DHC ASSETS LTD v ARNERICH [2021] NZHC 277

DHC ASSETS LTD v ARNERICH [2021] NZHC 277 [25 February 2021]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2020-404-00975[2021] NZHC 277BETWEEN DHC ASSETS LIMITEDPlaintiffAND ANTONY IVO ARNERICHDefendantHearing: 19 October 2020Appearances: F Thorp for the PlaintiffD A Cowan and J McBride for the DefendantJudgment: 25 February 2021JUDGMENT OF ASSOCIATE JUDGE GARDINERThis judgment was delivered by me on 25 February 2021 at 3.30 p.m.pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate.......................................Solicitors:Duthie Whyte, AucklandDoug Cowan, AucklandF Thorp and L Turner, AucklandJ McBride and A J Steel, AucklandIntroduction[1] Mr Arnerich was formerly the sole director of Vaco Investments (LincolnRoad) Limited (Vaco). Vaco engaged DHC Assets Limited (DHC) to design andconstruct a commercial building at Lincoln Road, Henderson.[2] After practical completion, DHC submitted a payment claim which includedclaims for time-related costs arising out of delays in construction. Many of DHC'sclaims were rejected, and DHC indicated an intention to proceed to adjudication.Before it could do so, Vaco was placed in voluntary liquidation. By that time, andunbeknownst to DHC, Vaco had sold the Lincoln Road property and Mr Arnerich haddistributed all Vaco's funds either to himself or to interests or persons associated withhimself, leaving Vaco without enough funds to satisfy DHC's claims.[3] Since then, DHC, Vaco and Mr Arnerich have been involved in a prolongeddispute involving an adjudication under the Construction Contracts Act 2002,arbitration under the construction contract and High Court proceedings. In the mostrecent of these, DHC sought, pursuant to s 301(1)(c) of the Companies Act 1993, torecover from Mr Arnerich the amount it says it is owed as an unpaid creditor of Vaco.[4] In a judgment delivered on 27 September 2019 and reissued on 2 October 2019,His Honour Davison J found that by procuring distributions and payments by Vacoshortly prior to it being placed into liquidation, Mr Arnerich had breached hisdirector's duties to act in good faith, by failing to act in Vaco's best interests and bydistributing Vaco's assets to the detriment of a creditor, and by preferring his interestsand those of other persons associated with him over the interests of Vaco's creditors.1His Honour ordered, pursuant to s 301(1)(c) of the Companies Act 1993 thatMr Arnerich pay directly to DHC the amount that had been awarded to DHC in theadjudication proceedings, with interest. However, His Honour concluded that he didnot have jurisdiction to order Mr Arnerich to pay any further sums, unless and untilsuch sums are found to be owing by Vaco to DHC through the arbitration which hadbeen activated (but is presently adjourned).1 DHC Assets Limited v Arnerich [2019] NZHC 1695.[5] Mr Arnerich appealed that decision. DHC cross-appealed the finding as toabsence of jurisdiction and the decision to dismiss that portion of DHC's claim unders 301. That appeal was heard on 4 and 5 November 2020. The Court of Appeal hasnot yet delivered a judgment.[6] In the meantime, DHC filed the present proceeding, which for all intents andpurposes duplicates the earlier proceeding. DHC commenced this proceeding (the975 proceeding) without prejudice to its cross-appeal of the earlier proceeding,against the possibility that the cross-appeal is dismissed and DHC's outstanding claimsagainst Vaco need to be resolved in arbitration, and therefore a s 301 applicationagainst Mr Arnerich would be time-barred.[7] Mr Arnerich says that DHC's statement of claim should be struck out and thisproceeding dismissed because:(a) the proceeding is an abuse of process because the cause of action uponwhich it is based is res judicata;(b) the statement of claim discloses no reasonable cause of action becausethe pleading is barred by the Limitation Act 2010 as it was filed sixyears after the acts upon which the claim is based; namely, thepayments made by Vaco to Mr Arnerich and related persons or entitiesset out in the statement of claim.[8] DHC contends that its claim has never been "determined" in any forum.His Honour Davison J expressly declined to determine the claim with respect totime-related costs based on an absence of jurisdiction. Further, the claim is nottime-barred because ss 11 and 16 of the Limitation Act 2010 extend the start of thelimitation period for claims advanced under s 301 to the date the company is placedin liquidation (in this case, 1 July 2014). Alternatively, it filed the proceeding withinthe "late knowledge" period.Issues[9] The issues to be determined in this application to strike-out are:(a) Is DHC's proceeding an abuse of process because the cause of actionupon which it is based is res judicata?(b) Is the proceeding time-barred because it was commenced after theexpiry of the primary and late knowledge periods under the LimitationAct 2010?Factual background[10] DHC and Vaco entered into a contract to design and construct a commercialbuilding comprising a bank and other commercial spaces on a property atLincoln Road. Mr Arnerich was the sole director and effective owner of Vaco. Thecontract works, initially scheduled to take 34 weeks, were delayed by 21 weeks.Practical completion occurred on 21 November 2012. DHC applied for extensions oftime in respect of the delays.[11] In March 2013, DHC submitted payment claim 17, which included claims fortime-related costs arising out of the delays. Payment Schedule 17 rejected many ofDHC's claims and noted that others had been referred to the engineer for review.