w w w . L a w y e r S e r v i c e s . i n



Gibbston Community Water Company 2014 Limited v/s Tomanovich Holdings Limited


Company & Directors' Information:- A V S R HOLDINGS PRIVATE LIMITED [Active] CIN = U67120TG2005PTC045117

Company & Directors' Information:- S R HOLDINGS LIMITED [Active] CIN = U65993TN1988PLC083659

Company & Directors' Information:- S R HOLDINGS PRIVATE LIMITED [Active] CIN = U65993TN1988PTC083659

Company & Directors' Information:- A B HOLDINGS PRIVATE LIMITED [Active] CIN = U70102KA2006PTC040894

Company & Directors' Information:- S K A HOLDINGS LIMITED [Active] CIN = U65993DL1981PLC012592

Company & Directors' Information:- S K A HOLDINGS LIMITED [Active] CIN = L65993DL1981PLC012592

Company & Directors' Information:- G J HOLDINGS PRIVATE LIMITED [Active] CIN = U51100DL2004PTC126687

Company & Directors' Information:- G J HOLDINGS PRIVATE LIMITED [Active] CIN = U65993DL2004PTC126687

Company & Directors' Information:- P P HOLDINGS LTD [Active] CIN = U65993PN1981PLC025916

Company & Directors' Information:- G S D HOLDINGS PVT LTD [Strike Off] CIN = U70109WB1990PTC048518

Company & Directors' Information:- S T HOLDINGS PRIVATE LIMITED [Active] CIN = U67120MH1979PTC021588

Company & Directors' Information:- M C HOLDINGS PRIVATE LIMITED [Active] CIN = U67190DL2009PTC190957

Company & Directors' Information:- J S K HOLDINGS PVT LTD [Active] CIN = U67120WB1994PTC065660

Company & Directors' Information:- P R HOLDINGS LIMITED [Active] CIN = L27310AS1983PLC007154

Company & Directors' Information:- P R HOLDINGS LIMITED [Active] CIN = L27310DL1983PLC314402

Company & Directors' Information:- G R A HOLDINGS PVT LTD [Active] CIN = U70101WB1992PTC055865

Company & Directors' Information:- B S S HOLDINGS PVT LTD [Active] CIN = U67120WB1992PTC056874

Company & Directors' Information:- H M HOLDINGS PRIVATE LIMITED [Active] CIN = U65993ML2005PTC007956

Company & Directors' Information:- S M H HOLDINGS PRIVATE LIMITED [Active] CIN = U65993TG2006PTC049309

Company & Directors' Information:- M M HOLDINGS PVT LTD [Active] CIN = U70109WB1993PTC058147

Company & Directors' Information:- D J HOLDINGS PRIVATE LIMITED [Active] CIN = U67120MH1992PTC067448

Company & Directors' Information:- R S M P HOLDINGS PRIVATE LIMITED [Active] CIN = U67190MH1995PTC088443

Company & Directors' Information:- V A G HOLDINGS PRIVATE LIMITED [Active] CIN = U74899DL1994PTC057817

Company & Directors' Information:- K E HOLDINGS PRIVATE LIMITED [Active] CIN = U70101TN2013PTC089953

Company & Directors' Information:- K C HOLDINGS PRIVATE LIMITED [Active] CIN = U65990MH1981PTC024688

Company & Directors' Information:- A TO Z HOLDINGS PRIVATE LIMITED [Active] CIN = U74899DL1987PTC028294

Company & Directors' Information:- V R HOLDINGS PRIVATE LIMITED [Active] CIN = U70102KA2009PTC051724

Company & Directors' Information:- J B HOLDINGS LIMITED [Strike Off] CIN = U91110ML1995PLC004396

Company & Directors' Information:- P G T HOLDINGS LIMITED [Strike Off] CIN = U74899DL1994PLC057886

Company & Directors' Information:- S M HOLDINGS PRIVATE LIMITED [Active] CIN = U65990MH2011PTC225004

Company & Directors' Information:- M S R HOLDINGS LIMITED [Active] CIN = U85110KA1995PLC018599

Company & Directors' Information:- V N C A HOLDINGS PRIVATE LIMITED [Active] CIN = U74999TN2011PTC081684

Company & Directors' Information:- S C HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U74899DL1986PTC025017

Company & Directors' Information:- S G HOLDINGS PVT LTD [Active] CIN = U70109WB1986PTC040839

