PROVINCIAL FINANCE LTD (IN RECEIVERSHIP) AND ANOR V VEDA ADVANTAGE (NZ) LTD AND ORS HC AK CIV 2006-404-007864 [2009] NZHC 205 (24 February 2009)

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
                                                                    CIV 2006-404-007864

               BETWEEN                          PROVINCIAL FINANCE LTD (IN
                                                RECEIVERSHIP)
                                                First Plaintiff

               AND                              CONSUMER CREDIT
LTD (IN
                                                RECEIVERSHIP)
                                                Second Plaintiff

               AND                              VEDA ADVANTAGE (NZ) LTD
                                                First Defendant

               AND                              GATE PA CARS AND COMMERCIALS
                                                LTD
                                                Ninth Defendant

               AND                              GOLDEN EAGLE INVESTMENTS
LTD
                                                Tenth Defendant

               AND                              SHAHENSHAH INVESTMENTS
LTD
                                                Twelfth Defendant

Hearing:       20 February 3009

Appearances: J Billington
QC and J McMillan for Plaintiffs
             No appearance for First, Ninth, Tenth and Twelfth Defendants

Judgment:      24 February
2009 at 11:30am


                             JUDGMENT OF WYLIE J


             This judgment was delivered by me on 24 February
2009 at 11:30 am
                       pursuant to Rule 11.5 of the High Court Rules.

                               Registrar/Deputy
Registrar

                               Date: ............................

Solicitors/Counsel:
Chapman Tripp, PO Box 2206, Shortland
Street, Auckland 1140
LeeSalmonLong, PO Box 2026, Shortland Street, Auckland 1140

J Billington QC, PO Box 4338, Shortland Street,
Auckland 1140




PROVINCIAL FINANCE LTD (IN RECEIVERSHIP) AND ANOR V VEDA ADVANTAGE (NZ) LTD AND
ORS HC AK CIV 2006-404-007864 24
February 2009

[1]    These proceedings were set down for a three week trial starting on Monday,
16 February 2009.


[2]    On 12
February 2009, the plaintiffs, Provincial Finance Limited (In
Receivership) ("Provincial") and Consumer Credit Limited (In Receivership)
("Consumer Credit") settled their claim against the first defendant, Veda Advantage
(NZ) Limited ("Veda"). When the hearing commenced,
Mr Billington QC for the
plaintiffs and Mr Law for the first defendant advised that there are some aspects of
the settlement which
need to be completed, and they requested a telephone
conference in some six weeks time to confirm that settlement has been concluded.
I
have already issued a minute in that regard.


[3]    The plaintiffs also seek judgment against the three remaining defendants
­
Gate Pa Cars and Commercials Limited ("Gate Pa"), Golden Eagle Investments
Limited ("Golden Eagle") and Shahenshah Investments
Limited ("Shahenshah").
There was no appearance by any of those entities and the plaintiffs seek to proceed
by way of formal proof.


[4]    I am satisfied that each of the remaining defendants, Gate Pa, Golden Eagle
and Shahenshah, have been served. Each of those
companies initially instructed
LeeSalmonLong in relation to the proceedings. The original statement of claim was
filed in December
2006. A statement of defence was filed on behalf of inter alia
Gate Pa, Golden Eagle and Shahenshah. LeeSalmonLong continued to act
until the
middle of 2008. On 30 May 2008, the Court granted LeeSalmonLong leave to
withdraw, but directed that it should remain solicitors
on the record for service
purposes. On 29 July 2008, counsel for the Official Assignee submitted a
memorandum to the Court advising
that the shares in Gate Pa and Golden Eagle had
vested in him. Counsel recorded that both companies were likely to be struck off
the
Companies Register. The Official Assignee indicated that he had no knowledge of
Shahenshah. On 30 July 2008, the Court confirmed that LeeSalmonLong was to
remain solicitors on the record for service purposes on Gate Pa, Golden Eagle and
Shahenshah.

[5]
   The plaintiffs filed an amended statement of claim in October 2008. An
affidavit has been filed by a Ms Miles confirming that
she served that document on
LeeSalmonLong. When the matter was called this morning, the plaintiffs sought
leave to amend their statement
of claim. They had filed a document headed "Further
and Better Particulars of the Amended Statement of Claim", because the amended
statement of claim which had been filed earlier had omitted to plead any particulars
against Shahenshah. The further particulars
amended paragraph 11 to provide that
detail. I granted leave to the plaintiffs to amend the statement of claim in this regard.
Mr
Marcetic gave evidence that the further and better particulars had been served on
LeeSalmonLong.