[12] On 20 January 2014 the engineer issued formal decisions to DHC. Thedecisions were largely unfavourable to DHC. DHC, after making further efforts topursue payment, indicated an intention to proceed to adjudication. However, on1 July 2014, Mr Arnerich placed Vaco in liquidation. By that time, and unbeknownstto DHC, Vaco had sold the Lincoln Road property for $8.4 million on 3 April 2013;Mr Arnerich had made payments of around $2.5 million from Vaco to his own interestsbetween 3 and 9 April 2013; and Vaco had been insolvent from 10 April 2013 as aresult of those payments.[13] In October 2016, the Construction Contracts Act adjudicator awarded DHC anadditional $367,768.12. The adjudicator rejected DHC's claims for time-related costsassociated with the delayed construction and certain other claims for preliminary andgeneral costs (referred to together for convenience as the TRC claims). Subsequently,with the leave of the High Court, DHC commenced an arbitration to have theseadditional claims examined. Mr Arnerich was not a party to the arbitration. Thearbitration was later adjourned, and remains adjourned sine die.2[14] On 1 March 2017, DHC issued proceeding CIV-2017-404-307 (the307 proceeding) against Mr Arnerich, alleging that Mr Arnerich had breached hisduties under s 131 of the Companies Act 1993. In its initial pleading DHC claimedcompensation under s 301:(a) firstly, the amount which had been held to be owing by Vaco to DHCin the 2016 adjudication;(b) secondly, in respect of the TRC claims, for such further amount as thearbitrator might find to be owing by Vaco to DHC.[15] By the time the 307 proceeding went to trial on 31 October 2019, allcontractual claims between DHC and Vaco including the TRC claims had beenrepleaded in the 307 proceeding. DHC sought payment by Mr Arnerich direct to DHCpursuant to s 301 of $1,088,156.17 (being the sum of the adjudication determinationand the rejected TRC claims). The arbitration remained adjourned, and the liquidatorhad filed a memorandum expressly agreeing to abide any decision of the Court inrespect of any amounts held to be due and owing to DHC under the building contractwith Vaco. The parties say that they proceeded on the basis that the issue of Vaco'sliability for each of DHC's contractual claims against it, including the TRC claims,would be resolved in the 307 proceedings. The parties pleaded, led evidence, cross-examined witnesses and advanced submissions on that basis.[16] In his judgment dated 2 October 2019, His Honour Davison J upheld DHC'sclaim against Mr Arnerich for breach of s 131 of the Companies Act and orderedMr Arnerich to compensate DHC directly for the full amount which the adjudicatorhad held to be owing by Vaco to DHC. This was on the basis that Mr Arnerich was2 With no appointed date for resumption.not able to challenge the existence of the liability found to be owing by the adjudicator,as he had actively participated in the adjudication process.[17] However, His Honour declined to make an order with respect of DHC's claimsfor compensation in relation to the TRC claims, finding that in circumstances wherethe dispute resolution clause in the contract had been engaged, the Court did not havejurisdiction to do so.[18] Mr Arnerich appealed the finding that he had breached his director's duty.DHC cross-appealed, challenging the finding of an absence of jurisdiction to considerthe TRC claims, and His Honour's decision to dismiss that portion of the claim under301 against Mr Arnerich. If successful, DHC seeks an order that the issue of thoseTRC claims, and relief in respect of them, be remitted to the High Court fordetermination. Alternatively, if the Court of Appeal considers that His Honour wasright that the arbitration must be concluded before compensation for the TRC claimsmay be pursued in the High Court, DHC seeks an order reversing the decision todismiss that aspect of DHC's claim under s 301 against Mr Arnerich, and insteadadjourning or staying consideration of it until after the conclusion of the arbitrationproceedings.[19] In the interim, DHC has commenced this proceeding without prejudice to itscross-appeal in the 307 proceeding. This proceeding has been filed to guard againstthe possibility that Davison J's judgment is upheld and the cross-appeal dismissed,such that DHC's TRC claims need to be resolved through arbitration; and to avoid thepossibility of any claims upheld in arbitration and subject to a s 301 application beingtime-barred.[20] Mr Arnerich subsequently applied to strike out the present proceeding pursuantto r 15.1.1(d) of the High Court Rules 2016, on the basis that it is an abuse of processof the Court, as it is a duplication of the earlier proceeding; and further, that it is time-barred.Abuse of processLegal Principles[21] Rule 15.1(1)(d) of the High Court Rules provides that the Court may strike outall or part of a pleading if it is an abuse of the process of the Court. This categorycaptures instances of misuse of the Court's processes beyond the specific grounds in15.1(a) to (c). It has been held to extend to attempts to re-litigate matters alreadydetermined3 and duplication of proceedings.4[22] The onus is on the party alleging abuse of process to show that the proceedingwas brought for an improper purpose. It is a "heavy onus" and one to be exercisedonly in exceptional circumstances.5[23] With respect to evidence for strike-out applications, the Court may accept thepleading as proven. As expressed by the Court of Appeal in Attorney-General vMcVeagh:6The Court is entitled to receive affidavit evidence on a striking-outapplication, and will do so in a proper case. It will not attempt to resolvegenuinely disputed issues of fact and therefore will generally limit evidenceto that which is undisputed. Normally it will not consider evidenceinconsistent with the pleading, for a striking-out application is dealt with onthe footing that the pleaded