IBC JAPAN LTD v AUTOTERMINAL NEW ZEALAND LTD [2019] NZHC 1834

IBC JAPAN LTD v AUTOTERMINAL NEW ZEALAND LTD [2019] NZHC 1834 [31 July 2019]IN THE HIGH COURT OF NEW ZEALANDHAMILTON REGISTRYI TE KŌTI MATUA O AOTEAROAKIRIKIRIROA ROHECIV-2019-419-0069[2019] NZHC 1834UNDER the Companies Act 1993IN THE MATTER of liquidation under s 241BETWEEN IBC JAPAN LIMITEDPlaintiffAND AUTOTERMINAL NEW ZEALANDLIMITEDDefendantHearing: 10 July 2019Appearances: J A MacGillivray and M K Brady for the PlaintiffM D Branch and K F Shaw for the DefendantJudgment: 31 July 2019Reissued: 6 August 2019RE-ISSUED JUDGMENT OF ASSOCIATE JUDGE SMITHThis judgment was delivered by me on 31 July 2019 at 2.30pm,pursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarSolicitors / Counsel:Tompkins Wake, HamiltonHarkness Henry, Hamilton[1] On 31 July 2019 I issued the judgment that appears below, on a "counsel-only"basis. I invited counsel to advise within 48 hours whether they considered thereremained any purpose or utility in certain non-publication orders I had made on11 April 2019. I indicated that I would re-issue the judgment on an 'open' basis ifneither counsel advised any reason to the contrary. Neither counsel having advisedany reason for the non-publication orders to remain in place, they are now revokedand this judgment is issued on an 'open' basis.[2] On 4 April 2019 the plaintiff (IBC) filed an application for an order putting thedefendant (ATNZ) into liquidation. The application was not based on the usual groundthat the defendant is unable to pay its debts,1 but on the ground that "it is just andequitable that the company be put into liquidation".2[3] ATNZ filed a statement of defence opposing the making of a liquidation order.ATNZ also filed an interlocutory application (the stay application) asking for thefollowing orders:(a) Restraining publication of the advertisement required by Rule 31.9 orany other information relating to [IBC's] statement of claim; and(b) For an order staying any further proceedings in relation to theliquidation; and(c) Striking out the liquidation proceeding; and/or(d) Restraining [IBC] from advising any person that liquidationproceedings have been filed; and(e) For costs.[4] IBC filed a notice of opposition to the stay application, and on 11 April 2019 Idirected that, pending further order of the Court, the liquidation application was not tobe advertised and IBC was not to take any other steps to progress the liquidation. Ialso made an order by consent that IBC was to instruct its employees/agents not toadvise any party that liquidation proceedings have been filed.31 Companies Act 1993, s 241(4)(a).2 Companies Act 1993, s 241(4)(d).3 Reserving to IBC the right to notify its bankers that the application had been filed.[5] Having received written submissions and heard from counsel orally, I now givejudgment on the stay application.Background[6] The liquidation claim is the latest in a number of Court cases in severaljurisdictions which have followed the breakdown of the relationship betweenMr Hohua Hemi (Mr Hemi) of IBC and his former business partner, Mr Robert Stone(Mr Stone).[7] Mr Hemi and Mr Stone decided to go into business together in about 1991, forthe purposes of purchasing used cars in Japan and exporting them for sale inNew Zealand and elsewhere. Mr Hemi and Mr Stone were 50/50 partners in theenterprise, and the business operated through what Mr Hemi described in his evidenceas a complex structure of corporate entities incorporated in various jurisdictionsaround the world.[8] IBC was the first entity formed by Mr Hemi and Mr Stone. It was incorporatedin Japan, and structurally it sits at the top of the global business. Mr Hemi andMr Stone each holds 50 per cent of the shares in IBC. Under Japanese law, thebusiness of a company is conducted by a "representative director". Until May 2018IBC's representative director was Mr Stone. Thereafter, Mr Hemi became therepresentative director.[9] The business enterprise grew, and Mr Hemi and Mr Stone set up a largenumber of other entities to carry out functions within the overall global business(including companies carrying out vehicle appraisals and inspections, importdistribution, and shipping and logistics). All of the entities within what Mr Hemidescribed as "the business partnership" are ultimately owned directly or beneficiallyby Mr Stone and Mr Hemi or their respective interests in equal shares. However, thevarious other incorporated entities are not subsidiaries of IBC — IBC has noshareholding in the other entities within the wider "partnership".[10] ATNZ was incorporated in New Zealand at the instigation of Mr Hemi andMr Stone, on 5 April 2000. From its incorporation in 2000 until January 2019, ATNZoperated as IBC's representative/sales agent in New Zealand. Its role was to sell anddistribute cars imported into New Zealand by IBC, for and on behalf of IBC.[11] There are issues over who beneficially owns the shares in ATNZ. Onincorporation, the shares in ATNZ were held by Mr Hemi's brother, Apihai Hemi, asbare trustee for Mr Hemi and Mr Stone. However, in March 2001, at the direction ofMr Hemi and Mr Stone, Mr Hemi transferred his shares in ATNZ to a Cayman Islandscompany called AutoNet. Half of the shares in AutoNet are owned by Mr Hemi'sfamily trust, while the other 50 per cent is owned by Mr Stone or his partner.[12] Mr Hemi's brother resigned as a director of ATNZ on 31 May 2004, and he wasreplaced as director by Mr Michael Tyler. Mr Tyler took over the management ofATNZ in 2008, acting as chief executive officer.[13] In 2010 the shares in ATNZ were transferred from AutoNet to Mr Tyler.Mr Tyler accepts that he holds the ATNZ shares as a bare trustee, but there is a disputeas to who are the beneficiaries of the bare trust. Initially it appeared to be agreedbetween the parties that Mr Tyler holds the shares in trust for AutoNet, and in aproceeding filed in this Court last year 4 Mr Hemi accepted in the course of aninterlocutory hearing that that was the position.5 In his affidavit filed in thisproceeding, however, Mr Hemi said that he had thought that because AutoNettransferred the shares to Mr Tyler as trustee the intention was that Mr Tyler was tohold the shares for AutoNet. Mr Hemi said that he had reviewed the position, and nowconsidered that when the shares were transferred from AutoNet (on the direction ofMr Stone and himself as beneficial owners) to Mr Tyler as trustee, the effect was thatMr Tyler became the trustee for Mr Hemi and Mr Stone, not trustee for AutoNet.[14] Mr Tyler maintains the position that the beneficial owner of the ATNZ sharesis AutoNet. He refuses to accept that Mr Hemi has any rights in respect of the ATNZshares, contending that he is answerable only to AutoNet as the beneficial owner ofthe shares in ATNZ. In response, Mr Hemi says that AutoNet, which is in effect owned4 CIV-2018-419-294.5 In a judgment given on the interlocutory application Woolford J recorded the position accordingly— Autoterminal New Zealand Ltd v IBC Japan Ltd [2018] NZHC 2986 at [4].on a 50/50 basis by himself and Mr Stone or their interests, is itself completelydeadlocked following the breakdown of the business relationship between Mr Hemiand Mr Stone. He says that the result of the deadlock is that there is no effectiveshareholder supervision of Mr Tyler's activities as CEO of ATNZ.[15] AutoNet was incorporated in the Cayman Islands on 13 March 1997.Originally, the shareholders were Mr Hemi and Mr Stone. In 1999 Mr Stone andMr Hemi transferred legal ownership of their AutoNet shares to Mr David Roberts, aresident of Grand Cayman, as nominee and bare trustee. In July 2015, Mr Hemiarranged for his shareholding in AutoNet to be transferred to a New Zealand-registeredcompany, NPLH Ltd. Mr Roberts continues to hold the other 50 shares in AutoNet ontrust for Mr Stone or his partner, Luciane Fernandez.[16] Mr Hemi said that the affairs of AutoNet became deadlocked when therelationship between him and Mr Stone broke down. Mr Roberts resigned as a resultof the deadlock. However, a new independent director, Mr Michael Pearson, has veryrecently been appointed, and he has instructed New Zealand solicitors, WynnWilliams, to act for AutoNet in relation to matters in New Zealand. By email dated7 July 2019 to counsel for ATNZ, Wynn Williams advised that Mr Pearson intendedto appoint himself and a colleague, Chris Rowland, to the board of ATNZ.[17] In their email, Wynn Williams referred to the adverse effect advertising of thisproceeding would have on AutoNet. They suggested that, in light of Mr Pearson'sappointment by both parties to act as director of AutoNet, the present application beadjourned for two months to allow Mr Pearson and Mr Rowland to be appointed andto assess the situation. However, the proposed adjournment application was notpursued by ATNZ at the hearing.The Vehicle Supply Agreement[18] The arrangements under which IBC exports vehicles from Japan toNew Zealand were documented in a Vehicle Supply Agreement (the VSA), on 1 July2014. Prior to that, there had been no formal agreement recording the arrangementsbetween IBC and ATNZ.