Kidd v Van Heeren [2015] NZHC 2475 (9 October 2015)

Last Updated: 13 December 2015

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-725 [2015] NZHC 2475

BETWEEN	MICHAEL DAVID KIDD Plaintiff
AND	ALEXANDER PIETER VAN HEEREN Defendant

Hearing:	7 October 2015
Counsel:	S Mills QC and B O'Callahan for Plaintiff B Gray QC and AJ Wakeman for Defendant
Judgment:	9 October 2015

_{JUDGMENT (No 7) OF FOGARTY J}

This judgment was delivered by me on 9 October 2015 at 1.00 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

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

Solicitors: Kirkland Morrison O’Callahan Limited, Auckland

Jones Fee, Auckland

KIDD v VAN HEEREN [2015] NZHC 2475 [9 October 2015]

Introduction

[1] On 14 April this year¹ this Court held that the defendant is issue estopped from denying that he is in partnership with the plaintiff and that the partnership accumulated assets worldwide as found by Satchwell J in the South Gauteng High Court of South Africa.² The Court went on to require the taking of accounts between the plaintiff and the defendant.³ Further, the judgment required the defendant to pay the sum of USD25m in equivalent New Zealand dollars one calendar month from the date of the judgment.⁴

[2] On 31 August, the Court declined to vary these orders, to essentially defer the order to pay the sum of USD25m into Court and significantly vary the taking of account orders by making it a mutual taking of account from the outset and otherwise providing a different regime.⁵ Had that application succeeded, it would have amounted to a substantive stay of the judgment.

[3] On 11 September, the defendant applied for a stay, relying on several grounds:

(a) The merits of the appeal are strong.

(b) If stay is refused, the defendant’s appeal rights would be rendered

nugatory.

(c) A mutual account is not possible pending a factual finding as to the effect of the sale of the Genan shares by the plaintiff to the defendant.

(d) A mutual account is not possible pending the provision a full discovery of documents relevant to the account from the plaintiff.

_{(e) The plaintiff has not provided security for costs.}

¹ _{Kidd v van Heeren [2015] NZHC 517.}

² _{Kidd v van Heeren South Gauteng High Court 27973/1998, 21 May 2013 at [132].}

³ _{Kidd v van Heeren, above n 1 at [172].}

⁴ _{At [172](f).}

⁵ Kidd v van Heeren [2015] NZHC 2082 at [6].

(f) The High Court has dismissed the defendant’s applications for variation and discovery, and denied the defendant the opportunity to provide further evidence that he is unable to pay the interim payment of USD25m.

(g) The overall balance of convenience favours a stay being granted.

[4] I have disregarded some minor grounds raised, which I think are subsumed in the above summary, for example, that the stay will not have any material effect on any third parties.

[5] On 7 October, this application for stay was dismissed,⁶ with the reasons to follow in a separate judgment. This is the separate judgment.

[6] The plaintiff opposed the application for stay. The plaintiff’s grounds were in

summary:

(a) That compliance with the orders made in the first judgment would not render the defendant’s appeal nugatory in respect of the order that he pay into Court the sum of USD25m.

(b) Nor will the defendant’s appeal be rendered nugatory if he is required to pursue the taking of account, as there is no realistic prospect the Court of Appeal will reverse the finding of issue estoppel.

(c) The delay will be significantly prejudicial to the defendant who is now 74 years of age and has been pursuing his claim since it was commenced in New Zealand in 1996.

(d) That there is an inference properly open to the Court now that on the

defendant’s conduct to date, he does not intend to comply with orders made in the first judgment.

⁶ Kidd v van Heeren [2015] NZHC 2455 at [2].

(e) The overall balance of convenience does not favour a stay.

The principles to be considered on an application for stay

[7] This application for stay is enabled by High Court Rule 20.10. That rule does not set out the criteria to be considered by the Court. Those criteria are, however, settled by case law and reflect the following three principles:

(a) The general rule is the a party is entitled to enjoy the fruits of a judgment in its favour.

(b) A party seeking stay will have to persuade the Court that if a stay were not granted, its appeal rights would be rendered nugatory.

(c) In exercising its discretion, the Court will engage in a balancing exercise, weighing up positions of both parties.

