EMBARGOED FROM PUBLICATION IN OR BY ANY MEDIA UNTIL MIDDAY ON TUESDAY, 30 JUNE 2020. SEE [31(a)] BELOW.	
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE	
CIV-2017-404-1074
[2020] NZHC 1449	

BETWEEN	MICHAEL DAVID KIDD
Applicant	
AND	ALEXANDER PIETER VAN HEEREN
First respondent

WORLDWIDE LEISURE LIMITED
Second respondent

SARACENO HOLDING BV
Third respondent

Continued overleaf	

Hearing:	23 June 2020	
Appearances:	S J Mills QC, B O’Callahan and EJH Morrison for the applicant M D O’Brien QC for the first respondent
T B Fitzgerald and B J Ward for the second respondent C R Vinnell and L M Van for the receivers	
Judgment:	25 June 2020	

JUDGMENT OF JAGOSE J
[Redacted]

Counsel/Solicitors:
S J Mills QC, Auckland

This judgment was delivered by me on 25 June 2020 at 2.00pm.
Pursuant to Rule 11.5 of the High Court Rules.
…………………………
Registrar/Deputy Registrar

B O’Callahan Barrister, Auckland K3 Legal Limited, Auckland
M D O’Brien QC, Auckland Bell Gully, Auckland Anthony Harper, Auckland

KIDD v VAN HEEREN [2020] NZHC 1449 [25 June 2020]

STICHTING ADMINISTRATIEKANTOOR SARACENO HOLDING
Fourth respondent

BEATTIE RICKMAN TRUSTEE COMPANY LIMITED
Fifth respondent

BANK OF NEW ZEALAND
Sixth respondent

[1]	By application of 1 May 2020, Mr Kidd applies for:

… directions determining the correct interpretation of the Orders C and F(a) made by the Court of Appeal in its judgments dated 2 July 2019 and 1 August 2019 and the effect of that interpretation with respect to the duties and powers of the Receivers in selling Huka Lodge and/or Dolphin Island.

Background

[2]	The background to the application can be found in those Court of Appeal judgments.1 For present purposes, it is enough to recite part of the second judgment’s opening sentence:2
In our judgment delivered on 2 July 2019 we made an order appointing receivers of the shares of Worldwide Leisure Ltd for the purpose of realising as soon as reasonably practicable sufficient of that company’s assets found to be partnership assets, being Huka Lodge and (if necessary) Dolphin Island, to enable USD25 million to be paid into the High Court on account of Mr van Heeren’s obligations under an interim payment order made by Fogarty J on 14 June 2015.

[3]	On 27 July 2019, Worldwide Leisure Limited (“WWL”) entered into an agreement for the sale of Huka Lodge, for settlement 20 working days after satisfaction of conditions. The conditions were for Overseas Investment Office and other consents on acceptable terms, and a satisfactory due diligence investigation, such acceptability and satisfaction generally being at the purchaser’s “sole and unfettered discretion”.3 For Mr Kidd, Stephen Mills QC described the contract as conferring an

1	Kidd v van Heeren [2019] NZCA 275; Kidd v van Heeren [2019] NZCA 352.
2	Kidd v van Heeren [2019] NZCA 352 at [1].
3	The Overseas Investment Office consent condition nonetheless included the purchaser’s commitment to standard conditions as may be imposed, and was to be met six months after

option on the purchaser, rather than presenting any (even conditional) commitment to Huka Lodge’s acquisition.

[4]	The receivers’ appointment formally was made on 17 September 2019, on terms including:

A Kare Johnstone and Andrew John Grenfell, chartered accountants of Auckland be appointed as receivers (the receivers) over all the shares in Worldwide Leisure Limited (WWL) held by Saraceno Holding BV (21303458 shares) and David McGregor (1 share).

…

C The purpose of the appointment is to facilitate WWL realising, as soon as reasonably practicable, sufficient of its assets to pay USD 25,000,000 into Court on behalf of Mr van Heeren pursuant to the High Court’s order dated 14 April 2015 in CIV 2014-404-725 (the appointment purpose).

