GRIFFITHS v ISLAND GRACE (FIJI) LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION) [2023] NZCA 627

GRIFFITHS v ISLAND GRACE (FIJI) LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION) [2023]NZCA 627 [7 December 2023]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA145/2023[2023] NZCA 627BETWEEN ANDREW GRIFFITHSAppellantAND ISLAND GRACE (FIJI) LIMITED(IN RECEIVERSHIP AND INLIQUIDATION)RespondentHearing: 3 October 2023 (further submissions received 18 October 2023)Court: Katz, Palmer and Jagose JJCounsel: R B Hucker, M W Swan and A L McMillan for AppellantA S Olney and B E Marriner for RespondentJudgment: 7 December 2023 at 10.30 amJUDGMENT OF THE COURTA The application for interim relief is declined.B The applications for leave to adduce further evidence are declined.C The appeal is dismissed.D The appellant must pay the respondent costs for a standard appeal on aband A basis and usual disbursements. We certify for two counsel.____________________________________________________________________REASONS OF THE COURT(Given by Jagose J)[1] Andrew Griffiths brings this appeal against the 17 February 2023 decision ofAssociate Judge Andrew (as he then was) in the High Court at Hamilton.1 The Judgedismissed Mr Griffiths' protest to jurisdiction and opposition to the liquidation ofSatori Holdings Ltd (Satori), and declined to grant him leave to file a statement ofdefence out of time.2 The Judge then put Satori into liquidation,3 on the orthodoxgrounds it was unable to pay its debts and its liquidation was just and equitable.4 Inso doing, the Judge had regard for Mr Griffiths' opposition to Satori's liquidation,notwithstanding the Judge's finding Mr Griffiths should be refused leave to join theproceeding.5Background[2] Satori is a New Zealand company, Mr Griffiths its sole director andshareholder. Satori is trustee for the Satori Family Trust, a foreign trust registered inNew Zealand. Indemnification from the Satori Family Trust is Satori's sole asset. Inthat capacity, Satori holds a 24 per cent interest in the Island Grace joint venture interms of a joint venture agreement dated 14 March 2019. The joint venture agreementprovides it is subject to New Zealand law, and the parties submit to the jurisdiction ofthe New Zealand courts.[3] The joint venture's assets are held by the respondent (Island Grace), also aNew Zealand company (registered as a foreign company in Fiji). The joint ventureagreement includes a self-executing process by which "Events of Default" disentitledefaulters to participation in joint venture decision-making.[4] Sequitur Hotels Pty Ltd (Sequitur) has a 52 per cent interest in the joint venture.Other entities respectively hold the 16.75 per cent and 7.25 per cent balance ofinterests in the joint venture. In 2019, Sequitur issued proceedings in the High Courtof Fiji against Mr Griffiths, Satori and others, alleging various wrongdoing in relationto the joint venture's formation. The proceeding is yet to be determined.1 Island Grace (Fiji) Ltd (in rec and in liq) v Satori Holdings Ltd (in interim liq) [2023] NZHC 219[Judgment under appeal].2 At [116]–[117].3 At [118].4 At [113].5 At [113].[5] The joint venture's principal asset was a Fijian resort, Six Senses Fiji, on landsubleased from Vunabaka Bay Fiji Ltd, also a New Zealand company. The resort wasplanned to form part of a larger development to be undertaken by another joint venture,the Vunabaka Bay joint venture, of which Satori as trustee also holds a 31.66 per centinterest (and shareholding in Vunabaka Bay Fiji Ltd, which is the trustee company forthe Vunabaka Bay joint venture). In matrimonial proceedings between Mr andMrs Griffiths, on 1 April 2022, consent orders substituted Mrs Griffiths for Satori inthose interests.[6] The Island Grace joint venture was the recipient of a substantial loan from theFiji Development Bank. Satori did not meet its share of the loan's debt or respond toa number of capital calls made by the joint venture. By final and binding expertdetermination of the Hon Paul Heath KC dated 1 April 2022, Satori was found to beliable, among other things, to respond to the capital calls (and for costs). In anotherproceeding,6 stayed pending the outcome of the present proceeding in the High Court,Satori sought to set aside Island Grace's statutory demand for the capital call debt.[7] After Island Grace's directors resolved in December 2021 the company was orwas likely to become insolvent, Island Grace was put into receivership by Sequitur.The receivers obtained a stay of the consent orders in the Fiji Magistrates Court, andsold the resort to Sequitur in May 2022 for FJD 24.0 million. The sale leftFJD 29.8 million owing to creditors, of which Satori is contended liable for its pro ratashare. In June 2022, Satori issued proceedings in the High Court of Fiji disputing thevalidity of the receivers' appointment.