Company & Directors' Information:- K C A HOLDINGS PRIVATE LIMITED [Active] CIN = U74899DL1995PTC066204

Company & Directors' Information:- S N J HOLDINGS PRIVATE LIMITED [Active] CIN = U67120DL1997PTC084488

Company & Directors' Information:- H P HOLDINGS LIMITED [Strike Off] CIN = U67120HP1997PLC019474

Company & Directors' Information:- K L N HOLDINGS PRIVATE LIMITED [Active] CIN = U65990TG1986PTC006344

Company & Directors' Information:- M R HOLDINGS LIMITED [Active] CIN = U67120MH1978PLC020559

Company & Directors' Information:- J T HOLDINGS PRIVATE LIMITED [Active] CIN = U67120MH1979PTC021585

Company & Directors' Information:- B M D HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U51909TN1995PTC031179

Company & Directors' Information:- H K R HOLDINGS PRIVATE LIMITED [Active] CIN = U74899DL1982PTC013032

Company & Directors' Information:- R J HOLDINGS PRIVATE LIMITED [Active] CIN = U74899DL1982PTC013033

Company & Directors' Information:- K D R HOLDINGS PRIVATE LIMITED [Active] CIN = U74899DL1982PTC013034

Company & Directors' Information:- P D R HOLDINGS PVT LTD [Amalgamated] CIN = U67120WB1996PTC077248

Company & Directors' Information:- W A HOLDINGS PRIVATE LIMITED [Active] CIN = U65993DL1997PTC084687

Company & Directors' Information:- W D HOLDINGS PRIVATE LIMITED [Active] CIN = U65993DL1997PTC084667

Company & Directors' Information:- A K HOLDINGS PRIVATE LIMITED [Active] CIN = U74899UP1986PTC037306

Company & Directors' Information:- J R D HOLDINGS PRIVATE LIMITED [Active] CIN = U74899DL1994PTC059769

Company & Directors' Information:- C S HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U85110KA1995PTC018441

Company & Directors' Information:- R A HOLDINGS LIMITED [Strike Off] CIN = U17119GJ1986PLC037333

Company & Directors' Information:- W. M. F. HOLDINGS PRIVATE LIMITED [Active] CIN = U70101CT2011PTC022482

Company & Directors' Information:- A V HOLDINGS PVT LTD [Active] CIN = U51109WB1992PTC054035

Company & Directors' Information:- K B R HOLDINGS PRIVATE LIMITED [Active] CIN = U67120TG1998PTC030518

Company & Directors' Information:- E K HOLDINGS PRIVATE LIMITED [Active] CIN = U74899DL1990PTC040323

Company & Directors' Information:- N R HOLDINGS PVT LTD [Strike Off] CIN = U67120WB1993PTC060077

Company & Directors' Information:- B P A HOLDINGS PVT LTD [Strike Off] CIN = U74990DL1982PTC013326

Company & Directors' Information:- V V HOLDINGS PRIVATE LIMITED [Active] CIN = U74899DL1994PTC060480

Company & Directors' Information:- D D B HOLDINGS PVT LTD [Strike Off] CIN = U67120WB1992PTC055592

Company & Directors' Information:- M D HOLDINGS PRIVATE LIMITED [Active] CIN = U67120DL2001PTC111221

Company & Directors' Information:- V H A HOLDINGS PRIVATE LIMITED [Converted to LLP and Dissolved] CIN = U65993DL2003PTC120147

Company & Directors' Information:- K E F HOLDINGS LTD [Amalgamated] CIN = U67120WB1988PLC045280

Company & Directors' Information:- A P HOLDINGS PVT LTD [Active] CIN = U65993PN1981PTC025915

Company & Directors' Information:- N. R. HOLDINGS PRIVATE LIMITED [Active] CIN = U67120MH1993PTC140612

Company & Directors' Information:- M B HOLDINGS LTD. [Not available for efiling] CIN = U70109WB1986PLC041226

Company & Directors' Information:- J S R HOLDINGS PRIVATE LIMITED [Active] CIN = U45200KA2006PTC040195

Company & Directors' Information:- K M HOLDINGS PRIVATE LIMITED [Active] CIN = U74899DL1995PTC064343

Company & Directors' Information:- A S H HOLDINGS PRIVATE LIMITED [Active] CIN = U74899DL2004PTC125403

Company & Directors' Information:- C M HOLDINGS PVT LTD [Strike Off] CIN = U45203WB1986PTC041627

