BBG Holdings Limited (in liquidation) v Fatupaito
[2021] NZHC 1877
•23 July 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-2159
[2021] NZHC 1877
UNDER the Companies Act 1993 and the High Court Rules 2016 IN THE MATTER
of an application under s 284 of the Companies Act 1993
BETWEEN
BBG HOLDINGS LIMITED (in liquidation) Applicant
AND
VIVIAN FATUPAITO and LEON
BOWKER as joint and several liquidators of CIT HOLDINGS LIMITED (in liquidation) Respondents
Hearing: 23 March 2021 Appearances:
B Gustafson and W van Roosmalen-Werie for the Applicant M Tingey for the Respondents
Judgment:
23 July 2021
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 23 July 2021 at 4.30pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors/Counsel:
Adam Stevenson Botterill, Auckland Waterstone Insolvency, Auckland Bell Gully, Auckland
B Gustafson, Auckland MJ Tingey, Auckland
BBG HOLDINGS LIMITED (in liquidation) v FATUPAITO and BOWKER as joint and several liquidators of CIT HOLDINGS LIMITED (in liquidation) [2021] NZHC 1877 [23 July 2021]
Introduction
[1] BBG Holdings Limited (in liquidation) applies for a review of a decision by the liquidators of CIT Holdings Limited (in liquidation) to decline BBG’s claim in the liquidation of CIT.
[2] BBG’s claim relies on invoices from BBG to CIT in respect of civil works completed by JG Civil Limited. The claim was initially accepted by the CIT liquidators but several years later the decision was reversed, following submissions to the liquidators on behalf of Mr Gregory Olliver that the claim should be rejected. Mr Olliver was the director of BBG and CIT at the time the invoices were issued.
[3] BBG does not accept the basis for rejecting the claim and so has brought this application seeking a review of the decision.
[4] Leave is required for a creditor to apply for review to ensure that liquidators are free to undertake their duties in a cost effective and efficient manner and only appropriate challenges proceed.
Issues
[5]The issues for determination are:
(a)Should leave be granted to BBG as a creditor to bring the application?
(b)Was it unreasonable for the liquidators of CIT to reject BBG’s claim in the liquidation of CIT?
Background
[6] The application involves two entities associated with Mr Olliver and his former wife, Ms Sarah Sparks. It is important to consider the BBG claim in context, so the background facts are set out in some detail below. Mr Olliver and Ms Sparks’ business
affairs have been described by the Court of Appeal as having a “convoluted legal structure” so unfortunately it is relatively complex.1
[7] Mr Olliver and Ms Sparks began their relationship in 1997 and married on 18 March 2000. They separated on 4 July 2012 and their marriage was dissolved on 25 August 2014.2
[8] Over the course of the couple’s marriage, a number of properties were purchased in Waimarie Street, St Heliers, through related entities. One of the properties was used as the family home. The other properties (other than those immediately adjacent to the family home) were viewed as a development opportunity.
[9] In 2009, following the global financial crisis, bankruptcy proceedings were brought against Mr Olliver. In order to try and salvage some value for the benefit of the family a plan was devised which was structured as a joint venture between the Waimarie Trust, controlled by Ms Sparks, and the Glover Trust, controlled by Mr Olliver (at least at that time). The discretionary beneficiaries of both trusts included Mr Olliver, Ms Sparks and their children. The joint venture was to be carried out through CIT Holdings, the company for which the respondents are the liquidators.
[10] A short history of the Waimarie properties is set out in CIT Holdings Ltd v Glover No.2 Ltd and I set it out here:3
The Waimarie properties — a short history
The properties
[6] When Mr Olliver's insolvency proposal was being pursued in 2009, Mr Olliver and Ms Sparks embarked upon arrangements to have Mr Olliver drop out of both legal and beneficial ownership of assets held by them or their interests.
The Waimarie Joint Venture
[7] Central to their arrangements was a joint venture agreement of March 2009 (the Waimarie JV) to which the Glover Trust and the Waimarie Trust were (through their corporate trustees) parties. (Glover No.2 subsequently took the Waimarie Trust's place as a party by the deed of novation referred to at [17] below).
1 Glover No.2 Ltd v Glover Trust Ltd [2013] NZCA 608 at [10].
2 Olliver v Sparks [2021] NZHC 220 at [11].
3 CIT Holdings Ltd v Glover No.2 Ltd [2014] NZHC 3114 (footnotes omitted).
[8]The recitals to the Waimarie JV indicate its purposes: “WHEREAS
AThe parties have experience in the acquisition and potential for the Property. The opportunity has arisen to acquire the Property by mortgagee sale. The purchase of that has to be completed as a total package.
BFor the purposes of preserving the residential portion of the Property for the benefit of Waimarie and maximising the potential for the residue of the property without prejudicing the residential portion the parties are to form the Joint Venture.
CGlover and Waimarie intend to contribute to the Joint Venture by investing capital and borrowing on current account loans to the Joint Venture on the basis set out in this agreement.”
[9] The “Property” referred to in the Waimarie JV was defined as comprising a number of properties, which I will refer to as the first tranche properties.
[10] The parties agreed that the Waimarie Trust would contribute “capital” and that the Glover Trust would contribute the Property. The Waimarie JV included the following further provisions:
“1. Interpretation and definition
…
“Percentage interests” means for Waimarie (yet [sic] having contributed to be [sic] cash equity to the Joint Venture) a 60% share, which shares shall include the distribution or transfer in specie of the residential portion of the Property, and for Glover a 40% share.
“Property” means the properties set out in the schedule.
“residential portion” means the property (more or less) set out as the first listed in the schedule [being a reference to 22 to 24 Waimarie Street].
“2.3 Upon the commencement date:
(a)Waimarie shall contribute the initial capital of $2,000,000.00;
(b)Glover shall contribute the Property. The Property to remain in the name of the Glover owned company, CIT Holdings Ltd (‘CIT’), for so long as the Property or any part of it remains part of the assets of the Joint Venture. The beneficial ownership of the Property and other assets of the Joint Venture shall be determined in accordance with the terms of this agreement and not by reference [sic] the title to any part of the Property or the shareholding of CIT.
6. Termination
6.1This agreement shall terminate upon the transfer of the residential portion to the Waimarie free of any encumbrance and completion of the realisation by sale of the remainder of the Property. On the completion of the transfer of the residential portion and all sales of the remainder of the Property any remaining cash assets shall be divided between
the parties in proportion to their respective percentage interests in completion of the termination of the Joint Venture.”