facts can be proved[24] In terms of res judicata, a right of action is extinguished by final judgmentgiven on that right of action by a Court of competent jurisdiction.7 As explained byTipping J in Joseph Lynch Land Co Ltd v Lynch:8The expression "res judicata" means the matter has been adjudicated. Theconcept of res judicata is often applied to both cause of action estoppel andissue estoppel. Traditionally its use was confined to the former. Cause ofaction estoppel is different from issue estoppel, which can arise where a plea3 McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR15.1.05(2)], citing Hunterv Chief Constable of West Midlands Police [1982] AC 529 (HL) at 541; and Collier v Butterworthsof New Zealand Ltd (1997) 11 PRNZ 581 (HC) at 586.4 At [HR15.1.05(2)], citing Otis Elevator Co Ltd v Linnel Builders Ltd (1991) 5 PRNZ 72 (HC);and Cowley v Shortland Publications Ltd (1991) 5 PRNZ 76 (HC).5 Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509.6 Attorney-General v McVeagh [1995] 1 NZLR 558 (CA) at 566.7 Saba Yachts Ltd v Anae HC Auckland, CIV-2007-404-1049, 27 June 2007, at [26].8 Joseph Lynch Land Co Ltd v Lynch [1995] 1 NZLR 37 (CA), at [40].of res judicata in the strict sense is not open because the causes of action arenot the same: see [16], Halsbury's Laws of England (fourth ed reissue)(Estoppel) at para 977. Cause of action estoppel is more precise than issueestoppel. For there to be cause of action estoppel, the cause of action soughtto be estopped must be precisely the same as that upon which there has beenan earlier adjudication.[25] Res judicata / cause of action estoppel and abuse of process are distinct butrelated concepts. Conduct which permits the other party to raise res judicata may beabusive but will not necessarily be so. The relationship between the two concepts wasdiscussed by the Court of Appeal last year in Craig v Stringer:9[16] Res judicata applies where a cause of action has been determinedin earlier proceedings between the same parties or their privies –– cause ofaction estoppel. The doctrine prevents re-litigation of the same cause of actionin any subsequent proceedings.[17] A related principle is that the parties are required to bring forwardtheir whole case and will generally be prevented from later attempting to re-open the same subject on a different basis. This principle was first recognisedby Wigram V-C in Henderson v Henderson:10[W]here a given matter becomes the subject of litigation in, and ofadjudication by, a Court of competent jurisdiction, the Court requiresthe parties to that litigation to bring forward their whole case, and willnot (except under special circumstances) permit the same parties toopen the same subject of litigation in respect of a matter which mighthave been brought forward as part of the subject in context, but whichthey have, from negligence, inadvertence, or even accident, omittedpart of their case.[19] Lord Sumption explained the juridical difference between the doctrineof res judicata and the Henderson v Henderson principle in Virgin AtlanticAirways Ltd v Zodiac Seats UK Ltd [Virgin Atlantic v Zodiac]:11Res judicata is a rule of substantive law, while abuse of process is aconcept which informs the exercise of the court's procedural powers.In my view, they are distinct although overlapping legal principleswith the common underlying purpose of limiting abusive andduplicative litigation. That purpose makes it necessary to qualify theabsolute character of both cause of action estoppel and issue estoppelwhere the conduct is not abusive.9 Craig v Stringer [2020] NZCA 260. See also Contact Energy Ltd v Attorney-General [2009]NZCA 351 at [85]–[87].10 Henderson v Henderson (1843) 3 Hare 100, 67 ER 313 (Ch) at 115.11 Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46, [2014] AC 160 at [25].[26] The distinction was also discussed by the High Court inCommerce Commission v Harmoney.12 The Court quotes Lord Bingham'sobservations in Johnson v Gore Wood, which Lord Sumption subsequently referred toin Virgin Atlantic v Zodiac:13Henderson v Henderson abuse of process, as now understood, althoughseparate and distinct from cause of action estoppel and issue estoppel, hasmuch in common with them. The underlying public interest is the same: thatthere should be finality in litigation and that a party should not be twice vexedin the same matterIt is, however, wrong to hold that because a matter couldhave been raised in earlier proceedings it should have been, so as to render theraising of it in later proceedings necessarily abusive.[27] Somers J summarised the position in New Zealand Social Credit PoliticalLeague Inc v O'Brien:14Estoppel per rem judicatam, issue estoppel, and abuse of process in at leastone of its manifestations, may be seen an exemplifying similar concepts – thata matter once determined may not be again litigated, that a matter which couldand should have been raised subsequently, and that a collateral attack upon afinal decision in another proceeding will not be permitted. The dual objectsare finality of litigation and fair use of curial procedures.Mr Arnerich's submissions[28] Mr McBride for Mr Arnerich submits that this is a clear case of cause of actionestoppel, as DHC's statement of claim in this proceeding alleges precisely the samebreaches of director's duties as the 307 proceeding. In so doing, DHC seeks torelitigate the same issues concerning those alleged breaches. For that reason, thisproceeding is an abuse of process. Any complaints that DHC has about the 307judgment must be resolved by way of its appeal, in the usual way. Mr McBridesubmits that DHC's commencement of a parallel process, as a "backstop" to its appealentitlements, is a clear and intolerable abuse of the Court's process, that the Courtshould not sanction. Mr McBride contends that this is not a Henderson v Hendersonsituation, where the Court must consider whether the new claims might have beenadvanced in the earlier proceeding. Rather, it is the more egregious and objectionable12 Commerce Commission v Harmoney [2017] NZHC 2421.13 Commerce Commission v Harmoney [2017] NZHC 2421 at [33], quoting Virgin Atlantic v Zodiac,above n 11, at [24] citing Johnson v Gore Wood [2001] 1 All ER 481.14 New Zealand Social Credit Political League Inc v O'Brien [1984] 1 NZLR 84 (CA) at [89].form of res judicata, being a cause of action estoppel arising where the causes of actionbrought then and now are one and the same.