[19] A copy of the VSA was not produced in evidence, but ATNZ did not take issuewith the following description of its contents given in Mr Hemi's evidence:(i) After shipment of the vehicles, IBC was to send to ATNZ a sales invoice forthe shipment of the vehicles. ATNZ was required to pay IBC for the vehicleswhen ATNZ received payment from its own New Zealand customers.(ii) ATNZ agreed to make various necessary payments on IBC's behalf inNew Zealand (for matters such as freight costs and charges by the Ministryfor Primary Industries) and then invoice IBC for the amounts paid.(iii) The parties agreed that they would work closely together to develop themarket in New Zealand for both companies' benefit. IBC granted ATNZ theexclusive right to represent IBC, and to act on IBC's behalf and use IBC'sname in New Zealand for the purposes of marketing, promotion, customerservice and sales.[20] Mr Hemi said:56. The VSA does not contain any terms protecting IBC as the partypermitting ATNZ to "represent IBC, act on IBC's behalf and use theIBC name in New Zealand" in the event of the relationship betweenthe parties coming to an end – e.g. any restraint of trade – the type ofprotective terms that you would expect in an arms' length relationship.57. In the CIV-2018-419-294 proceedings, ATNZ alleged for the first timethere were two subsequent vehicle supply agreements dated 1 July2016 and 1 July 2017 between IBC and ATNZ. I had never seen thosedocuments before and they had never been referred to before byMr Tyler or Mr Stone.[21] When Mr Hemi took over as representative director of IBC in May 2018, hebecame concerned at what he considered was a large sum of money owing by ATNZto IBC under the VSA. He said in his evidence that he had serious doubts that ATNZwas meeting its repayment obligations as required under the VSA, and he estimatedthe amount owing at about $40 million. He formed the view that it was not sustainablefor IBC to keep funding vehicle purchases for ATNZ on the basis of potentiallyopen-ended credit to ATNZ, unless the flow of cash back to IBC improved.[22] Mr Hemi said that he tried to obtain from ATNZ details of the amounts it hascollected from its customers, so that IBC could verify that ATNZ had remitted all thefunds it had collected. He also tried to obtain details of the credit terms which ATNZoffers to its customers, but Mr Tyler refused to provide the information. In the end,IBC issued a proceeding in this Court (to which I refer later) to resolve the issue of theamount owing under the VSA. Mr Hemi said that from June 2018 there was a "trickle"of payments from ATNZ, but Mr Tyler continued to refuse to provide the informationto show that it was meeting its obligations under the VSA to pay when it receivedpayments from its customers.[23] Mr Tyler did not directly dispute that evidence in his reply affidavit, but he saidthat it did not portray the full picture: according to Mr Tyler, IBC reneged on its ownobligations under the VSA, and Mr Hemi wrongly (in Mr Tyler's view) discontinueda proceeding IBC had brought against Mr Hemi and another party before Mr Hemibecame representative director of IBC.[24] As at the end of December 2019, the parties have agreed that the total balancethat is or will be payable by ATNZ to IBC is NZ$43,075,737. However, there remainsan issue as to how much (if any) of that sum has fallen due for payment under thepayment provisions of the VSA.The breakdown in the relationship between Mr Stone and Mr Hemi[25] For various reasons with which I am not concerned in this proceeding, therelationship between Mr Stone and Mr Hemi began to break down from around 2008.The relationship worsened thereafter, and it is now common ground that it has brokendown irretrievably.[26] Mr Hemi said that Mr Tyler has taken Mr Stone's side in the dispute, and thatMr Tyler has refused to cooperate with his requests for information about ATNZ'sbusiness, regardless of whether Mr Hemi's requests were made in his capacity asrepresentative director of IBC, as someone with a beneficial interest in ATNZ, or as a50 per cent owner of the Hemi/Stone group, and notwithstanding Mr Hemi's positionas representative director of IBC.[27] Mr Tyler has taken the view that Mr Hemi has no standing to seek informationas a shareholder in ATNZ, and that any requests for information (to which ashareholder would be entitled) needed to come from AutoNet.Further evidence of Mr Tyler and Mr HemiMr Tyler[28] In his evidence, Mr Tyler acknowledged that ATNZ has been competing withIBC in the New Zealand market since early 2019. He considered that course wasforced upon ATNZ by IBC's wrongful repudiation of the VSA.[29] Mr Tyler said that, in November and December 2018, IBC began trying toforce ATNZ to sign a new VSA. ATNZ refused, taking the view that it did not have toagree to the proposed changes, and that it would have been unable to commit to theproposed revised payment terms. However, ATNZ was forced (on threat of IBCrefusing to honour the VSA) to agree to payment of freight for vehicles before IBCwould agree to ship.[30] Mr Tyler referred to a shipment arranged on the Euro Spirit, scheduled to leaveJapan on 19 January 2019. Mr Tyler said that vehicles had been assigned as agreed tothis vessel, but they were unassigned by IBC without notice to ATNZ. IBC refused toship the vehicles, and refused to release vehicles already in New Zealand to ATNZ.IBC then went about completing sales of these vehicles directly to ATNZ customerswho had agreed to purchase them from ATNZ.[31] By then, the trading position had become untenable for ATNZ. Mr Tyler saidthat it was left in the position of either finding an alternative supplier of vessels out ofJapan, or ceasing to trade. ATNZ has since gained access to an alternative supplier.[32] Since then, Mr Tyler said that IBC has been making claims designed toundermine the credibility of Mr Tyler, including making statements to ATNZ'sNew Zealand customers that ATNZ is being liquidated and that Mr Tyler is going tojail for fraud.[33] Mr Tyler speculated as to why Mr Hemi "would destroy ATNZ when he claimsto have 50% interest in ATNZ". He referred to Mr Hemi having gone aboutpositioning entities which are designed to take over ATNZ's position in theNew Zealand marketplace (primarily, Pacific Auto Carrier (NZ) Ltd — "PAC"). Hereferred to a derivative action claim commenced by IBC in Japan in relation to thesetting up of the corporate vehicle which Mr Hemi intends to use to replace ATNZ.[34] Mr Tyler then addressed ATNZ's financial position. He said that all of thecompany's creditors are current, and that if it owes IBC $43,075,737 as IBC claims(which Mr Tyler does not accept) then ATNZ has assets sufficient to cover all of itscreditors.[35] Mr Tyler said that any advertising of the pending liquidation claim would becatastrophic for ATNZ. He said that one customer has already asked to change histrading terms and hold the vehicle release documents, in case ATNZ goes under andthe customer's vehicles are impacted. Mr Tyler said that in ATNZ's business,reputation is everything. ATNZ has over 3,000 vehicles out on dealers' yards, and anythreat of liquidation will cause every one of those dealers to worry about what willhappen with the vehicles and the terms on which they are being held for sale.Customers would be afraid to purchase, believing that vehicles might not be delivered.Some ATNZ customers are already starting to purchase from IBC, and IBC has beenusing the threat of liquidating ATNZ as leverage, to gain business. Also, oncesuppliers become aware of this situation, it will likely jeopardise ATNZ's paymentterms with them.[36] Mr Tyler confirmed the contents of ATNZ's statement of defence in thisproceeding. The statement of defence includes the following:(i) A denial that the commercial relationship between Mr Hemi andMr Stone can be categorised as a "business partnership".(ii) An assertion that any deadlock within AutoNet is solely the fault ofMr Hemi, and he should not be able to use the deadlock to support thisproceeding.(iii) A denial that Mr Tyler took instructions from Mr Hemi — it wasMr Stone he consulted over important decisions.(iv) An assertion that since 2015 Mr Hemi has actively sought to harmATNZ, including by unlawfully establishing PAC to take over ATNZ'scustomers and business.(v) A denial that IBC has reposed significant trust and confidence in ATNZ,or that there exists any fiduciary relationship between IBC and ATNZ.The VSA governs the relationship between the parties.(vi) An assertion that IBC's business interests in New Zealand are nowconducted by PAC, which competes directly with ATNZ. IBC isaffected because, due to its repudiatory conduct, ATNZ now sources itsvehicles from another Japanese exporter.(vii) An assertion that it is Mr Hemi who has been hostile towards bothATNZ and Mr Tyler.(viii) A pleading that Mr Hemi acknowledged in proceedingCIV-2018-419-243 that the sole shareholder of ATNZ is AutoNet, andthat Mr Hemi has no legal interest in AutoNet.(ix) An assertion that ATNZ has always competed with IBC in theNew Zealand market. The only thing that has changed is that, due toIBC's repudiation of the VSA, ATNZ is no longer purchasing vehiclesfrom IBC.