Company & Directors' Information:- M H HOLDINGS PRIVATE LIMITED [Active] CIN = U74899DL1995PTC067392

Company & Directors' Information:- I K HOLDINGS LTD [Strike Off] CIN = U70101WB1951PLC019703

Company & Directors' Information:- C & R HOLDINGS PVT. LTD. [Active] CIN = U65929WB1991PTC051376

Company & Directors' Information:- J J HOLDINGS LTD [Amalgamated] CIN = U65993WB1980PLC032736

Company & Directors' Information:- K G HOLDINGS PVT LTD [Active] CIN = U65929WB1987PTC042868

Company & Directors' Information:- B & T HOLDINGS PRIVATE LIMITED [Active] CIN = U74920DL2007PTC171796

Company & Directors' Information:- H D HOLDINGS PVT LTD [Amalgamated] CIN = U51109WB1991PTC051415

Company & Directors' Information:- N AND N HOLDINGS PRIVATE LIMITED [Active] CIN = U74899DL1990PTC040846

Company & Directors' Information:- M P HOLDINGS PRIVATE LIMITED [Under Process of Striking Off] CIN = U67120DL1997PTC088350

Company & Directors' Information:- B P HOLDINGS PRIVATE LIMITED [Active] CIN = U74899DL1989PTC038274

Company & Directors' Information:- K P R HOLDINGS PRIVATE LIMITED [Active] CIN = U74900TZ2011PTC017467

Company & Directors' Information:- U AND V HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U65999TN2005PTC057659

Company & Directors' Information:- B AND B HOLDINGS PRIVATE LIMITED [Active] CIN = U70101AS1999PTC005674

Company & Directors' Information:- M. G. HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U67120DL2010PTC198226

Company & Directors' Information:- D G HOLDINGS PRIVATE LIMITED [Active] CIN = U65110DL1998PTC094466

Company & Directors' Information:- I R HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U74120DL2008PTC185743

Company & Directors' Information:- S I HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U74120DL2008PTC186043

Company & Directors' Information:- C J G HOLDINGS INDIA PRIVATE LIMITED [Active] CIN = U70101KL2010PTC038559

Company & Directors' Information:- U P L HOLDINGS PVT LTD [Strike Off] CIN = U67120OR1990PTC002414

Company & Directors' Information:- N N HOLDINGS PVT LTD [Strike Off] CIN = U65999WB1990PTC048493

Company & Directors' Information:- O M K HOLDINGS PVT LTD [Strike Off] CIN = U67120WB1995PTC072914

Company & Directors' Information:- M K HOLDINGS (INDIA) PRIVATE LIMITED [Strike Off] CIN = U65993TN1996PTC036985

Company & Directors' Information:- K I HOLDINGS PVT LTD [Strike Off] CIN = U67120MH1981PTC024069

Company & Directors' Information:- D R HOLDINGS PRIVATE LIMITED [Active] CIN = U65993DL1982PTC013031

Company & Directors' Information:- R R HOLDINGS PRIVATE LIMITED [Active] CIN = U74899DL1983PTC017127

Company & Directors' Information:- G J HOLDINGS PVT LTD [Not available for efiling] CIN = U65993PB1985PTC006327

Company & Directors' Information:- M G L HOLDINGS PRIVATE LIMITED [Active] CIN = U65993TN1994PTC029354

Company & Directors' Information:- K V R HOLDINGS PRIVATE LIMITED [Active] CIN = U65191KA2012PTC063353

Company & Directors' Information:- R N M HOLDINGS P LTD. [Active] CIN = U65921WB1990PTC050174

Company & Directors' Information:- M D HOLDINGS PVT LTD [Strike Off] CIN = U67120CH1983PTC005399

Company & Directors' Information:- R V HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U74899DL1989PTC036577

Company & Directors' Information:- B J HOLDINGS PRIVATE LIMITED [Active] CIN = U67120MH1982PTC028820

Company & Directors' Information:- R S HOLDINGS PVT LTD [Active] CIN = U70109WB1986PTC040255

Company & Directors' Information:- A D HOLDINGS PVT LTD [Strike Off] CIN = U65993WB1976PTC030525

Company & Directors' Information:- S P HOLDINGS PVT LTD [Strike Off] CIN = U65993WB1988PTC044540

Company & Directors' Information:- R A HOLDINGS PVT LTD [Strike Off] CIN = U70200WB1986PTC040138