(I will refer to cl 2.3(b) as “the beneficial ownership clause”).
[11] The Waimarie JV concludes with an entire agreement clause which strips any prior understandings of all force or effect and provides that the JV agreement constitutes the sole understanding of the parties with respect to the subject matter. In other words, the correct construction of the agreement is to be derived from the words used in the written document read in their context but not (by reason of the entire agreement clause) from any previous written or oral discussions or understandings.
[12] On 9 March 2009, CIT bought the first tranche properties funded by the Waimarie Trust's $2,000,000 and an advance from the Bank of New Zealand (BNZ) of $6,750,000. The bank loan was secured by a first ranking mortgage over the first tranche properties and a General Security Agreement (GSA) over CIT's present and future property. Ms Sparks, as director of CIT, signed the mortgage and GSA documentation.
[13] The following month, April 2009, the Glover Trust and the Waimarie Trust entered into an agreement supplementary to the Waimarie JV. The supplementary agreement recorded the purpose:
AThe parties are parties to a Joint Venture known as the Waimarie Joint Venture pursuant to an agreement dated
_ March 2009.
BA further opportunity has arisen in respect of adjacent properties to those acquired under the joint-venture.
CWaimarie intends to contribute further capital to the Joint Venture on the basis set out in this supplementary agreement.”
(The gap in paragraph A, with a date omitted, is as it appears in the document).
[14] In the supplementary agreement the Waimarie Trust agreed to contribute further capital of $1,675,000 which the joint venture was to apply to the purchase of further properties (which I will refer to as the second tranche properties). The supplementary agreement repeated in materially identical terms the beneficial ownership clause of the Waimarie JV.
[15]In April 2009, CIT purchased the second tranche properties for
$1,650,000.
[16] The BNZ was not notified of the purchase of the second tranche properties but those properties became subject to the GSA as after-acquired property of CIT.
[11] In the latter half of 2010 the relationship between Ms Sparks and Mr Olliver began to deteriorate and the couple separated in July 2012. Unbeknownst to Mr Olliver, Ms Sparks settled the Glover No.2 Trust and executed a suite of documents for the purpose of transferring the second tranche of properties from CIT (of which she was a director at the time) to Glover No.2 Limited, as trustee for the trust. By deed of novation Glover No.2 replaced the Waimarie Trust as a party to the Waimarie
JV. At the same time, Ms Sparks executed a declaration by Glover No.2 that it held the second tranche of properties on a bare trust for CIT.
[12] The corporate trustees controlling CIT pursued recovery of the properties from Glover No.2 through extensive litigation. First this Court and then the Court of Appeal held that CIT was entitled to have the second tranche of properties re-transferred to it.4 Glover No.2 then caveated CIT’s titles for both the first tranche and second tranche properties.
[13] At the beginning of 2014, steps were taken to sell the properties including offering the properties to Ms Sparks and her related entities.5
[14] On 19 June 2014, BBG agreed to purchase certain of the Waimarie Street properties from CIT. The sale and purchase agreement included the following conditions:
19.Conditions
This agreement is conditional on:
19.1An agreement between the Vendor (as vendor) and Gregory Martin Olliver (or any other party acceptable to the Purchaser in the Purchaser’s sole and absolute discretion) (as purchaser) for the sale and purchase of the properties at 18, 22 and 28 Waimarie Street, St Heliers, Auckland, being entered into with the same settlement date as the Settlement date and otherwise on terms and conditions and at a price acceptable to Gregory Martin Olliver (or other party) and the Purchaser, which is either unconditional or made unconditional by the Settlement date (Other Agreement). This condition is inserted for the sole benefit of the purchaser.
19.2The Vendor procuring the withdrawal of all caveats affecting the Property by the Settlement date including (without limitation) the following registered caveats:
(a)Caveat 9645842.1 by Glover No.2 Limited.
(b)Caveat 9455113.1 by Glover No.2 Limited.
(c)Caveat 9502174.1 by Bank of New Zealand.
4 Glover Trust Ltd v Glover Trust Corporation Ltd [2013] NZHC 545; supplementary judgment [2013] NZHC 545 (23 September 2013); Glover No.2 Ltd v The Glover Trust Ltd [2013] NZCA 608. Leave to appeal to the Supreme Court was declined on 7 May 2014: see Glover No.2 Ltd v The Glover Trust Ltd [2014] NZSC 54.
5 CIT Holdings Ltd v Glover No.2 Ltd [2014] NZHC 3114 at [22] – [34].
[15] The deposit of $275,000 was only payable by BBG upon fulfilment of the conditions contained in cls 19.1 and 19.2 as set out above.
[16] Settlement was to be four months after the date of the agreement, although it could be extended for certain reasons, including for failure to procure the removal of any caveat as long as CIT was using reasonable endeavours to remedy the issue.6
[17] Between July 2014 and August 2014, JG Civil completed earthworks on the properties.
[18] On 1 August 2014, BBG invoiced CIT, recharging it for the earthworks undertaken by JG Civil. The invoice expressly stated it was to “Recharge JG Civil Invoice 64”. Invoice 64 from JG Civil to BBG had the narration “Progress Claim 1 for period 10-07-2014 to 28-07-2014. See Certificate of Payment attached”. The certificate of payment by Woods as engineers certifying the value of the work is dated 8 August 2014.
[19] On 1 September 2014, BBG again invoiced CIT, recharging for JG Civil invoice 75 to BBG in the sum of $619,416.68. Invoice 75 has the narration “Progress Claim 2 for period 29-07-2014 to 31-08-2014. See Certificate of Payment attached.” The certificate of payment is dated 29 September 2014 and again certifies the value of the works.
[20] The vendor, CIT, applied to remove the caveats lodged over the properties by Glover No.2 on 1 July 2014. The application was heard on 15 September 2014 but dismissed in a judgment dated 5 December 2014.7 As a result, the contract never went unconditional and title to the properties was not transferred to BBG.
[21] On 4 March 2016 at 11.18am CIT was placed into liquidation with Andrew Hawkes and Vivian Fatupaito appointed liquidators. Leon Bowker subsequently replaced Mr Hawkes.
6 Clause 20 of the sale and purchase agreement.
7 CIT Holdings Ltd v Glover No.2 Ltd [2014] NZHC 3114.
[22] On 4 May 2016 BBG submitted a creditor’s claim signed by Mr Olliver in the liquidation of CIT for the two JG Civil invoices recharged totalling $836,012.06. The claim was filed through his solicitor and included copies of the invoices from BBG to CIT in support.
