Adams v Sun - [2014] NZHC 913

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
COMMERCIAL LIST

CIV 2013-404-4168 [2014] NZHC 913

UNDER THE COMPANIES ACT 1993

IN THE MATTER OF

STARPLUS HOMES LTD (IN LIQUIDATION)

BETWEEN

SHAUN NEIL ADAMS AND JOHN ROBERT BUCHANAN (AS LIQUDIATORS OF STARPLUS HOMES LTD (IN LIQUIDATION)) Applicants

AND

DAVID WEI SUN First Respondent

MAGSONS HARDWARE LTD Second Respondent

HAMILTON HARDWARE RETAIL LTD Third Respondent

UNITED TIMBER MERCHANTS LTD Fourth Respondent

DALE KING BUILDING SUPPLIES LTD Fifth Respondent

RD 1 LTD

Sixth Respondent

Hearing: 26 February 2014

Counsel:

M J Tingey for Applicants

M Arthur for First, Second, Third, Fourth and Sixth Respondents

No appearance by or on behalf of Fifth Respondent

Judgment:

6 May 2014

JUDGMENT (NO. 2) OF HEATH J

This judgment was delivered by me on 6 May 2014 at 4.00pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

ADAMS AND BUCHANAN (AS LIQUDIATORS OF STARPLUS HOMES LTD (IN LIQUIDATION)) v SUN [2014] NZHC 913 [6 May 2014]

Introduction

[1] Mr Adams and Mr Buchanan are the liquidators of Starplus Homes Ltd (in liquidation) (Starplus). They applied to this Court for directions in relation to the distribution of a sum of $1,747,229.28, a surplus arising from the sale by ASAP Finance Ltd (ASAP), the first mortgagee of some 20 properties that Starplus had owned.

[2] The moneys were held in Court as a result of orders made by Brown J on 31

July 2013.1 Those orders followed an application by ASAP, under s 200 of the Property Law Act 2007, to authorise the last of the mortgagee sales. In general terms, they represented the surplus from the sale of two properties at Redoubt Road, in Manukau, that Brown J’s order had authorised ASAP to sell. In a judgment being delivered contemporaneously,2 I have ruled on competing claims to moneys held in Court. The background to the litigation is set out fully in my substantive judgment. There is no need to repeat it.

[3] The liquidators claim that they are entitled to have their reasonable indemnity costs, in relation to the application, paid out of the surplus in priority to successful claimants. Mr Tingey, for the liquidators, submits that the costs were incurred to help the secured creditors to resolve their differences and should be treated as linked specifically to the fund in question. The five claimants to the fund have taken a common position. In an argument advanced by Mr Arthur on their behalf, they object to costs being awarded on that basis.

Background

[4] After Brown J’s orders were made (but before the s 200 application was finally determined), the liquidators of Starplus decided to seek directions from the Court on how the money should be distributed. Ultimately, without opposition from any of the claimants, the s 200 proceeding was discontinued and the fund was made
subject to the liquidators’ application.3

1 ASAP Finance Ltd v Starplus Homes Ltd (in rec and in liq) HC Auckland CIV 2013-404-3432,
31 July 2013 (Minute of Brown…

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.

Continue reading Adams v Sun

Details

AGLC: Adams v Sun [2014] NZHC 913
Case: [2014] NZHC 913
Decision Date: 6 May 2014

CaseChat Overview and Summary

In this case, the liquidators of Starplus Homes Ltd, Shaun Neil Adams and John Robert Buchanan, sought directions from the Court on the distribution of a surplus sum of $1,747,229.28 arising from the sale of 20 properties owned by Starplus. The funds were held in Court following orders made by Brown J on 31 July 2013 under s 200 of the Property Law Act 2007. The liquidators claimed they were entitled to have their reasonable indemnity costs, incurred in relation to the application, paid out of the surplus in priority to successful claimants. The five claimants to the fund objected to this claim. The key issues for the Court to decide were whether the liquidators' decision to issue a separate proceeding to resolve questions of entitlement to the surplus funds was appropriate and whether it was appropriate for all (or some) of the claimed costs to be borne by the general body of creditors, rather than the secured creditors that were entitled to participate in the fund.

The Court held that the liquidators were entitled to be heard to safeguard the interests of preferential and unsecured creditors who may have had a genuine interest in the outcome. However, the Court found that it was doubtful whether it was open to the liquidators to deal with the questions of priority through the existing proceedings issued by ASAP. The Court considered that costs were within its discretion and found that it would be unfair for the secured creditors entitled to participate in the fund to subsidise costs incurred for the benefit of preferential and unsecured creditors. The Court ordered that two-thirds of the liquidators' costs, equating to $24,650.34, should be paid out of the fund held in Court, in priority to those creditors whose secured claims had been marshalled. The Court also ordered that the filing fees and costs incurred in serving the application be paid out of the fund.

Leave was reserved for any party to make submissions as to the incidence in which those costs should be borne. This can be done in submissions filed for the resolution of questions of costs set out in the Court's substantive judgment.

Orders