[29] Mr McBride relies on the Court of Appeal decision of Neylon v Dickens for theproposition that cause of action estoppel applies not just to the cause of action, but tothe relief being sought.15 So, a party suing for breach of director's duties andsucceeding on some, but not all, of its damages claims does not get the opportunity toreturn to Court to relitigate the cause of action to make additional damages claims.DHC's submissions[30] DHC's submission is simply that the TRC claims have never been determinedin any forum, with His Honour Davison J expressly declining to determine thembecause of an absence of jurisdiction. Davison J also expressly envisaged that a furtherproceeding would be filed to litigate and determine Mr Arnerich's liability in respectof the TRC claims.Analysis[31] The courts have treated s 301, not as creating a new cause of action, but asproviding a procedural mechanism by which a liquidator, creditor or shareholder maypursue the claims which a company in liquidation may have against, among others, itsformer directors.16[32] Applications by a liquidator, creditor or shareholder for an order against adirector pursuant to s 301 are to be approached in two-stages.17 First, the courtconsiders and determines whether the director has breached a duty or is otherwiseliable. Second, the court considers whether to exercise its discretion to order thedirector to repay or restore money or property to the company (s 301(1)(b)(i)) or tocontribute a sum the court thinks just to the assets of the company by way ofcompensation (s 301(1)(b)(ii)). When determining the amount of compensation to be15 Neylon v Dickens [1987] 1 NZLR 402 (CA) at [409]–[410].16 Robb v Sojourner [2007] NZCA 493 at [53]. See also Paul Heath and Mike Whale InsolvencyLaw in New Zealand (3rd ed, LexisNexis, Wellington, 2018) at 647.17 Mason v Lewis [2006] 3 NZLR 225 (CA) at [52] and [55].paid, the authorities have identified three factors to consider: causation, culpabilityand duration of any breach.18 If the application is made by a creditor such as here, thecourt may order that the director pay the money or property or any part of it directlyto the creditor (s 301(1)(c)).[33] Here, Davison J completed the first stage of the process. His Honourdetermined that Mr Arnerich had breached his duty to act in good faith:19[352] I find that Mr Arnerich, as director of Vaco, has breached his duty ofgood faith under s 131 of the Companies Act 1993.[34] The first stage, the finding of a breach of duty by Mr Arnerich, is res judicata(subject to Mr Arnerich's appeal).[35] However, Davison J did not complete the second stage of the process for allDHC's claims. His Honour considered that he only had jurisdiction to make an orderunder s 301 in respect of a crystallised, proven debt owing from Vaco to DHC:20In order for the plaintiff to recover damages from Mr Arnerich, either directly,or through Vaco, it needs to have a crystallised debt owing to it from Vaco,and then must show that Mr Arnerich's breach has caused it to be unable torecover that debt.[36] His Honour's assessment was that this Court did not have jurisdiction in thiscontext to determine Vaco's liability to DHC, or vice versa.21 His reasons are set outat paragraphs [260] to [267] of his judgment and do not need to be repeated here.However, his view was that Mr Arnerich could not, in those proceedings, challengethe existence of the debt found to be owing by Vaco to DHC by the adjudicator.22 Tothat extent, there was a crystallised debt owed to DHC by Vaco. He then completedthe second part of the s 301 process in respect of that debt, determining that it wasappropriate that Mr Arnerich compensate DHC directly, and to its full extent:[347] Consistently with the observations of Heath J in Sanders v Flay, to theeffect that a creditor should be directly compensated when it has personallyinitiated proceedings against the errant director, in circumstances where the18 Madsen-Ries v Cooper [2020] NZSC 100 at 158.19 Also, [244] and [345].20 At [254].21 At [259].22 At [268].liquidator has elected not to, I consider that in this case it is appropriate forMr Arnerich to compensate the plaintiff directly.[348] The amount which I direct Mr Arnerich to pay to the plaintiff is thesame amount as found owing in the adjudication. In the present circumstances,I consider that to be a just exercise of the Court's discretion to determine thequantum of compensation. Mr Arnerich's breaches of duty by distributing theassets of Vaco to his related interests, and thereby rendering Vaco insolvent,defeated the plaintiff's ability to prosecute those claims against Vaco directly.Accordingly, as Mr Arnerich personally and via associated entities controlledby him benefitted directly from his breach of duty, I consider that he shouldpersonally compensate the plaintiff for the full amount of Vaco's debt to theplaintiff.