Company & Directors' Information:- A HOLDINGS PVT LTD [Strike Off] CIN = U70101WB1962PTC025617

Company & Directors' Information:- K T R HOLDINGS PVT LTD [Strike Off] CIN = U67120WB1993PTC059078

Company & Directors' Information:- B I HOLDINGS PVT LTD [Strike Off] CIN = U65922WB1988PTC043690

Company & Directors' Information:- E TO E HOLDINGS INDIA PRIVATE LIMITED [Active] CIN = U65999KA2008PTC047780

Company & Directors' Information:- M A HOLDINGS PRIVATE LIMITED [Active] CIN = U26106UP2003PTC027990

Company & Directors' Information:- G L HOLDINGS PRIVATE LIMITED [Dormant under section 455] CIN = U74996KA2008PTC044867

Company & Directors' Information:- A AND M HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U67190TG1995PTC021464

Company & Directors' Information:- K V S HOLDINGS PVT LTD [Strike Off] CIN = U65993WB1993PTC060850

Company & Directors' Information:- V K HOLDINGS PRIVATE LTD [Strike Off] CIN = U27924DL1987PTC027924

Company & Directors' Information:- Q AND A HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U67120MH2000PTC127319

Company & Directors' Information:- S K HOLDINGS PVT. LTD [Strike Off] CIN = U99999UP1988PTC010231

Company & Directors' Information:- V A HOLDINGS PVT LTD [Strike Off] CIN = U67120KL1986PTC004442

Company & Directors' Information:- S R HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U65993TN1980PTC008388

Company & Directors' Information:- M T R HOLDINGS PRIVATE LIMITED [Active] CIN = U67110KA2007PTC042600

Company & Directors' Information:- C S A HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U65990MH1995PTC092555

Company & Directors' Information:- K N Z HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U67120MH1998PTC117331

Company & Directors' Information:- S H HOLDINGS PRIVATE LIMITED [Active] CIN = U67120MH2001PTC131041

Company & Directors' Information:- D L HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U67100TN2012PTC083929

Company & Directors' Information:- P C T HOLDINGS PRIVATE LIMITED [Active] CIN = U70101TZ2004PTC010971

Company & Directors' Information:- M J P HOLDINGS PRIVATE LIMITED [Active] CIN = U74900TG2015PTC098835

Company & Directors' Information:- P H HOLDINGS PVT LTD [Active] CIN = U67120WB1985PTC039369

Company & Directors' Information:- J D S HOLDINGS PRIVATE LIMITED [Active] CIN = U65993DL1993PTC053637

Company & Directors' Information:- M R S HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U67120DL2001PTC113197

Company & Directors' Information:- J S M S HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U45201DL2002PTC117110

Company & Directors' Information:- R M G HOLDINGS PVT LTD [Active] CIN = U67120MP1987PTC004209

Company & Directors' Information:- B R HOLDINGS PRIVATE LIMITED [Amalgamated] CIN = U74899HR1994PTC064054

Company & Directors' Information:- P R S HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U67120KA2010PTC052295

Company & Directors' Information:- M AND D HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U67120MH1981PTC025882

Company & Directors' Information:- A T HOLDINGS PRIVATE LIMITED [Under Process of Striking Off] CIN = U74899DL1994PTC057216

Company & Directors' Information:- J AND S HOLDINGS PVT LTD [Strike Off] CIN = U67120RJ1996PTC012114

Company & Directors' Information:- S K V HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U65993DL1981PTC012910

Company & Directors' Information:- S M K S HOLDINGS PVT LTD [Strike Off] CIN = U45400WB1990PTC048498

Company & Directors' Information:- S J P HOLDINGS PRIVATE LIMITED [Strike Off] CIN = U99999GJ1981PTC004682

    CA No. 291 of 2018

    Decided On, 12 February 2019

    At, Court of Appeal of New Zealand

    By, THE HONOURABLE MR. JUSTICE FRENCH
    By, THE HONOURABLE MR. JUSTICE LANG & THE HONOURABLE MR. JUSTICE MOORE

    For the Appellant: A.N. Isac, Advocate. For the Respondent: J. Moss, Advocate.



