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Boult v Cain

Boult v Cain

Case [2022] NZHC 2402 20 September 2022

Liquidation

Inspection of Documents

Liquidation Committee

Statutory Interpretation

Corporate Law & Governance

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IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2022-409-000196

[2022] NZHC 2402

UNDER The Companies Act 1993

IN THE MATTER

of an application to reverse or modify a

liquidator’s decision in the liquidations of Stonewood Homes Limited (in liquidation), Stonewood Homes New Zealand Limited (in liquidation) and Holmfirth Group

Limited (in liquidation)

BETWEEN

JAMES BOULT and BRENT ALFRED METTRICK

Applicants

AND

RHYS JAMES CAIN

Respondent

Hearing: 24 August 2022

Appearances:

G J Ryan for Applicants

J K Stringer for Respondent M J Borcoski for G Ball

Judgment:

20 September 2022

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 20 September 2022 at 11.00 am pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

BOULT v CAIN [2022] NZHC 2402 [20 September 2022]

What is the issue?

[1] A liquidator’s decision to allow his liquidation committee to inspect documents of the liquidation is being challenged by a director and former director of the company in liquidation.

[2] Mr Cain is the liquidator of the Stonewood Group of companies. He pursued a claim for damages against James Boult and Brent Mettrick (the directors) in the High Court, alleging they breached director’s duties owed to the companies. That claim was settled when the parties entered into a confidential settlement agreement dated 23 July 2021. The proceeding has been discontinued.

[3] Mr Cain has agreed to allow the liquidation committee of Stonewood Homes Ltd (in liq) to inspect some of the Court documents relating to the proceeding. The directors do not want the liquidation committee to inspect the documents. They apply under s 284(1) of the Companies Act 1993 to reverse the liquidator’s decision and prevent inspection. They say the liquidator’s decision is wrong and unreasonable, and the Court should intervene and set it aside.

[4] The kernel of the directors’ objection is they consider the reason the liquidation committee has asked to inspect the Court documents is that it may assist one of its members to pursue a claim against them. That, they say, is a misuse of the liquidation committee’s powers, and is prejudicial to the liquidation.

[5] The primary issue is whether the liquidator’s decision to allow the liquidation committee to inspect the Court documents should be set aside as wrong or unreasonable because:

(a)the liquidation committee’s request to inspect was not made for a proper purpose; or

(b)the inspection of the documents will be prejudicial to the liquidation.

What has happened

[6] Geoffrey Ball, David Lee and David Gilbert are the members of the liquidation committee of Stonewood Homes Ltd (in liq), having been elected at a meeting of the company’s creditors on 17 November 2016.

[7] Stonewood is one of the companies in the Stonewood Group for whom the litigation against the directors was pursued by Mr Cain.

[8] Mr Boult is a former director of Stonewood, and Mr Mettrick is presently a director of the company.

[9] On 22 September 2021, Mr…

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 Boult v Cain

Details

AGLC: Boult v Cain [2022] NZHC 2402
Case: [2022] NZHC 2402
Decision Date: 20 September 2022

CaseChat Overview and Summary

The case of Boult v Cain involved a challenge by former and current directors of the Stonewood Group of companies to a liquidator's decision to allow a liquidation committee to inspect certain documents related to a settled legal claim against them. The applicants, James Boult and Brent Mettrick, sought to reverse the liquidator's decision under section 284(1) of the Companies Act 1993. The primary issues were whether the liquidation committee's request to inspect was for a proper purpose and whether such inspection would prejudice the liquidation.

The Court considered the arguments presented by the applicants, who contended that the liquidation committee's request was made for an improper purpose and that allowing inspection would be prejudicial to the liquidation. The applicants argued that the liquidation committee had no legitimate interest in the Court documents as the claim had been settled and that the request was made for personal gain. However, the Court found that the liquidation committee had a qualified right to inspect the liquidator's documents, and the liquidator had a correlative duty to allow inspection unless he believed on reasonable grounds that it would be prejudicial to the liquidation. The Court also concluded that the liquidator's decision to allow inspection was not prejudicial to the liquidation.

The Court dismissed the application by the applicants and held that the liquidator was correct in allowing the liquidation committee to inspect the Court documents, subject to certain exceptions. The Court found that there was no basis to interfere with the liquidator's decision.

Orders