With fraud suspected, Callaghan Innovation sued to recover a $383,000 initial instalment on a $17.2 million Science and Innovation grant made to Auckland-based David Alan Johnson and his company Trends Publishing. Callaghan now seeks to bankrupt Johnson on a $1.2 million court costs order for legal fees incurred chasing down the money.
Mr Johnson’s Trends Publishing International Ltd applied for a Callaghan grant after a crippling downturn in business following the 2008 Global Financial Crisis. A subsequent audit found evidence Trends had misled Callaghan; in particular, Trends improperly categorised some of its expenses as research and development.
Their dispute escalated: Callaghan sued to recover its $383,000 initial payment; Trends counter-sued for $61 million, claiming Callaghan’s funding termination caused Trend’s failure. End result: Trends lost in court; Justice Powell describing its case as hopeless.
He ordered Mr Johnson and his company Thecircle.co.nz Ltd pay Callaghan’s full legal costs and expert witness fees; a total of $1.2 million. Mr Johnson and his company had managed the claim against Callaghan on Trends behalf and had paid its legal fees.
Unpaid for its $1.2 million costs order, Callaghan served a bankruptcy notice on Mr Johnson and a notice of statutory demand on Thecircle, precursors to triggering bankruptcy for Mr Johnson and liquidation for Thecircle. Each challenged their notice, saying the failed $61 million claim had been appealed and the High Court costs order should not be enforced whilst an appeal was underway.
The mere fact of an appeal is not grounds to stop a winning litigant from enforcing a High Court order, Associate judge Andrew ruled. It can be enforced, unless the losing litigant first applies for a stay of execution, pending the result of an appeal. Neither Mr Johnson nor Thecircle had applied for a stay, the court was told.
Trends Publishing v. Callaghan Innovation – High Court (10.07.20); Callaghan Innovation v. Johnson – High Court (31.3.21)
21.061