(x) Confirmation that, when he has been asked, Mr Tyler has said that heis the sole shareholder of ATNZ. He has also stated that ATNZ endedits supply relationship with IBC, and that it will be continuing tocompete with IBC. Mr Tyler did approach some disaffected staff ofIBC, but none of the staff mentioned in the statement of claim havebeen employed by ATNZ.(xi) An admission that ATNZ has ceased remitting to IBC any furtheramounts collected by it in respect of vehicles shipped by IBC under theVSA.Mr Hemi[37] Mr Hemi said that ATNZ and IBC were never intended to and never did operateas separate, arm's length businesses who were merely in a contractual tradingrelationship. He said that ATNZ was under the ultimate control of Mr Hemi andMr Stone (until their relationship broke down), and ATNZ was run as if it were simplyone division of a single business within IBC.[38] ATNZ was not required to pay IBC for cars imported into New Zealand untilthose cars had been on-sold by ATNZ and it had received payment, and Mr Hemicharacterised the terms of the relationship between IBC and ATNZ as not beingremotely like commercial terms. Mr Stone and Mr Hemi had decided to fund thegroup business from IBC's borrowings in Japan, and there was no need for ATNZ tohave to borrow in New Zealand. There were no contract terms in place to control thecredit terms that ATNZ could offer to its customers, or to regulate how long ATNZwould have to collect the money from its customers before it had to pay IBC. As thetwo businesses were initially operating transparently and collaboratively, andMr Stone and Mr Hemi were ultimately in control, that did not initially provide a causefor concern.[39] Mr Hemi said that when he took over as representative director of IBC in May2018 he had concerns over what he considered to be a large sum of money (thought tobe around $40 million) owing by ATNZ to IBC. He said he had serious doubts thatATNZ was meeting its repayment obligations as required under the VSA, and heconsidered it unsustainable for IBC to keep funding vehicle purchases for ATNZ onthe basis of potentially open-ended credit to ATNZ, unless the flow of cash back toIBC improved.[40] Mr Hemi said that he tried to obtain from ATNZ details of the amounts it hadcollected from customers so that IBC could verify that ATNZ had remitted to it all theamounts it had collected. He also tried to obtain disclosure of the credit terms ATNZwas offering its customers. His evidence was that Mr Tyler refused point blank toprovide access to any of that information. In the end, IBC issued a court proceedingin this Court against ATNZ (proceeding CIV-2018-419-294) to resolve the issue of theamount owing from ATNZ to IBC.[41] Mr Hemi said that in June 2018 no funds at all were remitted by ATNZ to IBC.He raised the matter with Mr Tyler, suggesting that the situation was untenable. Overthe next few months, ATNZ made some payments, but it refused to provide theinformation Mr Hemi had sought that would show that ATNZ was meeting itsobligations under the VSA.[42] Pending resolution of the dispute as to the obligations of ATNZ under the VSA,and determination of the amount owing to IBC under the VSA, IBC has taken theposition that it is not required to extend open-ended credit to ATNZ and to shipvehicles to ATNZ under the VSA without any co-operation or agreement between theparties as to terms on which vehicles are on-sold by ATNZ. It considers that ATNZhas been in ongoing breach of its obligations under the VSA, including breach of animplied obligation to provide to IBC on request records that disclose and verify whenpayments have been received or collected from third parties in respect of vehiclesshipped to ATNZ under the VSA.[43] Instead, Mr Hemi said that IBC has endeavoured to reach agreement withATNZ on payment and other terms, on a shipment-by-shipment basis. Interimarrangements were made between November 2018 and January 2019 for the shipmentof cars from IBC to ATNZ on three vessels, but these arrangements did not resolve theoverall dispute. Mr Hemi agreed that the interim payment arrangements were outsidethe terms of the VSA, but he said that IBC was effectively driven to make newarrangements when Mr Tyler refused to provide information about amounts collectedfrom ATNZ's customers and the credit terms that were offered to the customers. Giventhe unsatisfactory cash flow back to IBC, he contended that it had to negotiate specificpayment arrangements to cover ongoing shipments to ATNZ.[44] Mr Hemi said that ATNZ failed to comply with the interim arrangements. Inparticular, it failed to pay the sum of $2,914,486 for a shipment of cars on the vesselIstra Ace in January 2019. And on 5 January 2019 ATNZ gave notice to IBC allegingthat IBC was in breach of the VSA, and that ATNZ had "no choice but to stoppurchasing vehicles from IBC and instead source them from alternative suppliers".The letter said that ATNZ would instead be taking steps to purchase vehicles fromalternative suppliers in Japan, and it would be withholding further payments due toIBC under the VSA, to offset against a claim it asserted it had for damages.[45] Mr Hemi then instructed IBC's solicitors to write to ATNZ's solicitors inrelation to ATNZ's decision to suspend payment under the interim agreements. Thesolicitors' letter set out terms for a new agreement that would need to be reached forthe next vessel. The letter said that, until agreement was reached for that vessel, IBCwas suspending its sales to ATNZ.[46] Although ATNZ has not purported to cancel the VSA, since the start of January2019 it has not purchased any vehicles from IBC.[47] Mr Hemi asserted that he has no wish to destroy ATNZ. He said that since hetook over as representative director of IBC in May 2018 his aim has been to reduceand control the degree to which ATNZ was indebted to IBC, and to ensure that ATNZwas being operated in a sustainable manner, particularly in respect of credit termsbeing offered to its customers. Until ATNZ set up in open competition with IBC,Mr Hemi's approach was to keep the trading relationship functioning, while debt andshare ownership issues were resolved by the Court.[48] Mr Hemi set out the basis for IBC's liquidation claim on just and equitablegrounds as follows: ATNZ is now acting in a way that is the exact opposite to the purpose forwhich it was created and in a way that is outside anything contemplated by itsshareholders (whether that is me and Mr Stone directly, or AutoNet). In doingso, it stands to do enormous harm to IBC's business. By the time issuesrelating to the beneficial ownership of ATNZ and the size of the debt areresolved through ordinary proceedings, the damage could be irreparable. IBCsays that it is unjust and inequitable for Mr Tyler to take advantage of his statusas sole director and shareholder and of unresolved disputes about who he holdsthe shares for, to have ATNZ act in a way that is entirely outside the purposefor which it was created.Mr Tyler in reply[49] Mr Tyler said that since he became a director, ATNZ has always operated as aseparate arm's length business from IBC. Fees were negotiated with IBC, and ATNZran its own operation, employed its own staff, developed its own customer base, andmade its own decisions. For the whole period of ATNZ's operation in New Zealand,IBC was in the market place selling vehicles in competition with ATNZ. Due to thenature of the relationship and the funding there was always an open and transparentrelationship with IBC, but ATNZ was never run as a division of IBC.[50] The VSA was a commercial arrangement, with benefits to both parties. ATNZcould buy more cars if it was able to offer its customers credit terms, and there areother similar operations in New Zealand, where the New Zealand importer on-sellsvehicles on terms under which it is not required to pay its supplier until it is paid.[51] Mr Tyler said that until recently ATNZ and IBC did work closely in theNew Zealand market, but that was no longer possible when IBC started aggressivelytargeting ATNZ's customers, and made purchasing vehicles impossible.[52] Mr Tyler frankly acknowledged that he has aligned himself with Mr Stone inthe dispute between Mr Hemi and Mr Stone. He said that he had no confidence inMr Hemi's business acumen, and was of the view that Mr Hemi would ultimatelydestroy IBC. He referred to IBC supplying vehicles to a company called 2 Cheap Carsin an effort to have that company replace ATNZ as IBC's customer in the New Zealandmarket. He also accused IBC of trying to operate an unsustainable business model inNew Zealand, and of attempting to liquidate ATNZ as one means of salvaging thatsituation.[53] Mr Tyler denied that he has received any form of reward for his actions inrelation to IBC and the VSA, and said that he has been acting to protect the interestsof ATNZ. He said that his salary reflects the fact that he performs as a full time CEOof a company turning over $100 million per annum and employing 25 staff and asimilar number of contractors.[54] Mr Tyler acknowledged the overall group structure, and that members of thegroup may have interlocking business concerns, but said that he regarded the issue asbeing the legal relationship between IBC and ATNZ within that group structure.