646 Victoria (Hamilton) (in liq) v Hunt HC Hamilton CIV 2009-419-1640 [2010] NZHC 2162 (9 December 2010)

Last Updated: 14 December 2010

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

_{CIV 2009-419-001640}

BETWEEN 646 VICTORIA (HAMILTON) (IN LIQUDIATION)

Plaintiff

AND GEOFFREY GERARD HUNT Defendant

Hearing: 8 December 2010

Counsel: DP Shore for plaintiff

GE Minchin for defendant

Judgment: 9 December 2010 at 4:45pm

JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for summary judgment]

This judgment was delivered by me on 9 December 2010 at 4:45pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date...............

Solicitors: McCaw Lewis Chapman, PO Box 9348, Hamilton 3240

Ellis Law, PO Box 4516, Auckland 1140

646 VICTORIA (HAMILTON) (IN LIQN) V HUNT HC HAM CIV 2009-419-001640 9 December 2010

[1] In my interim judgment delivered on 18 August 2010 I set out the background, the opposition to the plaintiff’s summary judgment application, the court’s approach to a plaintiff’s summary judgment application and the current position.

[2] This judgment must be read with my interim judgment. I do not intend to repeat matters which were set out in that interim judgment in this judgment.

[3] In my interim judgment I recorded a reservation I had concerning the possibility that persons other than the defendant may have been responsible for the withdrawal of company funds.

[4] Because of that reservation and because it appeared to me that the matter might still be able to be determined within the summary judgment context I gave directions for further evidence.

[5] The defendant has expanded that position and has adduced evidence designed to disclose:

a) That not all moneys in the plaintiff’s schedule were in fact items of the defendant’s personal expenditure; and

b) That he introduced to the company no less than $1,283,035.16 and therefore must be given credit for this. If such credit is given it would more than extinguish the plaintiff’s claim.

[6] The plaintiff acknowledges that the original claim for the period which is covered in the schedule, namely 3 December 2003 to 12 September 2007 should be reduced to $633,320.25. I need not record the reasons for this save to say that it is recognised that the amount beyond $633,320.25 relates to legitimate company expenses which should not be charged to the defendant’s current account with the company.

[7] As I recorded in my interim judgment I remain concerned about the defendant’s explanation for the entries which appeared in the schedule prepared by

the liquidators which is now reduced to $633,320.25. The defendant instructed Mr BW Hunt, who is not related to him, to carry out an analysis of the schedule prepared by the plaintiff liquidators. The exercise is not complete. I was not provided with the precise analysis. Mr Minchin acknowledged that there really could be no contest about the defendant’s liability for the cash withdrawals referred to in the plaintiff’s schedule. They total $119,985.37.

[8] The defendant has no-one other than himself to blame for the position which he currently faces in this claim. Had he kept proper records and provided the information sought to the plaintiff liquidators the true position could have been able to be ascertained without difficulty. Having said that, the concern about this case arises from the fact that:

a) The defendant is the sole shareholder of the company; and

b) The liquidators have so far only identified claims by creditors totalling $85,957.87. In addition, they have referred to the fees and legal costs which have been incurred in investigating this liquidation which, as at 15 October 2010, amounted to $86,000.

Both counsel recognise that any recovery made by the liquidators for an amount in excess of that which was due to the unpaid creditors and the liquidators costs would, in reality, be returned to the defendant because he is the sole shareholder. That position, in itself, has caused me some caution in the approach that I take to this application for summary judgment.

[9] The issue that caused me some concern at the first hearing is whether or not other persons might have been responsible for the payments which were recorded in the liquidators’ schedule. The only additional evidence that has been adduced in this respect shows that when an analysis of cheques obtained from the company’s bank was undertaken, only one matter on the liquidators’ schedule totalling $187.50 was found to have been due to a cheque signed by someone other than the defendant. Bearing in mind the size of the claim, this issue is clearly insignificant and would not have therefore deterred me from the entry of summary judgment in this case. I

would simply have adjusted the figure accordingly by reducing the claim by

$187.50. As it happens that adjustment is already made by the liquidators in their concession that the claim would be reduced to $633,320.25.

[10] Further evidence has thrown up another issue which, in the scheme of things, is not decisive but I record it in any event. An assumption was made that the defendant was the sole director. The further evidence adduced to me have proved that assumption to be wrong. Mr Hunt has now produced evidence which has not been challenged by the liquidators, that the Companies Office electronic register discloses that, in addition to himself, one Richard Hayes has been a director since

12 December 2002 and Bonavia Trunau has been a director since 7 April 2004. Both persons have been directors down to the present time. A number of other persons are recorded as having been directors but have resigned. Why that position is not terribly significant is that there is no evidence of those directors, other than the defendant, being involved in the payment out of the company’s accounts which are recorded in the liquidators’ schedule. I simply record this position because it is another unsatisfactory piece of background material with which I have had to deal.