[8] Also in June 2022, on Island Grace's application, interim liquidators wereappointed to Satori.7 The liquidators identified Satori's assets as its interests in thetwo joint ventures (and a miniscule sum of FJD in a bank account), and its liabilitiesas the capital calls and loan debt together in the amount of some FJD 8.2 million(as well as costs of NZD 73,000 which Satori was ordered to pay following the expert6 Satori Holdings Ltd (in interim liq) v Island Grace (Fiji) Ltd (in rec and in liq) HC AucklandCIV-2022-404-836.7 Island Grace (Fiji) Ltd (in rec and in liq) v Satori Holdings Ltd HC Hamilton CIV-2022-419-145,21 June 2022 (Minute of Campbell J).determination). These are the debts on which Island Grace's liquidation applicationprimarily relies.Judgment under appeal[9] In the Judge's preliminary view, as Mr Griffiths had not filed a statement ofdefence in the proceeding, he lacked standing to oppose the proceeding.8 In hiscapacity as shareholder, he required leave to apply to restrain advertising or stay theproceeding.9 The Judge signalled he would address the company's disputed liabilityand solvency for the purposes of the leave criteria in connection with Island Grace'ssubstantive application for liquidation.10[10] The Judge turned to consider if Satori was unable to meet its liabilities. Henoted Mr Griffiths' opposition was "based in a large part on the allegation that the saleof the resort was an unlawful/improper sale by the receivers to a related party at a'gross under-value'".11 He also noted Mr Griffiths' contention Sequitur and anotherjoint venturer "combined to plan to ultimately buy the resort at an under-value".12[11] The Judge observed that "there is little probative evidence to support theseserious allegations".13 Acknowledging that it was not possible to make an "informedassessment of the merits of [Satori's] potential claims based on untested affidavitevidence", the Judge considered the claims were nevertheless "at best a potential assetof Satori" and accepted the submission for Island Grace that "if there is merit to theseclaims and a proper economic basis for prosecuting them then the liquidators are bestplaced to make the relevant assessments and decisions".14 Even so, Satori would bein no better position as it would remain liable for its share of the joint venture's8 Judgment under appeal, above n 1, at [50]–[51], [56] and [58]–[59].9 At [62].10 At [67] (following references at [64] to Auckland City Council v Stonne Ltd HC AucklandCIV-2007-404-4208, 30 November 2007 at [21]; and at [65] to Commissioner of Inland Revenuev Ron West Motors (Otahuhu) Ltd (2003) 21 NZTC 18,281 (HC) at [15]).11 Judgment under appeal, above n 1, at [72].12 At [81].13 At [82].14 At [83].FJD 56 million liability.15 And Mr Griffiths had not demonstrated any "substance orarguable merit" to his dispute as to Satori's liability for that share.16[12] The Judge considered "Satori is deeply insolvent [as] apparent from therecent report of the interim liquidators".17 As Satori was a New Zealand company, theHigh Court of New Zealand had jurisdiction to determine Satori's liquidation.18[13] So far as any connection with Fiji was concerned, Satori's only asset — itsright to indemnification by the Satori Family Trust — was a New Zealand asset andSatori's creditors had "a right to be subrogated to that indemnity".19 The trust ownedshares in the New Zealand joint venture companies.20 A judgment in anotherproceeding, accepting Fiji was the preferable forum for claims about Mr Griffiths'conduct as "main actor" while resident in Fiji, also held "New Zealand is the morenatural forum in respect of the contractual claims against Satori".21 New Zealandaccordingly was the convenient forum for determination of Island Grace's applicationfor Satori's liquidation.22[14] Additionally, the circumstances of Mrs Griffiths' substitution for Satori in theVunabaka Bay joint venture, and Island Grace's allegations of Satori's "profoundinsolvency" and continued incurring of obligations while insolvent, provided a properbasis for investigation of Satori's affairs on "just and equitable" grounds.23[15] Ultimately, the Judge concluded:24Mr Griffiths has failed to establish to the arguable basis threshold that Satoriis solvent and not liable for the debts at issue. There is no legitimate basis forstaying the proceedings pending determination of the related proceedings inFiji. That includes the proceedings in which there is a challenge to theappointment of the receivers.15 At [84].16 At [93].17 At [94].18 At [98].19 At [99].20 At [100].21 At [103], citing Sequitur Hotels Pty Ltd v Satori Holdings Ltd [2020] NZHC 2032 at [81]–[82].22 Judgment under appeal, above n 1, at [105].23 At [107]–[110] (following reference at [106] to Loch v John Blackwood Ltd [1924] AC 783 (PC);and Re Senator Hanseatische Verwaltungsgesellschaft mbH [1997] 1 WLR 515 (CA) at 523).24 Judgment