[55] Mr Tyler said that ATNZ has no plans to purchase any shares in a competitorof IBC. Any action that turned out to be contrary to IBC's interests would be a resultof IBC making it impossible to purchase vehicles from it. He reiterated ATNZ'sposition that if it wanted to remain in business it had no option but to source vehiclesfrom another supplier.[56] Mr Tyler expressed the view that ATNZ should continue in business until thevarious disputes between Mr Stone and Mr Hemi are resolved. In the meantime, theprofit that ATNZ makes is accruing for the group as a whole.[57] Mr Tyler said that all recent actions taken by ATNZ (vis a vis IBC) have flowedfrom the decision made by Mr Hemi to refuse to ship ATNZ's vehicles. Mr Stone wasnot involved in that decision, which was taken by Mr Hemi alone.[58] On the issue of ATNZ's solvency, Mr Tyler said that ATNZ's balance sheetoverstates the sum actually owed to IBC. That view was recorded in a letter dated2 May 2019 from ATNZ's solicitors to IBC's solicitors, in which the solicitors said thatMr Tyler was in the process of having the ATNZ balance sheet updated to reflect thecorrect liability to IBC. The letter referred to ATNZ's net assets of $43 million, and aproperty valued at $2.5 million over book value. ATNZ was said to have net assets ofapproximately $3.7 million, without any allowance for goodwill.[59] All of that said, Mr Tyler did not accept that any sum of money is actually duefor payment to IBC. On that basis, IBC's total claim is disputed.The parties' financial positions[60] There are allegations of insolvency on both sides. Mr Hemi denies that IBC isinsolvent, although he acknowledges that ATNZ's decision to cease making paymentsto it, and to compete with it in the New Zealand market, has put IBC under financialpressure. However, IBC continues to trade profitably.[61] Mr Hemi asserted that ATNZ is at least balance sheet insolvent. He referred tothe last full set of financial statements for ATNZ that he had received (for the yearended 31 March 2016), showing that ATNZ had a negative equity of $11.8 million.[62] Further financial information provided as at 31 July 2018 showed an excess ofliabilities over assets totalling $12.8 million. ATNZ has refused to provide its mostup-to-date financial statements, contending that the onus is on IBC to proveinsolvency.IBC is a prospective or contingent creditor of ATNZ[63] It is common ground that IBC is a prospective or contingent creditor of ATNZ,and as such had standing under s 241 of the Act to file the liquidation claim. However,Mr MacGillivray acknowledged in his submissions that IBC will also need to qualifyas a "creditor" when the liquidation claim is heard — if before that date adetermination is made that no money is due and payable to IBC, IBC would no longerhave standing to proceed with the liquidation claim.The various other court proceedings[64] On 20 August 2018 Mr Hemi filed a proceeding in this Court against Mr Tylerpersonally,6 seeking a declaration that Mr Tyler holds the ATNZ shares on trust forMr Hemi and Mr Stone. The proceeding also alleges various breaches of fiduciaryduties said to have been committed by Mr Tyler in his capacity as director andshareholder of ATNZ and as a director and CEO of another company within theHemi/Stone group, iCOMM International Inc (Icomm).[65] The issue of who is the beneficial owner of the shares in ATNZ remainsunresolved, and is expected to be determined in the proceeding filed in August 2018.[66] Next, there are proceedings in each direction between IBC and ATNZ. First,IBC commenced proceeding CIV-2018-419-355 against ATNZ. In this proceeding,IBC seeks a declaration that the VSA contains an implied term requiring ATNZ toprovide information to IBC on demand, and recovery of sums said to be due, and/or6 CIV-2018-419-243.damages, under the VSA. Initially IBC sought summary judgment, but the summaryjudgment application was abandoned and the proceeding continues as a claim for debtand damages. ATNZ commenced proceeding CIV-2018-419-294 against IBC, inwhich it sought an interim injunction to preserve what it contended was its position asa preferred recipient of cars from IBC. The interim injunction application wasdismissed by Woolford J in a judgment given on 19 November 2018.7 Woolford Jrecorded that IBC has always made significant sales to other customers inNew Zealand, and that there is no specific clause in the VSA (or in the supplementalagreements that ATNZ contends were entered into) prohibiting IBC from selling carsdirect to other customers in New Zealand.8 His Honour considered that damageswould be an adequate remedy if ATNZ were to succeed at trial. ProceedingCIV-2018-419-294 has continued as a claim for damages, on the basis that the tradingrelationship between ATNZ and IBC no longer exists.[67] Proceedings CIV-2018-419-355 and CIV-2018-419-294 were consolidated byorder of the Court made on 9 July 2019.[68] The next set of proceedings were two proceedings (the Latumbo proceedings)commenced in this Court by Melanie Latumbo against PAC — proceedingsCIV-2018-419-45 and CIV-2018-419-113. Ms Latumbo is a financial controlleremployed by Icomm, a company based in Cebu in the Philippines that providesaccounting, "back office" and other services to the companies within the Hemi/Stonegroup. Her first proceeding was an application for leave to bring a derivative actionon behalf of PAC against Mr Hemi and another individual relating to certaintransactions made in PAC's name. In her second proceeding, Ms Latumbo sought (byway of summary judgment) a declaration that she is a director of PAC, plus ancillaryorders. The applications for leave to bring the derivative action and for summaryjudgment were both dismissed by van Bohemen J in a judgment given on 23 October2018,9 however leave has been granted to appeal the judgment.7 Autoterminal New Zealand Ltd v IBC Japan Ltd [2018] NZHC 2986.8 At [36].9 Latumbo v Pacific Auto Carrier (NZ) Ltd [2018] NZHC 2773.[69] There is also an interpleader proceeding brought by a company called JacannaHoldings Ltd against PAC and others in this Court (CIV-2018-419-229). Jacannacollects funds from car vehicle sale operations in New Zealand, and there is a disputeas to whether funds held by it (now around $11.4 million) are to be dealt with at thedirection of PAC or IBC.[70] In other jurisdictions, I was told that proceedings either have been or will soonbe filed in the Cayman Islands and Japan, for the liquidation of AutoNet and IBCrespectively. Mr Hemi has also commenced a proceeding in the Philippines againstMr Stone and Mr Tyler relating to Icomm.The specific relief claimed by IBC in its statement of claim[71] The particular matters that are said to justify the making of a liquidation orderon just and equitable grounds are identified by IBC as follows:61. In all the circumstances, it is just and equitable that the defendantcompany be placed into liquidation. In particular:(a) In deciding to commence business as a competitor of IBC,[ATNZ] has departed radically from the purpose for which itwas incorporated by Mr Hemi and Mr Stone. It wasincorporated to serve IBC's interests and now proposes tocompete with IBC and to act in a way that is hostile to IBC'sinterests;(b) [ATNZ] was incorporated (and Mr Tyler was appointeddirector and CEO as a trustee shareholder) on the basis of arelationship of trust and confidence between [ATNZ] and itsmanagement and both business partners, and on the basis thatboth business partners would be able to play a role inoverseeing the conduct of the business of [ATNZ];(c) There is no longer any relationship of trust and confidencebetween the business partners and there is no longer arelationship of trust and confidence between Mr Tyler andMr Hemi. Mr Hemi is no longer being permitted to play anyrole in the conduct of the business of [ATNZ];(d) [ATNZ] was incorporated (and Mr Tyler was appointeddirector and CEO as a trustee shareholder) on the basis thatthere would be open collaboration between IBC and [ATNZ];(e) IBC and [ATNZ] have ceased to work together in acollaborative way as contemplated by the business partnersand by the terms of the VSA;(f) It would be unjust and inequitable to permit [ATNZ] to takeadvantage of the relationships it has developed as IBC'srepresentative in New Zealand to now compete against IBCagainst the wishes of one of the business partners responsiblefor its creation;(g) [ATNZ] is balance sheet insolvent and IBC is its largestcreditor;(h) As [ATNZ] has ceased to serve the purpose for which it wasincorporated by the business partners and as there is noagreement and no prospect of agreement between them as tothe future conduct of [ATNZ's] business, it is appropriate forthe affairs of [ATNZ] to be wound up and investigated by aliquidator.Counsel's submissionsATNZ[72] Mr Branch submitted:(a) The most extreme of situations would be required in order for a creditorto liquidate a company on just and equitable grounds, and even moreso where the debt is disputed and/or where the company is able to meetits debts as they fall due.