SIGNUM HOLDINGS LIMITED v OKUORA HOLDINGS LIMITED [2023] NZHC 3041

SIGNUM HOLDINGS LIMITED v OKUORA HOLDINGS LIMITED [2023] NZHC 3041 [1 November 2023]ORDER PROHIBITING PUBLICATION OF THE JUDGMENT AND ANYPART OF THE PROCEEDINGS (INCLUDING THE RESULT) IN NEWSMEDIA OR ON THE INTERNET OR OTHER PUBLICLY AVAILABLEDATABASE UNTIL 7 NOVEMBER 2023.IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2023-409-152[2023] NZHC 3041BETWEEN SIGNUM HOLDINGS LIMITEDApplicantAND OKUORA HOLDINGS LIMITEDRespondentHearing: 15 August 2023Appearances: N F Flanagan and P J O'Boyle for ApplicantD R Kalderimis and T J Powell for RespondentJudgment: 1 November 2023JUDGMENT OF ASSOCIATE JUDGE PAULSENThis judgment was delivered by me on 1 November 2023 at 2.15 pmpursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Introduction[1] Okuora Holdings Ltd (Okuora) provided funding to Signum Holdings Ltd(Signum). In January 2022, Okuora appointed receivers to Signum. In April 2022, asone of a suite of interrelated agreements involving the satisfaction of Signum'sindebtedness to Okuora, the bringing to an end of the receivership, and a change inownership of Signum, Okuora and Signum entered into a deed of agreement to pay(the DAP).[2] Under the DAP, in consideration of Okuora entering into the suite ofagreements and waiving any claims against Signum or any related company, Signumwas to pay Okuora $500,000 by no later than 31 March 2023. When the debt was notpaid Okuora issued Signum with a statutory demand.[3] Signum applies to set aside the statutory demand, asserting it is fairly arguablethe DAP should be rescinded in equity as having been obtained by undue influence.1It says also there are disputed facts and difficult issues of law making the caseunsuitable for final resolution on a summary application of this kind.[4] The undue influence is said to have been exercised by Maury Penno(Ms Leyland Penno), who executed the DAP both as the sole director of Signum andas a director of Okuora.[5] Signum says Ms Leyland Penno, and through her Okuora, had full governingand managerial control over Signum, and in breach of a duty of candour she failed todisclose to Signum and to its shareholders material information such that Signum'sconsent to the DAP was obtained by undue influence.[6] The information is a single email sent by John Penno, Ms Leyland Penno'shusband and also a director of Okuora, to a key customer of Signum which Signumsays undermined the likelihood of a continued commercial relationship betweenSignum and the customer.1 Companies Act 1993, s 290(4)(a). An additional ground the DAP was procured unconscionablyis not now pursued.[7] Okuora opposes the application to set aside the statutory demand. It says therewas no undue influence as neither Signum nor its shareholders reposed trust andconfidence in Ms Leyland Penno giving rise to a duty of candour in the respectalleged. Okuora contends this is a dispute between commercial parties whose rightsare governed by the terms of the commercial bargain struck between them, whichincluded terms precluding Signum from challenging Okuora's right to payment.Signum also argues there was no concealment or failure to disclose materialinformation in any event. Furthermore, Okuora submits the remedy of rescission isnot available because Signum cannot selectively avoid part of a transaction, and itwould be unjust to set aside the DAP in circumstances where Signum and thoseassociated with it have taken the benefit of it.[8] I am satisfied there is not an arguable case the DAP should be rescinded forundue influence. The issues that arise and lead me to that conclusion are the following:(a) whether there was a relationship of trust and confidence as betweenMs Leyland Penno and Signum so as to give rise to a duty of candour;(b) whether Ms Leyland Penno in fact exercised influence over Signum;and(c) whether Signum can selectively avoid part of the overall transaction.Background[9] Okuora is an investment company in which Ms Leyland Penno and John Pennoare the shareholders and directors. Mr Penno was also a founder of Synlait Milk Ltd(Synlait) and the Chair of the Board of Synlait at relevant times.[10] Signum is a holding company and held the shares of Trust Codes Ltd (TrustCodes), which sold technology facilitating the digital tracing of products throughsupply chains. The founders of the companies included Paul Ryan (Mr Ryan), PeterRyan and Mark Darrow, who were also directors of Signum at relevant times.Mr Ryan was also the Chief Executive Officer (CEO) of Signum and Trust Codes.[11] Synlait processes products for The a2 Milk Company Ltd (a2MC). Part of theservices Synlait provided to a2MC was an item traceability and anti-counterfeitsolution to track products it produced for a2MC. That service was originally providedby Trust Codes pursuant to a supply agreement that expired in February 2020, afterwhich Trust Codes continued to supply its services while discussions were ongoingfor a further supply agreement. No such agreement was ever entered into, and Signumterminated its relationship with Synlait in October 2022. However, Mr Ryan says atthe relevant times Trust Codes considered a2MC to be a customer of criticalimportance.[12] In May 2019, Signum needed funding. Okuora agreed to invest in Signum andbecame a minor shareholder. Upon Okuora's investment, Ms Leyland Penno becamea director of Signum and, about a month later, Trust Codes. She remained a directoruntil 27 May 2022.[13] Relations between Okuora and Signum's founders soured, and further fundingwas required. By 10 July 2020, Mr Ryan, Peter Ryan and Mr Darrow had resigned asSignum directors, leaving the board inquorate. An agreement was reached wherebyOkuora provided new debt funding under a convertible note agreement dated 22 July2020, and Mr Ryan returned as a director. It was agreed Mr Ryan and Peter Ryanwould not support Mr Darrow becoming a director again because of issues Okuorahad with his conduct.[14] During the next year relationships did not improve and there was furtherdisagreement regarding funding for Trust Codes. By December 2021, the sale of TrustCodes was contemplated but the directors were unable to agree on the basis or termsof the sale.[15] It appears that by January 2022 Signum was insolvent and could not meet itsobligations to Okuora under the convertible note agreement. On 18 January 2022,Mr Ryan again resigned as a director and then CEO of Signum and began to work outhis notice period. Mr Ryan also threatened to take steps to remove Ms Leyland Pennoand Signum's two independent directors. The independent directors chose to resignon 24 January 2022. As a result, the board of Signum was again inquorate withMs Leyland Penno the sole director.[16] In an email of 24 January 2022, Mr Penno advised Mr Ryan of concernsOkuora had about Mr Ryan's conduct, including that he had deliberately misledshareholders and other stakeholders of the legal arrangements between Okuora andSignum. He said Mr Ryan would be held liable for any reduction of value in Signumand accruing to Okuora as a result.[17] Mr Ryan's solicitor responded to those concerns the same day, denying anywrongdoing on the part of Mr Ryan and putting Okuora on notice that any repetitionof the allegations exposed it and any responsible director to legal liability. The contentof this correspondence reflects the breakdown in the relationship between Okuora, itsdirectors and Mr Ryan.[18] On 28 January 2022, Signum was placed into receivership.[19] On 4 February 2022, the receivers terminated Mr Ryan's notice period andrelieved him of his duties as CEO.