under appeal, above n 1, at [111].The Judge therefore refused Mr Griffiths leave to oppose Satori's liquidation on anybasis, and held "Satori is unable to pay its debts and that it would also be just andequitable to make the liquidation order sought".25 Noting Mr Griffiths' failure toestablish Satori even arguably was solvent, the Judge did not need to decide ifMr Griffiths had standing to oppose the liquidation.26Submissions[16] Seemingly accepting the onus fell on Mr Griffiths to demonstrate "an arguablebasis that there is a defence to the liquidation proceeding", Robert Hucker argues theJudge's acknowledged inability to determine Mr Griffiths' claims of the resort's"under-value" sale "should have led to a dismissal of the liquidation proceedings".27Mr Hucker also argues the Judge erred in his assessment of Satori's continued liabilityeven if the sale was set aside.28 Then, he contends, the joint venture's assets wouldhave exceeded its liabilities, meaning the liquidation proceeding against Satori alsoshould have been dismissed. And he submits the Judge's acceptance issues remainedin dispute after the expert determination undermines the Judge's conclusion there wasno arguable case for Satori's liability or merit in its claim against Sequitur.29 Rather,the question of Satori's liabilities should be left to the Fijian courts.Approach on appeal[17] Section 27(1) of the Senior Courts Act 2016 entitles any party to proceedingsto appeal to this Court against any order or decision of an Associate Judge. Pursuantto s 27(2), s 56 of the Act applies to any such appeal. If Mr Griffiths has a right ofappeal against the Judge's decision, he bears the onus of satisfying us the Judge waswrong — in other words, the Judge erred.3025 At [111] and [113].26 At [115].27 Referring to [83].28 Referring to [84].29 Referring to [88].30 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [4] and[13].Analysis[18] Section 241(4)(a) of the Companies Act 1993 entitles the High Court ofNew Zealand to appoint a liquidator if it is satisfied a company registered under thatAct is unable to pay its debts.31[19] As such a company, there is no other forum for determination of Island Grace'sapplication for Satori's liquidation. Mr Griffiths' purported protest to jurisdictionand plea that Fiji is the more convenient forum are misconceived. The High Court,and only that court, has original jurisdiction to appoint a liquidator to aNew Zealand-registered company.[20] As noted, the court may do so if satisfied the company is unable to payits debts. As this Court stated in Yan v Mainzeal Property and Construction Ltd(in rec and in liq), "[t]he test is one of solvency, not liquidity"; of ready availability offunds to meet liabilities as they fall due.32 Where a company is insolvent, a creditor"prima facie" is entitled to an order putting the company into liquidation.33 It iswell-established courts are to take "a commercially realistic approach" under s 241.34[21] Mr Griffiths seeks to refocus issues on the joint venture's or particularventurers' prospects in Fiji, and especially if then having assets exceeding liabilities(being a liquidity, not solvency, assessment). His effort misses the point. The point isSatori's lack of solvency now within the joint venture has given rise to its liquidation.Satori inarguably has failed to pay its capital call debt, and has not established evenan arguable case it was not so liable.[22] Presuming Satori's success in various as yet undetermined Fijian proceedings,Mr Griffiths instead contends for counterfactuals in which such liability may not havearisen on a "proper" accounting between the joint venture parties or otherwise may be31 Companies Act 1993, s 2 definitions of "company" and "court".32 Yan v Mainzeal Property and Construction Ltd (in rec and in liq) [2014] NZCA 190 at [59], citingSandell v Porter (1966) 115 CLR 666 at 670.33 Commissioner of Inland Revenue v Newmarket Trustees Ltd [2012] NZCA 351, [2012] 3 NZLR207 at [65], quoting Commissioner of Inland Revenue v Chester Trustee Services Ltd [2003]1 NZLR 395 (CA) at [3].34 Cummins v Body Corporate 172108 [2021] NZCA 145, [2021] 3 NZLR 17 at [42(d)], referring toYan v Mainzeal Property and Construction Ltd (in rec and in liq), above n 32, at [60](citing Sandell v Porter, above n 32).offset. So characterised, the paucity of Mr Griffiths' opposition to Satori's liquidationin New Zealand is obvious. Satori has liabilities now in indemnification of thejoint venture's funding. It is commercially unrealistic other joint venturers should bearthose obligations while Satori seeks some more advantageous financial position foritself.[23] If Satori's failure to pay also qualifies as an "Event of Default" (limitingSatori's participation under the joint venture agreement), the expert determination didnot decide such and thus any such limitation is not material in assessing Satori'ssolvency by reference to its liability to Island Grace. Neither are Satori's prospectsfor liquidity arising from Fijian litigation any basis for dismissing the liquidationapplication in New Zealand.