GRANT v JESSE & ASSOCIATES BARRISTERS & SOLICITORS [2020] NZHC 168

GRANT v JESSE & ASSOCIATES BARRISTERS & SOLICITORS [2020] NZHC 168 [14 February 2020]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-002394[2020] NZHC 168UNDER Section 266 of the Companies Act 1993IN THE MATTER of the liquidation of Carlton Capital Limited(In Liquidation) and GEP Limited (InLiquidation)BETWEEN DAMIEN GRANT as liquidator of GEPLimited (In Liquidation) and Carlton CapitalLimited (In Liquidation)ApplicantAND JESSE & ASSOCIATES BARRISTERS &SOLICITORSFirst RespondentAND JESSE SEANG TY NGUYSecond RespondentHearing: 13 February 2020Appearances: A S Botterill and S Chambers for ApplicantP Napier for DefendantJudgment: 14 February 2020JUDGMENT OF ASSOCIATE JUDGE PAULSENThis judgment was delivered by me on 14 February 2020 at 10.00 ampursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:[1] The applicant is the liquidator of GEP Ltd (In Liquidation) and Carlton CapitalLtd (In Liquidation) (GEP and Carlton Capital respectively).[2] The first respondent is a firm of solicitors.[3] The second respondent is the principal of the first respondent (Mr Nguy).[4] At various times the respondents have acted as solicitors for both GEP andCarlton Capital. Their instructions apparently included acting in respect of some largeloan transactions.[5] The applicant applies under s 266 of the Companies Act 1993 (the Act) fororders that:(a) The respondents produce to the applicant all books, records,correspondence, notes, trust account bank statements and documentsrelating to the business, accounts or affairs of GEP and Carlton Capitalthat are in their possession or under their control; and(b) Mr Nguy attend the High Court at Auckland for an examination onmatters relating to the business, accounts or affairs of the companies.[6] The application is made to further the applicant's investigation into the loans,to unravel inter-company transactions and to seek recovery of monies owing to thecompanies.[7] In his affidavit, the applicant describes a history of requests of the respondentsfor documents and/or information concerning GEP and Carlton Capital and non-compliance with those requests. I do not need to set out the evidence. It is largelyunchallenged.[8] The applicant says that whilst the respondents have provided some of thecompanies' documents, they have not provided bank statements to verify the firstrespondent's trust account ledger (the accuracy of which is a matter that the applicantwishes to investigate) and there is a surprising absence of email correspondence andfile notes.[9] Mr Nguy was interviewed by the applicant on 25 June 2019 pursuant to arequest made of him under s 261 of the Act. At that time, he said he was not able toanswer questions in relation to Carlton Capital as he did not have access to files. Sincethen he has not attended for a further interview despite requests.[10] The relevant provision of the Act is s 266(2) that provides:The Court may, on the application of a liquidator, order a person to whomsection 261 of this Act applies to̶(a) Attend before the Court and be examined on oath or affirmation bythe Court or the liquidator or a barrister or solicitor acting on behalfof the liquidator on any matter relating to the business, accounts, oraffairs of the company;(b) Produce any books, records, or documents relating to the business,accounts or affairs of the company in that person's possession or underthat person's control.[11] The respondents do not dispute that they are persons to whom s 261 of the Actapplies or otherwise challenge the Court's power to make the orders sought. In thenotice of opposition, supported by an affidavit of Mr Nguy, the respondents contendthat the orders sought should not be made as they have not refused to producedocuments, nor attend an interview, have provided documents and continue to searchfor more, and the second respondent is prepared to attend further interviews.[12] In admirably succinct submissions, Mr Napier advises that recently therespondents provided the applicant with what they believe to be all the documentssought and that upon the second respondent's return from overseas he will willinglyattend an interview with the applicant.[13] Mr Napier referred to Dalton v Hong, where Associate Judge Smith said:1The Courts have noted that the discretion to make an order under s 266 mustbe exercised after a careful balancing of the factors involved. On the one hand,the Court should consider the reasonable requirements of the administrator to1 Dalton v Hong [2018] NZHC 2266 at [70].carry out his or her task; on the other hand, there is a need to avoid making anorder which would be wholly unreasonable, unnecessary, or oppressive to theperson concerned.[14] Here, Mr Napier asserts that the orders sought are "unnecessary" given therespondents' co-operative positions.[15] Attached to his submissions is a letter that Mr Napier sent on behalf of therespondents to the applicant on 5 February 2020 which states:Please find enclosed herewith copies of the documents sought in theoriginating application for order to produce books, records and documentsdated 16 October 2019. Our client informs that these are all of the documentsthat he has. We are informed that the originals were given to the Policefollowing a production order.Our client is travelling to Asia today for a week and will, as advised, self-quarantine for two weeks thereafter. He will be available for an interview ata time suitable to you from the week commencing Monday 2 March 2020onwards.[16] At the hearing today, Mr Botterill presented a somewhat different picture. Thebank statements requested have not been provided. These have been required since atleast 25 June 2019. Mr Botterill also notes that only one email has been produced andan absence of file notes. I am satisfied that the respondents must have the bankstatements and have failed to produce them. The respondents' failure to produce thebank statements has gone on for a long time despite several requests. They are clearlyimportant to the applicant's investigation of the loans. In these times, the absence ofemails and file notes between solicitors and their clients involved in commercialtransactions is surprising in the absence of any explanation. I do not accept thesubmission that making an order that the respondents produce documents isunnecessary. I make an order on the terms set out below.[17] In relation to the examination application, Mr Botterill says this is necessaryas Mr Nguy has not been interviewed in relation to the affairs of Carlton Capital andwas evasive in his previous interview. Because of the possibility that Mr Nguy mightassert grounds to withhold information in any further interview, Mr Botterill arguedthat it is desirable that he be examined before the Court, where any issues arising canbe ruled upon immediately. There is force in these submissions but a risk of delay ifCourt-time to conduct an examination is not immediately available. Mr Botterillagreed that the examination application should be adjourned until the end of March2020. This will give Mr Nguy the opportunity to submit to a voluntary interview bythe applicant, as he said he will do. Assuming he does so, is fully co-operative and nolegal issues arise requiring a ruling from the Court, I would expect the examinationapplication may be withdrawn. I note that Mr Napier had no instructions to agree toan adjournment of the examination matter.Result[18] There shall be an order under s 266(2)(b) of the Act that by no later than9 March 2020 the respondents are to produce any books, records, or documents (thatthey have not already produced) relating to the business, accounts, or affairs of GEPand Carlton Capital in their possession or under their control to the applicant. Thedocuments must include (but are not limited to) any bank statements or transactionrecords confirming the first respondent's trust account ledger transactions relating toGEP or Carlton Capital, as well as any email correspondence between the respondentsand those companies and any file notes relating to the affairs of those companies.[19] The application to examine Mr Nguy is adjourned. There will be a telephoneconference convened before me at 9.30 am on 30 March 2020. The liquidator is toadvise the respondents and the Court no later than 26 March 2020 whether it wishesto pursue or withdraw the examination application.[20] Costs are reserved. I will hear from Counsel on the matter on 30 March 2020.___________________O G PaulsenAssociate JudgeSolicitors:A S Botterill, Waterstone Insolvency, AucklandKeegan Alexander, Auckland