Cochrane v Totara Properties Whangarei Limited [2014] NZHC 1006 (14 May 2014)

	Home \| Databases \| WorldLII \| Search \| Feedback High Court of New Zealand Decisions

UNDER	the Companies Act 1993 setion 174
IN THE MATTER OF	TOTARA PROPERTIES WHANGAREI LIMITED
BETWEEN	GRANT ALEXANDER C OCHRANE NOEL BRENT COCHRANE and LARRY PETER COCHRANE Plaintiffs
AND	TOTARA PROPERTIES WHANGAREI LIMITED First Defendant ALEXANDER REGINALD COCHRANE Second Defendant ALEXANDER REGINALD COCHRANE MAQ TRUSTEES 2011 LIMITED and MAC TRUSTEE SERVICES LIMITED as trustees of the SNOW COCHRANE NO.1 TRUST Third Defendants _{Continued over the page}

Hearing:	14 May 2014
Appearances:	J A Browne for Plaintiffs G P Curry and P J Magee for Second to Ninth Defendants
_Judgment:	_{14 May 2014}

COCHRANE and OTHERS v TOTARA PROPERTIES WHANGAREI LIMITED [2014] NZHC 1006 [14 May

MAQ TRUSTEES 2011 LIMITED and SHAREE MILDRED COCHRANE as trustees of the MAREE COCHRANE NO.1 TRUST Fifth Defendants

SHARLA COCHRANE and CAROLYN JANICE HARRISON as trustees of the SHARLA COCHRANE FAMILY TRUST Ninth Defendant

[1] This case has been set down for a substantive hearing for five days beginning on 26 May 2014. That is only eight working days away. At the same time as this proceeding is to be heard, the plaintiffs also wish the court to hear their application that at least some of the defendants are in breach of interim injunction orders made in December 2012.

[2] The second to ninth defendants have applied for leave to join a third party. They do not want the hearing in this case to go ahead unless they have the opportunity to have their claims against the third party heard and decided at the same time. If that third party is to be joined, there is obviously not enough time to serve him and give him adequate opportunity to file a defence, go through all the interlocutory steps (including discovery) and to prepare for a hearing. That means that this application to join the third party also requires me to consider whether the hearing to start on 26 May should be adjourned.

[3] The joinder and adjournment decision involves the exercise of a discretion under which the court has to weigh up competing considerations. Rule 4.8 of the High Court Rules recognises that the decision to join a third party involves the exercise of the discretion. Similarly, in O’Malley v Southern Lakes Helicopters Ltd Tipping J recognised the discretionary nature of adjournment decision when he said:¹

However the essential question which the Court always has to consider when asked for an adjournment is whether or not that is necessary in order to do justice between the parties. One must not overlook that not only is it necessary to do justice to the party who is seeking the adjournment but also justice to the party who wishes to retain the benefit of the fixture. It is essentially a balancing exercise.

[4] It needs to be borne in mind that, as with other discretions under the High Court Rules and under the practice of the court, the exercise of the discretion must be aimed at securing the just, speedy and inexpensive determination of the

[5] The second to ninth defendants wish to join Mr George Swanepoel. He is the lawyer who acted for at least some of the defendants in relation to transactions in issue in this proceeding. He also acted for the second to ninth defendants in this proceeding as litigation lawyer. He was replaced in February of this year. The fact that the third party is the lawyer who formerly acted for the defendants in the defence of this proceeding adds an element of complexity to the proposal that he be joined as a third party.

[6] The case involves a dispute within the Cochrane family. Mr Alexander Cochrane, known to everyone as Snow Cochrane, is the father of the family. He is the second defendant. His wife, Maree, is the fourth defendant. They have four children. The plaintiffs - Grant, Noel and Larry Cochrane - are the sons. The daughter, Sharee, is the sixth defendant. Sharee has a daughter, Sharla, who is the eighth defendant.

[7] The dispute concerns the family company, Totara Properties Whangarei Limited. The sons claim under s 174 of the Companies Act 1993 that they have been unfairly treated as shareholders and seek relief under that section. Their essential complaint is that although they are shareholders of the company, the company is being and has been run in such a way that benefits have been conferred on others in the company but they have been excluded.

