MacLab (NZ) Limited v Wilson [2016] NZHC 449 (16 March 2016)

Last Updated: 21 April 2016

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

CIV-2014-442-000008 [2016] NZHC 449

BETWEEN	MACLAB (NZ) LIMITED Plaintiff
AND	PHILLIP JOHN WILSON First Defendant TEAPOT ENTERPRISES (2008) LIMITED Second Defendant P J CONTRACTING (NELSON) LIMITED Third Defendant PAMELA JANE THOMSON Fourth Defendant PHILLIP JOHN WILSON, PAMELA JANE THOMPSON and LINDA LORRAINE PHILIPSON, as trustees Fifth Defendant

Hearing:	11 March 2016
Appearances:	B Nathan and S Galbreath for Plaintiff No appearance for First Defendant A J D Bamford for Second, Third, Fourth & Fifth Defendants
Judgment:	16 March 2016

_{JUDGMENT OF ASSOCIATE JUDGE MATTHEWS}

[1] In this proceeding the plaintiff sues the first defendant, Mr Wilson, a former employee, then manager, and later director, of the plaintiff for a period between 1996 and 2013. The plaintiff calls into question a number of transactions said to have been undertaken by the first defendant, maintaining that these constitute breaches of

_{his fiduciary duties to the plaintiff, and breaches of duties set out in ss 131 and 133}

MACLAB (NZ) LTD v WILSON [2016] NZHC 449 [16 March 2016]

of the Companies Act 1993. The first defendant has defended this claim from the outset.

[2] The fourth defendant, Ms Thompson, is said to be the de facto partner of Mr Wilson and is also a former employee of the plaintiff. They are equal shareholders in, and the directors of, the second defendant. Ms Thompson is the sole shareholder and director of the third defendant. The fifth defendants, who comprise the first defendant, fourth defendant and a further party, Ms Philipson, are trustees.

[3] In the fourth amended statement of claim, allegations are made against the second to fifth defendants. The second and third defendants are said to have been unjustly enriched by the actions of the first defendant, the fourth defendant is said to have given dishonest assistance to the first defendant, and tracing orders are sought in relation to assets said to be held by the fifth defendant.

[4] None of the second to fifth defendants has filed a statement of defence. They were joined to the proceeding by an order made on 7 July 2015 and served with proceedings on 13 July 2015, and 15 July 2015 in the case of the independent trustee, Ms Philipson. Under the High Court Rules the deadline for filing a statement of defence expired on 17 August 2015.

[5] On 24 August 2015 the plaintiff applied for formal proof against the second to fifth defendants, and served its application on the first defendant on 27 August. On 28 August the Court ordered that the claim against the second to fifth defendants be set down for a formal proof hearing.

[6] On 12 October a memorandum was filed on behalf of the second to fifth defendants indicating that statements of defence, and possibly counterclaims, would be filed by 13 November 2015.

[7] On 13 October the Court directed that any application for leave to file statements of defence must be filed and served within 10 working days. That period expired on 27 October without any application having been filed. On 28 October the second to fifth defendants applied for leave to file statements of defence out of time,

and advised the Court that draft statements of defence would be filed before the hearing of the application.

[8] On 12 November the plaintiff filed a notice of opposition to this application. On 9 December counsel for the second to fifth defendants, who had still not provided even draft statements of defence or (as foreshadowed) counterclaims, advised that medical evidence in relation to the health of the first defendant, said to be delaying preparation of the defences of the second to fifth defendants, would be filed by

18 December 2015.

[9] On 11 December the Court set down for hearing the second to fifth defendants’ application for leave. The specified hearing date was 11 March 2016. The Court directed the second to fifth defendants to file a synopsis in support of their application 10 working days in advance of the hearing (26 February 2016) and directed the plaintiff to file its synopsis five working days in advance of the hearing. The Court noted the advice of the second to fifth defendants that their draft statements of defence were likely to take some further time before being produced.

[10] Despite the advice given by counsel for the second to fifth defendants on

9 December, no further medical evidence in relation to the first defendant was provided by 18 December.

[11] The second to fifth defendants did not file and serve their synopsis in support of their application by 26 February 2016. Their synopsis was filed the day before the hearing, at 5.10 pm and the draft statements of defence for the second and third defendants at 5.31 pm. Although it referred to a draft statement of defence being attached, this was not the case. Draft statements of defence were lodged with the court shortly before 10.00 am on the day of the fixture.