[6]    I am also confident that
LeeSalmonLong were aware of the hearing date. On
13 November 2007, Associate Judge Robinson directed that the proceeding be listed
for a three week hearing in 2009. That direction was made at a case management
conference attended by a Mr Heard from LeeSalmonLong
who appeared on behalf of
a number of defendants, including Gate Pa, Golden Eagle and Shahenshah. On 20
November 2008, the Court
advised that the proceeding would be heard over the three
weeks starting 16 February 2009. Notice of the date of hearing was posted
to
LeeSalmonLong.


[7]    As noted above, there was no appearance for Gate Pa, Golden Eagle, or
Shahenshah.


[8]    In such circumstances,
it is open to the plaintiff to proceed by way of formal
proof. Rule 10.7 provides that the plaintiff must prove its cause of action
so far as the
burden of proof lies on it.


[9]    Here the only cause of action alleged against Gate Pa, Golden Eagle and
Shahenshah
is that of conspiracy by unlawful means. To prove this cause of action
Provincial and Consumer Credit must show:


       a)    
 that the defendants combined with others in concert,


       b)      that the defendants intended to injure the plaintiffs in their
trade,

       c)        that the means which the defendants used were        independently
                 unlawful, and


  
    d)        that such conduct caused loss to them.


The plaintiffs must also show that such conduct caused loss to it.


[10]
  The plaintiffs have filed a substantial number of documents in support of the
orders they seek, including affidavits from Ms J
R Mills, Mr P D Roigard, Mr J S
Edilson, Mr C B McKenzie, Mr J H Boswell, K M Evans, P Kumar, and
Mr E Lucas. In the circumstances
I am prepared to accept the giving of this evidence
by affidavit under rule 9.56. I also heard viva voce evidence from Mr Roigard
and a
Mr Marcetic. Mr Roigard produced three exhibits, first, a brief of evidence he was
intending to give at trial had the matter
proceeded, secondly, a master schedule
detailing the losses claimed by the plaintiffs, and thirdly, a report into the
manipulation
of the credit records it is alleged occurred.


[11]   It is clear from the evidence that Provincial and Consumer Credit carried
on
business as finance companies based in Christchurch. Consumer Credit is a wholly
owned subsidiary of Provincial and it has played
a relatively small part in the
proceeding because it only wrote a few loans. Those loans have been included in the
claim. Both plaintiffs
were placed into receivership on 30 May 2006 by Perpetual
Trust Limited.


[12]   The receivers commenced these proceedings in December
2006. There were
initially 12 defendants. Veda was formerly known as Baycorp Advantage (NZ)
Limited. It was a provider of credit
reports. The second, third and fourth defendants
were brokers of financial services. The fifth defendant, Abdul Osman, was a director
of Gate Pa, Golden Eagle and various other companies. So was the sixth defendant,
his brother, Abubakr Osman. The seventh and eighth
defendants were also members
of the Osman family. Gate Pa was a motor vehicle dealer, as was Golden Eagle.
Shahenshah was a property owning company.

[13]      In February
2007, the Osmans left New Zealand, and I am advised that in so
far as the plaintiffs are aware, they have not returned. Since that
time, the four
members of the Osman family who were defendants have been adjudicated bankrupt,
and one of their companies ­ the eleventh
defendant ­ has been placed into
liquidation. The claim against the Osmans and the eleventh defendant has been
stayed.


[14]   
  The statement of claim alleges that Provincial and Consumer Credit were the
targets of fraudulent loan applications submitted by
the three defendant finance
brokers. These loan applications were submitted on behalf of car-yards controlled by
the Osman family,
including Gate Pa and Golden Eagle.


[15]      Gate Pa traded under the name Ray's Wholesale Cars from car-yard premises
located
at Hall Avenue, Otahuhu and at Great South Road, Papatoetoe. Golden Eagle
traded as United Cars and it operated from the premises
in Hall Avenue, Papatoetoe.
Shahenshah owned the premises on Great South Road.


[16]      The scheme was that the Osmans, operating
through one or other car yard,
would locate prospective motor vehicle purchasers. The purchasers would be
brought to the car-yards
to inspect the motor vehicles for sale. When each purchaser
found a car he or she wanted to buy, the car-yard would try to arrange
finance for
him or her.      Staff employed by the car-yards would run credit checks on the
customer through Veda. If the credit
checks showed adverse information, then car-
yard staff ­ usually one of the Osmans ­ would make contact with an employee of
Veda,
who would fraudulently alter the customer's data in Veda's records, and/or
write a letter saying that certain debts had been paid,
and that Veda's records would
be amended in the near future. Reports would then be generated by the car-yard,
based on the falsely
manipulated data. The finance broker would then put together
the application for finance on the basis of the false documents. The
application was
submitted to either Provincial or Consumer Credit. If one or other accepted the
application, they would advance the
purchase price of the car to the relevant car-
yard, and pay fees to the finance broker. The car-yard would then supply the car to
the purchaser who became a customer of either Provincial or Consumer Credit.