[37] His Honour considered that the balance of DHC's contractual claim againstVaco, including the TRC claims, had not been determined and could not be determinedby the Court. He was therefore unable to undertake the second part of the evaluationrequired by s 301:[269] As regards those parts of DHC's contractual claim that weredisallowed by the adjudicator and which it has since referred to arbitration,clearly the dispute provisions of the contract are engaged, are underway, andare yet to be completed. In these circumstances and for the reasons set outabove, I do not consider that the Court can in these proceedings undertake adetermination of whether DHC can establish that Vaco is also liable to meetDHC's claims that were rejected by the adjudicator. The process fordetermining those issues under the contract is by arbitration.[351] The final amount of Vaco's indebtedness to the plaintiff is yet to bedetermined and cannot be determined other than by means of arbitration whichis presently adjourned. This means that although the plaintiff may in the futuresucceed in establishing the claims it has referred to arbitration, it cannotrecover any further sum found owing to Vaco, directly from Mr Arnerichpursuant to s 301(1)(c) of the Act, other than by means of a further proceeding.However unfortunate this situation, it is the consequence of the plaintiffhaving elected to pursue this proceeding before concluding the arbitrationproceeding and thereby determining the full extent of Vaco's indebtedness inaccordance with the dispute provisions of the contract.Conclusion[38] My assessment is that this Court has completed the first part of the s 301evaluation. Davison J considered whether Mr Arnerich had breached his duty unders 131 and decided that he had. That issue is res judicata.[39] The second part of the s 301 evaluation, assessing whether an order forcompensation by Mr Arnerich directly to DHC should be made and if so what amount,has been completed for the crystallised debt that was determined by the adjudicatorunder the contract. That also could be said to be res judicata. So, if for exampleDavison J had ordered Mr Arnerich to pay to DHC a lesser sum than that determinedby the adjudicator, DHC would be estopped from making a further application unders 301 in respect of that debt.[40] However, the s 301 assessment has not been completed by the Court for theTRC claims. His Honour Davison J expressly declined to consider whether an ordershould be made under s 301 with respect to those claims or for how much. That aspectof the s 301 procedure is not res judicata, nor would it amount to an abuse of processfor DHC to make a further application to the Court under s 301 for an order in respectof those claims. Such an application would not constitute the sort of duplicativeapplication that might undermine the principle of finality in litigation, or waste courtresources.23[41] Mr McBride referred me to Neylon v Dickens24. Mr McBride submitted thatthe Court's conclusion that "every remedy that can be claimed in respect of the samecause of action must, under New Zealand procedure, be claimed in the one action"applied here and prevented DHC from advancing the present proceeding.[42] This case can be distinguished for two reasons. The Court of Appeal said:Here the general principle applies that the Court should not allow issues to beraised which are so clearly part of the subject-matter of earlier litigation thatit would be an abuse of process to allow a new proceeding to be started inrespect of them: see the judgments in this Court in New Zealand Social CreditPolitical League Incorporated v. O'Brien [1984] 1 NZLR 84, 90, 95, 99 ,applying such authorities as Henderson v. Henderson (1843) 3 Hare 100 ,Greenhalgh v. Mallard [1947] 2 All ER 255 , and Hunter v. Chief Constableof West Midlands Police [1982] AC 529 . In the particular field of contractsfor the sale of land this Court held as long ago as 1902 in Dillon v.Macdonald 21 NZLR 375, 393, that every remedy that can be claimed inrespect of the same cause of action must, under New Zealand procedure, beclaimed in the one action. And that as the plaintiff there could have made inthe former action (an action for specific performance dismissed forunreasonable delay) her alternative claim (a claim to common law damages23 Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46, [2014] AC 160 at [25].24 Neylon v Dickens [1987] 1 NZLR 402 (CA) at [409]–[410].for breach of the same contract) she could not by dint of having limited herprayer for relief in the first action take a second proceeding claiminganother remedy on the same cause of action.The purchasers should have put forward all their claims on that cause of actiontimeously, under the supplementary jurisdiction if need be, in the first action.They failed to do so and must accept the consequences.(emphasis added)[43] First, while the general principle to which Neylon refers applies, the Court'sstatement that every remedy that can be claimed in respect of a cause of action mustbe claimed under the one action, was concerned with the "specific field of contractsfor the sale of land." This case concerns an application for relief under s 301 of theCompanies Act 1993. It is a unique procedure. I do not accept that the ratio of Neylandv Dickens necessarily extends to applications for orders under this statutory provision.[44] Further, key to the Court of Appeal's decision was the fact that the plaintiff hadfailed to seek the relief she now sought in her first proceeding, when she could andshould have done so. Here, DHC did not omit to seek relief in respect of the TRCclaims in the 307 proceeding. It sought that relief, but the Court determined that it didnot have jurisdiction to consider whether to grant the relief sought, for the reasonsalready recited.