[8] The company was originally established in 1972. It was re-registered under the Companies Act 1993. The shareholding of the company is divided into two classes. There is one class A share and there are 100 class B shares. They have different voting rights. The class A share has 300 votes but each class B share carries only one vote. Each of the plaintiffs own 20 class B shares. Maree, the mother, also has 20 class B shares, as does Sharee. Snow Cochrane used to own the class A share but it appears that that has been transferred to the third defendants, the trustees of his family trust. Other defendants are other trustees associated with the personal defendants. The fifth defendants are the trustees of the Maree Cochrane No.1 Trust said to be sued as former owners of a class A share. The seventh defendants are

trustees of the JS Family Trust which is associated with Sharee Cochrane. The ninth defendants are the trustees of the Sharla Cochrane Family Trust.

[9] The company owns a forestry block at Carruth Road, Titoki. It has in recent years successfully harvested a crop of pine trees. It holds significant funds in hand. It is solvent. In 2011 it bought another forestry block at Kirikopuni from Snow Cochrane and Maree, although that transaction is the subject of a complaint by the plaintiffs who allege that it was bought overvalued so as to benefit husband and wife at the expense of the company generally. I was advised that the assets of the company are said to be approximately $3.5 million.

[10] In December 2012, Andrews J heard an application to appoint interim liquidators. Her decision summarises the complaints made by the plaintiffs:²

The essence of the plaintiff’s claim is that since at least 2010, Totara’s affairs have been conducted with no regard for the powers and rights vested in the plaintiffs, or the duties and obligations imposed on the defendants, under the Act and Totara’s constitution. Mr Browne referred in particular to the following, which are detailed in the plaintiffs’ affidavits (in particular, the affidavit of Noel Cochrane):

(b) In April 2010, Mr Cochrane Snr entered into a contract to sell the Carruth block property to a third party for $10 million. While this was clearly a “major transaction”, the requirements as to major transactions were not complied with. Mr Cochrane Snr then purchased, in his own name, a property intended for a trust to be formed for his granddaughter (Sharee’s daughter) Sharla. The sale of the Carruth block fell through, and Mr Cochrane Snr was forced to take out bridging finance.

(c) In September 2010, Mr Cochrane Snr caused Totara to enter into a harvest contract with P F Olsen Ltd. An advance payment of

(d) In late 2010 or early 2011, shortly after the harvest of the Carruth Road block commenced, Mr Cochrane Snr purchased a large Chevrolet truck and horse float/caravan, using Totara’s funds. Neither the Chevrolet truck nor the horse float is used for company purposes.

(e) During the year ended 31 March 2011, substantial amounts were credited to Mr Cochrane Snr as drawings. Totara’s accounts record

the sum of $112,918 as drawings. At the same time, $48,000 was recorded as being salaries for Mr Cochrane Snr and Mrs Cochrane.

(f) On 31 March 2011, Mr Cochrane Snr procured Totara to pay a dividend of $68,420 to himself, but not to any of the other shareholders. In a judgment delivered on 5 December 2012, on a preliminary question of law, Lang J held that the constitution of Totara prevented it from paying a dividend in respect of the Class A share held by Mr Cochrane Snr, unless the Class B shares shared equally in the dividend.

(g) On 1 May 2011, Totara entered into a long term lease of the Kirikopuni block. That property was then owned by Mr Cochrane Snr and Mrs Cochrane. On 1 June 2011 Totara purchased the Kirikopuni block at government valuation, that is, at a price which did not take into account the lease already obtained. This purchase benefitted Mr Cochrane Snr and Mrs Cochrane.

(h) Totara paid for the purchase of the Kirikopuni block by assigning to Totara the debt owed by the Sharla Trust to Mr Cochrane Snr and Mrs Cochrane, and by issuing two new Class A shares, one to Mr Cochrane Snr and one to Mrs Cochrane. The share issue was in breach of both the Act and Totara’s constitution.

(i) A special meeting of Totara’s shareholders was held on 4 May 2012 (after the plaintiffs’ proceeding had been issued). Larry Cochrane was the only plaintiff to receive notice of the meeting. The notice to him was by email, contrary to the provisions of Totara’s constitution as to giving notice. A resolution was passed at the meeting pursuant to which Totara bought back the two new Class A shares, and cancelled them. A solvency test document dated 4 May 2012 discloses a distribution of $100,000 to Mr Cochrane Snr and Mrs Cochrane on that date.