[24] We consider the Judge did not err in his conclusion Satori was unable to payits debts. It plainly has debts, as established by the final and binding expertdetermination in respect of its capital calls and costs liabilities, even leaving aside theloans. Given that lack of solvency, and Mr Griffiths' singular pursuit of alternativeoutcomes through Satori, we agree Satori's liquidation is just and equitable to ensureits effort is addressed to creditors' interests.[25] Given those conclusions, the Judge also was right to refuse Mr Griffiths leaveto apply to stay or restrain the liquidation proceeding.35 Even as shareholder, withoutSatori's solvency, Mr Griffiths cannot demonstrate desirable legitimate interest in therelief sought as the outcome of the proceeding.36 Rather Mr Griffiths seeks to avoidthat outcome. We will dismiss his appeal partly on that basis.Procedural issues[26] We have addressed the appeal in that way because, had the appeal substantivemerit, there are difficult procedural issues we would need first to determine inMr Griffiths' favour. It is not at all clear he would there have succeeded. Given the35 Companies Act, s 247.36 Re CBL Insurance Ltd (in liq) [2019] NZHC 2291 at [20]–[23], citing Deloitte & Touche AG vJohnson [1999] 1 WLR 1605 (PC) at 1611 (approving Re Corbenstoke Ltd (No 2) [1990] BCLC60 (Ch) at 61–62).appeal's lack of merit, the uncertainty of Mr Griffiths' role in the court below and onappeal make this appeal an unsuitable vehicle for determining those issues.[27] Mr Griffiths purports to have brought this appeal also as Satori, "on instructionthrough [him]". Satori is named the second appellant on the notice of appeal. GivenSatori's liquidation, as director, Mr Griffiths has no powers, functions or duties otherthan those required or permitted to be exercised for liquidation.37 If any entitled himto bring an appeal, as a party to the proceeding in the court appealed from, Satori thenwas required to be served with the notice of appeal.38 If not, the appeal would nothave been "brought",39 and we would have lacked jurisdiction to determine it.[28] After hearing the appeal, we drew the jurisdictional point to counsel'sattention. Mr Hucker submits Satori's right of appeal was exercised in Mr Griffiths'residual discretion as director, and in any event Satori effectively had notice ofMr Griffiths' appeal. Otherwise he seeks an extension of time for "the appeal to beadjudicated on its merits".[29] It may be the case, as much as a director may seek an order for the company'sliquidation,40 a director also should be able to oppose the making of such an order.But, from commencement of liquidation on the making of such an order,"the liquidator has custody and control of the company's assets" and directors "ceaseto have powers, functions, or duties other than those required or permitted to beexercised by [pt 16 of the Companies Act]".41 Nothing in pt 16 makes any provisionfor appeal against the court's appointment of a liquidator. Rather, provision for appealarises under the Senior Courts Act 2016, and — where, as here, the subject order ordecision is one of an Associate Judge — the right of appeal is vested in "[a] party" tothe proceeding.4237 Companies Act, s 248.38 Court of Appeal (Civil) Rules 2005, r 31(1)(b).39 See for example Underhill v Coca-Cola Amatil (NZ) Ltd [2019] NZCA 566 at [10]; andKoroniadis v Bank of New Zealand [2014] NZCA 197 at [2].40 Companies Act, s 241(2)(c)(ii).41 Section 248(1).42 Senior Courts Act 2016, s 27(1).[30] Mr Griffiths palpably was not a party to the proceeding in the High Court. Hispersonal participation in the proceeding wholly was informal, only as shareholderwithout leave. His purported protest to jurisdiction and opposition to Satori'sliquidation filed in the proceeding accordingly were nullities. If exercising powers asa director, his actions must be in Satori's name. It follows Mr Griffiths personally hadno right of appeal against the Judge's substantive decision on Satori's liquidation. Wewill dismiss his appeal also on that basis.[31] Any question of Satori's notice thus is redundant. For what it is worth, if weaccepted Mr Griffiths personally had a right of appeal, we would not have acceptedhis knowledge of the appeal appropriately constituted notice to Satori. Mr Griffiths'failure to distinguish what hat he wore at any particular point is a significant source ofprocedural complexity in this proceeding.