[20] On 7 February 2022, Mr Penno wrote to David Bortolussi, the CEO of a2MC,(the a2MC email) and, amongst other things, expressed his concerns as to the conductof Mr Ryan which Mr Ryan considers was "extraordinary in its vindictiveness". Theemail is disparaging of Mr Ryan and makes serious allegations against him, includingof fraudulent and criminal behaviour. However, Mr Penno stands by the content ofthe email and rejects Mr Ryan's characterisation of it. He also says that althoughconcerns about Mr Ryan's conduct were noted, so too were his strengths. Okuorasubmits the email is, overall, consistent with Mr Penno's expressed concerns in his24 January email, as well as the relevant context and wider shareholder dispute.[21] Mr Bortolussi responded on 7 February 2022 and expressed interest in a2MCacquiring Okuora's interests in Signum. The receivers granted a2MC permission towork with Mr Ryan for due diligence purposes. a2MC undertook due diligence andentered negotiations, but then withdrew from the process on 10 March 2022.[22] On 15 March 2022, Mr Ryan provided a term sheet making an offer to purchaseSignum's convertible note, end the receivership and assume control of Signum andTrust Codes. The purchaser would be PPM SPV Ltd (PPM), a company Mr Ryan laterformed with Peter Ryan and Mr Darrow.[23] The initial understanding was that the entire purchase price was to be paid byPPM. Mr Ryan proposed a variation by which $500,000 of the $1.7 million (laterreduced to $1.5 million) would be paid directly by Signum. Meredith Connell, actingfor Signum and taking instructions from Mr Ryan, drafted the agreement for Signumto pay that $500,000. That agreement is the DAP.[24] During negotiations disclosure was provided by Okuora to Meredith Connell.The agreement for sale and purchase by which PPM was to acquire Okuora's debtrights in Signum (the ASP) contained both vendor and purchaser warranties, notablycl 1.4 of sch 1 as follows:1.4 Material circumstances: [Okuora] is not aware of any materialcircumstance which has not been disclosed in writing to [PPM] in respect ofthe period on and from 18 January 2022, which might reasonably be expectedmaterially and adversely to affect the financial position, business, assets orprofitability of the Company or a Related Company. Provided however thatnothing in this warranty applies to information actually known to [PPM], PaulRyan, Peter Ryan or Mark Darrow at that date of this Agreement, or which ispublicly available.[25] Included in the disclosure provided by Okuora was a letter dated 6 April 2022describing Signum's relationships with Synlait and a2MC as well as requestedcorrespondence relating to the disclosures. It was an unusual feature of thenegotiation, but a matter of some importance in light of what Signum is now alleging,that Meredith Connell substantially edited a draft of Okuora's disclosure letter to limitthe extent of disclosure while Okuora insisted upon providing broad disclosure.[26] The matters Meredith Connell sought to remove from the disclosure letter arealso of significance, including almost all the disclosures in respect to a2MC andconcerning the relationship between Signum and Synlait and Mr Ryan. In relation toMr Ryan, the disclosure provided was in these terms:12 Matters relating to Paul Ryan: Mr Ryan's employment agreementwas terminated by Signum's receivers on 4 February 2022 pursuant to section32 of the Receiverships Act 1993. Mr Ryan has made a number of threats oflitigation against the Company and its Related Companies, and their presentand former directors, including having served an employment claim,submitted a complaint to the Privacy Commissioner and serving (andwithdrawing) a statutory demand on Trust Codes.[27] The disclosure correspondence included an email from Chapman Tripp toa2MC, referring to the a2MC email in the following terms:In addition, [Trust Codes] has a number of concerns in relation to Paul'sconduct as an employee and director. There concerns were brought to a2MC'sattention in John Penno's email to David Bortolussi on 7 February 2022.[28] Despite the reference to the a2MC email in the disclosure material, there wasno request made by Meredith Connell for a copy of it at that time.[29] On 10 April 2022, the final arrangements between PPM, Okuora, Signum,Trust Codes, Signum's shareholders and the receivers of Signum were recorded in asuite of transaction documents. These included the ASP to which both Signum andTrust Codes were parties, the DAP, an amended and restated shareholders agreement,a deed of release and termination of receivership, and a deed of mutual release (thetransaction agreements).[30] Also on 10 April 2022, Ms Leyland Penno executed a resolution as soledirector of Signum. The resolution acknowledged her personal interest in thetransaction and resolved that:(a) in approving the documents in the transaction she was acting for aproper purpose; and(b) Signum's entry into and performance of the documents and thetransaction was in the best interests of Signum.[31] On 11 April 2022, Mr Ryan returned as CEO of Signum and Trust Codes.[32] It was a requirement of closing that Signum's shareholders ratified thetransaction agreements. Clause 5.3 of the ASP set out PPM's obligations on closingand included at (b) and (c) the following:5.3 Purchaser's Obligations: On Closing, subject to compliance by[Okuora] with all of its obligations (b) Documents: [PPM] will deliver to [Okuora] and [Signum]:(iv) Shareholder Approvals: a copy of the ShareholderApprovals, signed by all parties thereto other thanOkuora;(c) Ratification: [PPM] will deliver to [Okuora] a ratification bythe Shareholders, the Company and Trust Codes of thisAgreement, the Agreement to Pay, and all the documentsdelivered by [Signum] or any of its subsidiaries under thisAgreement, such ratification by such companies being by wayof unanimous resolutions of their newly constituted Boards ofDirectors, in each case in a form satisfactory to [Okuora].[33] Mr Ryan took responsibility for liaising with and obtaining the consent of allshareholders, other than Okuora, to the transaction agreements. This took some timebut was completed by 26 May 2022, at which time the Signum shareholders alsosigned the deed of release and the amended and restated shareholders agreement. Theshareholders resolution provided:Background8. The exercise of powers authorising [Signum] and its subsidiaries toenter into the Transaction, and to approve the execution of thedocuments in relation to the Transaction by Maury Leyland Penno asthe sole director (notwithstanding that [Signum] and its subsidiarieswere inquorate), requires ratification by the Shareholders.Resolved as a resolution of the shareholders of [Signum] in writing inaccordance with section 122 of the Act that:2 The exercise of powers authorising [Signum] and its subsidiaries toenter into the Transaction by Maury Leyland Penno as sole director of[Signum] and each of its subsidiaries, and the execution of documentsto give effect to the Transaction by Maury Leyland Penno as soledirector of [Signum] and each of its subsidiaries, is ratified andapproved by the Shareholders, including where applicable pursuant tos177 of the Companies Act 1993.[34] On 27 May 2022, Ms Leyland Penno retired as a Signum director, PPM'spurchase closed, and the receivership ended. PPM then converted the convertiblenotes and PPM and its three shareholders, Mr Ryan, Peter Ryan and Mr Darrow,together held over 70 per cent of Signum. Shortly thereafter, PPM sold approximatelyone-third of its new holding to Jamestrong Packaging Pty Ltd for $1.2 million.[35] The relationship between Signum, Synlait and a2MC continued and effortswere made to negotiate a new supply agreement. On 17 June 2022, Mr Ryan reportedto shareholders on his confidence in the integrity of the a2MC/Signum relationship.However, on 26 October 2022, Signum reported to its shareholders that it had decidedto cease working with Synlait. Its decision was unrelated to the a2MC email.