Judgment Text

REASONS OF THE COURT

(Given by Moore J)

Introduction

[1] Tomanovich Holdings Ltd (“Tomanovich”) has applied to the High Court to set aside a disposition of property. The transaction at the centre of this dispute is the transfer of potable water assets (the water scheme) in the Gibbston Valley, Central Otago. Tomanovich claims that the water scheme was transferred to the appellant, Gibbston Community Water Co 2014 Ltd (Community Water), for less than it was worth. It is alleged this transfer was for the purpose of defeating creditors, including Tomanovich.

[2] Community Water applied to strike out the proceeding on the ground that Tomanovich’s application amounted to an abuse of process because it was commenced and continued for a collateral or improper purpose, namely to have the water scheme vested back in the transferor with the intention of Tomanovich, or others connected to it, obtaining control of the water scheme.

[3] Justice Gendall declined to grant strike-out.[1] He was not satisfied that Tomanovich’s application was an abuse of process.[2] Community Water now appeals on the basis the Judge not only erred in his assessment of some of the grounds for strike-out but also failed to assess whether, when viewed in their totality, the reasons revealed an abuse of process justifying strike-out.

Background[3]

[4] The water scheme is presently owned by Community Water. Most of the local landowners who use the scheme are shareholders of Community Water. The water scheme services approximately 30 neighbours in the Gibbston Valley. It operates on a non-profit, cost recovery basis.

[5] Two of the landowners who draw water from the water scheme are Kristina Buxton and David Henderson (the Hendersons). Neither is a shareholder in Community Water. Ms Buxton is the sole director of Tomanovich. Mr Henderson is her husband. He was formerly the director of Tomanovich until he was adjudicated bankrupt on 29 November 2010. The shares in Tomanovich are held by his family interests.

[6] From 2007 until December 2014 the water scheme was operated by Gibbston Water Services Ltd (Water Services). This company was owned and operated by Mr Henderson and his family interests. It purchased the shares in Water Services for $60,000. The shares were held by Gibbston Water Holdings Ltd (Holdings), another Henderson entity.

[7] It appears that from an early stage relationships between the Hendersons and others in the valley soured. Users of the water scheme became deeply mistrustful of the Hendersons. Their fear was that the Henderson interests were proposing to use the water scheme for a large hotel and spa development. That acrimony and mistrust continues today and is plainly evident in the respective stances adopted by the opposing parties.

[8] In June 2010 a number of Henderson family companies, including Holdings, were placed in receivership and liquidation. This was some months before Mr Henderson, himself, was adjudicated bankrupt.

[9] In late 2011 an attempt was made to transfer Holdings’ shares in Water Services to another Henderson company, Castlereigh Properties Ltd (Castlereigh). The liquidator of Holdings voided that transaction and applied to the High Court for an order confirming his decision. Justice Mander, in a judgment of 11 July 2014, determined the liquidator could validly make that decision.[4] He determined that the sale for $1.00 was not for fair value.[5]

[10] Five days later, statutory demands were issued against Water Services on behalf of five companies associated with the Henderson family, including Tomanovich. They claimed debts totalling approximately $40,000. These demands provide an important part of the background to the present appeal.

[11] However, on 1 December 2014 the efforts of these companies to initiate the liquidation of Water Services were thwarted when the water scheme was sold to Community Water. The purchase price was $35,000. Various records reveal that this sale was intended to remove the water scheme from the control of Mr Henderson and his associated interests. Justice Gendall summarised the position in the following way:[6]

[19] It is that sale of the water scheme from [Water Services] to [Community Water] for $35,000 which is essentially the subject of [Tomanovich’s] challenge here. [Tomanovich] in its pleading maintains that as a creditor of [Water Services] it has been prejudiced by the disposition of company property, being the sale of the water scheme asset, at an undervalue. It contends that this sale was a disposition which was made with the intent to prejudice it and others as creditors of [Water Services] (as no part of the $35,000 was available to them) and, as a result, [Water Services] essentially became insolvent. As to its claim to be a creditor of [Water Services], [Tomanovich] notes that on 16 July 2014 it issued the statutory demand noted above. This claimed the sum of $11,838, said to be an outstanding debt owing to [Tomanovich]. The statutory demand expired without payment or compromise.

[12] The essence of Tomanovich’s application under s 348 of the Property Law Act 2007 (the Act) is that the disposition of the water scheme to Community Water was at a significant undervalue. Under s 348, the Court may make an order vesting the property in certain nominated persons or require a person who has acquired or received the property to pay reasonable compensation.[7]

[13] Two days after the transfer to Community Water, Water Services was placed into liquidation by shareholders’ resolution. Since the transfer, Community Water has operated and maintained the water scheme.