[23] On 14 November 2016 the liquidators requested copies of the invoices from JG Civil to BBG. These were provided to the liquidators on 15 November 2016.
[24] The CIT liquidators realised CIT’s assets (including selling the Waimarie properties in 2018 to Oceania Village Company Ltd for $20,500,000) and after paying secured and preferred creditors held approximately $3.8 million for distribution. Prior to settling the sale, the liquidators successfully applied to remove caveats lodged against the properties by entities associated with Mr Olliver and secured an order for Mr Olliver and members of his family to vacate the residential home at 22 Waimarie Street.8
[25] With the properties sold, on 8 March 2018 the liquidators wrote to BBG requesting additional information to assess BBG’s creditor’s claim. The information sought included:
(a)the contract between BBG and JG Civil for the earthworks carried out;
(b)the contractual basis for claiming interest on the outstanding balance purportedly owing to BBG;
(c)the drawings of the site, including any revisions or variations, in relation to the work carried out by JG Civil;
(d)the progress claims and certificate of payment submitted by JG Civil with their invoices to BBG; and
(e)evidence of payment made by BBG to JG Civil for the invoices being recharged to CIT.
8 CIT Holdings Ltd (in liquidation) v Auckland West Legal Services Ltd [2018] NZHC 232.
[26]On 29 March 2018 the lawyers for BBG responded as follows:
(a)no written contract was prepared for the earthworks between JG Civil and BBG;
(b)that Mr Olliver, the director of BBG, had advised BBG’s lawyers that he had instructed JG Civil to carry out the works specified by Woods as engineer and that he understood that a contract was being drafted and would have been signed in due course;
(c)Mr Olliver says that the earthworks on sites ceased early because of the legal situation in relation to the caveats placed on the relevant titles by Ms Sparks’ interests and that a written contract was never concluded;
(d)in respect of interest, Mr Olliver advised that BBG’s intention was to enter into a standard industry contract with JG Civil and that interest was payable to them pursuant to that contract, with a copy of the standard contract to be forwarded the following week;
(e)the drawings and schedules for the works were attached;
(f)the progress claims submitted by JG Civil together with copies of the certificates of payment and JG Civil’s invoices were also attached; and
(g)confirming that BBG had not yet paid JG Civil so the amounts were still owing.
[27] On 15 August 2018, the liquidators confirmed to BBG that their claim was accepted in the sum of $836,012.06 (with interest on the claim rejected).
[28] Just over a year later, on 4 September 2019, BBG was placed into liquidation by special resolution of the shareholder. Mr Damien Grant of Waterstone Insolvency was appointed liquidator.
[29] On 19 September 2019, JG Civil filed an unsecured creditor’s claim in the liquidation of BBG. The claim was for the earthworks completed over the Waimarie Property in the sum of $836,012.06.
[30] On 30 October 2019, Mr Grant requested confirmation of BBG’s claim in the liquidation of CIT from the CIT liquidators.
[31] On 7 November 2019, the CIT liquidators confirmed acceptance of BBG’s claim in the liquidation in the sum of $836,012.06.
[32] During the liquidation of BBG, Mr Olliver maintained to Mr Grant that entities related to him were creditors in the liquidation of BBG in the sum of around $8 million.
[33] On 6 December 2019, Mr Olliver sent Mr Grant a spreadsheet of proposed claims which included:
(a)Bankhouse Trust - $209,096;
(b)Durafort Investments - $7,687,239;
(c)Leefield Ventures Ltd - $27,853;
(d)Ollie & Co Ltd - $94,032;
(e)Phoenix Trust - $5,000.
[34] Mr Grant advised Mr Olliver that in order to claim these amounts Mr Olliver needed to submit creditors’ claims supported by adequate paperwork evidencing the claims. Mr Olliver then provided Mr Grant with emails and spreadsheets showing similar amounts. Mr Grant deposes that he advised Mr Olliver via several phone calls that such spreadsheets were insufficient and that Mr Grant was not going to consider these entities as creditors until formal proof of debt forms were provided and further supporting information.
[35] On 15 January 2020, Mr Grant requested an informal creditors’ meeting with the CIT liquidators as he was concerned at the delay in the CIT distribution. He proposed applying, at his own cost, for an order from the High Court for a distribution
to be made to BBG. Mr Grant’s request for an informal creditors’ meeting was rejected by the liquidators.
[36] On 13 February 2020, Mr Grant again requested a meeting of creditors in CIT, this time formally pursuant to s 314 of the Companies Act.
[37] On 3 March 2020, Mr Grant wrote to the CIT liquidators again regarding his concerns at the delay in distribution, with CIT holding nearly $4 million in cash and particularly following the recent correspondence from the liquidators in relation to a very small claim (approximately $5000) in the Olliver Trustee liquidation, for which Mr Grant was also the liquidator.
[38] The CIT liquidators scheduled a creditors’ meeting for 16 March 2020. That meeting was attended by a number of parties including the liquidators and their lawyer, Mr Tingey, Mr Olliver, Ms Sparks and Mr Grant. At the meeting, the liquidators outlined several options to finalise the liquidation of CIT. An undertaking had been given by the liquidators to the High Court that no distribution would be made to creditors without the leave of the Court but an issue had now arisen in relation to some of Mr Olliver’s claims in the CIT liquidation.
[39] Mr Grant deposes that it was agreed at the meeting that if Mr Olliver provided the documents necessary for substantiating his claim to the satisfaction of the CIT liquidators, the liquidators would make an application to the High Court within two months to make a distribution to creditors and to finalise the liquidation. Alternatively, if Mr Olliver did not provide the documents to the liquidators, then the liquidators agreed to retain $100,000 as a contingency to deal with Mr Olliver’s outstanding claims and to make an application to the High Court within two months on that basis. Mr Grant does not consider the liquidators adhered to the commitment given to creditors at that meeting.
[40] Then, on 21 July 2020, Mr Olliver emailed Mr Grant draft financial statements for BBG purporting to show related party creditors involved in claims in the BBG liquidation. These draft financial statements were supported by unsigned financial statements for some of the proposed related party creditors.
[41] Mr Grant responded the same day stating that more was required to approve the creditors’ claims. He queried what the $7.6 million owed to Durafort was for and stated that “unsigned financials are not going to be enough especially as I have PwC hot on the case”. Mr Olliver replied to Mr Grant on the same day stating “we don’t hold the paperwork back that far. PwC were responsible for preparing the accounts and KPMG audited them”.
[42] On 27 July 2020, the liquidators of CIT wrote to the creditors of CIT seeking their consent to a proposed distribution, including to BBG for their accepted claim.