(b) The relationship between IBC and ATNZ can only arise from itscontractual relationship and that is primarily one of customer and client,ie debtor and creditor, and those claimed breaches are already beingpursued by IBC in extant proceedings.(c) Even if IBC's claim that IBC and ATNZ are "members of the samebusiness partnership" is correct (which is denied), that does not makeIBC and ATNZ partners or give rise to any other fiduciary obligationsbetween IBC and ATNZ.(d) Therefore there is no possible basis on which IBC, as a creditor, orcontracting party in dispute, could make out the basis for a liquidationon just and equitable grounds.(e) Alternatively, even if the required relationship is arguable (which isdenied):(i) there is, in fact, no claim by IBC of a breakdown of trust andconfidence between IBC and ATNZ,10 and IBC cannot say thatit has justifiably lost trust and confidence in ATNZ; and/or(ii) liquidation is not the only appropriate method of bringing therelationship to an end; and/or(iii) the alleged breakdown of the relationship (on which the just andequitable ground is based) and, importantly, whether IBC (andMr Hemi) have clean hands, is already the subject of otherproceedings in multiple jurisdictions.(f) On that basis, this proceeding:(i) should be struck out as it is an abuse of process; or(ii) should be stayed until the proceedings already commenced byMr Hemi and Mr Stone (or related parties) have beendetermined as:(1) they are ordinary proceedings, well underway, which isthe appropriate type of proceedings in which to decidedisputed, and complicated, matters of fact; and/or(2) the appropriate parties are joined to, or covered by, thoseproceedings; and/or(iii) the interim orders in place in relation to the stay on advertisingand on IBC advising other parties of the liquidation proceedings10 The only loss of trust and confidence pleaded is that between Mr Hemi and Mr Tyler.should be continued but varied so as to cover, by name, IBC'srepresentatives in the market.[73] IBC and ATNZ are not partners, but simply individual components of theHemi/Stone business partnership. That is an insufficient basis for IBC to advance aclaim that the original purpose of ATNZ's incorporation is no longer being followed.Even if that were the position (which is denied), IBC was not one of the incorporatorsof ATNZ, and any rights arising from a failure by ATNZ to adhere to its originalpurpose can only belong to the incorporating parties (Mr Stone and Mr Hemi). Therelationship between IBC and ATNZ is nothing more than two parties having acontractual dispute.[74] IBC has not shown that liquidation on just and equitable grounds is the onlyappropriate method to bring the relationship to an end. The most appropriate way tobring the relationship to an end is for IBC to continue its claim for breach of the VSA,obtain judgment if it can, and then issue a statutory demand.[75] IBC does not come to Court with clean hands, an essential requirement for aliquidation claimant asking for a liquidation order on just and equitable groundsarising out of an alleged breakdown in confidence between the parties.11 IBC'scomplaint arises solely from its dealings with ATNZ and the fact that ATNZ is nowcompeting with it. If that state of affairs is due to IBC's conduct, it cannot display therequired clean hands. A determination on that issue is already the subject of aproceeding in this Court, and that proceeding should be determined rather than havinga parallel determination in the liquidation proceeding.12 Beyond that, IBC's claim isreally Mr Hemi's claim, but all of his claims are disputed and are the subject of otherproceedings.[76] The real reason for the commencement of the liquidation claim is that ATNZhas now set up in open competition with IBC. Mr Hemi acknowledged that, but forthat competition, he would have kept the trading relationship functioning while debt11 Referring to Paul Heath and Mike Whale Insolvency Law in New Zealand (3rd ed, Lexis Nexis,Wellington, 2018).12 Cowan v Sand Dune Ltd & Ors [2013] NZHC 1378 at [20] – [22].and ownership issues were resolved by the Court. But the basis on which Mr Hemirelies to justify the change of position is still to be decided in another proceeding. Afinding on that point should have been a pre-requisite to any liquidation application,and at the very least a stay should be granted until the issue is determined in the otherproceeding.[77] The argument that the competition is outside of anything Mr Hemi, Mr Stoneor AutoNet contemplated or expected is not an appropriate matter for determination inthe liquidation claim. Not one of those three parties is a party in this proceeding, andtheir expectations cannot be imputed, transferred, or assigned to IBC for the purposeof liquidating a competitor.[78] On the balance of convenience (relevant to the stay application) Mr Branchsubmitted that ATNZ is presently generating income for the business partnership, andthat would cease if a liquidation order were made.IBC[79] Mr MacGillivray submitted that it cannot be said that IBC's liquidation claimhas no prospect of succeeding, and it is not an abuse of process. The merits of theclaim should be determined at a full defended hearing.[80] He acknowledged that the fact that the claim is brought by a creditor of ATNZis an unusual feature in a claim brought on just and equitable grounds, but it reflectsthe highly unusual circumstances of the case. There are no settled categories orheadings under which cases must be brought if the just and equitable ground is toapply.13[81] All of the entities within the business partnership are ultimately owned andcontrolled by Mr Stone and Mr Hemi, or their interests, on a 50/50 basis. AndMr Tyler did not take issue with the description of ATNZ and IBC's relationship as"symbiotic", and Mr Hemi's evidence (referring to evidence given earlier by Mr Stone13 Automatic Parking Coupons Ltd v Time Ticket International Ltd (1997) 10 PRNZ 600 (HC), at603.in another proceeding) that the relationship "was, and is, vital to IBC's overallperformance in the New Zealand market".[82] There is no dispute that there has been a profound breakdown in therelationship between Mr Hemi and Mr Stone, between IBC and ATNZ, and betweenMr Hemi and Mr Tyler. Mr Tyler now refuses to deal with Mr Hemi in relation toATNZ's business, and Mr Tyler has gone to great lengths to prevent IBC and Mr Hemifrom obtaining any information about ATNZ's business. Mr Tyler's decision toterminate ATNZ's business relationship with IBC, and to now compete against IBC(the company ATNZ was created to serve), was made over vehement opposition fromMr Hemi whose interests own 50 per cent of AutoNet. And AutoNet is itselfdeadlocked at shareholder level as a result of the breakdown in the Stone/Hemirelationship.[83] Mr Tyler's evidence that he has been acting as an independent director ofATNZ, merely attempting to act in the best interests of his company, rings hollow. Thedispute involves significantly more than a simple one of two parties at arm's lengthbeing in a contractual dispute.[84] The issue for the Court to determine is whether in all the circumstances IBChas a sufficient interest to permit it to advance grounds that might ordinarily beexpected to be advanced by a shareholder. Mr MacGillivray submitted that it does.Mr Tyler (and Mr Stone) are taking advantage of the deadlock at AutoNet to act freefrom any control by the beneficial owners of ATNZ, and ATNZ has departed from thepurpose for which it was created within the overall business partnership. IBC is beingdirectly prejudiced by that departure. At the very least in those circumstances, itcannot be said that the liquidation claim has no prospect of success.[85] As for the other Court proceedings, the pending proceedings between IBC andATNZ in this Court will not determine whether it is just and equitable for ATNZ to beliquidated on account of its radical departure from the purpose from which it wascreated. The other proceedings will serve to determine what exact amounts are owingby ATNZ to IBC, and when those amounts must be paid. If ATNZ then paid its debtto IBC, the resolution of that proceeding would do nothing whatsoever to resolve theongoing circumstances that justify the application to liquidate. The application cannotbe regarded as a short cut for a debt claim.[86] On the issue of whether IBC should be pursuing a general proceeding if itbelieves that ATNZ is acting unlawfully in competing with it in the New Zealandmarket, Mr MacGillivray submitted that the ultimate issue in the liquidation claim willnot be whether ATNZ has acted in breach of the VSA, or otherwise unlawfully, butwhether it is just and equitable to permit it to carry on doing so in all of thecircumstances (regardless of its strict legal rights). Similarly, the proceeding againstMr Tyler personally may eventually have the effect of preventing him from continuingto conduct ATNZ's business as he has, but it will not resolve the underlying impasseat shareholder level. The existence of the other proceedings against Mr Tyler shouldnot prevent IBC from pursuing the present liquidation claim.