[14] There is one, further, background matter of relevance. This was described by Gendall J in the following terms:[8]

... once the present proceeding was issued, on 14 December 2017 [Community Water] made an open offer of settlement to [Tomanovich], (accompanied by a denial of liability) for reasons it outlined as:

(a) “The disproportionate cost that was being associated with this litigation compared to the relatively low value of [Tomanovich’s] claim”; and

(b) “The very strong impression [Community Water] has that [Tomanovich] through Mr Henderson is conducting this litigation for the purpose of seeking to wrest back control of the potable water scheme. This is notable from an email from [Tomanovich’s] solicitor, from various discussions between counsel and from the fact that financial compensation is not sought in the proceeding, just the setting aside of the sale.”

[Community Water’s] offer was to pay 100 per cent of all the creditor claims against [Community Water] of the Henderson companies and interests as approved by the liquidators, together with category 2B scale costs for steps taken up to the date of the offer. The offer, it seems, went on to state that if any doubt arose about the value of those creditor claims, the liquidators and the Henderson entities could avail themselves of the processes under the Companies Act to resolve that value issue.

Approximately one week later on 22 December 2007, this offer from [Community Water] was rejected. [Community Water] says this occurred without explanation.

Recent Developments

[15] In its submissions filed for this appeal Tomanovich claims that the offer was rejected because it provided no security for payment and required action to be taken by a liquidator, not appointed by the creditors, when the liquidator had no resources to do so and had refused to take any steps to date.

[16] This prompted the appellant, on 5 November 2018, to amend its offer of settlement by offering to pay all of the Henderson company debts as recorded in the proofs of debt filed by the five companies totalling $43,588.80. Also included was an offer to pay 2B scale costs for the steps taken in the proceeding until 15 December 2017 (being the date of Community Water’s original offer).

[17] On 2 October 2018, Tomanovich applied to join four additional plaintiffs; the four other Henderson companies which, with Tomanovich, have expired statutory demands. The joinder application has been adjourned pending the determination of this appeal.

[18] Tomanovich has also sought to amend its substantive claim by adding an alternative ground of relief; damages to be paid to Water Services. Mr Moss, for Tomanovich, submitted this provides the court with an alternative form of relief under s 248 if the claim is successful but the court is reluctant to transfer the water assets back to Community Water.

Legal principles

[19] Justice Gendall correctly summarised the principles which apply to strike-out applications, observing that Community Water’s application fell to be considered under the fourth ground of strike out listed in r 15.1(d) of the High Court Rules 2016, abuse of process. As the Judge observed, this ground:[9]

... extends beyond the other grounds and captures all other instances of misuse of the court’s processes, such as a proceedings that has been brought with an improper motive or are an attempt to obtain a collateral benefit.

[20] Determining whether a proceeding amounts to an abuse of process requires a broad, merits based judgment which takes into account the public and private interests involved and the facts of the case, focusing particular attention on the central question of whether, in all the circumstances, a party is misusing or abusing the court’s process.[10]

[21] This is an appeal by way of rehearing.[11] Community Water is entitled to judgment in accordance with the opinion of the appellate Court, which should not defer to the lower Court’s assessment of the evidence, but rather form its own, independent judgment.[12]

Issues on appeal

[22] Before Gendall J, six grounds for strike-out were advanced. On appeal, five are maintained. They are:

(a) The proceeding has been continued for an improper purpose.

(b) Tomanovich or associated parties have now held inconsistent positions in this and earlier litigation.

(c) Mr Henderson’s involvement in this proceeding is a cause for concern.

(d) Tomanovich is seeking to raise an issue it could have raised before.

(e) When the above grounds are assessed correctly and together, the only conclusion is that this proceeding is an abuse of process and should be struck out.

[23] We address each ground in turn.

Has the proceeding been commenced or continued for an improper purpose?

[24] Mr Isac, for Community Water, submitted the rejection of Community Water’s offer is telling. He said that if the offer was accepted this may well provide an “end result” more favourable to Tomanovich than it could expect if it was ultimately successful in its claim. Thus he said Tomanovich’s rejection of the offer without a credible explanation was objectively unreasonable, leading to the strong inference that these proceedings are being continued for an improper purpose.[13]

[25] In our view the issue is not so straightforward as Mr Isac contended. We agree with Gendall J that these are genuine causes of action.[14] There is a legitimate dispute as to the value of the water assets, for reasons we expand upon below in relation to the second ground of appeal. If Tomanovich’s position is proved correct, the offer of settlement will not provide a more favourable “end result” than Tomanovich and the other Henderson companies could otherwise expect. We also note Tomanovich now seeks alternative orders: to either set aside the transaction or award damages to the extent of the undervalue.

