IN THE HIGH COURT OF NEW ZEALAND

BLENHEIM REGISTRY

I TE KŌTI MATUA O AOTEAROA

TE WAIHARAKEKE ROHE
CIV-2018-406-000010
CIV-2021-406-000013
[2021] NZHC 1100

UNDER the Companies Act 1993

IN THE MATTER OF an application by the Liquidator for

declarations against Directors

BETWEEN MURRAY GEORGE ALLOTT AS

LIQUIDATOR OF PMT 2010 LIMITED (IN
LIQUIDATION)
Plaintiff

AND PETER MARK AND JEANETTE

PATRICIA MARK
First Defendants

AND WISHEART MACNAB & PARTNERS

TRUSTEE COMPANY LIMITED and
DAVID JOHN PAUL as Trustees of the
Mark Family Trust
Second Defendants

Teleconference: 14 May 2021

Counsel: A J Davis for the Plaintiff

P Morten for the Defendants

Judgment: 17 May 2021

JUDGMENT OF GWYN J
(Consolidation of proceedings)

Introduction

[1] The plaintiff, PMT 2010 Limited (In Liquidation) (PMT), commenced the
existing proceeding (CIV-2018-406-000010) against the defendants, Mr and
Mrs Mark, in 2018 (the 2018 proceeding).

ALLOTT v MARK [2021] NZHC 1100 [17 May 2021]

[2] At a teleconference before me on 10 May 2021, Mr Morten for the defendants
referred to a notice under s 347 of the Property Law Act 2007 (CIV-2021-406-
000013), which had been served by PMT as plaintiff on Mr and Mrs Mark as first
defendants, and the trustees of the Mark Family Trust as second defendants, on
28 April 2021 (the new proceeding). The notice recorded that PMT had applied to the
High Court at Blenheim for an order setting aside a disposition of property, being the
assignment of a vendor or finance loan of $680,000.00 owed by Peter Mark Floorpride
2008 Limited (PMF).

[3] At the time of the teleconference, the new proceeding had not been issued by
the Court for service. I declined Mr Morten’s oral application for consolidation of the
new proceeding with the 2018 proceeding, and directed Mr Davis, counsel for PMT,
to provide Mr Morten with a copy of the new proceeding as a matter of priority so that
he could decide whether to make a formal application for consolidation.

[4] A copy of the new proceeding has now been provided to Mr Morten, and he
has made a formal application to consolidate the new proceeding with the 2018
proceeding and to adjourn the hearing on 19 and 20 May 2021. The application is
opposed. Given the shortness of time, Mr Davis was willing to make oral submissions
only and accordingly I heard argument on the application by way of telephone
conference on 14 May 2020.

[5] I gave an oral judgment in favour of Mr and Mrs Mark and now record my
reasons for that judgment.

[6] The application is brought pursuant to r 10.12 of the High Court Rules 2016,
which provides the Court may order the consolidation of two proceedings if satisfied
that:

(a) some common question of law or fact arises in both proceedings; or

(b) the rights to relief claimed in the proceedings are in respect of, or arise
out of –
 (i) the same event or transaction; or

(ii) the same event and the same transaction, or the same series of
events, or the same series of transactions; or

(iii) the same series of events and the same series of transactions; or

(c) it is desirable in the interests of justice that the Court make an order
consolidating the proceedings.

What is alleged in the proceedings

[7] The 2018 proceeding alleges:

(a) breaches of s 194 of the Companies Act 1993, with relief sought under
s 300 of the Companies Act;

(b) that distributions (comprising “dividends” and “other changes”) were

made at a time when the company (in liquidation) was unable to satisfy
the solvency test, with relief sought under s 56 of the Companies Act;
and

(c) that a journal entry recorded in the Financial Statements indicates a

distribution of three company vehicles at an undervalue, with relief
sought under s 297 of the Companies Act.

[8] Mr Morten also draws attention to [25(b)] of the statement of claim in the 2018
proceeding, where PMT alleges that the effect of the “other changes” was to eliminate
as a liability owed to the company an advance from PMF of $680,000.00 (the vendor
finance loan).

[9] In the new proceeding, PMT alleges:

 (a) that the vendor finance loan was not validly assigned, remained an asset
of the company, and seeks judgment against Mr and Mrs Mark for
$680,000.00;

(b) that Mr and Mrs Mark breached their fiduciary and statutory duties to
the company (including the duty to keep accounting records), seeking
relief under s 301 of the Companies Act;

(c) that, if the vendor finance agreement was validly assigned, the
assignment was a disposition which defeated creditors, as a result of
which the company became insolvent, with compensation sought from
Mr and Mrs Mark under s 347 of the Property Law Act; and

(d) in respect of Wisheart Macnab & Partners Trustee Company Limited

and David Paul as trustees of the Mark Family Trust, PMT seeks
recovery of interest paid by PMF to the Trust on the vendor finance
loan, which PMT claims ought to have been paid to the company. PMT
pleads knowing assistance and conversion in respect of the interest
received.

Submissions

[10] For the defendants, Mr Morten notes that the plaintiff (PMT) and first
defendant (Mr and Mrs Mark) are the same in both proceedings, and the second
defendant (the trustees of the Mark Family Trust) in the new proceeding consents to
consolidation. In his submission, the summary of the respective pleadings at [7]–[9]
above clearly indicates that a common question of fact arises in both proceedings,
namely the validity of the assignment of the vendor finance loan.

