CLARK V LIBRA DEVELOPMENTS LIMITED AND ANOR CA CA390/2008

CLARK V LIBRA DEVELOPMENTS LIMITED AND ANOR CA CA390/2008 13 October 2008IN THE COURT OF APPEAL OF NEW ZEALAND CA390/2008 [2008] NZCA 416BETWEEN LINDSAY ALLAN CLARK Appellant AND LIBRA DEVELOPMENTS LIMITED First Respondent AND RUSSELL ERNEST HYSLOP Second Respondent Hearing: 7 October 2008 Court: O'Regan, Arnold and Baragwanath JJ Counsel: L A Andersen for Appellant P B Churchman for Respondents Judgment: 13 October 2008 at 10.00 amJUDGMENT OF THE COURTA The appeal is struck out. B The appellant must pay the actual and reasonable costs of the respondents plus usual disbursements. ____________________________________________________________________ REASONS OF THE COURT(Given by Baragwanath J)[1] The respondents Mr Hyslop and his company Libra Developments Ltd have applied to strike out an appeal by Mr Clark against a judgment of Chisholm J delivered on 10 June 2008 (the second judgment). There the High Court: (a) Determined the scope of an earlier decision of Chisholm J, delivered in the same proceedings on 4 February 2005 (the first judgment), in so far as it related to "the Cargill House project"; (b) Ordered particular discovery against Mr Clark; (c) Ordered a taking of accounts; (d) Reserved leave to apply for a tracing order; and (e) Ordered Mr Clark to pay the actual and reasonable costs of the application. The first judgment was endorsed by a judgment of this Court of 31 October 2006: [2007] 2 NZLR 709. Leave to appeal to the Supreme Court was declined by that Court on 15 March 2007. [2] The building formerly known as Cargill House is on the north-east corner of Princes and Dowling Street, south along Princes Street from the Octagon in the centre of Dunedin City. The building was bought in June 2000 for $1,065,000 by Danube Holdings Ltd the shares in which were acquired by Mr Clark who was its sole director. It provided basement car parking, ground floor retail and storage, and upper levels of office accommodation. [3] In the first judgment, Chisholm J found that the purchase was one of several transactions in which Mr Hylop's development skills were matched with Mr Clark's funding capability. He held that the acquisition in the name of Danube Holdings was in fact on behalf of a partnership between Mr Clark and Libra. [4] In mid 2001 Mr Hyslop suggested to Mr Clark that they consider the possibility of developing Cargill House into an hotel and for that purposeapproached Scenic Circle Hotels Management Services Ltd. It was agreed that Cargill House should be converted into a Scenic Circle Hotel. On 12 July 2002 Danube Holdings entered a written agreement for the sale of the premises to Cargill Hotel 2002 Ltd of which half the shares were to be owned by Scenic Circle and the other half by Mr Clark's interests. The hotel would be operated under a Hotel Management agreement with Scenic Circle. [5] Chisholm J held that Libra was entitled to a declaration that Cargill House, together with four other properties, and/or profits or proceeds from such properties were assets of the partnership. He rejected Mr Hyslop's claim that he was promised a shareholding in Cargill Hotel 2002 Ltd. [6] In the second judgment Chisholm J held that Libra's entitlement was not confined to bricks and mortar at the time the partnership was unilaterally terminated by Mr Clark on 30 October 2002. On the contrary, Mr Clark was obliged to account to the partnership for all profits he (or entities used by him) made as a result of the opportunities arising from the partnership project. The Judge cited the Partnership Act 1908, s 45(1) and Chirnside v Fay [2007] 1 NZLR 433 (SC). He held:[5] The declaration that [Libra] is entitled to share in the profits arising from the Cargill House project is entirely consistent with the nature of that project as found by this Court. In broad terms the object of the project was to acquire Cargill House and then develop it as a Scenic Circle hotel. Although the partnership involvement in that project was unilaterally terminated by the defendant, the project proceeded as originally contemplated. Under those circumstances [Libra] is entitled to recover the profits that would have accrued to it through the partnership if the partnership's involvement had not been unilaterally terminated.The orders for particular discovery and taking accounts followed that conclusion. [7] Mr Churchman for Libra and Mr Hyslop submits that the first judgment decided that the partnership's interest in Cargill House continued following the agreement of July 2002 and extended into what became Mr Clark's interest in the new company Cargill Hotel 2002 Ltd. That interest is said to include (or perhaps comprise) a 50 per cent equal shareholding with Scenic Circle's holding company, Clipper Investments 2002 Limited. The appeal seeks to reargue issues already determined and is therefore an abuse of the processes of this Court.