[11] The remaining, and worrying, issue with this case concerns the defendant’s allegation that he has advanced moneys to the company which exceed the amounts that are claimed by the liquidators. In his affidavit of 13 August 2010 the defendant claims he lent the company about $400,000 over the period, that is the period referred to in the liquidators’ schedule.

[12] In his affidavit of 5 October 2010 the defendant says:

I put a large amount of my own funds, held by my lawyers Foley & Hughes, into the company accounts to pay for specific costs or to provide working capital. My accountant has identified $1,575,338 of large payments, mostly from Foley & Hughes to the company.

[13] That position was challenged by Mr DJ Coombe, a chartered accountant who is assisting the liquidator. Mr Minchin accepted that when those challenges were taken into account the defendant could not claim that any payments in excess of

$1,283,035.16 could be recorded as an advance by the defendant to the company. That, however, still leaves an allegation that the defendant has advanced

significantly more than the liquidators say is due as advances by the company to its shareholder, the defendant.

[14] There is no satisfactory evidence which assists me in this regard. The evidence discloses that the file was uplifted by the defendant from the solicitors Foley & Hughes. When I asked counsel whether Foley & Hughes had been approached to disclose trust account records to ascertain what data was recorded in relation to the receipt of funds held in trust and their dispatch, I was told that this had not been undertaken.

[15] The issue of advances to the company was raised by the defendant in his first affidavit. I am left in a real doubt as to whether I have sufficient information before me to conclude in this case as to precisely what is owing by the defendant, if anything, to the company.

[16] I am not able to resolve, in this application, the different approaches to the analysis of the withdrawals from the company which have been adopted by the liquidators, on the one hand, and Mr B Hunt, the unqualified accountant, for the defendant. I am further concerned that even if Mr B Hunt’s analysis is totally ignored the defendant’s withdrawals from the company may, nevertheless be substantially less than the sums of money which he advanced to the company through his solicitors.

[17] This unsatisfactory state of affairs is largely of the defendant’s making. Having said that, and because the answer may well be available by further close scrutiny of the trust account records of the solicitors to determine what payments may have been made by the defendant to the company, on the one hand, and because the court on trial should determine the status of certain non-cash items in the liquidators’ schedule, I conclude that summary judgment is not appropriate and that the matter should proceed to trial.

[18] I record that Mr Shore invited me, as an alternative, to enter judgment for the cash items which Mr Minchin, quite properly, conceded could not be disputed of

$119,985.37. The problem with that approach is that if the advances made to the

company by Mr Hunt are of the order claimed, they more than off-set the figure for which Mr Shore is seeking judgment. In addition, although it is permissible to enter judgment for part of a claim, if I were to adopt the position advanced by Mr Shore, the case would still have to proceed in respect of the balance of the claim. When I weigh all these matters up I conclude that it is not appropriate to enter summary judgment and that what is required are directions pursuant to r 12.12 for the future conduct of this proceeding. I discussed such directions with counsel in the event that I came to the conclusion which I have. Accordingly, they are the reasons why the directions which appear at the conclusion of this judgment are made.

[19] In addition, I discussed the question of costs. Counsel were agreed that if I reached the conclusion which I have that the appropriate course was to reserve costs. I adopt that position.

Orders and directions

[20] I order and direct as follows:

a) The application for summary judgment is dismissed;

b) An amended statement of claim shall be filed and served by

28 January 2011;

100. A statement of defence to the amended statement of claim shall be filed and served by 18 February 2011;
     

d) Each party shall file and serve affidavits of documents by 18 March

2011;

e) A telephone case management conference shall be held at 12:20pm on

12 April 2011. The conference will discuss:

i) the issues requiring resolution at trial;

ii) settlement and whether a mediation or a Judicial settlement conference should be ordered;

iii) trial duration, the fixing of the trial date and the making of any special trial directions that are required. In respect of these matters counsel should have available the number of witnesses to be called and the general scope of the evidence to be covered by them so that an accurate assessment can be made of trial duration. In addition, counsel should be in a position to indicate if any order should be made in relation to the experts pursuant to r 9.44.

Because the issues requiring resolution at trial will be considered at the conference, memoranda shall be filed on a sequential basis so that the defendant has the opportunity of commenting upon the plaintiffs’ summary of the trial issues. To achieve this the plaintiffs’ memorandum dealing with the above matters shall be filed and served by 2 April 2011 and the defendants’ memorandum dealing with the above matters and, in particular, commenting upon, conceding or adding to the list of issues shall be filed and served by 9 April 2011.

f) Costs are reserved in line with the position adopted by the Court of

_{Appeal in NZI Bank Ltd v Philpott.}[1]

JA Faire
_{Associate Judge}

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[1] NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA).