Bennett v Ebert Construction Ltd (in rec and liq) - [2018] NZHC 2934

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

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

CIV-2018-485-792

[2018] NZHC 2934

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 LTD

First Interested Party

TASLO STEEL SECURITY LIMITED

Second Interested Party

Hearing: 8 November 2018

Counsel:

M G Colson and R L Pinny for the Applicants C R Andrews for First Interested Party

K Badcock for Second Interested Party

Judgment:

12 November 2018

JUDGMENT OF CHURCHMAN J

Introduction

[1] On 31 July 2018, the Bank of New Zealand, exercising their power under a General Security Agreement (GSA) appointed the applicants receivers of the respondent.

BENNETT & ORS v EBERT CONSTRUCTION LIMITED (in receivership and liquidation) [2018] NZHC 2934 [12 November 2018]

[2] On 3 October 2018, David Ruscoe and Timothy Downes (the Liquidators) were appointed by the shareholders as liquidators of the respondent.

[3] Up until it was placed into receivership, the respondent was a substantial construction company with 15 active project sites throughout the country and a staff of approximately 100. It had forecast turnover for the year to 31 March 2019 of
$171 million. It had engaged over 150 subcontractors, some of whom worked on multiple projects.

[4] The Construction Contracts Act 2002 (the Act) provided that, in relation to commercial construction contracts (CCCs) entered into after 31 March 2017, a head contractor (such as the respondent) withholding sums which would otherwise be required to be paid to a subcontractor (retentions), must hold those funds on trust for the subcontractor.

[5] As at the date of the receivership, the respondent had a Retention Account for retentions covered by the Act with a balance of $3,678,832.53.

[6] Upon receivership, the respondent owed its trade creditors (including subcontractors) approximately $24.517 million (including GST) and a further
$9.324 million (excluding GST) in subcontractor retentions. The $3.678 million held in the Retention Account represents the respondent’s only significant cash asset. There is likely to be a significant shortfall in the respondent’s insolvency. This means that, other than any payment that they may receive from the Retention Account, the subcontractors are most unlikely to receive any other payments in relation to the monies owed to them by the respondent.

[7] There are some 152 subcontractors who could potentially have a claim against the funds in the Retention Account and these claims arise from some 213 separate CCCs.

The issues

[8] This application relates to how the funds held in the Retention Account should be distributed. For various reasons which will be addressed in detail later, the funds

held in the Retention Account are insufficient to satisfy the claims of all 152 potentially affected subcontractors.

[9] The claims of some 131 subcontractors are clear and not contentious. There is uncertainty in relation to some 21 of the claims. For those 21 subcontractors, the conclusion I…

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 Bennett v Ebert Construction Ltd (in rec and liq)

Details

AGLC: Bennett v Ebert Construction Ltd (in rec and liq) [2018] NZHC 2934
Case: [2018] NZHC 2934
Decision Date: 12 November 2018

CaseChat Overview and Summary

This case concerns the distribution of funds held in a retention account by Ebert Construction Limited, a construction company that has gone into receivership. The applicants, who are receivers appointed by the Bank of New Zealand, sought to be appointed as receivers and managers of the retention account to manage the distribution of the funds to subcontractors. The primary legal issues were whether the applicants should be appointed as receivers, which subcontractors have a claim to the funds, and how to distribute the funds if there is a shortfall. The court found that the applicants should be appointed as receivers and managers of the retention account. The court also determined that the funds in the retention account should be distributed on a pari passu basis to the subcontractors entitled to share in the account. The court further ruled that the applicants are entitled to deduct their fees, costs, and expenses from the fund, subject to the approval of the court. The court granted the applicants leave to return for further directions as required and allowed the applicants to recover their costs on an indemnity basis.

Orders