…

F In the realisation of the appointment purpose:
a.	The receivers are subject to the usual duties and obligations of a Court appointed receiver under the Receiverships Act 1993 (the Act), including to obtain the best price reasonably obtainable at the time of sale;
…

[5]	On their appointment, after receiving representation from Mr Kidd’s counsel and subsequently engaging in negotiations with the purchaser, the receivers approved WWL’s entry into a varied agreement for the sale of Huka Lodge on 10 October 2019. The agreement was varied by an addendum.4 Of particular note was its provision of specific terms for replacement of the Lodge’s roof and wastewater treatment system, and for procurement of water rights, each by “30 June 2020 time being of the essence”.5 The water rights issue had become prominent in the due diligence process, when it appeared WWL’s use of water was not compliant with a range of applicable

application was made, extended by six months on the purchaser’s advice “it has no reason to believe consent will not be granted”. The condition initially was to be satisfied by 10 June 2020, and presently is to be satisfied by 10 December 2020.
4	The addendum enlarged the Overseas Investment Office consent condition with the purchaser’s commitment also to “any special or reporting conditions on the same terms as commitments proposed” in the purchaser’s application.
5	I was advised from the bar the parties had agreed an extension of those dates to 31 July 2020, which the receivers were minded to approve. I said I would issue this judgment by 29 June 2020.

regulations and required rectification regardless of sale. A solution now has been achieved until November 2027.

[6]	Mr Kidd’s application for interlocutory orders preventing that entry was refused by this Court.6 The contest was brought on grounds the agreement lacked requisite certainty, even allowing for Overseas Investment Office consent, Mr Kidd complaining:7

[T]he receivers’ focus has been weighted too heavily on achieving the best price at the expense of compliance with the orders of the Court of Appeal to realise the assets as soon as reasonably practicable.

[7]	Gordon J held the Court of Appeal’s orders were not breached.8 She added:9

[T]o allow eight and a half months for the satisfaction of the proposed conditions does not appear to fall outside “as soon as reasonably practicable”. Further, in the absence of detailed and prescriptive steps in the order, the receivers must be able to exercise their commercial judgment (consistent with the order and their duties as receivers). They have a role which is independent of the parties to the litigation.

Applicable law

[8]	The Receiverships Act 1993 provides:

18	General duties of receivers

(1)	A receiver must exercise his or her powers in good faith and for a proper purpose.

(2)	A receiver must exercise his or her powers in a manner he or she believes on reasonable grounds to be in the best interests of the person in whose interests he or she was appointed.

(3)	To the extent consistent with subsections (1) and (2), a receiver must exercise his or her powers with reasonable regard to the interests of—
(a)	the grantor; and
(b)	persons claiming, through the grantor, interests in the property in receivership; and
(c)	unsecured creditors of the grantor; and
(d)	sureties who may be called upon to fulfil obligations of the grantor.

6	Kidd v van Heeren [2019] NZHC 2596.
7	At [7].
8	At [13].
9	At [14].

(4)	Where a receiver appointed under a deed or agreement acts or refrains from acting in accordance with any directions given by the person in whose interests he or she was appointed, the receiver—
(a)	is not in breach of the duty referred to in subsection (2); but
(b)	is still liable for any breach of the duty referred to in subsection (1) and the duty referred to in subsection (3).

(5)	Nothing in this section limits or affects section 19.

19	Duty of receiver selling property

A receiver who exercises a power of sale of property in receivership owes a duty to—
(a)	the grantor; and
(b)	persons claiming, through the grantor, interests in the property in receivership; and
(c)	unsecured creditors of the grantor; and
(d)	sureties who may be called upon to fulfil obligations of the grantor— to obtain the best price reasonably obtainable as at the time of sale.
Sections 18 and 19 generally may be regarded as codifying the common law on receivers’ duties. To the extent they represent an advance on that state of the law, it is notable the common law is progressing in the same direction.10