[36] On 14 December 2022, PPM wrote to Okuora referring to a potential warrantyclaim under the ASP including in relation to the a2MC email. However, no such claimwas made.[37] In early March 2023, Trust Codes' assets were sold to VerifyMe Inc(VerifyMe). Trust Codes is no longer an operating business and Mr Ryan is now CEOof Trust Codes Global Ltd, a wholly owned subsidiary of VerifyMe.[38] On 4 March 2023, Okuora issued a statutory demand for payment by Signumunder the DAP. On 8 March 2023, Meredith Connell replied, for Signum, that theDAP debt had not fallen due for payment.[39] On 9 March 2023, Meredith Connell purported to reserve Signum's rights inregard to the validity of the DAP. Okuora's lawyers sought clarity as to the nature ofany dispute concerning the DAP.[40] On 10 March 2023, Meredith Connell wrote that the validity of the DAP wasa "broader issue than that of the statutory demand currently in play".[41] Okuora withdrew its statutory demand on 13 March 2023, asking that MeredithConnell set out any concerns Signum had in respect to the DAP. Meredith Connelldid not do so.[42] Signum did not make payment under the DAP on 31 March 2023 and, on2 April 2023, Okuora issued a second statutory demand (the demand challenged inthis proceeding).[43] On 6 April 2023, Meredith Connell disputed the demand, raising undueinfluence as a result of the alleged failure by Okuora and Ms Leyland Penno todisclose the a2MC email. Further correspondence between the solicitors followed.[44] On 18 April 2023, Signum filed its application to set aside the statutorydemand.The law[45] The relevant statutory provisions dealing with the issue of statutory demandsand applications to set them aside are ss 289 and 290 of the Companies Act 1993.These provide:289 Statutory demand(1) A statutory demand is a demand by a creditor in respect of a debtowing by a company made in accordance with this section.(2) A statutory demand must—(a) be in respect of a debt that is due and is not less than theprescribed amount; and(b) be in writing; and(c) be served on the company; and(d) require the company to pay the debt, or enter into acompromise under Part 14, or otherwise compound with thecreditor, or give a charge over its property to secure paymentof the debt, to the reasonable satisfaction of the creditor,within 15 working days of the date of service, or such longerperiod as the court may order.290 Court may set aside statutory demand(1) The court may, on the application of the company, set aside a statutorydemand.(4) The court may grant an application to set aside a statutory demand ifit is satisfied that—(a) there is a substantial dispute whether or not the debt is owingor is due; or(b) the company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less theamount of the counterclaim, set-off, or cross-demand is lessthan the prescribed amount; or(c) the demand ought to be set aside on other grounds.[46] The principles that apply to applications under s 290(4)(a) are as follows:2(a) The onus is on the applicant seeking to set aside the statutory demandto show that there is arguably a genuine and substantial dispute as tothe existence of the debt. The Court's task is not to resolve the disputebut to determine whether there is a substantial dispute that the debt isdue.(b) The mere assertion that a dispute exists is not sufficient. Materialshort of proof is required to support the claim that the debt is disputed.(c) If such material is available, the dispute should normally be resolvedfirst in ordinary civil proceedings before any statutory demand isissued.(d) If a counterclaim, cross-demand or set-off is suggested an applicantmust establish that this is reasonably arguable in all the circumstances.(e) It is not usually possible to resolve disputed questions of fact onaffidavit evidence alone, particularly when issues of credibility ariseunless such evidence is contrary to the available documents or earlierstatements made by the parties.[47] Notwithstanding that grounds for setting aside a statutory demand have beenmade out, the court retains a residual discretion to refuse to set aside a statutorydemand, but it would only be a rare case where such a discretion was exercised.32 Confident Trustee Ltd v Garden and Trees Ltd [2017] NZCA 578 at [16].3 Manchester Securities Ltd v Body Corporate 172108 [2018] NZCA 190, [2018] 3 NZLR 455 at[49].Signum's reliance upon undue influence[48] Signum says Trust Codes' tracing technology was of value to a2MC and,despite the direct commercial relationship being between Trust Codes and Synlait, therelationship between Trust Codes and a2MC was of critical importance and inherentlyfragile precisely because Trust Codes had no direct contract with a2MC.[49] Signum alleges that Ms Leyland Penno, and thus Okuora, exercised what iscommonly called "actual undue influence" upon Signum, that is where overt acts ofimproper pressure or coercion are affirmatively proved without the aid of a legalpresumption that such undue influence has been applied.4 A category of indirectpressure amounting to actual undue influence is where the relationship between theparties is such that the stronger party owes, but fails to meet, a duty of candour to theweaker party.[50] Signum contends that at all material times Ms Leyland Penno owed a duty ofcandour to Signum because she had full governing and managerial control overSignum and its financial affairs such that she had acquired ascendancy over it. This issaid to be by virtue of her sole directorship of Signum and the vacancy of the office ofCEO by Mr Ryan.[51] Additionally, Signum says the fact it was in receivership reinforced theascendancy because, on Signum's execution of the DAP, Okuora agreed to terminatethe receivership.[52] It contends that Ms Leyland Penno's disclosure that she had a conflict as adirector of Okuora could not relieve her of her wider equitable obligations to thecompany both as a fiduciary, by virtue of her role as sole director, and the particularobligations imposed on her in equity by the doctrine of undue influence.[53] Signum argues that Ms Leyland Penno breached her duty of candour by failingto disclose the a2MC email. It contends that, owing to the unique structure of the4 Nelson Enonchong Duress, Undue Influence and Unconscionable Dealing (3rd ed, Sweet &Maxwell, London, 2019) at [8-001].transaction, such disclosure was required to have been made to the shareholders ofSignum as they had the final say on the DAP by their act of ratification, and anythingother than disclosure to the shareholders themselves would not have been meaningful.[54] Signum submits the failure to disclose the a2MC email was a breach ofMs Leyland Penno's duty of candour because its overall effect was that Mr Penno andSynlait did not trust Mr Ryan and could not work with him in the context of therelationship between Trust Codes and a2MC in the long term, and thus it was materialto whether it was in Signum's interest to enter into the transaction and the DAP.[55] Signum also submits Okuora is bound by Ms Leyland Penno's conduct,because a company is bound by the undue influence of a natural person who controlsand directs the company where it enters into a contract procured by that undueinfluence.5The law of undue influence[56] The doctrine of undue influence concerns the circumstance where the intentionof one party to enter into a transaction is secured other than through the exercise oftheir free judgement, but by reason of some unacceptable form of persuasion by theother party to the transaction.6 The essence of the doctrine is the overbearing of thewill that makes the influence "undue". The focus of the court's enquiry is the mind ofthe person consenting to the impugned transaction, not the motives of the person whois exerting pressure or influence upon them.7[57] In Green v Green, Winkelmann J stated the legal principles relating to undueinfluence including:8(a) The overall burden of proof rests on the person seeking to establishundue influence.