[11] I do not understand that what Andrews J has set out in her decision are the limit of the matters raised by the defendants, but her decision gives a good understanding of what is generally in issue.

[12] The plaintiffs also allege that about the same time as the application was made to Andrews J, company funds sourced through family trusts were being used to buy a coastal property out at Oakura, thereby benefitting beneficiaries of the family trusts.

[13] Mr Snow Cochrane is the sole director of Totara. Maree and Sharee have been joined as shareholders of the company. The other defendants appear to have been joined as recipients of benefits from the company. The plaintiffs allege that Snow Cochrane has acted in breach of fiduciary duty and in breach of his duties

under the Companies Act and the other defendants have actual and constructive notice of this.

[14] The plaintiffs seek comprehensive relief under s 174 of the Companies Act. The prayer reads as though the draftsman wanted not to leave out any potential avenue of relief that might possibly be available under s 174. In particular, the relief sought includes directions for buy-out, order for liquidation and orders directed at restoring the benefits to the company, orders for the constitution to be changed and for Mr Cochrane to be removed as a director. For good measure, there is even a claim for general damages, but I am not sure how such a loss might be claimed under s 174 of the Companies Act.

[15] In submissions, Mr Browne said that there were four main avenues of relief which might be open if the plaintiffs can make out their claims. First, there might be an order for the defendants to buy-out the plaintiffs. Second, there might be an order for the plaintiffs to buy-out the defendants. Third, an order might be made for liquidation. And, fourth, he suggested that a possible resolution might be to order the distribution of the assets of the company. He pointed to the fact that there were two forestry blocks and a sum of cash which might allow one forestry block to be given to each side with the cash used to make any appropriate adjustments.

[16] Some of the transactions the plaintiffs challenge occurred during 2011 and others during 2012. This proceeding started in March 2012. Initially Snow Cochrane, the trustees of Snow’s trust, the trustees of Maree’s trust and the company were the only defendants but, as the case went on, the other defendants were added.

[17] In their latest statement of defence, for many of the matters targeted by the plaintiffs, the defendants say that they acted after taking advice from Mr Swanepoel. With the change of representation, much of their defence is that Mr Swanepoel must bear a large part of the responsibility. As I understand it, the defendants will present themselves as people not schooled in the finer points of company law. They looked to their professional advisers - in particular their solicitor Mr Swanepoel who had acted for them for many years - to ensure that when they entered into transactions

involving the company, they would comply with the law, including the principles of company law and the provisions of the Companies Act.

[18] Before dealing further with this case, I make some comments about the nature of a claim under s 174 of the Companies Act. It is helpful to remember that provisions such as s 174 were brought into the companies legislation to provide a more flexible form of relief than ordering the company to be put into liquidation.

_{The Court of Appeal recognised this in Latimer Holdings Ltd v SEA
Holdings NZ}

1948 (UK) as an alternative to winding up on the just and equitable ground. The argument was that winding up was much too drastic a remedy to utilise in many cases, and that it would be desirable to give Courts wider powers to intervene to set matters to right, whether by ordering one party to buy the other out or otherwise regulating the affairs of a company.

[19] That seems to be relevant for this case. Many of the allegations by the plaintiffs might otherwise be the basis for an application for a liquidation order on the just and equitable ground under s 241(4)(d) of the Companies Act. Under that ground the courts have made liquidation orders where minority shareholders have shown a justifiable lack of confidence in the conduct and management of a

[20] Because other relief under s 174 is in the alternative to a liquidation order, a successful plaintiff under s 174 may properly say that they ought not to be in a worse position than they would be if the company were put into liquidation. For a minority shareholder on a successful claim under s 174, the appropriate remedy may be to require the shares to be valued on a liquidation basis. In valuing minority shares in other circumstances it is common to apply a discount. Court decisions under s 174

_{have said that the discount for minority shareholding should not be
applied when}

approximate the plaintiffs’ position as if there had been a liquidation. That will ensure that the plaintiffs share pro rata with the shareholdings of the majority shareholders.

