Mark Stephen Hotchin v The New Zealand Guardian Trust Company Ltd

JurisdictionNew Zealand
CourtSupreme Court
JudgeGlazebrook J,Elias CJ,William Young J,Arnold,O'Regan JJ,O'Regan J
Judgment Date15 March 2016
Neutral Citation[2016] NZSC 24
Date15 March 2016
Docket NumberSC 92/2014

[2016] NZSC 24



Elias CJ, William Young, Glazebrook, Arnold and O'Regan JJ

SC 92/2014

Mark Stephen Hotchin
The New Zealand Guardian Trust Company Limited

N S Gedye QC and J A MacGillivray for Appellant

D J Cooper and J Q Wilson for Respondent

Appeal against a Court of Appeal decision which upheld a High Court decision of the striking out the appellant's claim against the respondent for contribution under s17(1)(c) Law Reform Act 1936 (“LRA”) (proceedings against, and contribution between, joint and several tortfeasors) — the appellant was a director of a number of finance companies which ceased trading in 2008 — the Financial Markets Authority (“FMA”) had filed proceedings against the appellant alleging that the prospectuses and advertisements distributed by the companies contained untrue statements causing loss to investors — the respondent was the trustee for the securities issued by one of the companies — the appellant and FMA later reached a settlement — whether the appellant could claim a contribution from the respondent under s17(1)(c) LRA and under the common law regime for equitable contribution — whether the respondent's liability to the FMA and investors was in respect of the “same damage” as the appellant's liability.

Held: The claims against the directors and Guardian Trust both related to the loss in value (either total or partial) of the investments. Therefore both claims related to the same damage and prospective investors. Like the claim against H, the claim against Guardian Trust related to misrepresentation on matters relating to the financial position of Hanover Finance, admittedly in different words but both contained in the same document: the prospectus. Both could have contributed to the investors deciding to purchase the debt securities. Even though the decision to invest would almost inevitably have been more influenced by the directors' statements than those of Guardian Trust, that would not mean that contribution was not available. Equality of responsibility was not required.

Even if the claim against Guardian Trust was characterised as negligent monitoring, with the consequence that the enforcement powers were not used at the appropriate time, there was commonality. It was only in respect of the common liability that the same damage requirement subsisted. There was still a single harm (loss in value of the investments) to which the directors and the trustee had contributed in different ways. Contribution would therefore be available.

The same damage test should apply equally to equitable contribution. The test for contribution under s17(1)(c) LRA and equitable contribution were the same. Both required that there be the same damage, with no additional requirement. Proportionate contribution was also available for both.

“Same damage” did not mean damage that was “substantially or materially similar” nor did it mean damage arising out of the same circumstances. Sameness of damage did not require that those in respect of whom contribution was available be liable for the same measure of damages. Contribution did not turn on the cause of action. It was available between tortfeasors under s17(1)(c) LRA whenever liability was in respect of “the same damage”. The harm in the present case was the same: the loss of the investments made or held because of the breaches of the directors and the Guardian Trust. It did not matter that the liability of the parties may not be co-extensive. There may be overlapping liability in respect of part only of the same damage. It was the overlap only that constituted the “same damage” in respect of which contribution was available. Potentially, the extent of liability of Guardian Trust to the investors was for the loss of the whole investment, at least in respect of the new investors and rollover investors.

The harm in both cases was the loss of funds invested. The different basis of liability in tort was irrelevant. The damage for which liability was claimed

Since the “nature and extent of the liability of each party” was not the focus of s17(1)(c) LRA requirement of “the same damage”, the CA had been wrong to look to the basis of liability as determining whether liability was in respect of “the same damage”.

The appeal was allowed.

  • A The appeal is allowed.

  • B Costs of $25,000 plus usual disbursements are awarded to the appellant. We certify for second counsel.

  • C The costs orders in the High Court and the Court of Appeal are set aside.


Glazebrook J


Elias CJ


William Young J


Arnold and O'Regan JJ


Glazebrook J
Table of Contents




Statutory background


Issue of securities




Factual background




The trust deed


Summary of trust deed in prospectus


FMA's claim against the directors


Mr Hotchin's draft amended statement of claim


The contribution claim under the 1936 NZ Act


Judgments below


Winkelmann J's judgment


The Court of Appeal judgment


The effect of the settlement


Test for contribution under the 1936 NZ Act


Application of the test to this case


Equitable contribution claim


Other matters


Result and costs


Appendix: Timeline


Mr Hotchin was a director of a number of finance companies which ceased trading in July 2008. 1 The Financial Markets Authority (FMA) filed proceedings against him and various associates alleging that the prospectuses and advertisements distributed by the companies contained untrue statements and that this had caused loss to investors. Similar allegations were made with regard to the directors' certificates issued to obtain extension of the prospectuses. The FMA proceedings settled after the oral hearing of the appeal in this Court.