[87] IBC has a legitimate concern that it could suffer irreparable harm if theliquidation claim is stayed pending determination of the other proceedings.Discussion and conclusionsApplications to strike out or stay liquidation claims[88] Rule 31.11 of the High Court Rules 2016 provides:31.11 Power to stay liquidation proceedings(1) If an application for putting a company into liquidation is made underrule 31.3, the defendant company, or, with the leave of the court, anycreditor or shareholder of that company or the Registrar ofCompanies, may, within 5 working days after the date of the serviceof the statement of claim on the defendant company, apply to thecourt—(a) for an order restraining publication of an advertisementrequired by rule 31.9 or any other information relating to thatstatement of claim; and(b) for an order staying any further proceedings in relation to theliquidation.(2) The court must treat an application under subclause (1) as if it werean application for an interim injunction and, if it makes the ordersought, it may do so on whatever terms the court thinks just.(3) The inherent jurisdiction of the court is not limited by this rule.[89] In Nemisis Holdings Ltd v North Harbour Industrial Holdings Ltd, Wallace Jnoted that the jurisdiction to stay a winding up proceeding is an inherent one, toprevent abuse of process. There is no inflexible rule.14 The governing considerationwill be whether the proceeding suggests unfairness or undue pressure. Wallace Jconfirmed that it is a serious matter to stay winding up proceedings, so the decision todo so is never made lightly. The onus is on the applicant for a stay, and it is normallynecessary to demonstrate something more than the balance of convenienceconsiderations which are usually considered on an application for an interiminjunction. A defendant is required to show that there is a strong prima facie case ofthe existence of a genuine dispute on substantial grounds, or that there are (otherwise)clear and persuasive grounds for a stay.15 A stay order may also be made where theCourt considers that the liquidation claim has been instituted for a collateral purpose.16[90] The foregoing approach is typically applied in liquidation claims that are basedon an allegation that the defendant company is insolvent, but I think broadconsiderations such as whether or not the proceeding is an abuse of process, orsuggests unfairness or undue pressure, must be equally applicable where theliquidation claim is made on just and equitable grounds.[91] The requirement that a defendant applying for a stay of a liquidation claimmade on just and equitable grounds must establish a "strong prima facie case of theexistence of a genuine dispute on substantial grounds" may be less important, at leastwhere the contest is between shareholders — the very existence of the proceeding islikely to reflect a significant level of dysfunction in the management of the company,probably extending to a deadlock, where important decisions cannot be made.However, there is authority for the view that there may be little point in staying the14 Nemisis Holdings Ltd v North Harbour Industrial Holdings Ltd (1989) 1 PRNZ 379 at 385.15 At 385.16 BNZ v Manor Inns Group Ltd HC Auckland M146/92, 30 November 1992 (HC).liquidation claim in such cases, as opposed to dealing with the substantive issues onfull evidence.17[92] In Automatic Parking Coupons Ltd v Time Ticket International Ltd, advertisingof the liquidation claim was stayed in a complex proceeding being litigated in tandemwith a substantive claim.Liquidation applications made on just and equitable grounds — legal principles[93] Section 241(4) of the Act materially provides:241 Commencement of liquidation(4) The court may appoint a liquidator if it is satisfied that—(d) it is just and equitable that the company be put intoliquidation.[94] The just and equitable jurisdiction is most frequently invoked where there isdissention and/or deadlock between a company's shareholders. The leading authorityis the decision of the House of Lords in Ebrahimi v Westbourne Galleries Ltd.18 Ingiving the principal speech in Ebrahimi, Lord Wilberforce said that it was impossibleand wholly undesirable to define the circumstances in which an order ought to bemade. The "just and equitable" provision has the effect of subjecting the exercise oflegal rights to equitable considerations, namely considerations of a personal characterwhich may make it unjust or inequitable to insist on legal rights or to exercise them ina particular way. Lord Wilberforce said:19The superimposition of equitable considerations requires something more,which typically may include one, or probably more, of the following elements:(i) an association formed or continued on the basis of a personalrelationship, involving mutual confidence — this element will oftenbe found where a pre-existing partnership has been converted into alimited company;17 Seapark Group Ltd v Convertech Group Ltd (1991) 5 NZCLC 66,975, and Automatic ParkingCoupons Ltd v Time Ticket International Ltd, above n 13.18 Ebrahimi v Westbourne Galleries Ltd [1973] AC 360.19 At 379.(ii) an agreement, or understanding, that all, or some (for there may be"sleeping" members), of the shareholders shall participate in theconduct of the business;(iii) restriction upon the transfer of the members' interest in the company— so that if confidence is lost, or one member is removed frommanagement, he cannot take out his stake and go elsewhere.[95] In a concurring judgment in Ebrahimi, Lord Cross said:20People do not become partners unless they have confidence in one another andit is of the essence of the relationship that mutual confidence is maintained. Ifneither has any longer confidence in the other so that they cannot worktogether in the way originally contemplated then the relationship should beended — unless, indeed, the party who wishes to end it has been solelyresponsible for the situation which has arisen.[96] Lord Cross made it clear in Ebrahimi that an applicant seeking a liquidationorder on the "just and equitable" ground must come to the Court with clean hands: ifthe breakdown in confidence between him and the other parties to the dispute appearsto have been due to his misconduct he cannot insist on the company being wound upif they wish it to continue.21[97] The decision in Ebrahimi was followed by Heath J in Jenkins v Supscaf Ltd.22After noting that Ebrahimi has been applied on many occasions in New Zealand,Heath J noted the dangers of invariably treating a closely held company as if it were apartnership. His Honour referred to the speech of Lord Wilberforce in O'Neill vPhillips, where Lord Hoffmann noted that the manner in which the affairs of acompany may be conducted is closely regulated by rules to which the shareholdershave agreed. Furthermore, company law has developed seamlessly from the law ofpartnership, which was treated by equity, like the Roman societas, as a contract ofgood faith.23[98] In Jenkins v Supscaf, Heath J considered that, to justify a liquidation order inthe case before him, the applicant had to demonstrate both that their lack of trust andconfidence in the other shareholder was justified, and that to liquidate the company20 At 383 – 384.21 At 387.22 Jenkins v Supscaf Ltd [2006] 3 NZLR 264.23 O'Neill v Phillips [1999] 2 All ER 961 (HL).was the only appropriate method of bringing the commercial relationship between theshareholders to an end.24[99] On the broad approach to the making of a liquidation order on just andequitable grounds, Heath J noted that s 241(4)(d) of the Act places no fetter on theCourt's discretion, either in relation to the factors that would justify an order, or inrelation to circumstances in which an order must be refused. In those circumstances,His Honour proceeded on the basis that the Court should balance all relevant factorsavailable for consideration at the time of the hearing to determine whether an orderought to be made.25[100] In Automatic Parking Coupons Ltd, the plaintiff applied to liquidate thedefendant on the basis that it could not pay its debts, but also on the basis that its soledirector was engaged in alienating the defendant's assets for his own benefit. Therewere concurrent civil proceedings seeking payment of $635,000 from the defendant.The case came before Tipping J on the defendant's application for an order striking outthe liquidation claim as an abuse of process. The defendant alleged that the proceedinghad been brought for ulterior purposes. Tipping J accepted that it would be wrong tocreate categories or headings under which applications for liquidation on the just andequitable ground must be brought. Room must always be left for a case which doesnot fit into any particular category, but which is nevertheless a suitable case forliquidation under the general words of the just and equitable ground.26[101] Tipping J noted that, for strike out purposes, it is elementary that allegations inthe statement of claim must be treated as being capable of proof. On the facts pleaded,it could not be said that the plaintiff had no prospect of obtaining an order forliquidation on the just and equitable ground.27[102] The defendant in Automatic Parking Coupons Ltd submitted that the issue ofthe proceeding constituted unfair commercial pressure, and was an abuse on that basis.There was also a suggestion that the liquidation claim had been issued for an ulterior24 Jenkins v Supscaf Ltd, above n 22, at [117].25 At [134].26 Automatic Parking Coupons Ltd v Time Ticket International Ltd, above n 13, at 603.27 At 603.purpose. On the pleadings and the evidence, the Judge accepted that those contentionswere arguable, but they were not of such force that the Court could properly hold thatthe liquidation claim should be struck out as an abuse of process. His Honourconsidered that, on the plaintiff's view of the facts, there was a bona fide reason forwanting to have the defendant put into liquidation.