[26] Furthermore, as Mr Moss submitted, s 348 is a bespoke provision. It entitles creditors who claim to be prejudiced by a disposition of property to apply to the court to set that disposition aside. It operates independently of any action undertaken by the liquidators. In the present context this is a particularly important consideration because Water Services does not have the funds to compensate the liquidator’s costs. On Tomanovich’s account, that is a consequence of the sale of the water assets at undervalue. And, because Community Water’s offer of settlement is contingent on action by the liquidators, the settlement offer does not provide a true or proper substitute for the relief claimed.

[27] For these reasons we are not satisfied the refusal of Community Water’s settlement offer establishes the proceedings were commenced or continued for an improper or collateral purpose, or that would provide support for strike-out.

Has Tomanovich or its associated parties maintained inconsistent positions in this and earlier litigation?

[28] Mr Isac submitted that Ms Buxton, as director of Tomanovich, has deliberately adopted inconsistent factual positions in different, albeit related, proceedings. He submitted that this inconsistent conduct was undertaken for the purpose of obtaining a strategic advantage.

[29] In particular, Mr Isac pointed to what he described as contradictory evidence given by Ms Buxton in respect of the value of the water assets. First was her claim to Mander J in Walker v Gibbston Water Services Ltd that the shares in Water Services were all but worthless because their value was only about $2,500.[15] By contrast, in the present proceedings, Tomanovich suggested the value of the water assets is at least $140,000. This is based on an offer made by a Mr Edney, who Community Water believes may be associated with the Henderson family.

[30] As Gendall J accepted, the discrepancy is a “major one”.[16] But it is explicable. First, as Mander J explained:[17]

[The valuation of $2,500] however represents the disposal value of the readily removable parts, being the pump, fittings and concrete tank. It does not purport to be a valuation of the potable water system in the Gibbston Valley itself. In effect, the valuation provided by Mr Moore and the $5,000 listed in the financial statements is nothing more than the book value of the equipment which could be recovered if the system was dismantled and disposed of. It does not represent the market value of the potable water scheme, nor does it purport to be.

[31] One surveyor put the cost of replacing the water scheme at $158,000 plus GST.[18] While Mander J did not make a finding on the value of the water assets, his conclusion plainly reveals he rejected Ms Buxton’s valuation, preferring the replacement value.

[32] We agree with Mr Moss that in the face of those comments it would have been an exercise in futility, as well as irresponsible, for Ms Buxton to have maintained the value of the water scheme was $2,500. For that reason the position taken by Tomanovich in this proceeding is not inappropriate, and does not lend support to the strike-out application.

[33] We would also add that the observations of Mander J lend weight to Tomanovich’s underlying argument that the sale of the water assets was at undervalue.

Is Mr Henderson’s involvement in these proceedings evidence of an abuse of process?

[34] This submission may be dealt with in short order. Mr Henderson is subject to a prohibition preventing him from participating, directly or indirectly, in the running of any business without the consent of the court.[19] Community Water claims Mr Henderson has been intimately involved in this litigation and thus in breach of that prohibition. He has filed a number of affidavits in support of the various applications brought by Tomanovich. Mr Isac submitted that Mr Henderson’s involvement in the proceedings is apparent from the following:

(a) In December 2014 Mr Henderson was reported in the Otago Daily Times as saying he would challenge the sale of the water assets. His lawyers wrote to Mr Marshall, one of the directors of Community Water, advising that if the assets were not voluntarily returned proceedings would be commenced.

(b) He made an affidavit in support of the present application and has continued to file affidavits in support of Tomanovich’s various interlocutory applications.

(c) Ms Buxton is Mr Henderson’s wife.

(d) Mr Henderson appears to have obtained Community Water’s discovery documents in these proceedings and has used one in breach of an implied undertaking.

(e) When Community Water first made its open offer Mr Henderson telephoned Ms Erkkila, another of the directors of Community Water, issuing threats in the event Tomanovich’s claim was not resolved to his satisfaction.