(b) The burden of proof is on the balance of probabilities. 5 O'Sullivan v Management Agency and Music Ltd [1985] QB 428 (CA) at 447–448 per Dunn LJ,at 463–464 per Fox LJ and at 470 per Waller LJ.6 Native Resorts Ltd v First Citizens Bank Ltd [2022] UKPC 10 at [10]; and Enonchong, above n 4,at [8–001].7 Green v Green [2016] NZCA 486, [2017] 2 NZLR 321 at [39].8 Green v Green [2015] NZHC 1218 at [100] (footnotes omitted), approved on appeal in Green vGreen, above n 7, at [48].(c) The person asserting undue influence must show that the allegedinfluence led to the making of the impugned transaction, and that theinfluence was undue in the sense that the transaction was not the resultof the free exercise of an independent will on the part of the person atwhose expense the transaction was made.(d) The question of whether a transaction was brought about by undueinfluence is a question of fact. A party can succeed in establishing thiseither directly by proving "actual undue influence" or [by] recourse toan evidential presumption which arises where it is established that:(i) the person said to have been subject to undue influence placedtrust and confidence in the other; and(ii) the transaction called for an explanation.[58] The leading case is the House of Lord's decision in Royal Bank of Scotland plcv Etridge (No 2),9 but the most convenient summary of the matters that must be provedto establish undue influence is in the text Equity and Trusts in New Zealand asfollows:10(a) The other party to the transaction (or someone who induced thetransaction for his or her own benefit) had the capacity to influencethe complainant – that is, there was a relationship of trust andconfidence between them (which need not necessarily be fiduciary innature);(b) Influence was exercised;(c) Influence was undue – in the sense of being unfair or unacceptable;(d) Influence brought about the transaction; and(e) The circumstances or consequences of the transaction or gift are suchthat equity's conscience is exercised. In other words, advantage musthave been taken (although whether the transaction is actuallydisadvantageous is a different question).Was there a relationship of influence?[59] In Royal Bank of Scotland plc v Etridge (No 2), Lord Nicholls described undueinfluence as arising out of a relationship between two persons where one has acquired9 Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44, [2002] 2 AC 773.10 J Stephen Kós "Undue Influence" in Andrew Butler (ed) Equity and Trusts in New Zealand (2nded, Thomson Reuters, Wellington, 2009) 679 at 681 (footnote omitted) citing Contractors BondingLtd v Snee [1992] 2 NZLR 157 (CA) at 166; Bank of Credit & Commerce International SA vAboody [1990] 1 QB 923 (CA) at 967; and see Public Trust v Vernon [2015] NZHC 1928 at [121].over another a measure of influence, or ascendancy, of which the ascendant personthen takes unfair advantage.11 He said:12 the influence one person has over another provides scope for misusewithout any specific overt acts of persuasion. The relationship between twoindividuals may be such that, without more, one of them is disposed to agreea course of action proposed by the other. Typically this occurs when oneperson places trust in another to look after his affairs and interests, and thelatter betrays this trust by preferring his own interests. He abuses the influencehe has acquired. In Allcard v Skinner Lindley LJ described this class ofcases as those in which it was the duty of one party to advise the other or tomanage his property for him.[60] Lord Nicholls noted that the question is whether one party has reposedsufficient trust and confidence in the other, rather than whether the relationshipbetween the parties belongs to a particular type,13 but said there is no single touchstonefor determining whether the principle is applicable and:14The principle is not confined to cases of abuse of trust and confidence. It alsoincludes, for instance, cases where a vulnerable person has been exploited. Several expressions have been used in an endeavour to encapsulate theessence: trust and confidence, reliance, dependence or vulnerability on the onehand and ascendancy, domination or control on the other. None of thesedescriptions is perfect. None is all embracing. Each has its proper place.[61] Lord Nicholls noted that proof the complainant received advice from a thirdparty before entering into the impugned transaction is one of the matters a court takesinto account when weighing all the evidence. Proof of outside advice does not of itselfnecessarily show that subsequent completion of the transaction was free from theexercise of undue influence.15 Whether a transaction was brought about by theexercise of undue influence is a question of fact to be decided having regard to all theevidence of the case.[62] In Lloyds Bank Ltd v Bundy, Sir Eric Sachs put the matter this way:16Such cases tend to arise where someone relies on the guidance or advice ofanother, where the other is aware of that reliance and where the person uponwhom reliance is placed obtains, or may well obtain, a benefit from the11 Royal Bank of Scotland plc v Etridge (No 2), above n 9, at [8].12 At [9] (footnote omitted).13 At [10].14 At [11].15 At [20].16 Lloyds Bank v Bundy [1975] 1 QB 326 (CA) at 341.transaction or has some other interest in it being concluded. In addition, theremust, of course, be shown to exist a vital element which in this judgment willfor convenience be referred to as confidentiality. It is this element which is soimpossible to define and which is a matter for the judgment of the court on thefacts of any particular case.[63] Not every fiduciary relationship will be one of influence,17 and where theparties are in a purely commercial relationship undue influence has less of a part toplay. In Etridge, Lord Nicholls said, albeit in relation to the notice requirements forthird parties to be bound by the undue influence:18Different considerations apply where the relationship between the debtor andguarantor is commercial, as where a guarantor is being paid a fee, or acompany is guaranteeing the debts of another company in the same group.Those engaged in business can be regarded as capable of looking afterthemselves and understanding the risks involved in the giving of guarantees.[64] In Zamet v Hyman, a widower, then aged 79, became engaged to marry awidow aged 71. Shortly before the marriage they executed a deed where, inconsideration of a payment of £600, on the death of her husband the wife gave up anyclaim she might have against the husband or his estate.19 The wife sought to have thedeed set aside on the grounds that it was obtained by undue influence of her thenfiancé. The deed was set aside. The court agreed with the first instance Judge that therelationship between the husband and the fiancé was one where confidence had beenbreached. Donovan LJ said, given the nature of the confidence, the husband:20 clearly owed her the duty to explain this impugned transaction to her inproper detail so that she would have all the facts before her to enable a freeand rational choice to be exercised. Had he done so, she would have realisedthat she was being asked to give up the rights which would accrue to her onmarriage for a song. I fully appreciate that the husband may have thought thatby this transaction he was doing the proper thing by both his children and hisintended bride: but at the same time I think the evidence established that heused his influence over her to obtain her agreement, despite the absence offigures which were essential to a free and independent decision by her; andwhich figures he would have had to place before her independent solicitor,had she employed one.17 J Stephen Kós "Undue Influence", above n 10, at [22.6]; and Zamet v Hyman [1961] 1 WLR 1442(CA) at 1452.,18 Royal Bank of Scotland plc v Etridge (No 2), above n 9, at [88].19 Zamet v Hyman, above n 17, at 1453 (CA).20 At 1453.