[9]	A significant point for present purposes is the interplay between s 19’s duty in selling property “to obtain the best price reasonably obtainable as at the time of sale”, and the duties articulated in s 18(1) and (2):11
Section 19 does not govern the decision of when to sell. The receiver’s duty when determining whether or not to sell and having decided to do so, when to sell, remains governed by s 18 and the common law…. Accordingly, the receiver’s primary duty when choosing the time to sell is to act in good faith in what he or she believes on reasonable grounds to be in the best interests of the appointing creditor. To the extent consistent with this primary duty, when choosing the time of sale the receiver also needs, pursuant to the subsidiary duty set out in s 18(3), to have reasonable regard to the interests of the debtor and its other creditors. This means that a receiver may choose to sell on a depressed market, and is not obliged to await any improvement in the market, if the receiver reasonably believes that this is in the best interests of the appointing creditor, even though to do so may cause the debtor loss. This relative freedom given to receivers to choose the time of sale appropriately recognises the fact that the receiver’s primary function is to secure repayment of the appointing creditor.

10	Brent Norling (ed) Heath and Whale on Insolvency (online ed, LexisNexis) at [14.36].
11	At [14.37], citing Silven Properties Ltd v Royal Bank of Scotland plc [2004] 4 All ER 484 (CA) at [28]–[29].

[10]	As to that ‘primary function’ here, the receivers are appointed by the Court. In such circumstances, this Court has held:12

Court-appointed receivers are officers of the Court. They are answerable to the Court alone and are not controlled by either the grantor or its creditors. A Court-appointed receiver must always act within the limits of the Court order making the appointment and within any subsequent directions of the Court. The Court retains the right to review and control the receivers’ conduct. In administering the property to which the receivership extends, a receiver has a duty to act impartially and in accordance with the directions of the Court.

Notably, Court-appointed receivers may not contract out of their personal liability.13

Discussion

—interpretation of orders C and F(a)

[11]	There is no dispute the receivers’ s 18(1) ‘purpose’ here is that specified by the Court of Appeal’s order C: “to facilitate WWL realising, as soon as reasonably practicable, sufficient of its assets to pay USD 25,000,000 into Court on behalf of  Mr van Heeren”.14

[12]	The foundation for that purpose is clear from the Court of Appeal’s substantive judgment – an “[overwhelming] demand that meaningful relief be granted to enforce” Fogarty J’s 14 June 2015 USD 25,000,000 interim payment order:15
… The context is highly relevant. Satchwell J found that Mr van Heeren had been “cheating” Mr Kidd out of partnership profits for years at the time he fraudulently sought to procure a binding indemnity precluding all claims in January 1991. Mr Kidd has been pursuing his entitlement to his share of the partnership assets ever since. Notwithstanding the final judgment given in his favour in South Africa giving rise to an issue estoppel as to the extensive partnership assets held by Mr van Heeren or his associated entities, Mr Kidd has still not received anything towards his entitlement. Fogarty J was satisfied Mr Kidd will receive at least USD 25 million following the account. This Court was not persuaded to interfere with that assessment and the Supreme Court declined leave for a further appeal against the order. Mr Kidd has been kept out of his entitlement to his share of the partnership assets for over 28 years and he is now in his mid-seventies.

The Interim Payment Order made by Fogarty J was intended to provide immediate partial relief to redress the serious injustice Mr Kidd has suffered

12	Rea v Omana Ranch Ltd [2013] 1 NZLR 587 (HC) at [11].
13	Receiverships Act 1993, s 32(2).
14	At [4] above.
15	Kidd v van Heeren [2019] NZCA 275 at [73]–[74].

for well over two decades. Mr van Heeren’s various attempts to overcome the effect of that order have all failed. For the Court now to deny Mr Kidd a remedy would deliver the result Mr van Heeren has sought all along and perpetuate the injustice the Interim Payment Order was designed to redress. This Court said in November 2015, when denying Mr van Heeren’s application for a stay of the Interim Payment Order, that Mr Kidd is entitled to the fruits of his judgment “now” and he should not have to wait indefinitely “as if the High Court judgment does not exist”. That observation applies with even greater force now, over three years later. As Lord Neuberger said, if court orders are disobeyed, a sanction is almost inevitable to ensure they continue to be respected. We have no hesitation in concluding that relief is justified. In our view, the Court would be failing in its duty to deny it. The only real issue is as to the appropriate form of relief.

