7 Security Limited (in liquidation) v McIsaac - [2024] NZHC 1610

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

I TE KŌTI MATUA O AOTEAROA

TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE

CIV-2024-463-27

[2024] NZHC 1610

BETWEEN
7 SECURITY LIMITED (IN LIQUIDATION)

Plaintiff

AND

MELISSA URSULA McISAAC

Defendant

Callover: 11 June 2024 [and subsequently dealt with on the papers]

Appearances:

Kevin Sullivan/Michael Bale for the Plaintiff No appearance for/of the Defendant

Judgment:

19 June 2024

JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

[Application for summary judgment]

This judgment was delivered by me on 19 June 2024 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

Solicitors:
WCM Legal (Michael Bale), Wellington, for the Plaintiff
Copy for:
Kevin Sullivan, Port Nicholson Chambers, Wellington, for the Plaintiff

7 SECURITY LIMITED v McISAAC [2024] NZHC 1610 [19 June 2024]

Introduction

[1] The plaintiff, 7 Security Ltd (In Liquidation) (7 Security), has applied by interlocutory application for summary judgment for the following orders:

(a)granting summary judgment against the defendant, Melissa Ursula McIsaac (Ms McIsaac), for the sum of $276,280; and

(b)interest on the judgment sum, calculated under the Interest on Money Claims Act 2016 from 19 September 2021, the date the demand was made, down to the date of payment.

Background

[2] The application for summary judgment arises out of the liquidation of 7 Security, which was placed in liquidation on 11 May 2021 by shareholders resolution. Mr John Scutter was appointed the sole liquidator.

[3]Ms McIsaac was the sole shareholder and director of 7 Security.

[4]Mr Scutter has sworn an affidavit where he deposes as follows:

(a)there were very few financial records provided by Ms McIsaac for 7 Security;

(b)the bank records that Mr Scutter obtained showed that Ms McIsaac had paid herself drawings from 7 Security, without properly accounting for them. He deposes that $276,280 was paid to Ms McIsaac between May 2019 and May 2021 in the two years prior to the liquidation;

(c)there were no resolutions or remuneration certificates in 7 Security’s records and the effect of Ms McIsaac taking drawings in this way means that she has overdrawn her current account;

(d)under s 161 of the Companies Act 1993 Ms McIsaac, as the sole director, should have signed the certificate/statement that the remuneration was fair to the company and also entered the remuneration in the interests register. None of these records have been completed and as a result the drawings are treated as drawings on her current account with the company.

[5] Mr Scutter deposes that on 19 September 2021 he contacted Ms McIsaac asking her to repay the $276,280 owing to 7 Security, or provide reasons why she ought not be held liable for the debt. He deposes that Ms McIsaac did not provide any substantive response despite multiple attempts being made by him between October 2021 and June 2023 to contact Ms McIsaac.

[6] Mr Scutter deposes that 7 Security is insolvent, with creditor claims amounting to $284,250.78, which have been lodged in the liquidation. He deposes that there are no tangible…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2024] NZHC 1610
Decision Date: 19 June 2024

CaseChat Overview and Summary

The High Court of New Zealand dealt with an application for summary judgment by 7 Security Limited (in liquidation) against Melissa Ursula McIsaac. The plaintiff, 7 Security, sought judgment against Ms McIsaac for $276,280 and interest, claiming that she had taken improper drawings from the company as its sole shareholder and director. The liquidator, Mr John Scutter, deposed that Ms McIsaac had failed to provide financial records and had overdrawn her current account with the company. Despite demands to repay the debt, Ms McIsaac did not respond.

The legal issues before the court included whether the defendant had a defence to the claim and whether the requirements of the Companies Act 1993 had been met. The court considered the principles of summary judgment and whether there was a real question to be tried. The court also referenced the Court of Appeal decision in Monnery v Convendium Limited (In Liquidation), which established that an overdrawn shareholder current account constitutes a debt repayable on demand unless otherwise justified.

The court granted the application for summary judgment. The reasoning was that Ms McIsaac had not provided any explanation or evidence to justify the payments, and thus, they constituted a debt owing to the company. The court ordered Ms McIsaac to repay the sum of $276,280 plus interest from 19 September 2021, and awarded costs to 7 Security.

Orders