[65] In Hewett v First Plus Financial Group plc a husband persuaded his wife tojoin with him in a re-mortgage of a property to provide security for his credit carddebts.21 The wife agreed but, unbeknown to her when she signed the documents, thehusband was having an affair which would lead to his separation from the wife. Thewife applied to set aside the mortgage on the ground of undue influence by thehusband. Briggs J noted that the questions to be determined were first whetherMrs Hewett had reposed a sufficient degree of trust and confidence in her husband togive rise to the obligation of candour and fairness and, secondly, whether the factMr Hewett was having an affair was something which his obligation of fairness andcandour towards his wife required him to disclose.[66] In respect to the first issue, the Judge said:22 the first question is whether Mrs Hewett reposed a sufficient degree of trustand confidence in her husband to give rise to an obligation of candour andfairness owed to her. I consider that she did, for two reasons. The first is that,as the Judge found, she regarded Mr Hewett as being in charge of the familyfinances, albeit not to an extent that excluded her from any participation inimportant decisions It would in my opinion be wrong to confine ahusband's obligation of candour and fairness when proposing a risky financialtransaction to his wife as confined to cases where the wife meekly follows herhusband's directions without question. The purpose of an obligation ofcandour is that the wife should be able to make an informed decision (with orwithout the benefit of independent advice) properly and fairly appraised of therelevant circumstances. The second reason is that the specific transaction which Mr Hewett put tohis wife required her to take on trust his promise to make the instalmentpayments due to First Plus arising from the re-mortgage. As the Judge put it that is what Mr Hewett swore to do on their children's lives. There wastherefore both a pre-existing relationship of trust and confidence, and anintensification of it derived from the very basis of the proposed transaction.[67] In response to the second question, the Judge found that Mrs Hewett's decisionto accede to her husband's request was based on an assumption on her part that he wasas committed as she was to the marriage, to the family and the preservation of theirhome life in the future.23 The truth was that he had embarked upon an affair whichrisked his departure from the family and withdrawal of both emotional and financialsupport. On that basis, his affair required disclosure.21 Hewett v First Plus Financial Group plc [2010] EWCA Civ 312.22 At [29]–[30].23 At [33].[68] Another example is Bank of Credit and Commerce International SA vAboody.24 There, a husband and wife guaranteed their company's loans and putcharges on the wife's house in favour of the bank. The bank attempted to enforce itssecurities, but the wife claimed she entered into the contracts under actual undueinfluence. The husband and wife had a relationship where she trusted him and wouldenter into contracts when asked by him with little or no explanation. The court did notaccept this was a merely passive role in terms of her signing the agreements and saidthat Mr Aboody suggested to his wife she should enter into the transactions. The courtapproved the following passage from the lower court:25There was more than a situation of trust; there was actual influence foundedon that trust and [Mr Aboody] used it intentionally. He intended and knewthat without any discussion or consideration of risk [Mrs Aboody] would signsecurity documents for a series of increasingly large overdrafts of thecompany. He never offered her any choice of her own. She was deprivedaltogether of the free use of any independent and informed judgment in thetransaction. He never mentioned risk at all even if he thought it was a slightone. The only judgment that she could be said to have exercised was hermistaken judgment of Mr. Aboody and his business capacity and probity.[69] In my view it is not arguable that Signum or its shareholders reposed trust andconfidence in Ms Leyland Penno to look after their interests in respect to thetransaction or that, vis-à-vis Ms Leyland Penno, they were in a position of "trust andconfidence, reliance, dependence or vulnerability".26 There are several reasons forthis.[70] The transaction agreements were negotiated, entered into and closed against along background of distrust, suspicion and conflict between Okuora (and Mr Pennoand Ms Leyland Penno) and Mr Ryan and the shareholder parties with whom Mr Ryanwas associated. I have set out just some of this in the background facts above. Thatatmosphere remained up to the closing of the transaction and beyond.[71] Mr Ryan acknowledges in his affidavits that the relationship with Mr Pennowas "fraught" and "strained". This understates the position. I do not intend to deal24 Bank of Credit and Commerce International SA v Aboody, above n 10.25 At 969.26 Royal Bank of Scotland plc v Etridge (No 2), above n 9, at [11].with all the evidence of what was a breakdown in relations between Mr Ryan,Mr Penno and Ms Leyland Penno, some examples reflecting that will suffice.[72] As noted earlier, Mr Ryan gave notice resigning as a director because ofdifferences concerning the sale of the business. He also resigned as CEO of Signumon 18 January 2022, giving as his reasons "comments made about me by directors"and the attempt to "rewrite the record means my position as CEO is no longer tenable".[73] On 21 January 2022, Mr Ryan gave Ms Leyland Penno notice he was raising apersonal grievance for constructive dismissal due to comments made about him by thedirectors that "were destructive to trust and confidence in the employmentrelationship". He said the Board had lost confidence in him because he challenged asale of the business "which appears to benefit Okuora over and above any othercreditor or shareholder".[74] On the same day, Mr Ryan called for a special meeting of shareholders toremove the independent directors and Ms Leyland Penno as Chair of the Board.[75] On 24 January 2022, there was the correspondence between Mr Penno andMr Ryan's solicitors including mutual threats of legal action.[76] On the same day, Mr Ryan's solicitors sent a letter to the directors of Signumproposing to appoint independent directors, replace Ms Leyland Penno as the Chair ofthe Board of Signum, and that Mr Ryan take the lead to urgently finalise a sale of theassets and business of Trust Codes.[77] In an email of 2 March 2022, Mr Ryan wrote to Signum's shareholdersconfidentially to "set out where things are at from my perspective" stating:There are employee/shareholders on this email trail and I want to emphasisethat you are receiving this email because you signed the confidential letterwith a2MC, and that what I say here must remain strictly confidential. It mustnot be shared with the company, the receivers, or with Okuora/John & MauryLeyland Penno. In fact, this email must stay within this group of recipients.[78] He goes on to say how "Okuora may have successfully poisoned the well" andthat "[t]he model I have worked on for the last week shows that damage fromreceivership and [Ms Leyland Penno's] sole management for the last 6 weeks willmean [Trust Codes] cannot turn a profit for at least 12 months, or longer".