[21] The case started in March 2012. The plaintiffs’ evidence shows that during

2011 they instructed lawyers with a view to resolving matters with the defendants without going to court. Their case is that they only brought this proceeding once they realised that trying to resolve the matter without court proceedings would be fruitless.

[22] At an early stage of the proceeding, the first three defendants sought determination of a preliminary question. That was whether, under the terms of the constitution of the company and under the Companies Act, the company could make differential dividends, i.e. pay different dividends for the class A share and for the class B shares.

[23] I ordered a split hearing. Lang J heard the preliminary issue. He gave a decision against the defendants in December 2012. They appealed unsuccessfully to the Court of Appeal which upheld the decision of Lang J.⁶

[24] At the end of 2012, the plaintiffs applied for the appointment of interim liquidators. Andrews J held that interim liquidators should not be appointed but she instead ordered an interim injunction to preserve the status quo until the substantive hearing. Her orders restrained Snow Cochrane and the company in a number of ways, effectively freezing the assets of the company and limiting the salary of Mr and Mrs Cochrane to no more than $48,000 each. She ordered that the company was not to buy any new property, it was not to sell or dispose of assets to third parties, but she did indicate the purchase of the Oakura property could still proceed.

[25] In September 2013, Venning J heard an application to vary the injunction. The company had surplus assets which it wished to place on long-term investment.

Venning J held that that was inappropriate. He dismissed the application for variation. He made certain observations:⁷

It is apparent that, unfortunately, there is currently a complete breakdown in the relationship and trust between the parties. If the parties are unable to resolve that on a practical basis with a view to the future then the further direction of the company will have to be determined by this Court...

In my view a fixture should be allocated for the hearing to provide certainty for the parties and to the company as to its future direction. ...

As noted in my judgment the answer is for these proceedings to be resolved as soon as possible and then once the proceedings have been resolved and orders made by the Court then the future operation of the company and its future will be determined.

24 September 2013, I gave directions for setting down and hearing. I allocated the fixture to begin on 26 May 2014. In the meantime, there have been some other developments. In December 2013, the parties took part in a mediation. I have asked not to be informed what was said in that mediation but it is common ground that it was not successful except that one claim by the plaintiffs was settled – a claim for payment for pruning work. The parties remained at large on all the other issues in this proceeding.

[27] The plaintiffs also contend that the defendants have breached the injunction ordered by Andrews J. They filed a contempt application. By agreement, that was put on hold pending the mediation. Case management directions were then given for that contempt application to be heard at the same time as the substantive proceeding.

[28] I am advised that so far the defendants have not formally opposed the contempt application. Apparently many (if not all) of the breaches are not contested. I understand that the response of the defendants to the contempt application will be that they were not properly informed as to the terms and effect of the order for the interim injunction and that they were unaware that actions they may have carried out were in breach of the court order. For that failure of understanding, they say that Mr Swanepoel must carry the responsibility.

[29] The defendants instructed new lawyers, Thompson Wilson, in February 2014. The files were handed over, apparently with some difficulty, in February and March

2014. The new lawyers have continued with preparation for the hearing. Mr Curry says that he is not confident he would be as fully prepared as he would like, should the hearing start on 26 May 2014. I will have to take that into account in my decision.

[30] The second to ninth defendants filed their application to join Mr Swanepoel in March 2014. On 25 March I gave directions to hear this application. The defendants have prepared a draft statement of claim against Mr Swanepoel. I emphasise that this is a draft. It may well benefit from modification.

[31] I treat the allegations against Mr Swanepoel as falling under two general heads, although the pleading is not drafted that way. In one respect claims are made against Mr Swanepoel as a corporate/commercial lawyer, that is, a lawyer asked to give advice to a director of a company as to the proper way to carry out transactions in accordance with the Companies Act and principles of company law. The other claims are directed at Mr Swanepoel as a litigation lawyer, that is, at the way that he has conducted the defence of this proceeding up until the time that the present lawyers took over.

[32] The statement of claim sets out three causes of action. The first is in tort for breach of duty of care, the second is for breach of contract and the third is a claim for contribution under s 17 of the Law Reform Act 1936.

