Body Corporate 355492 v Queenstown Lakes District Council
[2021] NZHC 1914
•27 July 2021
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2015-425-36
[2021] NZHC 1914
BETWEEN BODY CORPORATE 355492
First Plaintiff
AND
JOHN ROBERT CHESTNEY & ORS
Second Plaintiffs
AND
QUEENSTOWN LAKES DISTRICT COUNCIL
First Defendant
continued ….2
Hearing: 16 July 2021
(Telephone Conference)
Counsel:
D J Powell for First Plaintiff
R M Saunders and S D Campbell for First Defendant J M Morrison for Second Defendant
Judgment:
27 July 2021
JUDGMENT OF ASSOCIATE JUDGE LESTER
This judgment was delivered by me on 27 July at 4.00 pm Pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
…..
BODY CORPORATE 355492 v QUEENSTOWN LAKES DISTRICT COUNCIL & ORS [2021] NZHC 1914 [27 July 2021]
ANDELLIOTT ARCHITECT LIMITED (IN LIQUIDATION)
Second Defendant
AND EDWIN GERARD ELLIOTT
Third Defendant
ANDHOLMES CONSULTING GROUP LIMITED
Fourth Defendant
ANDARCH UNDERWRITING AT LLOYD’S LIMITED
Fifth Defendant / Fifth Third Party
ANDASTA MANAGING AGENCY LIMITED
Sixth Defendant / Sixth Third Party
ANDHARDY (UNDERWRITING AGENCY) LIMITED
Seventh Defendant / Seventh Third Party
ANDLIBERTY MANAGING AGENCY LIMITED
Eighth Defendant / Eighth Third Party
AND STEPHEN BRUCE McLEAN
First Third Party
AND JULIE RAEWYN WENSLEY JACK
Second Third Party
AND PETER LAWSON
Third Third Party
AND DANIEL STEWART
Fourth Third Party
[1] This proceeding was commenced on 16 April 2015. By a third amended statement of claim dated 16 December 2015, Elliott Architect Limited was added as a second defendant and Mr Elliott personally added as third defendant.
[2] Mr Ian Andrew Nellies, licensed insolvency practitioner, was appointed liquidator of Elliott Architect Ltd on 1 June 2021 by special resolution of the
shareholders, Mr Elliott and a Ms J M Elliott. The shareholders declared that Elliott Architect Ltd was solvent immediately prior to the passing of the resolution to liquidate the company. The liquidator was not made aware of these proceedings when appointed and advises the Court that he took the solvency declaration as read.
[3] As a result of the liquidation, the proceedings against Elliott Architect Ltd were stayed by virtue of s 248(1)(c) of the Companies Act 1993 (the Act).
[4] The first plaintiff has filed an application seeking leave to continue its proceeding against Elliott Architect Ltd and there is a similar application by the first defendant, Queenstown Lakes District Council (QLDC), to continue with its third party claim against Elliott Architect Ltd in liquidation.
[5] The applications first came before me on 8 July 2021, and by a Minute dated 9 July 2021, I requested that the liquidator advise his position in relation to the applications.
[6] Mr Nellies promptly filed a memorandum as requested in which he advised there were no realisable assets in the company and no creditors. He said the only creditor had been the Inland Revenue Department for a small business cashflow loan taken out on 12 May 2020 as part of the Government’s COVID-19 relief package. Mr Elliott has personally taken over responsibility for that debt.
[7] The liquidator’s formal position is that he does not consent to these proceedings continuing, but has no funds to instruct counsel. The liquidator advises that he has adopted a conservative position on the issue of leave and has advised the parties they should seek leave. The liquidator says that if leave is given then he will not be taking any part in the proceedings and will abide by the eventual outcome.
[8] The age and number of parties involved in this proceeding gives some flavour of their complexity. While it does not seem the liquidator has been asked to accept a proof of debt from the plaintiffs, it is a fair assumption that this would be a pointless exercise, given the liquidator has no funds to review the proceeding, take advice and reach a view as to the validity of the plaintiffs’ claim and then place a value on it.
[9] As noted in my earlier Minute, the applicants for leave are wanting to consider whether there is any potential for recovery against Elliott Architect Ltd’s insurer. The liquidator has properly provided information in respect of Elliott Architect Ltd’s insurance.
[10] Mr Campbell, counsel for the first defendant, drew my attention to the decision of Jagose J in J K Trading Ltd v Rimpro-tech Ltd (in liquidation).1 In that case, his Honour set out the relevant principles applying to an application for leave to continue a proceeding under s 248(1)(c).
[11] The short point here is that because there are no creditors of Elliott Architect Ltd, granting leave cannot cause creditors any prejudice. Nor will Elliott Architect Ltd’s assets be diverted into defending the litigation, given that, as the liquidator frankly acknowledged, there are no assets in Elliott Architect Ltd to fund a defence. How it came to be that the liquidator was not informed of these proceedings has not been explained by Elliott Architect Ltd’s shareholders.
[12] The issue of leave is not without urgency. There is the possibility that the parties may attend mediation in early September 2021. The applicants are still considering their position in relation to Elliott Architect Ltd’s insurance entitlements.
[13] I cannot see any prejudice being created by leave being granted. There is also the practical point that Mr Elliott personally remains a party as third defendant and so will continue to have involvement with the proceedings in any event. Granting leave against Mr Elliott’s company in liquidation would not cause him to be tied up in the proceeding even if the liquidator had the ability to fund a defence on behalf of Elliott Architect Ltd.
[14] Jagose J concluded in JK Trading, the more convenient method to determine an applicants’ claim to be an unsecured creditor of the company may be through proceedings.2 Such is the case here with regard to Elliott Architect Ltd.
1 JK Trading Ltd v Rimpro-Tech Ltd (in liq) [2019] NZHC 376.
2 JK Trading Ltd, above n 1, at [19], citing Satara Co-operative Group Ltd v Fus Ltd (in liq)
HC Napier CIV-2008-441-856, 30 January 2010 at [9].
[15] The applications were brought promptly. As again, Jagose J noted in his judgment at [25]:3
[The applicant] is entitled to risk its own non-recovery against [the liquidated company]. Although fruitlessness of the endeavour previously was seen as a disqualifying factor, the better view is – once liquidators have rejected a claim and substantially concluded the liquidation, and absent prejudice to other creditors, and/or without otherwise unduly dissipating such funds as the company may have – the fact of an arguable case for relief is a sufficient threshold for leave to be granted to commence or continue proceedings against a company in liquidation.
[16] There is nothing to suggest that the applicant’s claim in this case is not arguable.
Result
[17] The plaintiffs’ application for leave to continue this proceeding against Elliott Architect Ltd (in liq ) is granted, as is the first defendant’s application to continue with its third party claim against Elliott Architect Ltd (in liq ).
Leave to withdraw
[18] Mr Morrison, counsel for Elliott Architect Ltd (in liq) along with his instructing solicitor, seek leave to withdraw as solicitor on the record and counsel for Elliott Architect Ltd (in liq). The liquidator is aware of that application.
[19] Leave to withdraw as sought is granted. The address for service of Elliott Architect Ltd (in liq) is at the office of the liquidator, Ian Andrew Nellies.
Associate Judge Lester
Solicitors:
Wynn Williams, Christchurch
Greig Gallagher & Co, Wellington
3 JK Trading Ltd, above n 1, at [25] (footnotes omitted).
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