Thus the Court of Appeal concluded:16

[As] Mr van Heeren beneficially owns all the shares in Worldwide Leisure, we consider the appropriate course is for receivers to be appointed over those shares for the purpose of realising as soon as reasonably practicable sufficient of the company’s assets found to be partnership assets, namely Huka Lodge and (if necessary) Dolphin Island, to enable USD 25 million to be paid into the High Court in accordance with the Interim Payment Order

[13]	However, the parties diverge on s 18(2)’s application. Mr Kidd says he is the subject of that subsection here, as “the person in whose interests [the receivers were] appointed”. “Reasonable regard” may be had to WWL’s and related interests under  s 18(3), only “[t]o the extent consistent” with the s 18(1) purpose and Mr Kidd’s interests. Mr van Heeren and WWL disagree, arguing s 18(2) has no application, because “[t]he Court does not have an ‘interest’ for the purposes of s 18(2)”. Rather, in reliance on commentary, “the over-riding duty of Court-appointed receivers is to discharge the Court’s orders and to do so impartially (i.e. without being partial to any of the stakeholders)”.

[14]	Mr van Heeren and WWL are supported in that contention by the receivers, who say their duties “apply equally to all stakeholders with an interest in the asset which [they] are tasked with realising”. The argument is made in reliance on s 19: the receivers having decided to sell the property, their counsel, Crispin Vinnell, argues   s 19 has primacy in imposing an even-handed duty “to obtain the best price reasonably obtainable as at the time of sale”. But, if Mr Kidd is owed that duty, it can only be under s 19(b) as a person “claiming, through [WWL], interests in the property in

16	At [79].

receivership”. That is a tortuous route to his interest, not in the best price reasonably obtainable at the time of the sale, but in payment of “USD 25,000,000 into Court on behalf of Mr van Heeren”.

[15]	Section 18(2) cannot be read out of existence. In circumstances of Court- appointed receivers, I do not accept the Court does not have a qualifying interest, or only the Court’s interest may qualify for consideration, or such interest may not favour one or another party. That Court-appointed receivers are answerable only to the Court, and not susceptible to ‘control’ by either the grantor or creditors, is not to negate any interest served by their appointment.17 Notably, ‘grantor’ is defined as “the person in respect of whose property a receiver is, or may be, appointed”;18 it is not a term necessarily indicative of any voluntary concession to receivers’ appointment such as may entitle a grantor’s ‘control’ of them.

[16]	Subsection (2) is explicit receivers’ powers are to be exercised, not in the best interests of the appointer, but of “the person in whose interests he or she was appointed”. That person may, but need not, be the appointer itself (and, specifically, whether or not the grantor). Of relevance is the courts’ resort to receivership in creative resolution of the issues.19 Such is not to be frustrated by dogmatic application of the subsection’s usual or expected scope.20

[17]	The Court of Appeal judgment and order cannot be read otherwise than meaning the receivers’ appointment is in Mr Kidd’s interests. That is express in the Court of Appeal’s reasons;21 it is implicit in the Court’s choice of remedy. If the Court’s interest was limited to enforcing compliance with its orders, other remedies may have commended themselves. The Court was express jurisdiction under r 7.48 of the High Court Rules 2016 goes well beyond merely coercing compliance.22 It repeatedly emphasised its objective was to grant Mr Kidd “relief”. Mr Kidd clearly is “the person in whose interests [the receivers were] appointed”.

17	See [10] above.
18	Receiverships Act 1993, s 2 definition of “grantor”.
19	Kidd v van Heeren [2019] NZCA 275 at [75].
20	At [38], [42], [44] and [46].
21	At [12] above.
22	Kidd v van Heeren [2019] NZCA 275 at [41]–[42].

[18]	The Court of Appeal’s order requires the receivers to realise at least Huka Lodge. Their decisions then are how and when to do so. Those are decisions to be taken under s 18, primarily in Mr Kidd’s interests, and accommodating WWL’s and related others’ interests only to the extent consistent with that primacy. Only once having decided does s 19 have application.23

[19]	I disagree cases addressing the s 19 (or analogous) duty are to be understood as reaching back into performance of the prior s 18 duty. Particular emphasis was put on Asher J’s summary of a mortgagee’s duty under s 176 of the Property Law Act 1976 on exercise of a power of sale:24
[T]he mortgagee is not entitled to sell in a hasty way at a knock-down price sufficient to pay the debt, which because of the speed of sale leads to a lower price than could otherwise be obtained.