[11] Mr Morten also submits that time and costs for both parties and the Court will
be saved if the proceedings are consolidated. Consolidation will eliminate or reduce
the risk of inconsistent findings (of fact and/or law). Mr Morten says the defendants
will be prejudiced if the two proceedings are heard separately and, in contrast, no
disadvantage will be suffered by the parties if the proceeding is delayed.
[12] Overall, Mr Morten submits that the objective of the High Court Rules to
secure the just, speedy and inexpensive determination of the proceeding will not be
achieved if the two proceedings are heard separately.1

[13] Mr Davis, for the plaintiff, opposes the application for consolidation and
adjournment. He disputes that common questions of law or fact arise in the 2018
proceeding and the new proceeding: the 2018 proceeding concerns questions of
distributions, liquidation processes and accounting procedures and is an action
alleging breaches of record-keeping and financial position presentation (s 194 of the
Companies Act), directors’ duties (ss 131-138 of the Companies Act) and the making
of distributions (s 52 of the Companies Act).

[14] In contrast, the new proceeding concerns the transfer of a company asset and
revenue, namely interest being redirected to the Mark Family Trust. It is alleged that
this occurred before and after the appointment of a liquidator. The new proceeding
does not arise out of the same event or the same transaction as the 2018 proceeding
and gives rise to a stand-alone cause of action. Mr Davis submits there is no risk of
inconsistent findings, whether of fact or law.

[15] Mr Davis notes the 2018 proceeding is ready for trial; a new proceeding is not.
The plaintiff will be disadvantaged if the two proceedings are consolidated and the
scheduled hearing adjourned. The 2018 proceeding has been set down for hearing on
two previous occasions, both of which have been vacated. It is not in the interests of
justice for there to be a third adjournment.

Analysis

[16] I am satisfied that the criteria in r 10.12 of the High Court Rules are met and
that it is appropriate to exercise my discretion to consolidate the proceedings.

[17] Both the 2018 proceeding and the new proceeding relate back to the sale of the
business of Peter Mark Limited (now PMT 2010 Ltd (in liquidation)) to PMF, in

1
High Court Rules 2016, r 1.2.
May 2008. The sale included the provision of vendor finance of $680,000 by PMT to
PMF. It is the validity of that vendor finance that is the subject of the new proceeding.

[18] The plaintiff is the same in the 2018 proceeding and the new proceeding and
has the same legal representation. The defendants in the 2018 proceeding are the same
as the first defendant in the new proceeding and have the same legal representation.
The second defendant in the new proceeding consents to consolidation, although
representation of the second defendant is not yet settled.

[19] There is likely to be some commonality of witnesses in both proceedings.

[20] Both proceedings relate to the financial statements of PMT for the year ended
31 March 2012 and equity statements recording movements through the account, by
way of dividends paid and “other changes in shareholders’ funds”, which affected the
vendor finance.

[21] Both proceedings allege breaches of duty by the directors of PMT, particularly
breaches of s 194 of the Companies Act 1993.

[22] Both the 2018 proceeding and the new proceeding raise issues as to the dates
on which documents were signed, and the validity and effectiveness of those
documents.

[23] I am satisfied that there is a common question of fact in the proceedings and
that the rights to relief claimed will or are likely to arise out of the same series of
events or the same series of transactions.

[24] Consolidation will inevitably cause delay and potential prejudice for all parties,
as well as loss of court hearing time. However, I agree with Mr Morten that there is
potential for delay further down the track if the proceedings are not consolidated now
and any prejudice bears more on the defendants than the plaintiff.

[25] For those reasons, I grant the defendants’ application for consolidation of the
2018 proceeding and the new proceeding. I direct that the consolidated proceedings
be heard together.
Adjournment

[26] The consequence of my order consolidating the two proceedings is that the
fixture of the 2018 proceeding, on 19 and 20 May 2021, is vacated.

[27] Counsel are agreed that it is important to have the consolidated matter heard as
soon as possible. Accordingly, I confirm that the Registry has allocated a fixture for
the consolidated proceeding, in the Blenheim High Court, on 20 September 2021, for
four days.

[28] Counsel are also agreed on the desirability of a tight timetable leading up to
the new hearing date. Counsel are to confer and put forward a proposed timetable to
the Court as soon as possible.

[29] Mr Davis signalled that there may be an issue arising as to a potential conflict
of Mr David Clark, who is the solicitor on the record for the defendants. He indicates
that he has previously raised that issue but that it may be now be more acute, given
that the second defendant in the new proceeding (now consolidated) is Mr Clark’s
firm’s trustee company. If Mr Davis wishes to raise a formal objection on this basis,
he is to do so promptly.

Costs

[30] I did not hear counsel on the question of the costs of this application. I direct
that costs are payable to the defendant applicants on a 2B basis.2 If there is any reason
why that standard approach should not apply, counsel are to file memoranda
sequentially which are to be referred to me and, in the absence of any party indicating
they wish to be heard on the matter, I will decide the question of costs on the basis of
the material before the Court.

Gwyn J
Solicitors:
Clark Boyce, Christchurch
Wisheart Macnab & Partners, Blenheim

2
Rule 14.8.