Wagner v Gill

• Jurisdiction: New Zealand
• Judge: French J
• Judgment Date: 18 July 2014
• Neutral Citation: [2014] NZCA 336
• Docket Number: CA428/2013
• Court: Court of Appeal
• Date: 18 July 2014

In the matter of an application for summary judgment

BETWEEN

Nicola Joanne Wagner

Appellant

and

Robert Gill

First Respondent

Digital Partners (NZ) Limited

Second Respondent

Brand Advantage Measurement and Consulting Limited

Third Respondent

CPG York Limited

Fourth Respondent

91991 Limited

Fifth Respondent

11260 Limited (In Receivership)

Sixth Respondent

Brand Advantage Limited (In Receivership)

Seventh Respondent

[2014] NZCA 336

Ellen France, French and Miller JJ

CA428/2013

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal against a High Court decision which found that the appellant had not established the elements of the tort of unlawful means conspiracy — appellant was owed money by the second and third respondent companies which were under the control of the first respondent — the companies were now in liquidation — appellant alleged the respondents conspired to implement an asset stripping scheme to disadvantage creditors — whether a breach of fiduciary duty qualified as an unlawful means for the purpose of the tort of unlawful means conspiracy — what was the nature of the intention required under the tort — whether the appellant was entitled to damages on the basis of loss of a chance — consideration of two House of Lords decisions OBG Ltd v Allan and Revenue and Customs Commissioners v Total Network SL.

Counsel:

J R Eichelbaum for Appellant

A R Gilchrist and L M Nicholson for Respondents

• A The appeal is dismissed and the decision of the High Court confirmed.

• B The appellant must pay the respondents one set of costs for a standard appeal on a band A basis and usual disbursements of each of the respondents.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by French J)

Introduction

1 Ms Wagner is owed money by two companies that were under the control of the first respondent, Mr Gill. Both companies are now in liquidation and there is no realistic prospect of Ms Wagner being able to recover the debt from either of them. Ms Wagner contends that Mr Gill together with various other entities associated with him deliberately stripped the assets of the debtor companies so as to defeat her claim. She says such conduct is actionable in the tort of unlawful means conspiracy.

2 Ms Wagner issued proceedings in the High Court for damages against the relevant entities and Mr Gill personally. The case was heard by Ellis J. The Judge found that the elements of the tort of unlawful means conspiracy were not established and that in any event the conduct complained about had not caused the loss because the two debtor companies were already insolvent. 1 The Judge dismissed the claim.

3 Ms Wagner now appeals that decision.

4 The key issues raised by the appeal are:

• (a) Does a breach of fiduciary duty qualify as an unlawful means for the purpose of the tort of unlawful means conspiracy?

• (b) What is the nature of the intention required under the tort? In particular, must the unlawful conduct be directed at the plaintiff?

• (c) Is Ms Wagner entitled to damages on the basis of loss of a chance?

Background

5 Ms Wagner had established two websites, which she owned and operated through two companies.

6 In 2008 she sold 75 per cent of the shareholding in her two website companies to Digital Partners Ltd (DPL) for the sum of $700,000.

7 DPL was one of a group of companies owned and controlled by Mr Gill. The group comprised companies variously involved in the media, advertising, brand development and marketing.

8 DPL's obligations to Ms Wagner under the sale agreement were guaranteed by another company in Mr Gill's group, BA Partners Ltd (BAP). BAP was in the business of sponsorship management, including in particular arranging and managing sponsorship for Netball New Zealand Ltd (Netball NZ).

9 Under the sale agreement between Ms Wagner and DPL, the purchase price of $700,000 was payable in five instalments subject to the performance of the website companies.

10 After paying approximately half the purchase price, DPL stopped payments in November 2009. Ms Wagner claimed there was no justification for stopping the payments. She threatened legal action in February 2010. DPL denied that anything was owing as the website companies had not been as profitable as anticipated.

11 It was a term of the sale agreement that any dispute would be submitted to arbitration. An arbitration hearing was duly scheduled for December 2010, but in November it was adjourned at DPL's request until 22 January 2011. On 22 December 2010, DPL's solicitors advised the arbitrator that it was likely receivers would be appointed and the company would not be in a position to secure his costs. DPL withdrew from the arbitration. The arbitration then proceeded on an undefended formal proof basis in February 2011, and Ms Wagner obtained an arbitral award of $319,606. The arbitrator also awarded her costs of $21,000 on 12 April 2011.