[43] On 28 July 2020, Mr Grant wrote to Mr Olliver in relation to the claims made in the BBG liquidation in respect of his associated entities saying that the unsigned draft and unaudited financial statements provided as evidence were insufficient to support the claims. Mr Grant said that at that stage he could not accept or reject the creditors’ claims on the basis of the information provided and he had written to the accounting firm that had prepared the draft financial statements seeking further clarification.
[44] On 30 July 2020, Mr Grant deposes that he advised Mr Olliver by telephone that, based on the documents provided to date, he was not going to accept any of the claims put forward by Mr Olliver in the liquidation of BBG. Mr Olliver responded by saying that he would ensure that BBG’s claim in the CIT liquidation would be rejected and that he was going to instruct his lawyer to ensure that the BBG claim would be set aside.
[45] Less than two weeks later, on 10 August 2020, the liquidators wrote to Mr Grant advising that there had been a request to reject BBG’s previously accepted claim, attaching a partially redacted copy of the request and without indicating who the request was from.
[46] The redacted request forwarded to Mr Grant said that recent material had come to light which suggested that BBG had incurred the liabilities for earthworks on the basis that it had signed an agreement for sale and purchase of the Waimarie Properties
and had itself become the principal for the purposes of the development. A copy of the sale and purchase agreement was enclosed with the request. The request went on:
[BBG] only started incurring liabilities once it became the equitable owner of Waimarie Properties. The liabilities it incurred (from which its claim in the liquidation of CIT derives) were in fact incurred for its own benefit. In incurring these liabilities [BBG] assumed the risk that the parties to the SPA might not be able to settle (which was ultimately the case, owing to Ms Sparks’ notices of claim). Having assumed that risk, BBG cannot now refer its liabilities to [CIT].
[47] On 26 August 2020, Mr Grant’s lawyer responded to the CIT liquidators saying that they had reviewed the sale and purchase agreement from June 2014 and that the agreement was conditional on the caveats being removed, which did not happen until three and a half years after the settlement date of October 2014 stated in the June 2014 agreement. Mr Grant’s lawyer went on to say that the agreement never went unconditional and could never have been enforced. After referring to the transfer of the titles to Oceania Village Company Limited in 2018, Mr Grant’s lawyer stated that they believed it was unreasonable to conclude that BBG was incurring liabilities for which it could receive no benefit. The letter finished by saying they had requested the purchase file from the solicitor instructed for BBG on the sale and purchase of the property.
[48] On 17 September 2020, Mr Grant’s lawyer obtained BBG’s solicitors’ file relating to the sale and purchase agreement and provided it to the CIT liquidators.
[49] On 23 September 2020, the liquidators wrote to Mr Grant and said they had reviewed CIT’s solicitors’ file in relation to the sale and purchase agreement and it was the liquidators’ view that the claim should not now be admitted in the CIT liquidation. The liquidators confirmed in this letter that “Mr Olliver, the director of both companies, now disputes that BBG should be accepted as a creditor in CIT”. This was the first time the liquidators had advised that the request to reconsider the claim had come from Mr Olliver.
[50] I record that the evidence of Mr Grant that Mr Olliver said he would ensure that BBG’s claim would be rejected was not challenged in Mr Olliver’s affidavit sworn in support of the CIT liquidators’ opposition to the application to review. In cross-
examination Mr Olliver attempted, however, to challenge some of Mr Grant’s evidence saying that Mr Grant did not say he was going to reject Mr Olliver’s entities’ claims but instead that he had not made a decision yet. Mr Olliver went on to say the reason for his request to the liquidators to reject the BBG claim was because he came across the sale and purchase agreement between BBG and CIT when looking for further documents for Mr Grant and immediately thought “well hold on this must have an impact on things”. Mr Peter Spring, one of his lawyers, then recommended producing it to the liquidators. Mr Olliver’s evidence was that he did not talk to the liquidators about what was said in Mr Spring’s letter.
[51] If Mr Grant’s evidence had been challenged in Mr Olliver’s affidavit, Mr Grant could then have been cross-examined as required by s 92 of the Evidence Act 2006. A number of options are available under s 92 in these circumstances including to admit the contradictory evidence on the basis that the weight given to it may be affected.9 In the circumstances I have decided to admit Mr Grant’s evidence in relation to these conversations although in some cases contradictory but afford it little weight.
[52] On 29 September 2020, Mr van Roosmalen-Werie, in-house counsel for Mr Grant, responded to the CIT liquidators referring to the fact that the deposit of
$275,000 was not payable until Conditions 19.1 and 19.2 had been complied with and that it was undisputed that that did not occur. The deposit was therefore never paid and settlement did not take place. The letter stated that BBG was never the equitable owner of the Waimarie property and that the agreement never went ahead “due to CIT not upholding its contractual obligations under the agreement”.
[53] Finally, on 2 October 2020, the CIT liquidators wrote to Mr Grant formally rejecting BBG’s claim. The email referred to the “analogous facts scenario” in Avondale Printers & Stationers Limited v Haggie,10 saying that in that case the plaintiff spent money improving land which belonged to someone else, reasonably anticipating that they would become the legal owner in the future. After quoting from the case, the liquidator recorded that Mahon J declined the claim on the basis that a
9 s 92(1)(b) of the Evidence Act.
10 Avondale Printers & Stationers Ltd v Haggie [1979] 2 NZLR 124.
person who lays out expenditure on the property of another, whether as tenant or intending purchaser, acts entirely at their own risk.
[54] The liquidators also referred to Planet Kids Ltd v Auckland Council, where the Supreme Court stated that upon entering into a contract for the sale of land, the property belongs to the purchaser in equity even when the agreement is conditional.11
[55]The email summarised the position as follows:
BBG undertook work, knowing that they ran the risk of not receiving any reward (should the condition not be fulfilled), and without any agreement from CIT that the work should be undertaken or that BBG would be compensated for the work. There is no basis for a claim.
[56] On 2 November 2020 Mr Grant filed this application for review of the CIT liquidators’ decision to reject BBG’s claim, including for leave to bring the claim.
Should leave be granted to BBG to bring this application?
Is BBG a creditor for the purposes of s 284(1)(b)?
[57] As set out above, an application for review of a liquidator’s decision by a creditor requires leave.
[58] The Companies Act 1993 Liquidation Regulations 1994 make it clear that a creditor whose claim has been rejected may still apply as a creditor under s 284(1)(b) of the Act12 so BBG may apply.