[8] Mr Andersen for Mr Clark contends to the contrary and wishes to advance that contention at a substantive appeal. The agreement of 12 July 2002 was executed by Mr Clark on behalf of Danube Holdings Ltd. His signature was witnessed by Mr Hyslop who also witnessed Mr Clark's signature on behalf of Cargill Hotel 2002 Ltd. Mr Andersen's argument is essentially that the agreement of 12 July 2002 terminated the partnership's interest in relation to the building. He submits that the first judgment entailed only what he described as "a taking of accounts on dissolution of a partnership", which the second judgment "transformed into a complicated exercise involving breach of fiduciary duty with Chirnside v Fayconsequences." [9] But in the present context that is a distinction without a difference. The relevant principle was stated by Sir William Grant MR in Featherstonehaugh v Fenwick (1810) 17 Ves Jun 298, where the defendants terminated a partnership and claimed the exclusive right to a renewed lease of its glass manufacturing premises and to carry on its business, offering to pay for the plaintiff's share at valuation at the date of the termination. They continued to operate the business employing the partnership machinery, stock in trade and workmen. The defendants argued that they were only liable for the value of the partnership property at the time of the dissolution. Their argument was rejected. At 309 - 315 the Master of the Rolls stated:The [defendants'] proposition was, that a value should be set on the partnership stock; and that they should take his proportion of it at that valuation; or that he should take away his share of the property from the premises. My opinion is clearly, that these are not terms, to which he was bound to accede. They had no more right to turn him out than he had to turn them out, on those terms. Their rights were precisely equal; to have the whole concern wound up by a sale and a division of the properties. As therefore they never proposed to him any terms, which he was bound to accept, the consequence is, that, continuing to trade with his stock, and at his risk, they come under a liability for whatever profits might be produced by that stock There is still remaining what I consider a separate question; whether the renewed lease formed any part of the partnership property at the time of the dissolution supposing the lease to have been renewed on the 22d of November, and that the defendants are to be considered as trading for the plaintiff under that renewal, the consequence is, that the renewed lease was partnership property from 22d of November If they can hold this lease,and the partnership stock is not brought to sale, they are by no means on equal terms in effect they would have secured the good-will of the trader themselves and exclusion of their partner An account was accordingly directed to the partnership property upon the 22d November 1804: the renewed lease to be considered as partnership property; and to be sold; with the inquiry whether there were any, and what, profits, made since 22d of November 1804, by any, and what, use and application of, or by means of, the stock and trade and capital of the partnership business; as the Master finds the same to have been constituted: the Master to be at liberty to state especially at the request of any party any circumstances, relative to the stock and capital, existing on the 22 d of November 1804; or as to any profits, may, or alleged to have been made, since such time; the Master to make a separate Report as to what the partnership property now consists of: with liberty to apply upon the separate Report; reserving farther directions.[10] That decision retains its authority: Chan v Zacharia (1984) 154 CLR 178 at [2] and [25] (HC). See to similar effect Thompson's Trustee in Bankruptcy v Heaton[1974] 1 WLR 605. The principle of the decision is of direct application here. We accept the respondents' argument that the Courts have determined that the respondents' interests are not to be limited in the manner for which the appellant contends. The whole thrust of Chisholm J's first decision was that Mr Clark owed a duty, which it is unnecessary complicate with the adjective "fiduciary", to bring about an equal result in relation to the partnership assets. They included both the shares in Danube Holdings Ltd and the business opportunities which arose during the period of the partnership. That included the opportunities that the agreement of 12 July 2002 afforded the Clark interests. [11] It may be that the whole of the interests of the partnership in relation to the Cargill House venture are expressed in Mr Clark's 50 per cent shareholding in Cargill Hotel 2002 Ltd. In that event the taking of accounts would presumably include a valuation of that holding. But discovery and, conceivably, further interlocutory orders needed to establish what has happened to the partnership property, will be required to permit the taking of accounts. [12] The principle we apply is that nothing has happened which would deprive Libra of its share of the 50 per cent interest in the Cargill House project held by Mr Clark and thus the assets into which it may be traced.[13] It follows that the issues sought by Mr Clark to be raised on appeal have, as the respondents have submitted, been resolved in their favour. [14] We do not accept Mr Anderson's submission that this Court lacks jurisdiction because of his client's right to justice (New Zealand Bill of Rights Act 1990 s 27) and the right of appeal conferred by s 66 Judicature Act 1908. That is because his client has already exercised in three courts the right to challenge the respondents' claims. He may not relitigate what we have determined is the same point: Shiels v Blakeley [1986] 2 NZLR 262 (CA). [15] The respondents' application to strike out the appeal is granted. The appellant must pay the respondents' actual and reasonable costs plus usual disbursements. If the parties are unable to agree, they may file memoranda and costs will be fixed by the Court.Solicitors: Albert Alloo & Sons, Dunedin for Appellant Kensington Swan, Wellington for Respondents