[79] Mr Ryan sent an email on 10 March 2022 to Signum shareholders, notinga2MC had decided to withdraw its offer to acquire Okuora's interests in Signum. Hesaid the process for the sale of Trust Codes' business was "failing" and "there is deepsuspicion all around". He went on to say, "[t]here is obviously a breakdown in trustbetween the Okuora parties and us (or some of us anyway)".[80] Signum submits this case is not a simple one of two commercial partiescontracting at "arm's length" and "on an equal footing" because, by reason ofMs Leyland Penno's sole directorship of Signum and its receivership, Signum was atthe mercy of Okuora. I do not agree with those submissions. This case is very differentfrom those that I have referred to above, which usually arise in a family context wherea stronger party takes advantage of a personal relationship of trust and confidence tovictimise a weaker party.[81] Mr Ryan and those associated with him are sophisticated businesspeople. Theparties negotiated with the benefit of experienced commercial lawyers. They agreedterms of a complex commercial transaction, of which the DAP was but one part.Signum's outstanding debt to Okuora was purchased by a rival shareholder faction,any dispute relating to Signum's failure to repay Okuora's prior funding was fully andfinally settled, Signum was removed from receivership, and Mr Ryan immediatelyreturned to the day-to-day control of Signum and Trust Codes (before the transactionhad even closed). Notably, the commercial bargain struck between the parties includeda disclosure protocol, agreed contractual warranties, no set-off clauses and waivers.[82] The terms of the agreements entered into by Signum and Okuora with thebenefit of legal advice are inconsistent with the assertion now advanced that Signumwas a vulnerable party victimised by a stronger party. The intention was clearly tosettle all matters as between those parties. This is reflected, for instance, in the termsof the deed of mutual release to which they were parties, which provides:1. FULL AND FINAL SETTLEMENT1.1 Release of claims: By entry into of this Deed and subject toSettlement:(a) Signum and Trust Codes;(b) [Okuora];(c) [Ms Leyland Penno];(d) [Mr Penno]; and(e) the Continuing Shareholders,fully and finally settle and release all claims of any kind between anysuch party (in any of their capacities) (or associated or related partiesor body corporate of them or shareholders or directors thereof or ofany such person) on the one hand and any other party or parties (inany of their capacities) (or associated or related parties or bodycorporate of them or shareholders or directors thereof or of any suchperson) on the other hand, now or in the future in connection with orin any way relating to Signum, Trust Codes and Signum's othersubsidiaries, including (without limitation) the matters listed in clause1.2, other than in respect of any future claim for enforcement of thisDeed or in respect of any future claim arising from any action orinaction of a party in relation to a matter other than in connection withthe subject matter of this Deed.1.2 Subject matter of this Deed: For the purposes of this Deed, thefollowing matters are included in within the scope of the full and finalsettlement under clause 1.1:(c) any claims against [Okuora, Ms Leyland Penno and MrPenno], in any capacity, relating in any way to Signum, TrustCodes or any other subsidiary of Trust Codes, or theappointment or actions of the Receivers.[83] Ms Leyland Penno was the sole director of Signum at the time the transactionagreements were signed, but it is not the case that at all material times she had fullgoverning and managerial control over Signum. Mr Ryan was reappointed CEO ofSignum from 11 April 2022 and the shareholders did not ratify the transactionagreements until 26 May 2022. Both before and after his reappointment Mr Ryan tookcharge of communicating with the shareholders and completed his own due diligence,including personally checking with a2MC and Synlait before signing the ratificationand having the other shareholders sign it.[84] The shareholder ratification was the expedient adopted to addressMs Leyland Penno's conflict of interest and the fact Signum was inquorate. ThatMs Leyland Penno had a conflict of interest was a matter well known to all involved,as must have been the circumstances under which Signum became inquorate leavingMs Leyland Penno as the company's sole director.[85] However, importantly, under the ASP it was the obligation of PPM to obtainthe shareholder ratification of the transaction agreements. Given the breakdown in theparties' relationship, it is simply implausible that Mr Ryan or any of those associatedwith him would, or did, rely on Ms Leyland Penno.[86] As far as shareholders other than those closely associated with Mr Ryan areconcerned, Ms Leyland Penno had no involvement with them in the process ofobtaining shareholder ratification of the transaction agreements. She offered noexplanation to the shareholders of the terms of the transaction agreements. Noshareholders made any enquiries of her about the transaction agreements. There is noevidence from any such shareholders that they placed reliance uponMs Leyland Penno.[87] I find there was no relationship of influence between Ms Leyland Penno andSignum giving rise to a duty of candour. That is sufficient to dispose of thisapplication, but I will deal with the other two issues I have identified.Did Ms Leyland Penno exercise influence?[88] It follows from what I have said above that Ms Leyland Penno did not exerciseany influence over Signum or its shareholders. It was plain it was never intended theshareholders would rely upon Ms Leyland Penno in deciding whether to ratify thetransaction agreements, and they did not do so. As I have noted, it was PPM'sobligation to obtain the shareholder ratification, and Mr Ryan took the lead insatisfying the shareholders that it was worth proceeding.[89] There is nothing surprising about this as Mr Ryan was a former director ofSignum, had worked with a2MC on its own proposal to acquire Signum, and from11 April 2022 had returned to his former role as CEO of Signum. Okuora submits,and I accept, Mr Ryan was in an excellent position to judge the commercial attitude ofSynlait and a2MC and to relay this back to the shareholders.[90] Mr Ryan took an independent view to confirm that the relationship with bothSynlait and a2MC was satisfactory before the shareholders ratified the transactionagreements. This is reflected in Mr Ryan's affidavit where he says:43 The arrangements between Trust Codes and a2 were very much basedon the relationship between us. There were not legally bindingagreements and so the relationship was everything. I had enjoyed aclose working relationship for a2 since they became a customer viaSynlait in 2018 (indeed, it was my understanding from a2 that it wasa2 not Synlait who had come across Trust Codes and asked Synlait toengage us). I was aware of the inherent risk of such a situation, sowas very careful to make the best assessment I could of the strengthor otherwise of the relationship before ratifying the deal.44 That included my making enquiries of a2, seeking warranties anddisclosures from Signum and [Okuora], and generally doingeverything I could to assess what was going on. I was acutely awareof the bad blood between Mr Penno and I, and so was anxious toascertain exactly what he had said or done so I could make a realisticassessment of the possible impact of it.