[8] The leading cases relied on by the parties for the most recent summary of these principles are the Court of Appeal’s decision in Keung v GBR Investment Ltd⁷ and, by the plaintiff, Hammond J’s judgment in Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd.⁸ The Keung judgment of the Court of Appeal is applying Dymocks. It is therefore sufficient to set out [11] of the Keung judgment:

[11] The stay application is brought under r 12(3) of the Court of Appeal (Civil) Rules 2005. In determining whether or not to grant a stay, the Court must weigh the factors “in the balance” between the successful litigant’s rights to the fruits of a judgment and “the need to preserve the position in case the appeal is successful”. Factors to be taken into account in this balancing exercise include:

(a) Whether the appeal may be rendered nugatory by the lack of a stay;

(b) The bona fides of the applicant as to the prosecution of the appeal;

(c) Whether the successful party will be injuriously affected by the stay;

_{(d) The effect on third parties;}

⁷ _{Keung v GBR Investment Ltd [2010] NZCA 396 [2012] NZAR 17 at [11].}

⁸ Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd (1999) 13 PRNZ 48 (HC).

(e) The novelty and importance of questions involved; (f) The public interest in the proceeding; and

(g) The overall balance of convenience.

That list does not include the apparent strength of the appeal but that has been treated as an additional factor.

(Footnotes omitted.)

The merit of the appeal

[9] It will be noted that the Court of Appeal in Keung does not put this criteria at the head of the list. Indeed, it is not on the list but is regarded as an additional factor.

[10] In the submissions before the High Court, and I understand to be repeated in the Court of Appeal, the defendant’s argument is that issue estoppel is confined to matters specifically pleaded prior to the trial starting.

[11] This is an appeal against a finding of issue estoppel, on an issue which was not identified by the pleadings.⁹ There was no doubt, however, that the issue became a trial issue.¹⁰ That led to the critical finding in the judgment under appeal:

[73] I do not see the law this way, as I have endeavoured to explain in the review of the authorities. These submissions carry within them the assumption that an examination of the factual matrix against which the indemnity was to be construed cannot possibly raise an issue estoppel. That is not what the authorities say. There is no authority saying that. There is no authority confining issue estoppel to matters specifically pleaded prior to the trial starting. To the contrary, as the authorities cited above show, issue estoppel is recognised when issues have been decided in an earlier trial, which were “necessary” for the judge to decide, “groundwork” of the decision etc.

[12] Resolutions of the contentions in the pleading will certainly be res judicata. I

adverted to the distinction in [17] of the judgment:¹¹

[17] A res judicata is a decision pronounced by a judicial or other tribunal with jurisdiction over the cause of action and the parties, which disposes once and for all of the fundamental matters decided so that, except on appeal, they cannot be relitigated between the persons bound by the

⁹ _{See Kidd v van Heeren, above n 1, at [14].}

¹⁰ _{See at [70] – [72].}

¹¹ At [17].

judgment. A res judicata estoppel may be either a cause of action estoppel or, by extension, an issue estoppel. (Emphasis added.)

[13] Issue estoppel is commonly understood as an extension of res judicata. The concept of extension and the limits of the extension are considered in some detail in the judgment. So, for example, Lord Shaw in Hoystead v Commissioner of Taxation naturally uses the word “extends”.¹²

[14] The problem with the case law is, as to their guidance as to what extent can you identify issue estoppel beyond the pleadings. That is why I devoted 34 paragraphs of the judgment to the analysis of the case law. That is why I proceed on this application for stay on the basis that there will be a reasonable argument on appeal, seeking to confine issue estoppel more closely to the pleadings.

Is stay necessary to prevent the appeal being nugatory?

[15] This, to my mind, is the critical issue in this case. Essentially, it revolves around the order of an interim payment of USD25m.

[16] The defendant submits that:

If he is obliged to account to the plaintiff pending appeal, then there is a substantial risk that the account will either:

(a) be unnecessary; or

(b) proceed on the wrong basis.

In either event, the defendant will be put to considerable unnecessary time and expense locating historical documents which may be relevant to the account and instructing experts to trace the proceeds of “partnership assets” past the date of the Genan share sale.