[33] A defendant is allowed to issue a third party notice without leave of the court if the notice is issued within 10 working days of the expiry of the time for filing the

this case the defendants also need leave under r 7.7 because they have applied for joinder after the close of pleadings date, 27 January 2014.

[34] When a defendant applies for leave under r 4.4, the defendant needs to show that the claim against the third party falls within one of the heads under r 4.4(1). The defendant must also persuade the court to exercise its discretion in favour of joinder.

[35] Rule 4.8 makes it clear that on the exercise of the discretion, the court must have regard to all relevant circumstances, including delay to the plaintiff. The court may grant or refuse leave. It can grant leave on just terms.

[36] For this decision I accept that the defendants can properly claim that they may be able to pass on to Mr Swanepoel some liability if the plaintiffs succeed in obtaining some relief against them under s 174. That is, I accept that one or other of the heads under r 4.4(1) of the High Court Rules applies here.

[37] Some of the grounds set out by the defendants do seem rarefied. I am not persuaded that the claim against Mr Swanepoel is one for indemnity. The claim for contribution under the Law Reform Act 1936 seems improbable because the plaintiffs are not making a tort claim, but a claim under s 174 instead. It may be that there could be a claim for contribution in equity if Mr Swanepoel owed a duty of care to the company and by his actions he became a concurrent wrongdoer with Mr Snow Cochrane in assisting Mr Cochrane to breach his duties to the company. But there is a simpler way of approaching the matter.

[38] The risk to the defendants is that they might suffer some loss arising out of the plaintiffs’ claim against them under s 174. They may have a cause of action in contract or in tort against Mr Swanepoel for that loss. I have in mind one particular way in which that loss might be asserted. The loss might arise from the way that the A share is valued in this proceeding. The A share is a controlling share because of its

majority voting power. There is good authority, Holt v Holt,⁹that ordinarily such a

share carries a premium. However, once the company is put into liquidation, then the controlling power enjoyed by that share will be lost. In that case, the controlling A share would take no more than one per cent of any distribution of the assets of the company.

[39] The risk for the holder of the controlling A share is that the value of that share may fall as a result of the plaintiffs succeeding in their claim under s 174. To put the matter the other way, the controlling A share enjoys a premium only so long as the holder of the controlling A share does not treat the minority shareholders prejudicially so as to trigger a claim under s 174. Therefore it seems arguable for the defendants that they engaged Mr Swanepoel for his advice on how to deal with the complaints by the plaintiffs so as to ensure that, as director of the company, Mr Snow Cochrane managed the company in accordance with his responsibilities under the Companies Act and company law and to oppose the plaintiffs’ claim for orders under s 174.

[40] The second to ninth defendants say that Mr Swanepoel did his work incompetently. For this decision I do not see that it is necessary for me to go into those allegations in any further detail. Affidavit material indicates that the defendants have not made these allegations recklessly. On that basis, it is plausible that if the A share has lost its value as a result of incompetence on the part of Mr Swanepoel, then the holder of the A share can look to him for the loss.

[41] Determining that issue involves considering matters that arise under the plaintiffs’ claim under s 174. That overlap is enough to bring the matter within r 4.4(1)(c) and (d).

[42] The defendants say - this is a submission commonly made in joinder applications - that there will be greater efficiency if the plaintiffs’ claims against them are heard at the same time as their claims against Mr Swanepoel, given the overlap of issues.

[43] As already noted, the latest statement of defence shows that to a large extent the defendants lay the blame on Mr Swanepoel for the claims now made against them. They make the point that if this case were to go ahead without Mr Swanepoel being joined, there will be unfairness to him because the Court would be required to

make findings in respect of his conduct which may reflect on his professional reputation, even though he has not been given the opportunity to be heard.

[44] To enable their case to be heard fully, the defendants have gone further. An affidavit by Mr Snow Cochrane contains an express waiver of privilege in respect of any written communications between Mr Swanepoel and the defendants. I double- checked that in the hearing. I was assured that the waiver did not just apply to the materials attached to affidavits but extended more widely to all written communications with Mr Swanepoel. I was not told that it extended to oral communications. The parties may need to consider s 65(3) of the Evidence Act 2006 but it seems to me at least arguable that with the way the defendants are now running their defence, they have put the advice that Mr Swanepoel gave them in issue for the purpose of this proceeding and cannot claim privilege for oral communications as well as written communications between them and Mr Swanepoel.

