least, arguable that the sections are intended to provide a statutory framework to deal with pre-existing rights which the liquidator could have exercised under other causes of action in a manner akin to the way in which s 301 operates. It is arguable whether those rights, conferred on the liquidator alone, are exhaustive in their nature; for example, if a liquidator could not bring himself or herself strictly within those provisions would a claim, in equity or at common law, be enjoined from proceeding? It is undesirable, in an interlocutory judgment and when full argument has not been heard on the extent of the remedies under ss 297 and 298, for me to make any final pronouncements as to its parameters. ...”

The submission for Mrs Bradbury, as I understand it, is that Mr Vance has not established that Mrs Bradbury has no defence in equity to the claim under s 298.

[33] Conversely, Ms Potter said in reply that the evidence clearly establishes that the payments were made from company property and that there is no evidence that there was any money due to Mr Anderson or that the payments were dispositions other than of company property. She refers to an email of 26 November 2004 from Mr Anderson to Mr Brinsley – to which the 30 November 2004 email was the reply

– in which Mr Anderson “confirms [his] verbal instruction to apply funds held in trust for Touchtec Equipment Marketing Limited”. It is Ms Potter’s submission that this email thus confirms that the payments were dispositions of company property.

[34] Despite Mr Laurenson’s submissions, I do not accept that a gloss should be added to s 298 such that it only applies where the controller of the company benefits. This would be to add in an entirely new element to a section which is clear on its terms: where a relative of a person who has control of a company receives a disposition of property within the specified period, at a value exceeding any consideration provided to the company, s 298 will apply and the relative will be required to pay back to the company the amount by which the disposition exceeded the consideration. There is no room to incorporate a condition that the controller must thereby benefit. Indeed, to my mind, even if one accepts the proposition that s

298 is directed at preventing insiders obtaining undue benefits, there is no reason to restrict the definition of insider to the controller as opposed to also including a relative. (I say this as a general proposition and without in any way imputing any sort of insider misconduct to Mrs Bradbury.)

[35] Nor am I persuaded that there is sufficient evidence to support an arguable defence that the monies paid to Mrs Bradbury were not the property of Touchtec but represented monies owed to Mr Anderson and which were paid to Mrs Bradbury in settlement of monies he owed her. In Mr Anderson’s contemporaneous words in the email of 26 November 2004, the monies were held on trust for the company. There is some suggestion of advances of $300,000 being made to the company but no indication that this was advanced by and thus represented a loan from Mr Anderson. I am not persuaded that the evidence that Mr Anderson seems to have used company funds to satisfy other personal obligations means that the payments to Mrs Bradbury were not from company property.

[36] In An Ying International – and the cases cited therein – the question was whether monies identified as being paid by third parties were actually payments by the company. In this context the case is authority for the proposition that “it is a matter of fact in each case (based on the relationship between a third party payer and the company) whether the payment in question is a payment by the company.” Here, I am of the view that there is simply no factual basis before this Court on which it is arguable that the payments were not made by the company.

[37] Despite having considerable sympathy for the position in which Mrs Bradbury has found herself, I am therefore not persuaded that she has a tenable defence to Mr Vance’s claim under s 298. Effectively, the sole question here is whether there was a disposition of company property. In my view, there is no evidence before this Court that provides an arguable defence that the $40,000 paid was not a disposition of Touchtec’s property. Nor in my view can it be said in any way that consideration was provided to Touchtec for the two payments either by Mr Anderson or by Mrs Bradbury.

[38] To my mind, it is not relevant to this issue whether – as seems to be the case

– Mrs Bradbury advanced money to Mr Anderson or some other unknown company (such as Akamai Technologies New Zealand Limited) and is therefore entitled to repayment (and presumably interest or profit) from Mr Anderson or that other company. I accept that Mrs Bradbury seems to have had no control over or knowledge of which company or companies Mr Anderson used to handle her investments. However, this does not negate the fact that the monies paid were from Touchtec’s funds. Mrs Bradbury’s remedy here must be against Mr Anderson or any other company in which the funds she advanced were invested.

[39] Lastly, Mr Laurenson’s submission that an equitable defence may not be precluded by s 298 and that Mrs Bradbury may have such a defence was not supported by any evidence or particulars. I am not persuaded that any such equitable defence could constitute an arguable defence to Mr Vance’s claim here.

[40] The application before the Court seeks summary judgment. One remaining matter is whether the Court’s residual discretion should be invoked here to refuse this summary judgment sought by Mr Vance.

[41] Rule 136(1) High Court Rules provides that where “The plaintiff satisfies the Court that a defendant has no defence” to a claim, the Court “may give judgment”. It seems that the use of the word “may” gives the Court a general discretion in deciding whether to enter summary judgment although on the authorities this discretion has been significantly circumscribed.

[42] As McGechan on Procedure at para. HR136.11 notes, this residual discretion is to be restrictively applied and in the great majority of cases once a Court is satisfied the defendant has no defence there is no room for the exercise of discretion. The residual discretion is generally only to be invoked to avoid oppression or injustice to a defendant but not otherwise.

[43] In the present case as I have noted above, some sympathy must be expressed for the position in which Mrs Bradbury finds herself no doubt it seems as a result of the actions of her son Mr Anderson. Her complaints, however, must be directed at Mr Anderson and those companies in which she can establish she has invested which, on her evidence, would include Akamai Technologies New Zealand Limited.

[44] The present application before the Court, relying as it does upon s 298 of the Act, is directed at providing Mr Vance as liquidator of Touchtec with a proper recovery to augment the estate of Touchtec available to its creditors generally. The section relates to transactions involving the improper disposition of company property to classes of connected persons like Mrs Bradbury. That is just the situation which in my view has occurred here.

[45] I conclude that this is not an appropriate case for the exercise of the Court’s discretion to refuse summary judgment in terms of r 136(1).

Result

[46] For the reasons given, Mr Vance succeeds in his application for summary judgment against Ms Bradbury.

[47] I therefore enter summary judgment against the defendant Mrs Bradbury in the sum of $40,000.00 together with interest in accordance with the Judicature Act

1908 from the date of issue of this proceeding being 9 June 2008 together with costs on a Category 2B basis and disbursements as fixed by the Registrar.

‘Associate Judge D.I. Gendall’