[12] Self-evidently, the second to fifth defendants have spent the last seven months acting in flagrant disregard of the plaintiff’s right to bring its proceedings to a hearing, their own interests in presenting the defences they claim to have, the requirements of the High Court Rules, and the express orders of the Court.

[13] Despite the second to fifth defendants not having filed their synopsis, counsel for the plaintiff filed a comprehensive synopsis opposing the application, which I had an opportunity to consider well in advance of the hearing. It is fair to summarise this submission by saying it is a comprehensive analysis of the events which have occurred, coupled with a measured assessment of these against the principles the Court must apply when considering an application of this nature.

[14] By the time the case was argued, however, Mr Nathan and Mr Galbreath had had an opportunity to consider the statements of defence which had been provided to them. Two of these were provided to them late in the afternoon of the day before the hearing, and three on the morning of the hearing. As a result of this review Mr Nathan informed me that he accepted that for the purposes of the present application, the draft statements of defence presented for the second and third defendants presented defences of substance, but that the defences presented for the fourth and fifth defendants were little more than bare denials of the plaintiff’s pleadings.

[15] Having reviewed the draft statements of defence myself, I concur with Mr Nathan’s assessment. Nonetheless, when the pleadings for the third, fourth and fifth defendants are compared to the paragraphs of the fourth amended statement of claim to which they respond, it can be understood that in the case of some of the pleadings, a bare denial may be all that these parties can present. I am satisfied that the draft statements of defence present, for the purposes of this application, a sufficient indication that all the defendants have a defence which they should be able to present to the Court, in the interests of justice. Having said that, Mr Bamford is aware from his own review of the documents during argument that some of the pleadings he has presented in draft will need further particulars, and he is equally aware that as the application brought on behalf of his clients will be granted, as appears below, the Court expects the documents to be fully compliant with the High Court Rules, including provision of full particulars, when filed.

[16] A further reason supporting the granting of the order sought by Mr Bamford is that there is a close relationship between the second to fifth defendants, and the first defendant, and largely, if not entirely, the allegations against these parties are

derived from the actions alleged on the part of the first defendant. I am satisfied that it would be unjust not to permit them to defend their positions, in this circumstance, particularly given that the defences now presented in draft appear to have substance.

[17] Having said that, however, the plaintiff is entitled to have the defendants respond to the position that has been reached in two ways. First, the statements of defence in final form must be filed and served promptly. Second, the justice of the case requires that they pay the plaintiff’s wasted costs. These include the costs on this application, which should not have been required, and the costs to which it has been put in preparing for a formal proof hearing against the second to fifth defendants. All up, the actual costs of the plaintiff amount to approximately

$30,000. Mr Nathan candidly accepts that part of these costs will not be wasted as evidence prepared for the formal proof hearing will at least form a basis for evidence to be presented at trial. As well, some time has been spent on a side issue which is not relevant to this case. After discussions with Mr Nathan I am satisfied that the actual costs of the plaintiff which can fairly be attributed to the actions of the second to fifth defendants, and are wasted, amount to $20,000.

[18] Mr Bamford accepted that a costs order against his clients in that sum is appropriate and fair.

[19] I also raised with counsel my concern that the pleadings must be presented in final form promptly, and that an unless order is an appropriate way to ensure that this occurs. Further, discovery of documents on the cases against the second to fifth defendants has not yet occurred and must also be completed in a timely way, protected also by an unless order.

[20] In the final result, therefore, I make the following orders:

(1) The application by the second to fifth defendants is allowed, but this order will be revoked without further application to the Court unless:

(a) No later than 4.00 pm on Thursday, 24 March 2016 each of the second to fifth defendants files and serves on the plaintiff

a statement of defence complying with the directions given in this judgment, and

(b) No later than 4.00 pm on Thursday, 28 April the defendants jointly and severally pay to the plaintiff a total sum of

$20,000 costs.

(2) The plaintiff will give discovery of documents in relation to its claims against the second to fifth defendants by 4.00 pm on

28 April.

(3) The second to fifth defendants will also give discovery of documents on the causes of action against them by 4.00 pm on

28 April.

(4) If any of the second to fifth defendants fail to give discovery by the time just stated, the defences of that party will be stayed until further order of the Court.

_{[21] There will be a telephone conference with me on 4 May 2016 at 11.00 am.}

_{J G Matthews}

Associate Judge

Solicitors:

Duncan Cotterill, Nelson.

Queen City Law, Auckland. Bamford Law, Nelson.