[59] Furthermore, in Manifest Capital Management Pty Ltd v Lawrence, Heath J granted leave to Manifest following the rejection of their liquidation claim, with his Honour describing Manifest as a “putative creditor”.13
11 Planet Kids Ltd v Auckland Council [2013] NZSC 147.
12 Companies Act 1993 Liquidation Regulations 1994, regs 15 and 16.
13 Manifest Capital Management Pty Ltd v Lawrence HC Auckland CIV-2010-404-007741, 20 December 2011.
Legal principles regarding leave
[60] The test for leave under s 284(1) was set out in Trinity Foundation (Services No.1) Ltd v Downey.14 The Court held that a creditor must do more than merely demonstrate that its claim is sustainable but also that it has an arguable case. Associate Judge Lang (as he then was) held that an arguable case for the grant of leave is required to have two characteristics:15
(a)a credible factual basis; and
(b)a reasonable likelihood that if the claim is established, the Court will disturb the act or decision in question.
[61] The Court is only likely to reverse an act or decision of a liquidator if the act or decision is unreasonable. Applying this standard ensures that the object of the legislation will be met, because truly meritorious claims will be granted leave. The section therefore strikes a balance between preserving the rights of meritorious claimants, whilst at the same time ensuring that the assets of the company in liquidation are not frittered away as a result of claims that are unlikely to succeed.16
Is there a credible factual basis for BBG’s claim?
[62] BBG’s claim is based on invoices issued by BBG to CIT in August and September 2014 for earthworks completed on the Waimarie properties by JG Civil. At the time the invoices were issued Mr Olliver was the sole director of BBG and CIT.
[63] When CIT went into liquidation in 2016, Mr Olliver submitted a claim on behalf of BBG supported by copies of the invoices issued by BBG to CIT for the earthworks.
14 Trinity Foundation (Services No.1) Ltd v Downey (2005) 9 NZCLC 263,917 (HC) at [17]–[20].
15 At [21].
16 At [22].
[64] The liquidators did not ask for a copy of the contract between BBG and CIT providing that CIT would pay for the earthworks, presumably because Mr Olliver was the sole director of both BBG and CIT at the time the invoices were issued, so the invoices would not have been issued if CIT did not agree to pay.
[65] When BBG was placed in liquidation in September 2019, the newly appointed liquidator, Mr Grant, confirmed BBG’s claim had been accepted by the CIT liquidators. Furthermore, a CIT creditors’ meeting was held at which Mr Olliver, Ms Sparks, the liquidators and their lawyer, Mr Tingey, were present. Discussion included reference to a distribution to BBG on the basis of the claim.
[66] More than six years after the invoices were issued and four years after the claim was made by BBG in the CIT liquidation, Mr Olliver asked the liquidators to reject BBG’s claim on the basis that “recent materials” had come to light which suggested that BBG incurred the liabilities for earthworks only as a purchaser after it had signed a sale and purchase agreement with CIT.
[67] The “recent material” was a copy of the sale and purchase agreement between BBG and CIT dated 19 June 2014.
[68] The sale and purchase agreement made it clear that BBG was only agreeing to purchase some of the BBG properties, with the condition set out in cl 19.1 stating that the remainder were to be the subject of a separate agreement between Mr Olliver and CIT. Mr Olliver accepted in evidence that the earthworks completed by JG Civil, that were on-charged to CIT by BBG, were not just on properties subject to the sale and purchase agreement. They were also undertaken on 18, 22 and 28 Waimarie Street. This is a critical difference between the facts in this case and those in the cases relied on by the liquidators, Avondale Printers and Planet Kids.
[69] Even aside from that difference, the facts in Avondale Printers were very different from the facts in this case, as is apparent from the passage quoted by the liquidators in correspondence with Mr Grant:17
17 Avondale Printers & Stationers Ltd v Haggie [1979] 2 NZLR 124 at 155
The primary consideration would be the expenditure by the plaintiff of this large sum of money for which liability in restitution is now denied. The plaintiff spent part of that money when he was the owner of the property in equity and when he anticipated becoming the legal owner. That expectation was shared by the defendant, who could therefore not be the object of any moral censure in that respect. The balance of the money was spent after the defendant took title, but it was necessarily spent in order to complete the programme of works which had been embarked upon by virtue of the contract between the plaintiff and the builder. But as to this further expenditure laid out by the plaintiff after the defendant took title, the defendant specifically withheld his consent. He warned the plaintiff, and he warned the builder, that he would not be responsible for payment of any work performed on the property. Again the defendant could clearly not be characterised as a person seeking to gain a pecuniary advantage by unjust means.
(italics added)
[70] By contrast here the invoices were issued by BBG to CIT immediately the earthworks were done between companies with the same director and even before the certificates of payment were signed by Woods. The invoices were not rejected by CIT at the time or for the next several years until the liquidators determined to reject the claim.
[71] Another important distinction with Avondale Printers is that the vendor and purchaser were associated entities and the agreement was entered into against the backdrop of the Waimarie JV.
[72] The Waimarie JV was referred to in cross-examination by Mr Olliver, who suggested that entry into the sale and purchase agreement by BBG was a way of implementing the JV agreement:
Q.Some of the properties in this development were going to be owned if you could get the caveats off by BBG and some of them were going to be owned by you or other entities you controlled?
A. That’s correct. That was the intention, which was the original intention on the original JV agreement. So I think to simplify it, all we were looking to do was implement the original JV agreement that was put in place on the properties.
[73] The Waimarie JV expressly states at clause 2.3 that the beneficial ownership of the Property and other assets of the Waimarie JV is to be determined in accordance with that agreement “and not by reference [sic] the title to any part of the Property or the shareholding of CIT”.
[74] The termination date for the Waimarie JV was “upon the transfer of the residential portion to the Waimarie [Trust] [sic] free of any encumbrance and completion of the realisation by sale of the remainder of the Property”.18 Neither of these had happened at the time the earthworks were recharged by BBG to CIT in 2014. CIT Holdings Ltd v Glover No.2 Ltd, issued on 5 December 2014, confirmed that the Waimarie JV remained on foot.19
[75] Both the liquidators and their lawyers must have been aware of the Waimarie JV because the beneficial ownership of the Waimarie properties that were held in CIT’s name was determined by the Waimarie JV.20 Furthermore, by the time the liquidators decided to reject BBG’s claim, there had been considerable litigation, including by the liquidators, in which the Waimarie JV was considered.21
[76] In circumstances where the CIT liquidators must have been aware of the JV agreement and that the legal arrangements were complex, it is surprising that they did not consider it, or seek further information from Mr Olliver or JG Civil regarding the earthworks and what properties they were completed on.
