Bennett v Ebert Construction Limited (in receivership and liquidation) - [2020] NZHC 277

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2018-485-792

[2020] NZHC 277

UNDER the Receiverships Act 1993 and Part 19 of the High Court Rules 2016

BETWEEN

LARA MAREE BENNETT, JOHN HOWARD FISK and MICHAEL LONGMAN

Applicants

AND

EBERT CONSTRUCTION LIMITED

(in receivership and liquidation) Respondent

AUCKLAND VENTILATION SERVICES LIMITED

First Interested Party

TASLO STEEL SECURITY LIMITED

Second Interested Party

On the papers:

Counsel:

M G Colson and R L Pinny for Applicants No appearance for Respondent

C R Andrews for First Interested Party K Badcock for Second Interested Party

Judgment:

26 February 2020

JUDGMENT (NO. 2) OF CHURCHMAN J

BENNETT & ORS v EBERT CONSTRUCTION LIMITED [2020] NZHC 277 [26 February 2020]

Background

[1] In November 2018, the applicants were appointed Receivers of a fund comprising of retentions held on trust for the subcontractors of the respondent (the Fund).1

[2] The Receivers were given directions as to how to manage and distribute the Fund and the decision gave directions as to which of the various classes of subcontractors were entitled to participate in the Fund.

[3]Two issues were left to be resolved at the conclusion of the receivership:

(a)while the Receivers were entitled to deduct their fees, costs and expenses from the Fund, they were required to obtain the approval of the Court for their account; and

(b)the issue of whether interest accruing on the Fund belonged to the respondent or the subcontractors holding valid claims to the Fund was reserved for determination at a later date.

[4] Other than the matters which are the subject of this application, the receivership has essentially been completed. In broad terms, out of the net funds available for distribution of just over $4 million, approximately 96 per cent have been, or will be, distributed to eligible subcontractors.

The application

[5] By application dated 29 November 2019, the applicants sought the following orders:

(a)the Receivers may apply interest of $44,742.15 held in the Retention Account, together with any interest which accrues on the Fund from 1 November 2019, to their fees, costs and expenses;

1 Bennett & Ors v Ebert Construction Limited (in receivership and liquidation) [2018] NZHC 2934.

(b)the Receivers may make a distribution from the Fund to Ebert of
$30,253.98 (with such amount to be adjusted for the pro-rated rate) relating to defective work carried out by subcontractors identified as subcontractors A to F in the affidavit of Lara Maree Bennett sworn in these proceedings dated 29 November 2019 (the Bennett affidavit);

(c)the Receivers may apply $1,561.07 (with such amount to be adjusted for the pro-rated rate) from the Fund comprising entitlements waived by subcontractors identified in the Bennett affidavit as Subcontractors G to H to their fees, costs and expenses;

(d)the Receivers may pay $5,590.44 (with such amount to be adjusted for the pro-rated rate) to the Commissioner of Inland Revenue as unclaimed monies owing to subcontractors identified in the Bennett affidavit as Subcontractors I and J; and

(e)the…

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: [2020] NZHC 277
Decision Date: 26 February 2020

CaseChat Overview and Summary

The High Court of New Zealand was presented with an application by Lara Maree Bennett, John Howard Fisk, and Michael Longman, who were appointed as Receivers of a fund held on trust for subcontractors of Ebert Construction Limited. The case dealt with the management and distribution of the fund, focusing on the approval of fees and costs incurred by the Receivers. The applicants sought to apply certain interest and funds to their fees and expenses and to make specific distributions from the fund. The first interested party, Auckland Ventilation Services Limited, did not oppose the orders, while the second interested party, Taslo Steel Security Limited, raised concerns about the increase in the Receivers' costs and requested a detailed breakdown of the work done.

The court had to decide whether the Receivers' fees, costs, and expenses were fair and reasonable, considering the significant increase in costs from the initial estimate. The court examined the affidavits and reports submitted by the Receivers, which detailed the work done in resolving over 60 claims for defects. The Receivers argued that the increased costs were due to the complexity of resolving these claims, which were not anticipated in the initial estimate. Taslo contested the appropriateness of the fees, requesting detailed information on the work done for each claim, which the Receivers argued would incur unnecessary additional costs.

The court found that the Receivers had acted effectively and economically, with 96% of the net funds being distributed to eligible subcontractors. The court was satisfied that the Receivers' fees, costs, and expenses were reasonable and approved the total costs of $214,638. The court also granted the other directions sought by the Receivers, including the application of interest, the distribution of funds, and the payment to the Commissioner of Inland Revenue.

The final orders approved the Receivers' fees, costs, and expenses, and directed the application of interest, the distribution of funds, and the payment to the Commissioner of Inland Revenue as requested. The court directed that Taslo's request for further information on the work done be denied, as it would impose unnecessary additional costs.

Orders