[103] Tipping J acknowledged in Automatic Parking Coupons Ltd that the just andequitable ground is apt to be distinctly more open to dispute than the conventionalground for putting a company into liquidation, namely that the company is unable topay its debts. And all of the factual propositions relied upon by the defendant insupport of the abuse of process argument were the subject of dispute between theparties, either as to the facts themselves or as to the inferences to be drawn from them.The Judge concluded that the defendant had fallen short of establishing that theplaintiff's liquidation claim was an abuse of process.[104] Tipping J went on to deal with the clear overlap between the liquidationproceeding and the ordinary civil proceeding. His Honour recorded that, afterdiscussion, the parties accepted that if the liquidation proceeding was not struck outthe two proceedings should be consolidated and/or managed together, so that bothproceedings could be heard by the same Judge in the one hearing.[105] In Cowan v Sand Dune Ltd, Collins J considered that the existence of a parallelcivil proceeding is a factor to be taken into account when assessing the merits of anapplication to liquidate on just and equitable grounds.28 A proceeding was pending inthe Family Court between the two shareholders, who had been in a personalrelationship. Collins J considered that the Court should not consider Mr Cowan'sapplication to liquidate the companies until the Family Court had determined keyissues relating to the nature of the parties' relationship and their respective interests inany relationship property they might have had. His Honour noted that liquidation onjust and equitable grounds should only be pursued as a last resort, and that Mr Cowanhad yet to exhaust potential remedies available to him.2928 Cowan v Sand Dune Ltd, above n 12, at [17].29 At [21].[106] In Strachan v Denbigh Property Ltd,30 Associate Judge Gendall affirmed theview that an order for liquidation on just and equitable grounds is to be seen assomething of a last resort. If another remedy, such as an order under s 174 of the Actrequiring the purchase of shares were appropriate and available, that would bepreferred.31 But on the facts the Associate Judge considered that, in view of the bitter,acrimonious and uncertain circumstances of the company and the parties, it wasunrealistic to regard one party buying the other out as a realistic possibility. An orderwas made putting the defendant into liquidation.[107] Finally, under this heading, I mention the decision of Menhennitt J in Re TivoliFreeholds Ltd, in which the Judge, sitting in the Supreme Court of Victoria, noted thatit has been recognised that it may be just and equitable to wind up a company if thecompany engages in acts which are entirely outside what can fairly be regarded ashaving been within the general intention and common understanding of the memberswhen they became members.32Application of the law in this case[108] In Automatic Parking Coupons Ltd, Tipping J said:33 "I am still left with theview that [the plaintiff] on its view of the facts has a bona fide reason for wanting tohave [the defendant] put into liquidation". Similarly, in this case, it seems to me thatMr Hemi probably does consider that IBC has a bona fide reason for wanting to haveATNZ put into liquidation. The ultimate ownership of the two companies is the same,and the reason for the establishment of ATNZ was to represent IBC in theNew Zealand market. The VSA appears to have conferred on ATNZ very favourablecommercial terms, and the New Zealand operation, which until recently appears tohave been effectively funded by borrowings made by IBC in Japan, now operates incompetition with IBC. ATNZ was obliged to account to IBC for sales made and forexpenses paid on IBC's behalf, and it appears that IBC has shipped vehicles worth inexcess of $40 million to ATNZ for which it has not been paid.30 Strachan v Denbigh Property Ltd (2011) 10 NZCLC 264,813 (HC).31 At [57].32 Re Tivoli Freeholds Ltd [1972] VR 445 at 468.33 Automatic Parking Coupons Ltd v Time Ticket International Ltd, above n 13, at 604.[109] It can also be said in IBC's favour that there is no dispute that the ultimateowners of the worldwide business enterprise, which includes ATNZ, can no longerwork together. On ATNZ's own case, the breakdown in the relationship betweenMr Hemi and Mr Stone had the effect that ATNZ's shareholder (AutoNet) wasincapable of providing the ordinary input a shareholder might be expected toprovide.34[110] So I do not think it can be said that, in issuing the liquidation claim, Mr Hemidid not have a bona fide belief that the circumstances justified the making of theliquidation order which is sought. But I am satisfied that that view was misconceived.[111] This is not a case like Automatic Parking Coupons Ltd, where an applicationto liquidate a company on just and equitable grounds could be expected to bring all ofthe real protagonists before the Court. The fundamental problem with the liquidationclaim in this case is that it purports to raise issues which are really the concern of theshareholder or shareholders of ATNZ, without that shareholder or those shareholdersbeing joined in the liquidation proceeding. In other circumstances that might perhapsbe addressed by an order directing service of the liquidation claim on the shareholderor shareholders, but even that is problematic in this case because of the dispute overwho is (or are) the beneficial owner(s) of the shares in ATNZ. And there is already aproceeding on foot (Mr Hemi's claim against Mr Tyler) which is designed to providean answer to that question.[112] I do not think it can be said that there are no circumstances in which aprospective or contingent creditor might apply to liquidate a company on just andequitable grounds, but in my view the relevant equities must relate to the relationshipbetween the contesting parties, and not to equities arising in relationships betweenothers (in this case, the shareholder or shareholders of ATNZ, and/or the ultimateowners of the group).34 It remains to be seen whether the very recent appointment of new directors to the board of ATNZwill affect matters, given that there presumably remain a deadlock at shareholder level within theirappointor, AutoNet.[113] Questions such as whether ATNZ is acting in accordance with the purposes forwhich it was incorporated are issues for the incorporators, or at least for the currentshareholder or shareholders, not for IBC. IBC is not a shareholder of ATNZ, and Iaccept Mr Branch's submission that it cannot be treated as if it were. IBC is itself50 per cent owned by Mr Stone, and in those circumstances I do not think it would beappropriate to allow Mr Hemi to unilaterally use IBC to raise issues which areultimately issues between himself and Mr Stone.[114] Where IBC does have a legitimate interest in the conduct of ATNZ, is in therelationship between the two parties under the VSA (and the supplemental agreementsif they are binding). Mr Branch submitted that the relationship is purely a contractualone, and IBC has chosen to raise the issues under the VSA in a separate proceedingwhich is already pending in this Court. The question arises as to what changed tojustify IBC then deciding to issue a liquidation proceeding.[115] Mr MacGillivray's answer was that ATNZ began competing with IBC in theNew Zealand market, by importing cars from a rival Japanese exporter. But it appearsthat IBC has been supplying vehicles to other parties in New Zealand, not just ATNZ,for some years, and it is not at all clear to me that the change in 2019 (when ATNZbegan to import vehicles from another Japanese supplier) made such a qualitativedifference to the whole situation that liquidation on just and equitable grounds becamenecessary or appropriate. Up to then, the parties appear to have treated the relationshipbetween them as an ordinary commercial relationship. For example, IBC's claimagainst ATNZ in proceeding CIV-2018-419-355 relies on alleged breaches of expressterms of the VSA and of an alleged implied term as to the supply of information byATNZ to IBC, not on a broad fiduciary obligation to provide that information. If(under the VSA or otherwise) ATNZ was not entitled to import vehicles from anotherJapanese supplier, that could presumably have been an ordinary claim added to IBC'sproceeding CIV-2018-419-355.