For WWL, Tim Fitzgerald argues such unreasonable prioritisation of speed over price would often be in a mortgagee’s interests, “to sacrifice the interests of the grantor by obtaining a sale quickly, as long as it is sufficient to repay the mortgagee’s debt. This is precisely what the duty prevents”.

[20]	The common law duty on which Asher J relied for his explanation is one of fairness, rather than prohibition:25

In the exercise of his rights over his security the mortgagee must act fairly towards the mortgagor. His interest in the property has priority over the interest of the mortgagor, and he is entitled to proceed on that footing. He can protect his own interest, but he is not entitled to conduct himself in a way which unfairly prejudices the mortgagor.

Stripped of the adjectives, selling at a price sufficient to pay the debt should not be objectionable only because the speed of sale leads to a lower price than could otherwise be obtained, if nonetheless meeting the duty to obtain the best price reasonably obtainable as at the time of sale. It will not then be ‘unfairly prejudicial’.

23 Apple Fields Ltd v Damesh Holdings [2001] 2 NZLR 586 (CA) at [49]–[50], citing Countrywide Banking Corporation v Robinson [1991] 1 NZLR 75 (CA) at 77 and China and South Sea Bank Ltd v Tan Soon Gin [1990] 1 AC 536 (PC) at 545.
24 Public Trust v Ottow [2009] NZHC 749, (2009) 10 NZCPR 879 at [17(h)], citing Palk v Mortgage Services Funding plc [1993] Ch 330 (CA) at 337–338.
25 Palk v Mortgage Services Funding plc, above n 24, at 337.

[21]	The absence of any statutory comparator to s 18’s prefatory duties also makes s 176’s analogy unsafe for universal application. Without limiting or affecting their duty in the exercise of a power of sale under s 19,26 s 18 requires receivers to exercise their powers “in good faith and for a proper purpose”.27 Mortgagees exercising powers of sale also have an equitable obligation to act in good faith.28 Receivers’ purpose may often precisely be analogous with the purpose for which mortgagees usually are conferred a power of sale, to secure a sale to achieve repayment of the secured debt.29 But the receivers’ purpose here markedly is different.

[22]	As a matter of interpretation, then, the Court of Appeal’s order C thus both informs the receivers’ purpose under s 18(1) for exercise of their powers, and identifies the exercise’s primary object in terms of s 18(2) (and by exclusion its secondary object in terms of s 18(3)). To paraphrase, under orders C and F(a), the receivers must exercise their powers:

(a)	in good faith to facilitate WWL realising, as soon as reasonably practicable, sufficient of its assets to pay USD 25,000,000 into Court on behalf of Mr van Heeren;

(b)	in a manner they believe on reasonable grounds to be in Mr Kidd’s best interests;

(c)	to the extent consistent with (a) and (b) above, with reasonable regard to WWL’s and related others’ interests; and

(d)	of sale of Huka Lodge and (if necessary) Dolphin Island to obtain the best price reasonably obtainable as at the time of sale as a duty owed to WWL and related others.

—effect of the interpretation

[23]	The effect of that interpretation is the receivers, by comprehending their duties “apply equally to all stakeholders with an interest in the asset”, have conducted

26	Receiverships Act 1993, s 18(5).
27	Section 18(1).
28	Apple Fields Ltd v Damesh Holdings, above n 23, at [47].
29	At [44], citing Downsview Nominees Ltd v First City Corporation Ltd [1993] 1 NZLR 513 (PC).

themselves on an incorrect premise. However, it is plain they nonetheless have had considerable regard for Mr Kidd’s interests. [Redacted] The receivers’ regard also is made out in their monthly reports to the Court of Appeal, in the third of which they acknowledge sale on terms of the varied agreement “to be in the best interests of the Beneficiaries” of the sale, being Mr Kidd and Mr van Heeren. And there lies the rub.