[17] It was submitted:

The orders for interim payment and account are both premised on the basis that the sale of the Genan shares by the plaintiff to the defendant on

21 February 1990 was somehow invalid in the absence of any finding to that effect by Satchwell J or any equivalent finding of issue estoppel by Fogarty

J. If the Court of Appeal finds that the validity of the Genan share sale was not properly the subject of an issue estoppel in the substantive judgment, then that may be a complete answer to the obligation to account at this stage.

¹² Kidd v van Heeren, above n 1at [47].

[18] As a supplementary argument, counsel for the defendant argued:

The orders for account further ignore that neither the South African judgment nor the substantive judgment made any findings as to where and when the alleged partnership was entered into, the terms of that partnership, or the proper law of the partnership that applies.

[19] Those arguments were developed factually with this proposition:

The defendant will suffer if its stay is not granted pending the determination of the appeal. By that application the plaintiff is taking steps to enforce the substantive judgment by compelling the defendant to provide extensive discovery of documents post-dating the 1990 Genan share sale and to travel to New Zealand to attend Court and undergo examination. The effect of the orders sought in the plaintiff’s application is that the defendant is obliged to account beyond the date of the Genan share sale, and as such the underlying premise of the plaintiff’s relies on the Genan share sale being invalid. If successful, the application will put the defendant to considerable waste of time and expense, both in locating and providing the documents sought (to the extent that it is possible) and in travelling to New Zealand to prepare for and attend the examination.

[20] Further, it is submitted:

The order for interim payment of USD25m is similarly premised on the basis that the Genan share sale was invalid. Further, the order has been made on terms that expressly contemplate the USD25m will be paid out to the plaintiff and the plaintiff has made submissions to that effect in previous hearings before this Court.

[21] I do not accept this argument for two reasons: First, the Genan share sale, allegedly of 50 per cent of the shares from the plaintiff to the defendant, was disputed, the plaintiff saying the agreement was a fraud. It was examined by Satchwell J in the South African trial, who found that the sale was “not proven” by the defendant. Secondly and more significantly, Satchwell J found that the function of Genan was to be a “conduit” of the proceeds of steel trades into other assets of the

partnership.¹³

[22] The role of Genan has always figured in this litigation. The plaintiff’s original statement of claim of 20 February 1996 pleads the functions of Genan extensively. The claim pleaded, in 1996, that his signature to the agreement was

_{either a forgery or typed onto a signed blank paper the plaintiff had left with the}

¹³ These two propositions are examined in the judgment under appeal, above n 1 at [84] – [95].

defendant. The plaintiff’s signature was purportedly witnessed by Gabrielle

McLaughlin. Satchwell J said:¹⁴

75. This purported sale of Genan shares has not been proven. Neither Gabrielle McLaughlin, personal assistant to Van Heeren, who supposedly signed as witness nor Van Heeren who supposedly also signed as a contracting party have given evidence as to its provenance. Similarly, the basis upon which Van Heeren gave instructions that the transfer of US3 million to Kidd from a Prime NZ bank account should be marked “share transfer” has not been explained.

[23] As is apparent from my judgment, I considered that Satchwell J’s judgment as to the existence of the partnership¹⁵ and of the assets of the partnership,¹⁶ directly arose out of this context at the trial and are part of the issue estoppel. Accordingly, her finding as to the conduit character of the Genan company is part of the issue estoppel:

[132] I am more than satisfied that the partnership of Kidd and Van Heeren, through Genan and Prime NZ as also Tisco and Jocrow and the other entities, made acquisitions throughout the world. These include but are not limited to Prime NZ, Huka Island, Dolphin Island, Cromwell/Wellesley shares which ultimately became a substantial stash of monies, Optech, gold bars and bearer certificates, cash on hand in bank accounts. The full extent of the funds retained and the assets acquired is unknown to me.

(Emphasis added.)