[77] This is particularly the case where a request was made by Mr Olliver so late in the liquidation and where the reversal of the liquidators’ position would be likely to result in entities associated with Mr Olliver receiving a greater distribution than otherwise.22
18 Clause 6, see extract above at [10] from CIT Holdings Ltd v Glover No.2 Ltd [2014] NZHC 3114 at [10].
19 CIT Holdings Ltd v Glover No.2 Ltd at [90].
20 At [51].
21 Harris v The Bank of New Zealand [2018] NZHC 2386; CIT Holdings Ltd (In Liq) v Auckland West Legal Services Ltd [2018] NZHC 232; Olliver v Sparks [2021] NZHC 220.
22 Mr Olliver disputes this but to do so he relies on the claims of entities associated with him in the BBG liquidation being accepted and Mr Grant has indicated that these claims will be rejected if further supporting documents are not provided.
[78] From the above, it is clear that there is a credible factual basis for BBG’s claim. The claim is consistent with the contemporaneous documents issued at the time, which included invoices issued by BBG to CIT and not rejected at the time. Furthermore, the invoices were issued when Mr Olliver was the sole director of BBG and CIT. The claim was initially accepted by the liquidators with full knowledge that the invoices were for earthworks being on-charged by BBG to CIT and following provision of copies of the progress claims submitted by JG Civil and the certificates of payment issued by Woods. It was only after a request from Mr Olliver that the claim was reconsidered. The request relied on the equitable estate passing to BBG as the purchaser under the sale and purchase agreement, but that agreement on its face did not relate to all of the Waimarie property and nor was the Waimarie Joint Venture (“Waimarie JV”) considered.
Is there a reasonable likelihood the Court will disturb the decision in question?
[79] I now move on to the second stage of the test for leave: whether there is a reasonable likelihood that if a claim is established, the Court will disturb the decision in question.
[80] This is relatively briefly answered. The decision of the liquidators relies on the application of legal principle to what the liquidators consider to be the relevant factual material. When the liquidators were relying on the contemporaneous documents provided in support of BBG’s claim, the claim was admitted. The liquidators then decided to reverse what is a substantial claim on the basis of legal principle. If that legal principle is not applicable or the facts in the cases relied upon are distinguishable, there is a very reasonable likelihood that the Court will disturb the decision to reject the claim.
[81] In Manifest Capital Management Pty Ltd v Lawrence, Heath J described his approach to considering an application to reverse a liquidators’ decision as follows:23
The liquidators made a relatively peremptory decision to reject the claim. Before doing so, they did not obtain all relevant information. Nor were steps taken to examine relevant witnesses, even though power to do in Australia had
23 Manifest Capital Management Pty Ltd v Lawrence HC Auckland CIV-2010-404-007741, 20 December 2011 at [8].
been conferred on the liquidators by the Federal Court. Additional evidence is now before me. Two of the witnesses for Manifest have been cross-examined. Manifest is entitled to have its challenge considered by this Court on the basis of the evidence that is now available. My task is to undertake a fresh assessment of whether the claim should be admitted to proof.
[82] In Noyce v Parnell Property Investments Limited Woodhouse J endorsed this approach, saying that the Court will undertake a fresh assessment of whether a claim should be admitted where either it is obvious that the liquidator has not acted reasonably because they did not request or consider relevant evidence, or new and relevant evidence is before the court that was not available to the liquidator.24
[83] Both of the above cases make it clear that the Court will disturb a decision of a liquidator where the liquidator has not taken all of the relevant information into account. That appears to be exactly the position here.
[84] Furthermore, the CIT liquidators’ decision is not a matter of commercial judgment, as some liquidators’ decisions are, and so there cannot be a concern that reversing the liquidators’ decision would interfere with a commercial decision of expert liquidators.
Decision on leave
[85] As there is a credible factual basis and a reasonable likelihood that the Court will disturb the decision in question, the two characteristics necessary for establishing an arguable case are present. I therefore grant leave to bring the application.
Was it unreasonable for the liquidators of CIT to reject BBG’s claim?
[86] The liquidators rejected BBG’s claim on the basis that the equity in the property would have passed to BBG as the purchaser and any works done were therefore for BBG’s own benefit. However, the earthworks completed were not only on properties that BBG had agreed to purchase and the context in which the earthworks were completed included the existence of the Waimarie JV.
24 Noyce v Parnell Property Investments Limited [2015] NZHC 2037 at [45].
[87] Furthermore, it is not clear that the equitable estate would necessarily have passed to BBG on the signing of the sale and purchase agreement in respect of the properties to which it related. In Bevin v Smith the Court of Appeal held:25
There will be some conditional contracts, particularly those subject to true conditions precedent, where the parties cannot be regarded as intending that equitable title will pass to the purchaser until the condition is waived or fulfilled.
[88]A later decision of the Court of Appeal, O’Leary v Sentiero Properties Limited,
referred to the above passage and went on:26
[33] Features of the May agreement which point against an intention to pass equitable title are the fact that the deposit was not payable until the agreement became unconditional and the open ended nature of cl 14.0. That clause effectively allowed Sentiero to pull out of the contract for any reason prior to 14 July 2004. In those circumstances, there is an argument that the parties cannot have intended an equitable interest to pass until Sentiero had declared the condition unconditional and had paid the deposit.
[89] In the present case, the deposit was not payable by BBG until fulfilment of both conditions contained in cls 19.1 and 19.2, and there may be other relevant factors. I do not need to consider these further, however, because whether the equitable estate passes or not is not determinative now that it is clear the sale and purchase agreement between BBG and CIT does not relate to all of the properties on which earthworks were undertaken.
Contemporaneous documents
[90] The contemporaneous documents support there being an agreement between BBG and CIT for CIT to pay for the earthworks. This is because the invoices issued by BBG to CIT at the time were clearly recharging the invoices issued by JG Civil to BBG. The invoices were accepted by CIT. They related to earthworks not just on the Waimarie properties that were the subject of the sale and purchase agreement between BBG and CIT, but also on other Waimarie properties. In addition, Mr Olliver was the sole director of both BBG and CIT at the time the invoices were issued.