[17]   The evidence establishes that Gate Pa and Golden
Eagle were both involved
in making applications to the plaintiffs in this way. Gate Pa operated the car-yards
involved in respect
of 833 (or 92%) of the loans which have been analysed and in
respect of which the plaintiffs seek judgment. Golden Eagle operated
the car-yard in
all but three of the remaining cases.


[18]   I am satisfied that Gate Pa, Golden Eagle and others involved acted
in
concert. Gate Pa and Golden Eagle shared the same registered office at 34 Hall
Avenue, Otahuhu. Both traded from the same premises
at Hall Avenue. The
evidence shows that both were managed together. The directors and shareholders of
the companies were the same,
and it is clear that two members of the Osman family,
in particular ­ Abdul and Abubker Osman ­ were the directing minds of both
companies.


[19]   As a matter of law, companies as separate legal entities can conspire with
their directors. Further, they can
conspire with other corporate entities. I am satisfied
that Gate Pa, Golden Eagle and their directors were acting in concert.


[20]
  Shahenshah was not a motor vehicle dealer. Rather it was a land owning
company.     Nevertheless, I am satisfied on the evidence
that it also acted in
combination with Gate Pa, Golden Eagle, and their directors.


       a)      Shahenshah was incorporated by
the Osmans in late August 2005 to
               hold land in Papatoetoe (2 Great South Road and 39 East Tamaki
               Road).


       b)      The shares in the company were owned by Ayesha and Hajira Osman.
               They were also the directors of the company. They were the sisters of
               Abdul
and Abubakr Osman;


       c)      Abdul and Abubakr Osman effectively controlled Shahenshah and its
               land;

   
   d)      The Osmans and their bankers treated Shahenshah as part of the wider
               Gate Pa group. This group included
Gate Pa and Golden Eagle;


       e)      Shahenshah's property investments were in large part funded by Gate
               Pa;


       f)      Shahenshah offered its land as security for Gate Pa group borrowings
               from Westpac;


       g)  
   Abdul and Abubakr Osman used Shahenshah's land (at Great South
               Road) to sell cars either owned or previously owned
by Gate Pa which
               were in turn financed by advances made by the plaintiffs;


       h)      Abdul Osman controlled
a residential dwelling occupying part of the
               site at Great South Road. It was used to provide accommodation for
 
             purchasers of vehicles who came from out of Auckland.


[21]   Even though Shahenshah could not itself commit the unlawful
acts in
question, it can nevertheless be a party to the conspiracy to use unlawful means, and
I am satisfied that it was a party
to that conspiracy.


[22]   I am also satisfied on the evidence that Gate Pa, Golden Eagle and
Shahenshah, in combination with Abdul
and Abubker Osman, provided false and
fraudulent information to Provincial and Consumer Credit via finance brokers, with
the intention
of inducing Provincial and Consumer Credit to advance moneys to
support the purchase of motor vehicles from their yards. It is clear
from the papers
filed, and in particular from Ms Mills' affidavit, and Mr Roigard's affidavit and viva
voce evidence, that the combination
comprising Gate Pa, Golden Eagle, their
directors and Shahenshah intended to obtain moneys from the plaintiffs by inducing
them to
rely on Veda's representations contained in letters and credit reports.


[23]   Finally, I am satisfied that the means used by the
defendants, in combination
with others, were unlawful. Gate Pa, Golden Eagle and Shahenshah, through their
directors, or the persons
controlling them, knew that the information being obtained

from Veda was false at the time it was obtained.           They knew
that that false
information was being provided to Provincial and/or Consumer Credit, and they
intended that Provincial or Consumer
Credit should act on it in approving loan
applications and entering into loan contracts.


[24]   The plaintiffs have suffered substantial
losses. The majority of the losses
were incurred by Provincial, but some losses were also incurred by Consumer Credit.
The claim
was initially based on 910 loans, with a total value of $8,961,259.
Following detailed investigations undertaken by Mr Roigard, the
plaintiffs now seek
to recover $6,865,761.32 being the loss on 696 loans. Those loans, together with the
other loans the subject
of the initial claim, were detailed in a spreadsheet, which is
exhibit 3.


[25]   Having considered Mr Lucas's evidence, and the
evidence of Mr Roigard and
exhibit 3, I am satisfied that the plaintiffs have suffered loss in the sum now claimed.


[26]   Accordingly,
judgment is entered against the ninth, tenth and twelfth
defendants on a joint and several basis for $6,865,761.32. The plaintiffs
are also
entitled to their costs on a 2B basis, together with their reasonable disbursements in
such sum shall be fixed by the Registrar.




                                                 Wylie J