Published 1 March 2011
Justice Graham Lang has ordered Symphony Properties Ltd (Colin Reynolds) to pay the court costs accrued by 2 related companies, now in liquidation, in their fight against liability in the Farnham Terraces leaky homes case.
In a judgment issued last Friday, Justice Lang ordered Symphony Properties to pay the $65,430 in costs he’d ordered in August 2010 against Waimarie Investments Ltd & Pakenham Group Ltd, of which he is also sole director.
Symphony Properties had kept the other 2 companies’ defences running, paying a total $630,000 in legal fees & disbursements, although it could expect no return. Mr Reynolds put Waimarie & Pakenham Group (ex-Symphony Group Ltd) into voluntary liquidation on 28 September 2010, just before a 10-week trial over the Farnham Terraces body corporate’s multi-million-dollar claim against them & other defendants was due to start.
The body corporate had reached settlements with other defendants including 2 related to the Symphony group which had already gone into liquidation, and has since reached a settlement with Auckland City Council which will result in an independently managed restoration programme for the 41-unit block in Parnell.
The Symphony companies converted an office & warehouse building at 8 Farnham St, Parnell, in 1995 into 35 terraced houses, 5 apartments & one commercial unit, known as Farnham Terraces. The unit owners & their body corporate brought proceedings in 2005 claiming $12.9 million for remedial work or $18 million to demolish & rebuild (up to $23 million last year), plus another $20,000 general damages for each unit owner, but in 2007 Symphony applied to strike the claim out, arguing it was out of time.
The point at issue was whether the owners knew enough by 24 September 1998 to understand how wide-ranging & serious the water intrusion was. Associate Judge David Robinson decided they didn’t, and dismissed Symphony’s strikeout application in November 2007. Symphony sought a judicial review of the Robinson decision in 2008, but Justice Cooper turned that down as well, making an order for costs in favour of the unit owners.
While the case was running, counsel Sandra Grant said the Symphony group had paid for the defence by its shell companies “to defend the name & reputation of the group as a developer”.
In the latest round, Symphony Properties opposed the costs application, saying it was a “pure funder” and that it had no control over, and no interest in, the litigation or its outcome.
However, Grant Shand, counsel for the body corporate & owners, disputed that proposition, contending Symphony Properties stood to benefit from a successful outcome for these defendants in the litigation and pointing to the reputation issue.
Justice Lang said in his judgment last Friday: “It is highly significant, in my view, that Symphony Properties has been prepared to advance very substantial sums to related companies that have no means of repaying those advances. The fact that they may be recorded in the companies’ financial statements as intercompany advances does not begin to provide an explanation. There is no obvious commercial benefit to Symphony Properties in making the advances, because the prospect that it will be repaid in full, if at all, is remote.
“This means that Symphony Properties must have another motive for funding the defendants’ defence in such a substantial way. The explanation may lie in a desire, communicated apparently by its counsel to the associate judge [in an earlier appearance] to ensure that the reputation of the group as a whole is not sullied by an adverse outcome in the litigation. If that is the case, and it seems the most likely explanation, Symphony Properties has a clear interest in the outcome of the claim against the fourth defendants.
“Whatever the reason, I am satisfied that Symphony Properties made the funding available to the fourth defendants because it saw a benefit for itself, and perhaps other companies within the group, in taking whatever steps were necessary to defend the claims that the plaintiffs have made against the fourth defendants.
“It would be wrong, in my view, for Symphony Properties to be permitted to assist otherwise insolvent companies to put the plaintiffs to the significant cost of opposing the fourth defendants’ applications unless it was also prepared to assume the risk that it would be required to contribute to the plaintiffs’ costs if the applications were unsuccessful. I consider that the interests of justice therefore require Symphony Properties to contribute to the costs that its actions have forced the plaintiffs to incur.”
Earlier stories:
17 November 2010: Farnham Terraces body corporate can continue case against Symphony companies in liquidation
11 October 2010: Farnham Terraces leaky-building case off to November
4 October 2010: Reynolds puts Pakenham (ex-Symphony) & Waimarie into liquidation ahead of Farnham Terraces cases
U: The names behind the action, the week to 21 March 2010, part 7, 2 Symphony companies now face liquidation over Farnham Terraces leaks dispute 12 February 2010:Symphony companies may walk from $13-19 million leaky building case after losing strikeout applications
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Attribution: Judgment, story written by Bob Dey for the Bob Dey Property Report.