The New Zealand Guardian Trust Company (Guardian Trust) was the trustee

for the securities issued by one of the companies, Hanover Finance Ltd (Hanover Finance). Mr Hotchin claimed that Guardian Trust was liable to contribute to any compensation that he was required to pay to the FMA (for the benefit of certain investors in debt securities issued by Hanover Finance). He therefore joined Guardian Trust as a third party to the proceeding. Guardian Trust applied to strike out Mr Hotchin's third party claim against it. 2 It was successful in the High Court and the High Court decision was upheld by the Court of Appeal. 3

The issue in this appeal 4 is whether Mr Hotchin can claim contribution from Guardian Trust for any part of the settlement sum paid to the FMA. Mr Hotchin says that he is entitled to do so on two alternative bases:

  • (a) under s 17(1)(c) of the Law Reform Act 1936 (the 1936 NZ Act); and

  • (b) under the common law regime for equitable contribution.


Before discussing those alternatives, I first summarise the relevant statutory provisions and provide more factual background, including a summary of the documentation relating to the role of Guardian Trust. Secondly, I analyse the nature of the claims against Mr Hotchin as a director of Hanover Finance and Mr Hotchin's pleadings relating to Guardian Trust. I then discuss the basis of the contribution claim and summarise the decision of Winkelmann J, in particular as it relates to the nature of possible liability of Guardian Trust, as well as providing a brief summary of the Court of Appeal decision.


After this, I analyse the effect of the settlement with the FMA, before assessing in what circumstances contribution may be ordered under the 1936 NZ Act

and whether it could be ordered in this case. I then deal with equitable contribution and some other matters that may impact on both bases for contribution.
Statutory background
Issue of securities

Under s 33(1)(c) of the Securities Act 1978, no offer of securities to the public could be made without a registered prospectus. 5 No registered prospectus could be distributed if it was false or misleading in a material particular by reason of failing to refer, or give proper emphasis, to adverse circumstances (defined as an untrue statement). 6 It did not matter if the prospectus was misleading from inception or if it became misleading as a result of a change in circumstances after the date of the prospectus.


Under ss 55A and 55G of the Securities Act, where a prospectus containing an untrue statement was distributed (a civil liability event), 7 the court could make a compensation order, on the application of either the FMA or a depositor (investor). Pecuniary penalties could also be imposed but only on the application of the FMA. 8


Sections 56 and 57 of the Securities Act dealt with the persons and experts who were liable for untrue statements in advertisements and registered prospectuses. In addition to the issuer of a registered prospectus, 9 liable persons included those who have signed the prospectus as a director. 10



Section 33(2) of the Securities Act provided that no debt security was to be offered to the public for subscription unless the issuer of the security had appointed a

person as a trustee for the security, both the issuer and the trustee had signed a trust deed related to the security and a copy of the trust deed had been registered by the Registrar under the Act. 11

By virtue of s 45 of the Securities Act, every trust deed required for the purposes of the Act had to contain the matters prescribed in the regulations made under the Act. 12 Clauses 1–11 of sch 5 of the Securities Regulations 1983 (the Regulations) were deemed to be incorporated into trust deeds. 13 Clause 1 of sch 5 of the...

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5 cases
  • Heale v IAG New Zealand Ltd
    • New Zealand
    • High Court
    • 1 November 2019
    ...pleaded as a cause of action but is in reality a separately pleaded head of damage. 3 Hotchin v New Zealand Guardian Trust Company Ltd [2016] NZSC 24, [2016] 1 NZLR 4 TSB Bank Ltd v Burgess [2013] NZHC 1228 at [36], citing Barclays Bank Ltd v Tom [1923] 1 KB 221 (CA) at 224. 5 At [38] (fo......
  • Palmer v Hewitt Building Ltd
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    ...v H Construction North Island Ltd, above n 9. 24 Body Corporate No 207624, above n 6. 25 Hotchin v New Zealand Guardian Trust Co Ltd [2016] NZSC 24, [2016] 1 NZLR 26 At [54]. 27 Body Corporate 202254, above n 14. 28 Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324 at ......
  • Mailley v Shaw
    • New Zealand
    • High Court
    • 14 December 2021
    ...Nutarelli’s role in the proceeding was “a relatively minor one with the focus of the claims relating to the 21 Hotchin v Guardian Trust [2016] NZSC 24, [2016] 1 NZLR position of Mr Mailley”,22 and took that into account in deciding not to award indemnity costs. It is not immediately apparen......
  • Zhang v Guo
    • New Zealand
    • High Court
    • 7 April 2021
    ...or his or her residuary personal estate; or (b) by a charge of debts upon any such estate— Hotchin v New Zealand Guardian Trust Co Ltd [2016] NZSC 24, [2016] 1 NZLR 906; and Victoria Stace “The Law of Contribution – An Equitable Doctrine or Part of the Law of Unjust Enrichment?” (2017) 48 V......
  • Request a trial to view additional results

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