[45] I have concluded that this proceeding is not an abuse of process due to thecause of action being res judicata. I have also considered whether the proceedingcould be considered an abuse of process because the arbitration still has not beencompleted, remains paused with no timeline, and therefore the total indebtedness ofVaco remains unknown. In response to my questioning about this concern, Mr Thorpfor DHC explained that DHC has no intention of taking the 975 proceeding to trialbefore the arbitration is finished. He submits that if DHC loses in the arbitration, thenthe 975 proceeding will be discontinued; only if the arbitrator upholds the debt, willDHC advance the proceeding to obtain the order that the balance of the debt be paidto DHC. On that basis I do not consider it is an abuse of process for DHC to havefiled the 975 proceeding in circumstances where if it did not do so, and the Court ofAppeal finds against it, its claim to compensation will be time-barred.Limitation Act 2010[46] Mr Arnerich claims that DHC's pleading is barred by the Limitation Act 2010because it was filed six years after the acts upon which it was based; namely thepayments set out in paragraph 41 of the statement of claim. DHC says that it is nottime-barred because the start date for the "primary period" is the date on which theliquidator of Vaco was appointed. Alternatively, and without prejudice to that position,DHC says that it filed the proceeding within the "late knowledge period", which beganon or about 3 May 2018 or 18 June 2018.The law[47] Section 11 of the Limitation Act 2010 provides that it is a defence to a moneyclaim if the defendant proves that either:(a) the date on which the claim is filed is at least six years after the date ofthe act or omission on which the claim is based (the claim's primaryperiod); or(b) the date on which the claim is filed is at least three years after the "lateknowledge date" (the claim's late knowledge period).[48] Section 16(1)(i) of the Limitation Act 2010 stipulates:16 Special start dates for various money claims(1) For the purposes of section 11(1) and (3)(b), the primary and longstopperiods of a claim specified in one of the following paragraphs havethe start date specified in that paragraph:(i) a claim under section 301 of the Companies Act 1993—thedate on which the liquidator of the company or overseascompany was appointed.Mr Arnerich's submissions[49] The breaches of s 131 alleged by DHC concern a series of payments made byVaco to its creditors and Mr Arnerich's interests between 17 December 2012 and6 June 2014. This proceeding was filed on 29 June 2020. Mr Arnerich maintains thatas all the acts upon which DHC's claim is based occurred over six years prior to thedate upon which its claim was filed, the proceeding is time-barred.[50] Mr McBride relies heavily on the Court of Appeal decision ofArataki Properties Ltd v Craig.25 In that case the Official Liquidator of Arataki hadapplied under s 321 of the Companies Act 1955, the equivalent to s 301 of the 1993Act, for orders against a former director to pay to the liquidator compensation for asum of money the director had allegedly disposed of in breach of his fiduciary duty tothe company. The director moved that the application be dismissed as frivolous,vexatious and an abuse of process as it was barred by the Limitation Act 1950, s 4(1)and s 21. The Official Liquidator contended in response that the cause of actionaccrued at the date of winding up and not the date on which the cause of action arose.At the liquidator's instigation the case was removed to the Court of Appeal becausethe judgment of the Court of Appeal in Re J E Hurdley & Son Ltd (in liq)26 constitutedan apparent obstacle to the view that the proceeding was not statute-barred.[51] Cooke P observed that the Court had heard argument of quality from counselfor the Official Liquidator, which as well as contentions of principle, had stressed thedifficulties confronting Official Assignees with the dramatic growth in the number ofcompany liquidations ordered by the Court. It was accepted that "Official Liquidatorswould experience some easement in carrying out their investigations of the affairs offailed companies if under s 321 of the 1955 Act a cause of action for limitationpurposes were treated as running from the date of commencement of the winding uprather than that of any possible breach of duty to the company." However, the Courtconcluded that this consideration was insufficient to justify a departure from the view25 Arataki Properties Ltd v Craig [1986] 2 NZLR 294 (CA).26 Re J E Hurdley & Son Ltd (in liq) [1941] NZLR 686 (CA).acted on in Hurdley and other cases that time runs from the date the cause of actionaccrued to the company. Cooke P cited Myers CJ's observation that:27It is well settled by authority that a person against whom proceedings are takenunder the general misfeasance section is entitled to plead the Statutes ofLimitation by way of defence, and that the period of limitation commencesnot from the commencement of the winding-up but from the date when thecause of action arose. The reason for this is plain. The general misfeasancesection does not create any new cause of action. It is merely procedural anddoes no more than provide a summary method of procedure with the object ofsimplifying litigation and minimizing expense. What it contemplates ismerely a new method of procedure for the determination of existing causes ofaction: it does not create new liabilities or new rights.