[24]	I cannot tell from either the reports or Kare Johnstone’s affidavits filed in this proceeding what margin exists for the receivers’ belief on reasonable grounds between:

(a)	sale of Huka Lodge on terms of the varied agreement being in the best interests of both Mr Kidd and Mr van Heeren as Ms Johnstone deposes; and

(b)	sale of Huka Lodge and (if necessary) Dolphin Island on terms (whether of the varied agreement, or otherwise) being in Mr Kidd’s best interests, with reasonable regard for WWL’s and related others’ interests only to the extent consistent with sale on terms in Mr Kidd’s best interests.

[25]	The latter is the receivers’ duty under s 18. Given the receivers’ express admission they have proceeded under the former, they should have opportunity to reconsider. That is particularly the case given Ms Johnstone’s 19 June 2020 views the purchaser appears to be genuine and has committed substantial resources into progressing the sale process, replacement of the Lodge’s roof and wastewater treatment system is “very close”, and the water rights are capable of “an acceptable solution [to] be negotiated between the parties”. Given Gordon J’s view settlement by the end of June 2020 is within what was “as soon as reasonably practicable” for sale of Huka Lodge, the delta between factual and counterfactual may be very small.

[26]	Mr Mills urges I direct the receivers to make particular enquiries of the purchaser, and to decide if to proceed  with  the sale  and to pursue contingencies.  Mr Vinnell says the receivers already have experience of interceding in the commercial arrangements between the parties, with consequent upset and “negotiation fatigue”, and prevails upon me not to substitute for their assessments in continuing

negotiations for sale of a sensitive asset at a precarious time. I accept the receivers’ prospective further intercession presents risk I am ill-placed to judge.

[27]	Instead, I will direct the receivers to reconsider their approval of the varied agreement for sale of Huka Lodge in accordance with the interpretation provided by this judgment.

Directions

[28]	I direct the receivers, by Friday, 3 July 2020:

(a)	to consider if they believe on reasonable grounds sale of Huka Lodge on terms of the varied agreement is in Mr Kidd’s best interests, with reasonable regard for WWL’s and related others’ interests only to the extent consistent with sale on terms in Mr Kidd’s best interests; and

(b)	if so, to file and serve an affidavit specifying each of and all those reasonable grounds, together with such substantiation as they have; or

(c)	if not, to file and serve an affidavit specifying what steps are to be taken in performance of the purpose of their appointment.

Any party then may make such application as they consider appropriate.

Confidentiality

[29]	At commencement of the hearing of this application, I ruled nothing discussed in the hearing may be published, the issue to be revisited at the end of the day. The ruling was sought by all parties, although Mr Kidd favoured non-publication only of particular identified confidential subject-matter. I was not prepared to hold a hearing relating to the live conditional sale of a significant property in sensitive circumstances, in which either counsel found it necessary to make guarded submissions in open court, or put members of the media present to judgement on the subject of their reporting. The media members left the courtroom in the course of the morning.

[30]	At the conclusion of the hearing, I heard argument for blanket or targeted non- publication orders of discussion in the course of the day’s hearing. As the bulk of the

argument had gone unmonitored by media, while targeted orders were desirable, they likely served no particular purpose, and again risked uncertainty on the part of the media as to publishing such of the argument as it had heard. For those reasons,          I prohibited publication of any discussion at the hearing, except for it being convened to hear argument on an application as to the interpretation and effect of the Court of Appeal’s orders dated 17 September 2019.

[31]	Finally, Mr van Heeren’s counsel, Mark O’Brien QC, sought 72 hours after issue of this judgment for the parties to identify any confidential content requiring suppression. I further direct:

(a)	this judgment is embargoed from publication in or by any media until
midday on Tuesday, 30 June 2020;

(b)	counsel are to file a joint memorandum no later than midday on Monday, 29 June 2020, identifying what (if any) content of the judgment is sought to be suppressed; and

(c)	a teleconference be convened before me at 1.15 pm on Monday, 29 June 2020, to determine what (if any) interim redaction may be required in advance of determination of any application for suppression orders.

—Jagose J