FINNIGAN v ELLIS [2017] NZHC 3291

FINNIGAN v ELLIS [2017] NZHC 3291 [21 December 2017]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV 2016-404-1590[2017] NZHC 3291IN THE MATTER of the liquidation of WENZTRO CO-OPERATION LIMITED (INLIQUIDATION) formerly called TrojanFoods (NZ) LimitedANDIN THE MATTER of an application by liquidators and acreditor under s 301 of the Companies Act1993BETWEEN PERI MICAELA FINNIGAN AND BORISVAN DELDENFirst PlaintiffsAND WENZHOU HONGLIANG TRADING CO.LIMITEDSecond PlaintiffBRIAN ROBERT ELLISFirst DefendantGERALD NORMAN WILLIAMSSecond DefendantJAMES NEIL BLACKThird DefendantHearing: 21 December 2017Counsel: J K Boparoy and A A Alipour for PlaintiffsP D Sills for First DefendantNo appearance for Second DefendantThird Defendant in personJudgment: 21 December 2017ORAL JUDGMENT OF WYLIE JIntroduction[1] These proceedings were initially commenced by the liquidators of a companyknown as Wenztro Co-operation Limited (in liquidation) and Wenzhou HongliangTrading Co Ltd ("Wenzhou"). The first and second defendants were directors ofWenztro. The plaintiffs alleged that the third defendant, Mr Black, was a "shadow"director. In very broad terms the pleadings alleged reckless trading and/or tradingwhile the company was insolvent.[2] The proceedings are set down for hearing over a period of eight days, due tocommence on 12 February 2018.[3] In March of this year, Sargisson AJ set the matter down for hearing and put inplace a timetable designed to ensure that it was readied for trial.[4] The plaintiffs complied with that timetable and filed and served their briefs ofevidence on 30 October 2017. At the time those briefs were filed the plaintiffs advisedthat they were still waiting for further documents to be discovered from China. Thedocuments had to be translated into English.[5] In compliance with their obligations to discover on an ongoing basis, anadditional affidavit of documents was filed by the plaintiffs on 16 November 2017.The documents were provided on a USB stick. The USB stick was passwordprotected, but the password was provided at or about the same time. For some reason,it seems that neither the first nor the third defendant could access all of the documentsuntil late November 2017.[6] It is accepted by the plaintiffs that the additional documents discovered relateto that part of the claim as was brought by Wenzhou and in particular to consequentiallosses it was claiming.[7] The defendants were due to file their briefs of evidence by early December2017. They did not do so but given the delays with their additional documents theplaintiffs granted them an extension until 20 December 2017.The applications[8] On 14 December 2017, the plaintiffs filed an application seeking to file asecond amended statement of claim. The first and third defendants filed a notice ofopposition and also an application to adjourn the fixture. The plaintiffs for their part,filed a notice of opposition to the application for an adjournment.[9] The matter was called before me today. Mr Sills appeared on behalf of the firstdefendant. The second defendant is abiding the decision of the Court. The thirddefendant, Mr Black, appeared in person.[10] The first issue for discussion was the plaintiffs' application to amend thepleadings.Application to amend the Statement of Claim[11] Leave is required because the close of pleadings date was 25 September 2017.In the course of the hearing, I was advised by Mr Sills that the first defendant did notoppose the amended statement of claim, as long as one aspect was clarified. Headvised that the first defendant also wishes to seek costs because one of theamendments is that Wenzhou will drop out of the proceedings. The first defendantsays that it is entitled to costs as a result of the discontinuance by Wenzhou.[12] Mr Black adopted the submissions of Mr Sills and also agreed to the amendedstatement of claim being filed.[13] The clarification sought was provided by Ms Boparaoy to the satisfaction ofthe defendants.[14] Accordingly, I make an order granting leave to the filing of the secondamended statement of claim. I reserve leave to both the first and second defendantsto apply for costs against the former second plaintiff – now no longer a plaintiff –Wenzhou Hongliang Trading Co Limited. In that regard I direct that any applicationfor costs is to be filed and served by 19 January 2018. Any response from WenzhouHongliang Trading Co Limited is to be filed and served on or before 2 February 2018.The application is then to be referred to the trial Judge who will deal with it.[15] I now turn to the application to adjourn the trial.Application for adjournment[16] The reason for the filing of the second amended statement of claim is that theliquidators have belatedly accepted a proof of claim by Wenzhou. Initially theliquidators were not prepared to accept the Wenzhou's proof of claim. It was claimingapproximately $3.6 million. The bulk of that claim related to consequential lossesWenzhou said the company's alleged breach of contract had caused it. Wenzhou hadobtained a summary judgment at the time the company went into liquidation in thesum of $617,000 but it had not sued for its consequential losses. An initial sum wasclaimed of $2.5 million in this regard . Wenzhou employed an expert – a Mr Shepherd- and he determined that its consequential losses were in the sum of $1.2 million.Wenzhou decided to accept Mr Shepherd's views in this regard, rather than pursue aclaim in Court, or with the liquidators. The liquidators in light of Mr Shepherd'sevidence decided to accept the proof of claim comprising the earlier judgment amountof $617,000 plus Mr Shepherd's assessment of $1.2 million for consequential losses.[17] The first and third defendants say that late discovery of the additional material,relating as it does to the consequential losses claimed, puts them in a difficult position.They say that there is considerable additional work required from them and that theycannot properly expect to be in a position to proceed to trial on 12 February 2018.[18] The plaintiffs deny this assertion. They accept that the first and thirddefendants were not able to open all relevant documents until late November, but pointout that they do not seek to amend or change the evidence they filed as long ago as 31October 2017. They also say that various of the matters which Mr Black has intimatedhe wishes to raise are not properly causes of action open to him, and at best, may becauses of action open to the liquidators. They say that the matters tentativelysuggested by Mr Sills and more positively asserted by Mr Black, have not to date beenpleaded, notwithstanding that the consequential losses were sought by Wenzhou whenthey were parties to the proceeding.[19] I am not persuaded that an adjournment of the hearing is required. Theconsequential losses formerly claimed by Wenzhou, but now accepted in a lesser sumby the liquidator are the subject of an application under s 307 of the Companies Act.They have been in issue for some time. I accept that at least some of the relevantdocumentation was not made available until mid-November and that there wereinitially problems in accessing the documents. Who was responsible for thoseproblems is not clear, but in any event, in my judgment, the defendants have beenaware of the claim for consequential losses for some considerable time. It makes littledifference whether the claim was brought by Wenzhou, or by the liquidators. Theissues it is now claimed need to be clarified should have been foreshadowed and thedefendants should have been getting their respective houses in order to meet the claimat a very much earlier point of time. They have had the additional documents sincelate November. They appear to have done very little if anything.[20] Accordingly, I refuse the application for an adjournment. Some amendment tothe timetable will, however, be required, if for no other reason than that the defendantsare in breach. I canvassed amendments to the timetable with counsel. By consent, Iput in place the following amendments:(a) any amended statements of defence are to be filed and served on orbefore 5pm on 12 January 2018;(b) the defendants' briefs are to be filed and served on or before25 January 2018;(c) any reply briefs from the plaintiffs are to be filed and served on orbefore 5pm on Wednesday 7 February 2018;(d) a synopsis of the plaintiffs' opening submissions is to be filed andserved on or before 5pm on Thursday 8 February 2018.[21] The costs incidental to today's hearing are to be dealt with at the substantivetrial.Solicitors:Shieff Angland, AucklandEllis Law, AucklandCounsel:P SillsCopy to:J N Black