[32] The question instead is if Satori, not Mr Griffiths, may or should be affordedan extension of time to appeal. As a contingent asset of the company, it is a decisionnow in the custody and control of the liquidators, and not Mr Griffiths. No extensionof time is sought by the liquidators; we therefore have no basis on which to considerit. The slide in Mr Hucker's submissions — from Mr Griffiths as barely timelycontended appellant "on instruction" to or from Satori, to Mr Griffiths as directorseeking now belatedly to exercise Satori's appeal right — suggests he accepts theproper focus of the question. His submission relies on earlier English authority forsuch directors' residual power,43 and necessarily presupposes such power survivespt 16's arguable codification of directors' powers on liquidation.[33] Determination of the question involves complex factual, legal and policyassessments with potentially far-reaching consequences. It is an inappropriatedetermination to make here, especially on post-hearing submissions alone and withoutproperly established factual foundations, in a comprehensively unmeritorious appeal.We therefore decline to consider this issue further.43 Re Union Accident Insurance Co Ltd [1972] 1 WLR 640 (Ch).[34] Only Island Grace as petitioning creditor, and Satori as subject company, wereparty to the substantive proceeding. Any right of appeal against it is limited to them.Neither exercised any such right. This judgment is intituled accordingly.Interim relief[35] By application filed only the day before the appeal hearing, and pending thedetermination of the appeal, Mr Griffiths (and nominally Satori) sought ordersrescinding and staying Satori's liquidation. We declined the application at the hearing,with reasons to follow. These are those reasons.[36] Applications for interim relief involve the overall balance between"the successful litigant's rights to the fruits of a judgment and 'the need to preservethe position in case the appeal is successful'";44 this includes consideration of whetherrefusing interim relief would be harder on a prospectively successful appellant thangranting it would be on a successful respondent.45 Given our conclusion the appeallacks substantive merit,46 the balance fell solidly in Island Grace's favour.[37] The application for interim relief also came nearly eight months after Satoriformally was put into liquidation (and some 16 months after Satori was put into interimliquidation), with material steps being taken since in furtherance of creditors' interests.At least the liquidators needed to be heard on Mr Griffiths' applications for rescissionand stay of Satori's liquidation, but they were not served and by reason of Mr Griffiths'unorthodox approach to parties effectively were excluded from the hearing of theappeal. The consequent delay and prejudice also weighed against any grant of interimrelief.44 Court of Appeal (Civil) Rules, r 12(3); Keung v GBR Investment Ltd [2010] NZCA 396, [2012]NZAR 17 at [11], citing Duncan v Osborne Buildings Ltd (1992) 6 PRNZ 85 (CA) at 87; DymocksFranchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd (1999) 13 PRNZ 48 (HC) at [9]; andBody Corporate No 188529 v North Shore City Council (No 6) HC Auckland CIV-2004-404-3230,11 February 2009.45 Analogously with considerations for interim injunctions: Air New Zealand Ltd v WellingtonInternational Airport Ltd HC Wellington CIV-2007-485-1756, 30 July 2008 at [4], citingCayne v Global Natural Resources Plc [1984] 1 All ER 225 (CA) at 237.46 At [24] above.Further evidence[38] Both Mr Griffiths and Island Grace sought to adduce new evidence on theappeal.47 It is well-understood such requires the prospective evidence to be "fresh,credible, and cogent",48 and this requirement serves to balance the interests of theparties and ensure the just and efficient dispatch of litigation.49[39] Mr Griffiths would put in evidence various documents relating to Fijianproceedings and Satori's claims of Sequitur's improprieties there. Island Grace wouldadduce the liquidators' most recent report. Admission of either is opposed,respectively as lacking cogency (even if fresh) or being incorrect.[40] We admitted the evidence on a provisional basis. Given our view of the appeal,we have not required to consider any of the proposed evidence and will decline bothapplications.Result[41] The application for interim relief is declined.[42] The applications for leave to adduce further evidence are declined.[43] The appeal is dismissed.Costs[44] The appellant must pay the respondent costs for a standard appeal on a band Abasis and usual disbursements. We certify for two counsel.Solicitors:Molloy Hucker, Auckland for AppellantBuddle Findlay, Wellington for Respondent47 Court of Appeal (Civil) Rules, r 45.48 Lawyers for Climate Change Action NZ Inc v Climate Change Commission [2023] NZCA 443 at[12], citing Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190(CA) at 192–193, and Paper Reclaim Ltd v Aotearoa International Ltd (Further Evidence) (No 1)[2006] NZSC 59, [2007] 2 NZLR 1 at [6].49 Rae v International Insurance Brokers (Nelson Marlborough) Ltd, above n 48, at 192.