[116] Nor is it clear on the evidence I have seen that IBC was entitled to unilaterallychange the payment terms for shipment of vehicles to ATNZ, as it appears to havedone towards the end of 2018. It is not necessary for me to make any finding aboutthat, and I refrain from doing so. I note only that it seems likely that there will be asubstantial dispute between the parties over the circumstances leading up to ATNZ'sdecision, presumably made by Mr Tyler on its behalf, to source vehicles from analternative supplier in Japan.[117] Mr MacGillivray did not challenge Mr Branch's submission that every matterraised as a ground for liquidating ATNZ in the exercise of the "just and equitable"jurisdiction is already in issue in one or more of the other proceedings. And Mr Hemihas said that, at least until ATNZ began competing with IBC by importing vehicles toNew Zealand from an alternative Japanese exporter, he was content for the variousissues to be resolved in the civil proceedings issued for that purpose. It appears thatMr Hemi did not then consider that IBC had reached the "last resort" stage, whereliquidation on just and equitable grounds was believed to be the only remaining option.[118] I am not satisfied that the change in ATNZ's market behaviour in 2019 whichhas caused particular concern to IBC is not something that can also be dealt with in anordinary civil proceeding. If Mr Hemi considers that there is urgency in having someor all of the various civil proceedings determined, then appropriate applications canbe made to the relevant Courts asking for priority fixtures. And if IBC considers thatirreparable damage might be caused by permitting ATNZ to continue to import intoNew Zealand vehicles obtained from another Japanese supplier, and there is a seriousissue to be tried as to whether ATNZ is entitled to do that, then it may be that reliefcould be sought by way of an interlocutory application for an interim injunction.[119] But in circumstances where Mr Tyler says that ATNZ is paying its debts as theyfall due, and has assets to pay IBC if and when it is called upon to do so, I do notconsider it reasonably arguable for IBC that the position has reached the "last resort"stage, where a liquidation order would be appropriate on just and equitable grounds.[120] Mr MacGillivray submitted that the liquidation claim should be allowed to goto a defended hearing, so that all of the facts can be considered. I accept that anyconsideration of whether there are just and equitable grounds for a liquidation orderwill usually require a detailed consideration of the facts, but no new facts seem capableof changing the following:(i) IBC is not a shareholder in ATNZ, and issues such as whether ATNZhas departed radically from the purpose for which it was incorporatedby Mr Hemi and Mr Stone are fundamentally shareholder issues, orissues between Mr Hemi and Mr Stone. Neither Mr Hemi, Mr Stone,nor AutoNet (if it is the shareholder) are before the Court; and(ii) IBC has made its election to have claims that are clearly vigorouslydefended, resolved in separate civil proceedings. Those proceedingsappear to raise all of the issues now raised in support of the liquidationclaim. The only material thing that has changed since those civilproceedings were issued is that the supplier/customer relationshipbetween IBC and ATNZ has broken down, and ATNZ has commencedobtaining vehicles from an alternative supplier. Those are matterscapable of being addressed perfectly well in a separate civil proceeding.[121] Specifically addressing IBC's grounds for a liquidation order that arereproduced at paragraph [71] of this judgment, IBC says that ATNZ has departedradically from the purpose for which it was incorporated. It was incorporated, andMr Tyler was appointed director and trustee shareholder, on the basis of a relationshipof trust and confidence between ATNZ and its management and both business partners,and on the basis that both business partners would be able to play a role in overseeingthe conduct of the business of ATNZ. Those are issues between the incorporatorsand/or the current shareholder or shareholders: they are not issues for IBC to pursue.Similarly, the alleged breakdown in trust and confidence between Mr Hemi andMr Stone is a matter more appropriately dealt with in other proceedings. In my viewIBC should not be used as a vehicle for Mr Hemi to ventilate his personal concern athis exclusion from playing a role in the management of ATNZ.[122] Whether IBC and ATNZ have ceased working together as contemplated by theterms of the VSA, and whether it would be unjust to now allow ATNZ to compete withIBC in the New Zealand market, are matters which are or will be in issue in separateproceedings between the parties. Given the other circumstances to which I havealluded, I do not consider it appropriate that those issues be canvassed separately in aliquidation claim (even if it were to be consolidated with the other proceedings orsome of them).[123] IBC says that ATNZ has ceased to serve the purpose for which it wasincorporated by the business partners, and that there is no agreement (and no prospectof agreement) between them as to the future conduct of ATNZ's business. That maybe so, but the fundamental problem is that it is an issue to be resolved between thebusiness partners. It is not appropriate for Mr Hemi to be using IBC as a vehicle tohave his disagreements with his business partner determined in this proceeding.[124] Mr MacGillivray submitted that the dispute involved significantly more than asimple conflict between two contracting parties in a commercial dispute. That is nodoubt true as far as it goes, but the submission does not address the point as to whosedisputes have really been put in issue by the liquidation claim. In substantial part, theyare disputes not between IBC and ATNZ, but disputes over the management andcontrol of ATNZ in respect of which IBC has no direct interest. I consider, in thecircumstances disclosed by the pleadings and the affidavits, that it is not reasonablyarguable that IBC has a sufficient interest to permit it to advance grounds thatMr MacGillivray acknowledged might ordinarily be expected to be advanced by ashareholder.[125] I do not need to address Mr Branch's argument based on "clean hands". Thatwould not in any event have been something to be determined on a summaryapplication such as this.[126] I have considered whether the proceeding should be stayed, rather than struckout, but if the proceeding were to be stayed the question would arise "stayed untilwhen?". There is no clear answer to that. One could await determination of Mr Hemi'sproceeding against Mr Tyler, for a determination as to the beneficial ownership of theATNZ shares. But that would solve nothing, as the deadlock situation would remain,whoever the shareholder(s) was/were. Nor is there any indication that the Hemi v Tylerproceeding is likely to be resolved within the near future. Similarly, a judgment onIBC's claim for money said to be due under the VSA will not necessarily resolve thesubstantial issues that have been raised in the liquidation claim. If ATNZ were tosimply pay any sum of money found to be owing by it to IBC, the concerns such asthe alleged "radical departure" from the purpose for which ATNZ was incorporatedwould still be there.[127] The possibility of either IBC or AutoNet being liquidated might provide at leastpart of a solution to the wider problem within the group. For example, if AutoNetwere determined to be the beneficial owner of the shares in ATNZ, a liquidator ofAutoNet could presumably cause ATNZ to be sold as a going concern, therebymaximising the recovery for the group and its ultimate owners. But there is noevidence of whether, and if so when, any liquidation of AutoNet might occur. And ofcourse any liquidation of AutoNet might turn out to have no direct effect on IBC andATNZ if the beneficial owners of the ATNZ shares turn out to be Messrs Hemi andStone (or their interests) personally.[128] In the end, I do not think staying the liquidation claim is the answer. I considerthat the liquidation claim is fundamentally flawed, in that Mr Hemi cannot in my viewuse IBC as a vehicle to raise what are substantially shareholder concerns when it is nota shareholder of ATNZ. And to the extent the issues raised in the liquidation claim doarise between IBC and ATNZ, they are issues which have already been raised inseparate civil proceedings. I conclude that a stay is not an appropriate outcome, andthat the liquidation claim should be struck out.[129] I conclude that the appropriate course is to strike out IBC's claim.Result[130] I make the following orders:(1) Striking out IBC's liquidation claim.(2) ATNZ is entitled to costs on its application, and on the liquidationproceeding. In the ordinary course those costs would be on a 2B basis,but I did not hear detailed submissions from counsel on costs. If theparties are unable to agree, ATNZ may file a costs memorandum within15 working days, and IBC may reply within 10 working days afterservice of ATNZ's memorandum. I will then issue a judgment for costson the papers.Associate Judge Smith