[24] By comparison, the way that the Genan point is put in the argument for stay, is as though the successful plaintiff with a finding of issue estoppel, is now trying to couple to that finding an unproven controversial proposition relating to the Genan share sale. When, rather, the South African judgment accommodates the function of Genan as a conduit with other entities, notwithstanding Satchwell J’s finding the Genan sale of shares agreement was “not proven” by the defendant.¹⁷

Accounting for all transactions since 1990

[25] Embedded in the argument of wasted time and expense, appearing in para 5.9 of the submissions, is the notion that the High Court judgment requires the defendant

¹⁴ _{Kidd v van Heeren, above 2 at [75].}

¹⁵ _{At [126].}

¹⁶ _{At [132].}

¹⁷ Kidd v van Heeren, above n 1 at [92].

to locate, provide documents and narrate all transactions of the disputed

“partnership” since 1990. It does not. The critical order in this regard is in [172](c):

[172] The following orders are made:

...

(c) The defendant, as the principal accounting party, is required to account to the plaintiff by filing in the High Court and serving on the plaintiff within 30 days of this judgment a complete list of all assets of the partnership, not confined to the list in [132] of the South African judgment, other than any held by the plaintiff, including:

(i) a description of the entities holding the assets; (ii) a description of the assets; and

(iii) the current value of the assets.

...

[26] The judgment is premised on the basis that the assets of the partnership, as they were when the partnership broke down in 1990/1991, have not been lost. But, rather, have been reinvested and gains in value have been made. There was detailed evidence before the South African Court and before the High Court in New Zealand on this basis from Mr Browning. Essentially, [172](c) in the vernacular is saying tell the Court: “who is now holding these assets?”, “what are these assets now?”, and “what is their current value?”

[27] The judgment proceeds on the presumption that all wealthy people can answer those three contemporaneous questions about their wealth. Paragraph (c) is complemented by (d):

(d) In addition, if any assets have been disposed of or otherwise he has lost control of, they should be listed with details of loss of control, advice as to the his knowledge as to who has control of those assets, a description of those assets and his estimated current value of those assets.

[28] Similarly, wealthy people can always remember when they have suffered a significant loss. So the first task of the taking of account is of the defendant to essentially advise the present position.

[29] In my view, the defendant’s argument has grossly overstated the burden placed on the defendant by these orders in [172]. In doing so, it has lent strength to the plaintiff’s argument that the defendant’s response to the judgment so far shows he has no intention of complying with the orders of the High Court. The proposition that the defendant has no intention of complying is the fundamental argument underpinning the plaintiff’s application currently before the Court and currently adjourned, requiring the defendant to appear for examination. One of the reasons for the adjournment of that application to examine the defendant is to test this

proposition.¹⁸

[30] The second nugatory argument is that if the defendant were to pay the USD25m as an interim payment and is ultimately successful in his appeals, he would lose that money. That argument is contrary to the terms of the judgment he is appealing. The order made thus far is payment into Court:¹⁹

(f) That the defendant pay the sum of USD25m in equivalent New Zealand dollars as at the date of payment into Court at the latest, being one calendar month from the date of this judgment, with leave to apply for an extension of time.

(g) Further in respect to order (f) within two calendar months of this judgment, and after the payment is made by the defendant into Court, the plaintiff is to submit to the Court a plan of investment and/or use of the interim payment pending completion of the final accounts.

(h) On receipt of the plaintiff’s proposal the Court will have a case management conference between the parties to timetable the process of approving or varying that proposal, enabling release of the whole or part of the funds to the plaintiff and the investment of the balance, coupled with a timetable on completion of the account.

Unable to pay

[31] The defendant has provided evidence as to why he is presently unable to pay anything. That argument was examined in judgment (No 4), delivered on

31 August.²⁰ That was in the context of an application for variation of the orders

_{including, as I have already noted, that he be released from the obligation of paying}

¹⁸ _{Kidd v van Heeren (No 6) [2015] NZHC 2455.}

¹⁹ Kidd v van Heeren, above n 1 at [172](f)-(h).

²⁰ Kidd v van Heeren, above n 5.

money into Court. His application for stay includes the argument, as I have noted, that he has been prevented from giving a full explanation as to the ability to pay. That was not the intent behind my ruling in judgment (No 4) at [44]:²¹

[44] In the course of the hearing, I entertained the possibility of an adjournment of the hearing of these applications to enable Mr van Heeren to consider his position and file a further affidavit. I apprehended that Mr Gray was agreeable to that. Mr Mills was not. It is a step that I am not prepared to take without agreement of the parties, because each party is entitled to rely upon the application of the High Court Rules and the pleadings and, having undertaken the expenses inherent in all of that, including waiting for and obtaining a hearing, to get a judgment.