(f) Mr Henderson has sought to represent all of the Henderson creditors in their dealings with the liquidator.

[35] While these factors certainly indicate that Mr Henderson maintains a close interest in these and related proceedings, as Gendall J observed,[20] he is not a party. Given his past connection with the water scheme it is unsurprising that Tomanovich has filed evidence from him. In several respects, it would appear that he is the only available witness with direct knowledge of the matters he discusses. For these reasons, we are not satisfied that any involvement Mr Henderson has in these proceedings amounts to or contributes to an abuse of process.

Are these proceedings in breach of the rule in Henderson v Henderson?

[36] The rule in Henderson v Henderson is that the same parties cannot litigate a matter which might have been appropriately raised in an earlier litigation, but which was not only because of omission, negligence, inadvertence or even accident.[21]

[37] Again, this ground may be dealt with briefly. Tomanovich is not re-litigating matters which have already been brought before the court. Community Water was not a party to the 2014 originating application. That application concerned the termination of the liquidation of Water Services and the removal of a liquidator, in other words matters other than the particular transfer which lies at the heart of these proceedings.

[38] While there has been some delay in bringing this application, we do not accept that any substantial prejudice has been suffered by Community Water. In particular, we note that the proposed amended statement of claim seeks alternative relief in damages. If it is ultimately found that the transfer of the water assets was at undervalue, but their return would prejudice Community Water, it will be available to the court to award damages to Tomanovich.

Global assessment

[39] Mr Isac was critical of Gendall J for failing to conduct a broad, merits based evaluative judgment taking account of all of the facts of the case. While he accepted the Judge assessed each ground individually and observed that five had merit, he says the Judge did not undertake a collective or global analysis of whether Tomanovich was misusing or abusing the process of the Court.

[40] In our view there are two difficulties with that submission. The first, and most obvious, is that the Judge expressly undertook a global analysis when, having analysed each of the grounds, he observed that:[22]

[62] The sum of the factors discussed above lead me to conclude, but only by a reasonably fine margin, that this proceeding is not an abuse of process under r 15.1(1)(d).

[41] Secondly, in our view the single most persuasive factor justifying dismissing the strike-out application is that there appears to be a legitimate and bona fide dispute as to the value of the water scheme. There is a body of evidence from different sources which supports Tomanovich’s claim that the value of the water assets may be considerably greater than the $35,000 Water Services paid. That is a matter for the court to determine on the hearing of this application. It will require expert valuation evidence.

[42] It seems to us that the issues for litigation on this application are narrow. The first question is what is the true value of the water scheme, and whether the $35,000 paid by Comm

Please Login To View The Full Judgment!

unity Water was undervalue. Secondly, if the disposition was under value, what relief in terms of s 248 of the Act should be ordered. [43] This matter needs to be determined without further delay. Any outstanding interlocutory skirmishes, including discovery, should focus on the issues to be determined. Result [44] The appeal is dismissed. [45] The parties agreed that costs should follow the event. The appellant must pay the respondent costs on a band A basis together with usual disbursements. ------------------------------------------ [1] Tomanovich Holdings Ltd v Gibbston Community Water Co 2014 Ltd [2018] NZHC 990 [decision of Gendall J]. [2] At [62]. [3] The background to this proceeding was comprehensively summarised by Gendall J at [7]–[30]. What follows gratefully draws on that summary. [4] Walker v Gibbston Water Services Ltd [2014] NZHC 1638 [decision of Mander J]. [5] At [89] and [137(c)]. [6] Decision of Gendall J, above n 1. [7] See also Property Law Act 2007, s 350(1). [8] At [27]–[29]. [9] Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679 at [89] (footnote omitted); quoted by Gendall J at [32]. [10] Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1 (HL) at 31. [11] Court of Appeal (Civil) Rules 2005, r 47. [12] Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16]. [13] Relying on Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509 at 537. [14] Decision of Gendall J, above n 1, at [43]. [15] See decision of Mander J, above n 4, at [76]. [16] Decision of Gendall J, above n 1, at [47]. [17] Decision of Mander J, above n 4, at [76]. [18] Decision of Mander J, above n 4, at [77]. [19] Havenleigh Global Services Ltd v Henderson [2016] NZHC 2969 at [446]. [20] Decision of Gendall J, above n 1, At [51]. [21] Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100 at 115[1843] EngR 917; , 67 ER 313 (Ch) at 319. [22] Decision of Gendall J, above n 1.
O R