[45] It also appears that the defendants’ dissatisfaction with Mr Swanepoel extends not only to his conduct of the proceeding and the advice he gave on transactions that are now in issue. Some of the defendants complain that he acted without express instructions. It is foreseeable that the defendants will also claim what Mr Browne described as “billing issues.” Apparently legal fees charged by Mr Swanepoel, including expenses, come to about $170,000. The defendants will want to say that much of that was misspent.

[46] It is desirable that all of the defendants’ complaints against Mr Swanepoel be heard at the same time. There is inefficiency if the defendants’ complaints against Mr Swanepoel are divided up so that only some are heard in this proceeding and others in a separate proceeding.

[47] One matter that has troubled me is that part of the claim against Mr Swanepoel goes to his conduct of this proceeding. I regard it as unusual that in a claim against a defendant, the defendant should join as a third party the lawyer who was formerly instructed to run the defence. The court will be required to consider and decide not only liabilities between the plaintiff and defendant but at the same time it will also have to consider arguments as to the way that the defence was

formerly conducted and possibly counter-arguments from the third party as to how the current defence team ought to be running the defence.

[48] The defendants say that there is no difficulty as they are prepared to waive privilege. In other words, they do not consider that they will be embarrassed by their communications with Mr Swanepoel being disclosed to the plaintiffs. They may be handing a gift to the plaintiffs but apparently that does not concern them. Even so, it seems to me that there is a residual difficulty for the court in trying to hear a case in which the court is required to establish actual liabilities between plaintiffs and defendants and also hear arguments as to counterfactuals between the defendants and a third party.

[49] There are other factors. If Mr Swanepoel is to be joined as a third party in this proceeding, there will not only be an adjournment but it may also take some time before a fresh hearing can be started. It is likely that Mr Swanepoel carries professional indemnity insurance and that he would notify his underwriters. While he may have some inkling that a claim against him is going to be made, I was advised that no formal letter before proceedings has yet been sent. Once proceedings are issued, underwriters’ lawyers are likely to be instructed. They will want time in which to examine the matter carefully to formulate an appropriate response on behalf of Mr Swanepoel. They may also need time in which to check whether there is cover for the claim. They may also cast about to see whether other people should be joined into the proceeding to share any liability with Mr Swanepoel. It would require very efficient management for this case to be brought on for hearing earlier than 12 months from any joinder decision.

[50] Along with that is the fact that all sides have been preparing for the hearing on 26 May. With an adjournment there will be a large element of wasted costs. It invariably happens that where there is an adjournment of a hearing for which the parties have prepared, the parties must prepare afresh. They do not just pick up the file and carry on as before, but they re-work the case with a doubling of cost and effort.

[51] It is necessary to take into account as a general policy consideration the desirability of adhering to fixtures. Experience shows that if a case is given a fixture and the fixture is maintained, the certainty that the case will proceed on the date allocated promotes the efficient conduct of litigation generally. The certainty of a case proceeding to a hearing enables the more efficient resolution of disputes. It means that the parties, as they prepare, will reassess their cases. It increases the likelihood that the parties will negotiate and reach a settlement. In other words, a firm policy of maintaining fixtures where appropriate can overall assist in the orderly despatch of the court’s business.

[52] Conversely, abandoning fixtures adds to uncertainty. A delay in hearing is delay in obtaining justice. It leaves the parties under greater uncertainty.

[53] For this case, particularly as it concerns a family dispute, finality is required. Venning J identified that in his decision. The parties have not been able to settle matters by alternative dispute resolution. Allowing the matter to be put off further will only add to uncertainty, will add to stress on all sides and will wear on all parties.

[54] Moreover, it is also in the company’s interests that this matter be determined promptly. The interim injunction ordered by Andrews J was intended only to preserve the status quo until the case could be heard. It is apparent from the fact that there has been a variation application and that there have been alleged breaches of the orders that that injunction is causing, at the very least, inconvenience. Once the merits of the plaintiffs’ claim can be determined, it will be possible to do away with the injunction and to put new arrangements in place instead to operate in the long term.