[52] Cooke P referred to decisions of the English Court of Appeal,28 whichsupported the proposition stated by Myers CJ, and said:29That is a strong current of authority and I am not persuaded the differ from thereasoning running through it. Section 321 gives a summary discretionaryremedy to a range of persons much wider than the company itself, namely theOfficial Assignee, the liquidator, or any creditor or contributory. Thediscretion vested in the Court extends to the amount of any relief. It may bethat no set off is permitted, as counsel says. But as against a director thesection postulates misapplication or retention of, or liability or accountabilityfor, money or property of the company. Or negligence, default, or breach ofduty or trust in relation to the company. I cannot think that it was ever meantto create a wholly new cause of action as at the date of commencement of awinding up, which, subject only to the discretion of the Court, could exposenon-fraudulent directors to examination into their conduct in years long past.The settled interpretation that the section provides a new way of examininginto and enforcing an existing liability to the company should not be disturbedby judicial decision. Perhaps there are arguments of policy for extending thetime scope of the section; but to say the least they are not overwhelming. Ifthere is to be any change it is best left to the legislature.In my opinion therefore the relevant period in the present case is to be foundin s 21 and on the facts is six years from each of the three alleged breaches offiduciary duty previously quoted. On that view it is common ground that theOfficial Liquidator's motion under s 321 is statute-barred.[53] The other members of the Court concurred with the judgment of Cooke P. Ofnote, McMullin J observed at 299:27 Re J E Hurdley & Son Ltd (in liq) [1941] NZLR 686 (CA) at 723, as cited in Arataki PropertiesLtd v Craig [1986] 2 NZLR 294 (CA) at 297.28 Re Lands Allotment Company [1894] 1 Ch 616; Re National Bank of Wales Ltd [1899] 2 Ch 629,663.29 At 298.It may be that a case can be made for some statutory amendment extendingthe limitation period or postponing its operation for a specific period to enablea liquidator to make reasonable inquiry, after his appointment, into theactivities of directors and those other persons at whose activities s 321 isdirected. But, as s 321 now stands, I am not persuaded that the earlierdecisions of this Court should not be followed.[54] Mr McBride also relied on the decision of this Court in Benton v Priore.30Heath J, following Arataki, concluded that there is nothing in the way in which s 301has been expressed to suggest that Parliament intended that its character be changedfrom a procedural provision of the type discussed in Arataki to a substantive remedy.[55] As to 16(1)(i) of the Limitation Act 2010, Mr McBride submits that it does notchange the position established by these authorities. That is because a claim of thisnature is not brought "under" s 301 of the Companies Act 1993 for the purposes ofs 16(1)(i). Rather, it is brought "under" s 131 of the Companies Act 1993, the statutoryprovision that gives rise to the substantive cause of action. As such, the limitationperiod does not commence on the date the liquidator of Vaco was appointed, but onthe dates of the acts which gave rise to the cause of action under s 131. Mr McBridesubmits that it would be an absurdity if s 301 of the Companies Act 1993 provided aprocedural pathway to depart from the confines of the Limitation Act 2010 by decades.Notwithstanding the clear words of s 16(1)(i), he interprets ss 131, 301 and 16(1)(i)together as starting the clock for a claim under s 301 on the date of the breach of s 131.He underscores that the option remains open for a claimant to assert "late knowledge".Analysis[56] The authorities to which Mr McBride refers pre-date the Limitation Act 2010and, in my view, the statements concerning the commencement of the limitation periodfor claims under s 301 plainly do not survive the addition of s 16(1)(i). Parliamentdecided, possibly in response to Arataki, that the limitation period for applicationsunder s 301 of the Companies Act should start on the date on which the liquidator ofthe company is appointed, as opposed to the date on which the liability arises. Thewords of s 16(1)(i) are clear and unambiguous. There are sound policy reasons forsuch an approach, as noted by McMullin J in Arataki, including to allow liquidators a30 Benton v Priore [2003] 1 NZLR 564 (HC).reasonable opportunity following their appointment to investigate the company'saffairs and to apply to the Court for relief under s 301 of the Companies Act 1993.[57] The terms of s 301 support this interpretation:If, in the course of the liquidation of a company, it appears to the CourttheCourt may, on the application of the liquidator or a creditor or shareholder[58] Section 301 is a unique procedure which enables the Court to make an inquiryand orders for repayment, restitution or compensation when a company has beenplaced in liquidation. The section envisages that facts may come to light during theliquidation that provide grounds for an application under s 301 for the available formsof relief. There is a logic therefore to the limitation period for an application for thatform of relief commencing at the start of the liquidation.[59] Further, if Mr McBride's submission were correct, s 16(1)(i) would have nomeaning or effect.[60] The limitation period for a claim by DHC under s 301 began to run on the dateof appointment of the liquidator, namely 1 July 2014. As this proceeding was issuedon 29 June 2020 it is within the six-year primary period and is not time-barred.Late knowledge[61] Having concluded that the proceeding was filed within the primary period, itis not necessary for me to reach a finding on DHC's alternate defence, that it is withinthe late knowledge period. However, for completeness, s 14 relevantly provides:(1) A claim's late knowledge date is the date (after the close of the startdate of the claim's primary period) on which the claimant gainedknowledge (or, if earlier, the date on which the claimant oughtreasonably to have gained knowledge) or all of the following facts:(a) the fact that the act or omission on which the claim is based hadoccurred:(b) the fact the act or omission on which the claim is based wasattributable (wholly or in part) to, or involved, by the defendant:(c) if the defendant's liability or alleged liability is dependent on theclaimant suffering damage or loss, the fact that the claimant hadsuffered damage or loss.