25 Bevin v Smith [1994] 3 NZLR 648 at 665.
26 O’Leary v Sentiero Properties Limited (2006) 7 NZCPR 869 at [32] – [33].
[91] Under cross-examination, after admitting that the work completed by JG Civil included the removal of one driveway and development of another, Mr Olliver attempted to say that the work on the sections not subject to the sale and purchase agreement, including 22 (the section with the family home) and 28 Waimarie St, was only for the purposes of traffic management. Later on, in re-examination Mr Olliver described the quantity of works on the properties that were not the subject of the BBG agreement as “miniscule in the scheme of things”, work that Mr Olliver, after a rough calculation, said would only have cost approximately $4000. I did not find this evidence consistent or compelling.
[92] Mr Olliver would not go so far as to accept in cross-examination that CIT “agreed” to pay for the earthworks, but his explanations as to why the earthworks were recharged by BBG to CIT, if CIT had not agreed, were not convincing. They ranged from not being aware of the invoices, despite their size and his admitted focus at the time on making the land more saleable so the bank could be repaid, to not being able to recall why BBG’s claim was put into the liquidation if CIT had not agreed to pay. At other times he refused to be drawn, saying it was a legal question:
Q.So when you look at this, Mr Olliver, you’d accept wouldn’t you that JG Civil in doing this work in July and August are doing it on properties which are not part of the sale and purchase agreement between BBG and CIT?
A. Correct.
Q.And it’s actually CIT that own for instance the existing house, lot 2, 30309, that’s right, isn’t it?
A. Yes they owned it all.
Q. No, but we’re trying to –
A.I understand what you’re saying, but yes it owned it, but it owned it, but it owned it all.
Q. Okay, CIT, this is really important, Mr Olliver, because –
A.What you’re trying to say is that they’re doing work on land that BBG had not contracted to buy?
Q. Correct?
A. Why didn’t you just come out and ask that?
Q. Well, you agree with that proposition?
A. Absolutely, you could have asked that 20 minutes ago.
Q. You knew that when Keegan Alexander wrote the letter saying that legally CIT had made a mistake and CIT was not liable for work that had been invoiced. You knew that didn’t you?
A. Well it was in [wasn’t] front of my mind, but if they hadn’t put this in they couldn’t have done the earthworks.
Q. The whole point of your complaint about BBG is that BBG cannot claim for work done on properties it was going to buy.
A. No that’s not my point. That’s a legal position, which I’m not qualified to comment on.
Q. Okay, do you want to have a look at Mr Springs’ letter to the liquidators?
A. Yeah, so I took legal advice twice about when this fact arose and I followed that advice, but that’s a legal question as to whether BBG has a right to claim against CIT.
Q. But it’s also I think you’d agree a factual question, isn’t it?
A. I’m not – that’s beyond my pay grade. I’m not a lawyer.
[93] The re-examination of Mr Olliver by counsel for the liquidators further reinforces that Mr Olliver avoided expressing a view on the facts but was relying on legal argument:
Q. Now my learned friend asked you about those invoices?
A. Yes.
Q. And you said they were prepared by PWC?
A. No the invoices weren’t prepared by PWC, they would have been produced by my (inaudible 10:57:13) accountant at the time, which would have been Anne Dew.
Q. And were they properly prepared?
A. Well in hindsight no. I mean did Anne think she was doing the right thing? I absolutely think she did. A very fastidious person, but with the knowledge that we have now they’re clearly not.
Q. Well could you perhaps explain to the Court why they were incorrectly issued?
A. Um, well I think that Anne at the time, she’s the accountant and she’s processing those and not aware of the legal implications and probably not even the contract. In fact almost certainly so. So she simply on- charged, it’s pretty common for as mentioned that there’d been over a hundred companies and there’s 48 running now, which we’re trying to reduce, but there’s a lot of intercompany specialist legals on- charges and whatever they go on, so it’s a monthly occurrence.
Q. But were they issued correctly?
A. At the time or now?
Q. Based on what you know now.
A.Oh definitely. Now that I know the law and everything that’s visible that they were incorrectly issued.
The JV agreement
[94] Under cross-examination, when explaining entry into the sale and purchase agreement, Mr Olliver said “all we were looking to do was implement the original JV agreement that was put in place on the properties”.
[95] Although the JV agreement was not in evidence before me, it is discussed in detail and key clauses are quoted by Associate Judge Osborne (as his Honour then was) in CIT Holdings v Glover No.2 Ltd.27 His Honour dismissed CIT’s application to remove caveats lodged over the properties by Glover No.2, the corporate trustee for the Glover No.2 Trust controlled by Ms Sparks. CIT’s application was brought on 1 July 2014, shortly after the sale and purchase agreement between BBG and CIT was entered into, and determined on 5 December 2014, several months after the earthworks had stopped in August 2014. His Honour found:28
[51] It is at least arguable that … Glover No.2 in this case has an interest both in the land and the net proceeds of the sale of the joint venture assets. The beneficial ownership clause makes it clear that CIT is to become the owner of the properties only “in name”, with beneficial ownership of the properties and other assets of the joint venture being determined in accordance with the terms of the Waimarie JV. The joint venturers’ respective interests through their beneficial ownership of the property and other assets are then defined to be a 60 per cent and 40 per cent share respectively. While it is clear that the Waimarie JV contemplates that the share of each party will ultimately be received (with the exception of the residential portion) by way of the proceeds of sale of the remainder of the property it is
27 CIT Holdings v Glover No.2 Ltd [2014] NZHC 3114 at [7] – [16].
28 At [51].
arguable that at least for the time being each party has an interest not only in the ultimate proceeds but in the properties themselves.
[96] His Honour went on to say that if the reference to CIT’s bare trusteeship which appeared in the 31 March 2014 financial statements prepared by Mr Olliver is ultimately found to reflect the legal position, the joint venturers would each have the right to obtain an order requiring CIT to have the properties sold.29 As it was a caveat decision, the Court was not required to finally determine the parties’ rights but the Court of Appeal in Fatupaito v Harris has since held that CIT did hold the property as bare trustee for the joint venture parties.30
[97] BBG’s position needs to be considered against the backdrop of the Waimarie JV. The JV agreement expressly states that the beneficial interest in the properties is to be determined in accordance with the JV agreement and not according to the title of the properties or any shareholding of CIT. The position is not, therefore, as straight forward as the CIT liquidators considered it to be.
[98] Mr Olliver said several times that the earthworks were done to make the properties more saleable to ensure BNZ was repaid, describing it as his “sole motive”. BNZ had a caveat over the Waimarie properties in respect of the money owed to it by CIT. If CIT repaid BNZ it would mean the properties could be sold and the parties to the Waimarie JV paid out. This is consistent with the work being done to implement the JV agreement, as Mr Olliver said in cross-examination.