12 DPL went into receivership on 20 April 2011.

13 At the same time receivers were also appointed to BAP, which, as mentioned, had guaranteed DPL's obligations to Ms Wagner under the sale contract.

14 According to the evidence of the receivers, Ms Wagner will never receive any payment from DPL. And while BAP's future is said to be contingent on the outcome of other litigation, unsecured creditors are unlikely to receive any payment.

The claim in the High Court

15 The statement of claim alleges that the respondents conspired to implement an asset stripping scheme to disadvantage creditors. The conspiracy is said to have two limbs.

16 The first limb — the alleged conspiracy involving BAP — relates to what is described as “the without consideration transfer” of the Netball NZ contract from BAP to another Gill entity, the third respondent Brand Advantage Measurement and Consulting Ltd (BAMC).

17 The second limb — the alleged conspiracy involving DPL — relates primarily to the signing of general security agreements in February 2010 in favour of the fourth respondent over the assets of the website companies and the later sale of those assets.

18 The conspiracies are pleaded as supporting four causes of action — conspiracy with intent to injure and conspiracy to injure by unlawful means pleaded against all but two respondents, 2 unlawful means conspiracy against Mr Gill only and an application under s 174 of the Companies Act 1993, also against Mr Gill only. The

application under s 174 of the Companies Act was withdrawn prior to the hearing in the High Court

19 At the hearing before us, the focus was primarily on the Judge's findings in relation to the first limb of the conspiracy (the conspiracy involving BAP) and the cause of action based on unlawful means conspiracy. The discussion that follows of the High Court decision is accordingly also primarily focused on those findings.

The decision of the High Court

20 In her judgment, Ellis J described Ms Wagner's claim as bristling with legal and factual difficulties. 3

21 The legal difficulties were said to arise largely because of two recent “contentious” decisions in the House of Lords concerning unlawful means and the tort of unlawful means conspiracy. 4

22 The cause of the factual difficulties was twofold. The first issue was that Ms Wagner was not able to give evidence herself about most of the matters in issue, and so was dependent on the Court drawing inferences of dishonesty and illegality against the respondents from circumstantial evidence. The second issue was the role of Mr Gill's former business partner, Mr Regan, in the proceedings.

23 Prior to 2010, Mr Gill ran his group of companies effectively in partnership with Mr Regan. Mr Regan (either personally or through associated entities) was a minority shareholder in a number of the companies, including DPL and BAP, and he was also the group's Chief Financial Officer. Towards the end of 2009 and in early 2010, Mr Gill's relationship with Mr Regan and another employee, Mr Beattie, soured. Mr Regan left the group at the end of February 2010 and since then there has been what the Judge described as “highly acrimonious and ongoing litigation” between the

three men. 5 Mr Gill accuses the two employees of misappropriating highly lucrative contracts belonging to the group

24 In the current proceeding, Mr Regan gave evidence for Ms Wagner. The Judge said it was quite clear that Ms Wagner and Messrs Regan and Beattie had for better or worse chosen to join forces across their respective proceedings against Mr Gill, and that pursuit of Mr Regan's own agenda had influenced his part in the proceeding. 6 In the Judge's assessment, Mr Regan lacked the necessary independence to qualify as an expert witness and she was not prepared to treat his opinions about accounting and financial matters as carrying any evidentiary weight. That left the respondents' expert witness as the only properly qualified accounting expert.

25 Turning to the merits of the claim, the Judge said she proposed to deal with each of the two limbs of the conspiracy separately, although whether they were analysed as two separate conspiracies or as two parts of one larger combination would make no difference to her ultimate conclusions.

26 The Judge stated that liability for conspiracy depended on the answer to the following questions asked in relation to each limb: 7

• (a) Can it be said that there was a conspiracy between the relevant defendants as that term is interpreted in the relevant cases?

• (b) If so, can the conspirators be said to have acted (pursuant to their common design) either:

  • (i) for the dominant purpose of injuring Mrs Wagner's interests; or

  • (ii) through use of unlawful means and with the intention of injuring Mrs Wagner?

• (c) If so, was the pleaded loss caused to Mrs Wagner thereby?

27 As regards question (a), the Judge accepted (correctly in our view) that as a matter of law a company can conspire with its directors and/or shareholders for...