[62] Mr McBride, for Mr Arnerich, pleads that DHC's late knowledge date was1 March 2017 at the latest, which was more than three years before DHC filed the 975proceeding on 29 June 2020. Mr McBride points to the fact that on 1 March 2017,DHC commenced the 307 proceeding, and by way of accompanying affidavit forDHC, Mr McClatchy deposed that:319. The liquidatoradvised there were no assets in [Vaco's]liquidationb. VACO sold the developed [Lincoln Road] property in April2013 for $8.4 million, having paid a total of $2,223, 387.70 toDHC under the Contract; andc. Mr Arnerich had distributed the remaining profits made on thedevelopment at some point prior to placing the company inliquidation, with full knowledge of DHC's outstandingcreditor claim.[63] DHC pleads that it only had late knowledge of its claims in mid-2018,part-way through the 307 proceeding. It says that at 1 March 2017, it did not knowwhen Mr Arnerich had caused the relevant 2013 payments to be made to his interests,nor in what sums.[64] The flaw in DHC's submission is that it plainly had knowledge of sufficientfacts to bring a claim against Mr Arnerich for breach of his s 131 duty to act in goodfaith and in the best interests of the company by 1 March 2017, because it did so.DHC's statement of claim in the 307 proceeding dated 1 March 2017 includes as thesecond cause of action:SECOND CAUSE OF ACTION: MISAPPLICATION OF COMPANYFUNDS – BREACH OF DUTY – PROCURING VACO TO DISTRIBUTEOR PAY OUT FUNDS TO THE DEFENDANT OR INTERESTSASSOCIATED WITH HIM DESPITE KNOWLEDGE OF DHC'S CLAIMSAS A CREDITOR, AND TO THE DETRIMENT OF DHC31 Affidavit of Stuart Martin McClatchy, in support of application for summary judgment, sworn 1March 2017.51. At all material times the defendant, in his capacity as sole director of Vaco,owed a duty under s 131 of the Companies Act 1993 to act in good faith andin what he believes to be Vaco's best interests including:a. a duty not to give away assets of Vaco for the benefit of third partiesto the detriment of a person known to be a creditor; andb. a duty not to prefer his interests and those of entities associatedwith him over the interests of creditors of Vaco when the action inquestion jeopardises Vaco's solvency.52. By distributing or paying out, or procuring the distribution or paymentout by Vaco of, funds totalling no less than approximately $800,000 to himselfor interests associated with him despite his knowledge of DHC's claims as acreditor, as pleaded in paragraphs 31 – 34 above, the defendant:a. breached the duty pleaded in paragraph 51 above; andb. misapplied, retained, and became liable and accountable for,money of the company, namely the funds totalling no less thanapproximately $800,000.53. DHC is a creditor of Vaco and claims orders pursuant to s 301 of theCompanies Act 1993 that [65] Earlier, at paragraph 30 of the statement of claim DHC says: "The defendantdistributes or pays out, or procures the distribution or payment out by Vaco of theremaining assets of Vaco to himself or interests associated with him, notwithstandinghis knowledge of DHC's outstanding claims".[66] It does not matter that DHC did not know the specific details of each paymentand distribution: the amount and the date. The "act" by Mr Arnerich on which theclaim of breach of s 131 is based, is his act of distributing and paying out all Vaco'sfunds to himself or associated interests, to the detriment of DHC, a known creditor.DHC was aware of that "act" by 1 March 2017, as evidenced by its statement of claimof that date. It follows that, if I am incorrect in concluding that DHC issued thisproceeding within the primary limitation period, because of the effect of s 16(1)(i) ofthe Limitation Act 2010, in my opinion DHC is unable to rely on "late knowledge" tosave it.Conclusion and result[67] I have reached the decision that:(a) DHC's proceeding is not an abuse of process. Its application for reliefunder s 301 in respect of the TRC claims is not res judicata.(b) The statement of claim is not barred by the Limitation Act 2010.[68] Mr Arnerich's application to strike out the statement of claim and dismiss theproceeding is dismissed.[69] However, I am concerned that it is not an efficient use of the parties' or theCourt's resources to have a proceeding continuing which will be entirely redundant ifthe Court of Appeal finds in DHC's favour; or to have the arbitration revivedunnecessarily. Prior to the hearing of the present strike-out application,DHC requested that the proceeding be stayed for that reason. That request wasdeclined by His Honour Lang J and Mr Arnerich's application to strike out was setdown to be heard.[70] Now that Mr Arnerich's application to strike out has been determined, there ismerit in considering afresh whether the 975 proceeding should be stayed until theCourt of Appeal delivers its judgment. I invite the parties' submissions on thisproposal:(a) DHC's submissions are to be filed and served by 12 March 2021;(b) Mr Arnerich's submissions are to be filed and served by 26 March 2021.Costs[71] I can see no reason why Mr Arnerich should not be liable for DHC's costs ona 2B basis, and its disbursements. If counsel cannot agree on quantum they may filememoranda of no more than five pages:(a) DHC by 12 March 2021;(b) Mr Arnerich by 26 March 2021._____________________Associate Judge Gardiner