[91] The receiver of Signum, Neale Jackson, also records in his affidavit the stepsMr Ryan took to secure the shareholders' support. He attaches to his affidavit an emailhe sent to Okuora's solicitors and Chapman Tripp on 6 May 2022 recordingconversations Mr Ryan had with a2MC and Synlait because one of the shareholderswas seeking comfort as to the state of the relationship with a2MC. The email reads:1. Yesterday Paul only had Connell McLaren to go2. Connell (apparently) wants comfort that the A2 relationship isdurable. Paul says he is not prepared to waive claims unless he knowsthe business remains viable3. Paul has had "long conversations" with A2 and is comfortable he hasa way forward with them provided some issue involving logistics datais resolved between TCL and Synlait. Maury was aware of this issue4. Paul spoke with Synlait yesterday – Maury intervened to unblockthose comms5. Paul told me he was then comfortable providing Connell what hewanted subject to one further discussion[92] For completeness, I note Mr Darrow has filed an affidavit in which he says thatbefore the shareholders ratified the DAP they were provided with a copy ofMs Leyland Penno's resolution of 10 April 2022 and that:8 In deciding whether to ratify the DAP as a shareholder of Signum,I had no choice but to rely on Ms Leyland-Penno, as Signum's soledirector. I considered she was, at that time, the only person who couldmanage most of the company's affairs and protect its best interests.9 In particular, I relied on Ms Leyland-Penno's resolutions that inapproving the Documents and the Transaction, she was acting for aproper purpose and that Signum's entry into and performance of theDocuments and the Transaction was in Signum's best interests.[93] Although he has not seen the a2MC email, Mr Darrow says that had he knownabout it he would not have ratified the transaction documents including the DAP.[94] As I noted earlier, the court will not ordinarily resolve factual disputes on anapplication of this kind. However, it is well recognised that the court is not requiredto accept uncritically statements on an affidavit "however equivocal, lacking inprecision, inconsistent with undisputed contemporary documents or other statementsby the same deponent, or inherently improbable in itself it may be".27[95] It is not clear what I am to make of Mr Darrow's affidavit. It cannot beevidence that the a2MC email was material information that ought to have beendisclosed by Ms Leyland Penno consistent with an obligation of candour whenMr Darrow has not seen the email. I cannot therefore accept his evidence that had heknown of the email he would not have ratified the transaction agreements.[96] If it is intended to show reliance was placed upon Ms Leyland Penno'sdirector's resolution, it does not advance Signum's cause, there being nothing tosuggest Ms Leyland Penno's resolutions were wrongly given.[97] However, I expect Mr Darrow's evidence is intended to show reliance, at leastby Mr Darrow, upon Ms Leyland Penno as the "only person who could manage most27 Eng Mee Yong v Letchumanan [1980] AC 331 at 341 applied in this context in Koura Mining Ltdv Geotech Ltd [2016] NZHC 1926 at [29].of [Signum's] affairs and protect its best interests". I do not accept Mr Darrow'sevidence in this respect.[98] Mr Darrow is one of the founders of Signum and is closely associated withMr Ryan. He was a former director of Signum. He had been in dispute with Mr Pennoand Mrs Leyland Penno from least July 2020. There are emails written by Mr Darrowin early 2022 to Signum's shareholders critical of Okuora and the Board of Signumchaired by Ms Leyland Penno. He was directly involved in the purchase of Okuora'sconvertible note, becoming a shareholder of PPM on 3 May 2022 and a director ofSignum on 25 May 2022 just before the closing of the ASP. He would have beenaware that Mr Ryan had returned as CEO of Signum from 11 April 2022. To suggestthat in these circumstances he had no choice but to, and did, rely on Ms Leyland Pennois simply implausible.Can Signum selectively avoid part of the overall transaction?[99] The usual remedy in equity for undue influence is the setting aside of theimpugned transaction and the restitution of benefits transferred to restore the partiesback to their original positions (restitutio in integrum) through the transfer of propertyand money.28 The remedy cannot be sought against persons who acquire rights forvalue and without notice.29 Relief is discretionary, but it must be given on settledprinciples rather than a judge's personal conception of fairness. The court should keepthe basic object of restoring the parties back to their original positions in mind.30[100] At both common law and equity it will be a bar to rescission if restitutio inintegrum is impossible.31 However, that bar has a far narrower scope of operationwhen the relief, as in this case, is equitable in nature. Equitable rescission will bepermitted provided practical or substantial justice would be done by the parties. Thecourt is not required to restore the parties to precisely the state they were in prior to28 Allcard v Skinner (1887) 36 Ch D 145 (CA) at 186.29 Bainbrigge v Brown (1881) 18 Ch D 188.30 Dominic O'Sullivan, Steven Elliott and Rafal Zakrzewski The Law of Rescission (3rd ed, OxfordUniversity Press, Oxford, 2023) at [13.09].31 Erlanger v New Sombrero Phosphate Co [1874-80] All ER Rep 271 (HL) at 285–286.the contract being formed.32 The "bar" is therefore delineated by the extent to whicha court can manage to achieve practical justice.[101] The learned author of Duress, Undue Influence and Unconscionable Dealingputs the matter this way:33The court of equity is able to rescind a transaction even where strict restitutioin integrum is not possible by using its powers to make allowances for changesin value of the thing transferred or by ordering the taking of accounts in orderto achieve practical justice between the parties.[102] The author continues:34The claimant who obtains recission or for whose benefit the court orders thetaking of accounts will be required to give credit for any benefits they receivedfrom the transaction. Equity looks not only at the advantages gained by thewrongdoer, but also at the benefits gained by the victim of the vitiating factor.The maxim is, "he who seeks equity must do equity". The benefit received,for which credit must be given, will depend upon the type of transaction.[103] In O'Sullivan v Management Agency and Music Ltd the court rejected anargument that restitutio in integrum was impossible.35 The multiple defendants wereordered to account for profits, and allowances were made for expenses and somereasonable remuneration for work actually performed pursuant to the transaction aswell as certain tax liabilities. Interest was ordered at both compound and simple rateson the relevant sums.The parties' submissions[104] Signum asserts the shareholders ratification to the entire transaction wasimproperly procured by undue influence yet does not wish to unwind and returnmatters to how they stood on 25 May 2022 just before the shareholders ratification. Itseeks rescission of the DAP only. Okuora submits Signum cannot seek to take thebenefit of the transactions overall but selectively invoke undue influence to avoidpaying a part of the agreed purchase price.32 Root v Badley [1960] NZLR 756 (SC) at 762.33 Enonchong, above n 4, at [28-021]34 At [28-022].35 O'Sullivan v Management Agency and Music Ltd, above n 5.[105] Okuora says that undue influence is an equitable doctrine which will not beapplied inequitably, and the overall question is whether it would be unjust or unfair toallow a claim to be made. I was referred to Allcard v Skinner where Lindley LJ said:36Whether the Plaintiff's conduct amounts in point of law to acquiescence orlaches, or whether it amounts to an election not to avoid a voidable transaction,or whether it amounts to a ratification or a confirmation of her gifts, arequestions of mere words which it is needless to discuss. In my judgment, itwould not be fair or right to the Defendant to compel her now to restore themoney sought to be recovered by this appeal. Nor, in my opinion, would sucha result be in conformity with sound, legal, or equitable principles.