Was there a concluded bargain for CIT to pay for the earthworks?
[99] In rejecting the claim, the CIT liquidators relied on the equity in the property passing to BBG on its entry into the sale and purchase agreement with CIT. Even if the equity in some of the Waimarie property did pass to BBG, however, it does not preclude there being a separate agreement for CIT to pay BBG back for the earthworks undertaken by JG Civil.
29 At [52].
30 Fatupaito v Harris [2018] NZCA 497 at [5].
[100] Counsel for BBG submitted that a contract between BBG and CIT should be implied for BBG to organise the earthworks and charge them to CIT to pay when CIT realised the properties.
[101] In Paper Reclaim Ltd v Aotearoa International Ltd,31 the Court of Appeal stated that the test to determine whether dealings between parties establish a contract and the terms of that contract is “whether the parties’ dealings, when viewed objectively from the point of view of reasonable persons on both sides, allow only for a finding that a concluded bargain had been reached”.32 The courts are entitled to look at the whole context of the parties’ relationship in reaching a view as to whether a bargain was concluded and as to its terms.33
[102] On the evidence, when viewed objectively, it is clear that a concluded bargain was reached between BBG and CIT for CIT to pay for the earthworks for the following reasons:
(a)Mr Olliver was the sole director of both companies at the time the invoices were issued.
(b)CIT was immediately invoiced by BBG, even before the certificates of payment were received from Woods.
(c)CIT did not reject the invoices and both BBG and CIT proceeded on the basis they were correctly issued until the liquidators rejected the claim in 2021.
(d)There was no separate itemisation of earthworks completed on the properties that were the subject of the sale and purchase agreement between BBG and CIT and earthworks on the residential properties, as one would have expected if BBG was undertaking the earthworks for its own benefit.
31 Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA).
32 At [52], citing Boulder Consolidated Ltd v Tangaere [1980] 1 NZLR 560 (CA); Meates v Attorney- General [1983] NZLR 308 (CA) at 377.
33 At [52], citing Canterbury FM Broadcasting Ltd v Daniels (1988) 2 NZBLC 103,535 at 103,541; Burrows Finn & Todd (eds) Law of Contract in New Zealand (2ed 2000) at [3.3.1].
(e)The earthworks finished in August 2014, before the hearing of the application to remove the caveats in September 2014 and before the decision was issued dismissing the application in December 2014. If the earthworks were for BBG’s advantage then one would have expected them to continue beyond August.
(f)Mr Olliver’s evidence was that “all we were looking to do was implement the original JV agreement”.
(g)Mr Olliver said several times in evidence that the earthworks were done to make the properties more saleable to ensure BNZ was repaid, including in re-examination, when questioned about the benefits to BBG of the work done by JG Civil:
A. I mean [BBG] had a condition (sic) agreement to purchase and if you want to get to the nub of it, I mean the underlying driver was my determination to get – remember that you’ll see from various valuations there that the for sale valuation at the time wasn’t overly attractive to the bank and as a result, and we’ve proven we did a lot better, but we were convinced that by subdividing, doing the works, taking the rubbish off the site, the unsuitables off the site and doing, selling sections that ordinary people could buy rather than the developer would more than pay the bank back in full. This was seen as the best way out and my sole motives were to get the Bank of New Zealand’s money back to them.
(h)Finally, when Mr Olliver was asked in re-examination by counsel for the liquidators whether CIT encouraged BBG to do the work, having agreed that CIT did not engage JG Civil or ever agree to pay BBG, his response was:
A.Ah …
Q. Well (inaudible 11:11:08) Well –
A.I mean I think the correct question there it comes back to what I was saying before, I was personally driven to do whatever I could to get the bank’s money back, and clearly there’s a conflict there. However, CIT benefitted from paying back its debts, which it wouldn’t have otherwise been able to do.
[103] In my view, based on all of the above, there was objectively a concluded contract between BBG and CIT for CIT to pay for the works.
[104] Counsel for the liquidators submitted that the fact that there was an entire agreement clause in the sale and purchase agreement between BBG and CIT precluded such an argument. But now that it is clear that the sale and purchase agreement does not relate to all of the properties on which earthworks were undertaken, this submission loses force.
[105] Furthermore, the sale and purchase agreement named the purchaser as BBG “and/or nominee” so it is unsurprising that it was agreed on an “as is where is” basis, the vendor had no obligation to remediate and there was an “entire agreement” clause. Mr Olliver made it clear in evidence that the sole motivation was to repay the bank and that the earthworks were to make the land more saleable. For BBG to fund the purchase, it would have needed to find purchasers for the sections so the bank could be repaid and agree to remove its caveat (assuming Glover No.2’s caveats were also removed). These terms in the sale and purchase agreement do not, therefore, preclude a contract between BBG and CIT in regard to the earthworks.
[106] It is useful to go back to the CIT liquidators’ email confirming rejection of BBG’s claim:
BBG undertook work, knowing that they ran the risk of not receiving any reward (should the condition not be fulfilled), and without any agreement from CIT that the work should be undertaken or that BBG would be compensated for the work. There is no basis for a claim.
[107] It is clear that the above is not supported by the evidence both because the sale and purchase agreement entered into by BBG was not in respect of all the properties on which earthworks were undertaken and because there was an agreement for CIT to pay for those earthworks when viewed objectively. In these circumstances the decision by the liquidators to reject BBG’s claim is a decision that no reasonable liquidator could have come to and must be reversed.
Result
[108] Leave is granted to BBG as a creditor to apply for an order pursuant to s 284(1)(b) of the Companies Act 1993 against the liquidators of CIT.
[109] The application for an order reversing the liquidators’ decision to reject BBG’s claim in the liquidation is granted so that BBG’s claim in the liquidation of CIT in the sum of $836,012.06 is accepted.
Costs
[110] The parties did not make submissions on costs but my preliminary view is that BBG as the successful party is entitled to costs and that 2B costs are appropriate.
[111] I record that reg 16 of the Companies Act 1993 Liquidation Regulations provides that where a creditor makes an application under s 284(1(b) in opposition to the liquidator’s rejection of a claim, the Court has a discretion as to whether the creditor’s costs in respect of that application should be:
(a)added to the claim; or
(b)paid out of the company’s assets as an expense of the liquidation; or
(c)paid personally by a party to the proceedings (other than the liquidator).
[112] I encourage the parties to confer on costs and attempt to reach agreement. If that is not possible, brief memoranda may be filed on behalf of the applicant within 20 working days and on behalf of the defendant within 30 working days.
Associate Judge Sussock
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