[32] That judgment was made in the course of resolving the application to vary the orders. It was made on the standard premise that the defendant had had his procedural opportunity of selecting his arguments and evidence to be led in support of that application. His evidence was severely criticised during the hearing and his counsel was seeking an opportunity to come back again on another day (inferentially having the application for variation adjourned for a length of time) in order for the applicant to bolster his evidence. Paragraph [44] is a ruling that the respondent to the application is entitled to a judgment on the pleadings and evidence, such as they were led, prior to the fixture. However, to avoid any suggestion of prejudice and any suggestion that somehow the ruling in [44] in judgment (No 4) had some enduring quality for future interlocutory applications, and as a test of entitlement of the plaintiff to the remedy of examination, I adjourned the plaintiff’s application for an order that the defendant attend for examination so as to give the defendant an opportunity to address the criticisms of his evidence which appear in judgment (No

4).²²

[33] But, in my view, even if the defendant was able to prove his current inability to pay USD25m, or any lesser sum, that is not a foundation for arguing that if he did make a payment, the appeal would be rendered nugatory. For, as I have already discussed, it was an essential characteristic of the orders under [172] that if the interim payment into Court released to the plaintiff, either in whole or in part, it would be on terms approved by the Court, including the investment proposals. To be

_{sure, the Court would no doubt receive an application for partial use of those funds,}

²¹ _{Kidd v van Heeren, above 5, at [44].}

²² Kidd v van Heeren, above n 21.

for example, to meet the order for Court costs, or to be able to expend some money, providing that security can be provided over other fixed assets of Mr Kidd to ensure the ability to repay the same should the defendant be successful on appeal.

[34] For these reasons, I reject the submission that enforcement of the judgment of the High Court renders the appeal nugatory.

The overall balance of convenience

[35] It is common ground that these proceedings were commenced in New Zealand in 1996. The defendant challenged jurisdiction. The defendant argued that he was entitled to litigate disputes arising from the indemnity agreement in South African. The defendant won, the proceedings were stayed in New Zealand pending

resolution of the dispute as to the efficacy of the indemnity agreement.²³

[36] The order staying the New Zealand proceedings was made in 1998. It was not until May 2013 that the South African Court declared the indemnity void. In the High Court I heard argument as to fault or not on the part of Mr Kidd in delaying the process of getting the case to trial. I do not consider this contention to be justitiable on the material before me in February of this year or later. It is met with the counterpart argument by Mr Mills QC, for the plaintiff, that the delay between the commencement of the proceedings in 1996 and the position the parties are in now in

2015 is due to the misrepresentations deliberately made by the defendant (deceit) to the plaintiff in order to get him to sign the deed of indemnity.

[37] In considering the balance of convenience, the argument that no interim payment should be made in the meantime, needs to be set in the context where a deliberate decision was made not to lead evidence at the South African trial. There has been a contention by the defendant, not tested in oral argument before me, that the defendant was “ambushed” in the South African trial. But as the judgment under appeal records, Satchwell J heard a number of procedural objections to the scope of

_{the evidence being led before her in support of the argument that the contract of}

²³ See Kidd v van Heeren, above n 1, at [1] and [2].

indemnity was void.²⁴ The defendant lost those arguments and conducted a defence which was premised on an intent to call evidence in rebuttal of the plaintiff’s claim. He did not.

[38] Both counsel before have indicated that it is likely that whichever party loses in the Court of Appeal, that party will seek leave to appeal to the Supreme Court. This case has been allocated a fixture for June 2016. The appeal process therefore has the capability of going well into 2017. There is a significant prejudice to the successful plaintiff if taking of account and any interim payment is delayed up to two years, possibly more, from the judgment by the appeal process. The plaintiff is 74 years old.

[39] The starting point of this analysis is that the successful party, at first instance, is entitled to the benefits of the judgment which are not to be taken away by the exercise of rights of appeal. Ultimately, this proposition trumps the arguments that have been arrayed against it which I have endeavoured to deal with in this judgment.

[40] This application for stay is dismissed. The plaintiff is entitled to costs on a

_{2B basis.}

²⁴ At [71].