[106] Okuora's submission is that it would be evidently unjust and unfair to allowSignum, Mr Ryan and his associates to take the benefit of a bargain, by which Signumwas rescued from receivership and the Ryans and Mr Darrow resolved theirshareholder dispute with Okuora and gained control of Signum, without paying theagreed price.[107] Okuora submits that not only have the transaction agreements as a whole beenaffirmed but Signum and the shareholders have unreasonably delayed raising anyconcerns about the agreements, instead undertaking a year's worth of activity andentering into subsequent transactions all premised on such validity. It cannot nowfairly or equitably be claimed that Signum's shareholders never properly consented tothe arrangements of which the DAP is merely a part.[108] Signum argues that in equity a transaction may be set aside for undue influenceupon terms, and that the court has a broad jurisdiction to grant such relief as it thinksjust. It says that here the court could simply decide that Signum owes a lesser amountto Okuora to "reflect the equities of the position". This submission relies uponO'Sullivan v Management Agency where Dunn LJ said:37This analysis of the cases shows that the principles of restitutio in integrum isnot applied with its full rigour in equity in relation to transactions entered intoby persons in breach of a fiduciary relationship, and that such transactionsmay be set aside even though it is impossible to place the parties precisely inthe position in which they were before, provided that the court can achievepractical justice between the parties by obliging the wrongdoer to give up hisprofits and advantages, while at the same time compensating him for any workthat he has actually performed pursuant to the transaction.36 Allcard v Skinner, above n 28, at 189.37 O'Sullivan v Management Agency and Music Ltd, above n 5, at 458.[109] Signum advances a further argument that the DAP should be consideredseparately to the transaction as a whole because the only parties to it were Signum andOkuora, whereas Signum was not a principal contracting party to the ASP (although itwas a party), and it contains an entire agreement clause. It says the DAP can be setaside on terms, severed and rescinded as part of the overall transaction.[110] Signum also submits the court should not refuse to set aside the statutorydemand based on equitable defences which require a broad approach guided by theoverarching principle of equity and good conscience. It says these matters cannot beevaluated on affidavit evidence in a summary jurisdiction.My analysis[111] I agree with Okuora's submission that in the circumstances of this case Signumcannot take the benefit of the bargain set out in the transaction agreements withoutpaying the agreed price.[112] Signum's submission that the DAP should be treated as a stand-aloneagreement is unreal. It overlooks that the DAP was one of several interrelatedagreements giving effect to the transaction, the consideration for the DAP included theentering into of the transaction agreements, and the DAP was incorporated into theASP itself. In my view, Signum's submission reflects the fact that restitutio inintegrum is simply impossible in this case. It is plain the parties cannot be returned totheir positions as at 25 May 2022. Signum cannot be returned to receivership andOkuora's debt rights cannot be restored. There is no means by which practical justicebetween Okuora and Signum could be done.[113] However, even if I was to accept Signum's submission that the DAP could betreated separately from the transaction as a whole, that would not avail Signum toavoid payment of the amount Okuora says is due. The requirement that a claimantwho obtains rescission will be required to give credit for any benefits received fromthe transaction has work to do here, and restitutio in integrum as it applies to loantransactions provides a useful illustration of the principle in operation. It means thatthe court cannot simply set aside a loan transaction and leave the borrower with themoney received under it. That would result in the borrower being unjustly enrichedto the extent of the amounts already advanced by the lender. The borrower will berequired to repay the monies received with interest at a rate fixed by the court.38[114] In National Commercial Bank (Jamaica) Ltd v Hew the Privy Council said:39In the circumstances it is not strictly necessary to consider what remedy wouldhave been appropriate if Mr Hew's claims had succeeded. But their Lordshipsthink it desirable to state that in their opinion the orders below could not havestood unaltered. Where a transaction is obtained by undue influence, it mustbe set aside ab initio; and this requires a mutual accounting with mutualrestitution by both parties. Where the transaction is one of guarantee thispresents no difficulty. A surety incurs a liability but obtains no benefit. It issufficient to set aside his liability; there is nothing for him to disgorge by wayof counter-restitution. But where the transaction is one of loan the position isvery different. It would not be just simply to set aside the loan; this wouldleave the borrower unjustly enriched. The proper course is to set aside thecontract of loan and require the borrower to account for the moneys receivedwith interest at a rate fixed by the court. Since the effect is merely to vary therate of interest, it is not surprising that it is rare for the borrower himself tochallenge the transaction.[115] The same approach recommends itself to me here. Signum was indebted toOkuora and its indebtedness was released at a discount under the terms of the DAP inreturn for payment of $500,000. To set aside the DAP without requiring Signum toaccount for the $500,000 would leave it unjustly enriched, insofar as Signum wouldretain the entire benefit of the transaction of which it complains.40 While Signumargues the Court could decide to rescind the DAP but find that it owes a lesser amountto Okuora to reflect the equities of the position, counsel did not identify what"equities" are engaged that could possibly lead to such a result.[116] For those reasons, I find that Signum is not entitled to rescission of the DAP.Result[117] Signum's application to set aside Okuora's statutory demand is dismissed.38 Enonchong Duress, Undue Influence and Unconscionable Dealing, above n 4, at [28-024] citingNational Commercial Bank (Jamaica) Ltd v Hew [2003] UKPC 51, [2003] All ER (D) 402 at [43]and Leeder v Steven [2005] EWCA Civ 50 at [21].39 National Commercial Bank (Jamaica) Ltd v Hew, above n 38, at [43].40 Enonchong Duress, Undue Influence and Unconscionable Dealing, above n 4, at [28-024].[118] There shall be an order under s 291(1)(a) of the Companies Act 1993 thatSignum is to make payment to Okuora of the amount claimed in the statutory demandwithin five working days of the date of this judgment, failing which Okuora may applyto liquidate Signum.[119] Okuora is entitled to its costs. Counsel are to confer and if they cannot agreeon costs then they may file memoranda and costs will be determined on the papers.Memoranda should be no longer than five pages.[120] I can see no reason why a suppression order should be made in respect to anyparts of this judgment, but in light of concerns that have been raised by Synlait anda2MC I will make an interim order that this judgment shall not be published for aperiod of five days so that any application for suppression orders may be made if it isconsidered necessary. The Registrar is to provide a copy of this judgment to counselwho appeared for Synlait and a2MC at the commencement of the hearing for thatpurpose._______________________O G PaulsenAssociate JudgeSolicitors:Meredith Connell, AucklandHarmos Horton Lusk Limited, AucklandSimpson Grierson, AucklandLane Neave, ChristchurchCopy to:D Kalderimis/T Powell, Auckland