[55] As Mr Browne submitted, the plaintiffs have been proceeding in a diligent way towards a hearing. In my case management of the file, I have not been able to identify any delay on the part of the plaintiffs in bringing the matter to a hearing. Having applied to the court, they are entitled to have it determine the merits of their claim. I bear in mind that they have made a significant investment in this case and that part of that investment may be lost with an adjournment.

[56] Another factor is that two of the plaintiffs are in Western Australia. They have made arrangements to take time off work and to come to New Zealand for the hearing. The defendants downplayed that. I accept that that inconvenience has not been greater than for someone living in, say, the South Island coming to Northland for a hearing. But there is another feature. It is the stress of bringing proceedings in a foreign jurisdiction. For litigants, bringing proceedings in their home jurisdiction is stressful enough. For these plaintiffs living in Australia, bringing a proceeding in another jurisdiction is more stressful. With the distance, they have less control of the proceeding. Delay in having the matter heard can only add to stress and anxiety. The courts have to be responsive to those concerns.

[57] I refer to the defendants’ submission that there will be efficiencies in hearing all matters between the plaintiffs, the defendants and the third party. So far as the plaintiffs are concerned, this proposal is one that there be a more extended hearing so that matters have to be determined not only between them and the defendants but between the defendants and Mr Swanepoel. That will put them to extra costs. At present the plaintiffs are facing the costs of a hearing between only them and the defendants. Against that, they are being asked to carry extra costs for a longer hearing to decide a claim to which they are not parties. As to the question where doubled costs ought to fall, there is some justice in allowing the costs of a double hearing to fall on the defence alone rather than to require the plaintiffs also to carry that cost.

[58] I weigh the matter overall. In my view, the dominant consideration is that this fixture ought to be maintained so that the plaintiffs can have their claims heard. It remains to be seen what the outcome of that hearing will be. If it does turn out that the defendants carry any liability and that they wish to recover from Mr Swanepoel on account of that liability, they will have to bring a separate proceeding. The advantages are that their claim against Mr Swanepoel may extend more widely than the narrower issues in this case. The billing issues, for example, may also be aired later although they may be irrelevant to this proceeding.

[59] One effect of hearing any claim against Mr Swanepoel separately is that he will not be bound by any findings made in the hearing beginning on 26 May.

However, any liability of the defendants to the plaintiffs will have been established by any decision given on the s 174 hearing. The question in the claim against Mr Swanepoel will turn very much on whether he is the one responsible for the losses. It is a causation issue more than anything else.

[60] The defendants make the point that they changed representation only late in the piece because they, in good faith, believed that they were in good hands with Mr Swanepoel. Their new lawyers have obviously made determined efforts to get up to speed with the case. I do not hold anything against the defendants for the late change of representation. Nevertheless, I have to weigh the overall justice of this case. Justice, in my view, would be better served by allowing this proceeding to continue on 26 May than to grant an adjournment and allow this serious dispute within the family to continue.

[61] Therefore, I dismiss the application for joinder and I refuse the adjournment.

[62] During the hearing there was discussion as to the length of hearing. The case has been allocated five days. Mr Browne maintained that no more time would be required. He pointed out that evidence had been exchanged by affidavit so that there will be cross-examination only. Both sides have expert share valuers. He said that the differences between the share valuers were clearly identified and there is basic agreement on methodology. There is no dispute as to the value of underlying assets.

[63] The defendants were more cautious. I share the caution of the defendants. I am not suggesting that they will conduct the case inefficiently but there may be a fuller examination of issues under current representation than there might have been before. For that reason, it seems to me prudent to allow that this case may require more than one week. It would be prudent to allow the case up to seven days.

[64] Mr Browne has asked for costs. I make an order for costs in favour of the plaintiffs under category 2. I anticipate most of the steps taken fall within band B but I trust that counsel will be able to confer and agree on costs. If they cannot, memoranda may be filed.

High Court of New Zealand Decisions

Cochrane v Totara Properties Whangarei Limited [2014] NZHC 1006 (14 May 2014)