Butcher v Dragon Flyte Farm Limited

[2013] NZHC 1735

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

CIV-2012-488-570 [2013] NZHC 1735

BETWEEN  CARL DAVID GEORGE BUTCHER Plaintiff

ANDDRAGON FLYTE FARM LIMITED, PERI FINNIGAN AND ROY HORROCKS AS LIQUIDATORS OF DRAGON FLYTE FARM LIMITED Defendants

Hearing:                   8 July 2013

Counsel                   CDG Butcher, plaintiff in person

K Rowe for defendants
No appearance for interested parties, AJ and RV Burgess

Judgment:                8 July 2013

ORAL JUDGMENT OF ASSOCIATE JUDGE ABBOTT

Solicitors:

McElroys, Auckland

BUTCHER v DRAGON FLYTE FARM LIMITED & ORS [2013] NZHC 1735 [8 July 2013]

[1]      On 28 August 2012, Mr Carl Butcher filed an application seeking relief under s 174 of the Companies Act 1993 (the Act), as a 30 per cent shareholder in Dragon Flyte Farm Limited (in liquidation).   The liquidators were named as defendants. Although the other shareholders (holders of 70 per cent of the shares) were not named as parties, they have previously appeared as interested parties.

[2]      The proceeding is before the Court with an application by Mr Butcher, filed on 14 May 2013, for leave to commence the proceeding against the company.  I will come back to an issue over the nature of the application.

Background

[3]      This proceeding has its genesis in a dispute between shareholders, which seemingly began when the company was first established in late 2003.  In essence, as I understand from what Mr Butcher has told me today, he considers that his own property  was  put  into  the  company  without  his  authority,  and  although  an arrangement was reached to return that property to him, that arrangement has not been recognised by the liquidators.

[4]      Mr Butcher’s grievances have had previous airing in the Court in applications brought in the liquidation of the company both by Mr Butcher and by the liquidators (under s 284 of the Act).  Those matters were the subject of judgments by Associate Judge Bell on 27 April 2012 and 21 September 2012.[1]

[1] Finnigan v Butcher [2012] NZHC 810; Finnigan v Butcher [2012] NZHC 2463.

[5]      When this present proceeding first came before the Court in a telephone conference (on 3 December 2012), Associate Judge Bell commented that he considered it misconceived[2]  but also noted that as it had been issued against the company, it required leave under s 248(1)(c) of the Act.  At that point Mr Butcher had not asked the liquidators whether they would consent.

[2] A comment he also made at [28] of his judgment of 21 September 2012: Finnigan v Butcher

[2010] NZHC 2463.

\[6]      The liquidators filed a memorandum shortly after the conference advising that they did not consent to Mr Butcher issuing his claim against the company in

liquidation, and that they would oppose any application for leave.  They indicated several grounds for opposition and, in the course of doing so, signalled that they were close to completing distribution of the company’s assets (in accordance with directions given by the Court on 27 April 2012 and 14 November 2012) and that they were intending to complete the liquidation and have the company struck off the register.

[7]      The matter did not come back before the Court until 30 April 2013, at which point Associate Judge Bell noted his earlier direction that Mr Butcher required leave, the liquidators’ likely opposition, and his earlier view[3]  that the application under s

174 could not serve any useful purpose, before inviting Mr Butcher to consider his comments before deciding whether to bring any application for leave (it had still not been brought at that point).

[3] Expressed in his decision of 21 September 2012.

[8]      Mr Butcher filed the present application on 14 May 2013.

Clarification of application

[9]      Mr Butcher’s application is dated 6 May 2013.   It gives notice that he is applying  to  the  Court  under  s  250(1)  of  the Act  for  an  order  terminating  the liquidation.   The ground advanced is that the liquidators did not follow directions given by the Court in the liquidation in February 2011, and particularly had failed to address his contention that money he had paid towards the deposit of a property that is at the heart of this dispute (at 590 Trounson Park Road) had gone to the private

account of the other shareholders.[4]     In addition, he said that the application was

made in reliance on s 248(1)(c) of the Act (the provision requiring leave of the Court to bring any application against a company in liquidation).

[4] This is one of facts which has led to his contention that the liquidators have wrongly dealt with that property.

[10]     At the start of today’s hearing, I asked Mr Butcher whether he wished to pursue his application as one for termination of liquidation under s 250, or whether it was to be treated as an application for leave to commence his proceeding under s

174.  He has asked that the application proceed as one for leave.  I have accepted that

is the proper course, given the background to the matter coming before the Court today.

Service

[11]     There is an issue as to service.   The liquidators say that they have never received the application (for leave).   Mr Butcher says that he posted it to the liquidators on the same date that it was filed in Court.  Nothing turns on this: the liquidators have appeared today, having filed a memorandum dated 6 June 2013 challenging the application[5]  and having filed submissions ahead of today’s hearing with these documents having been served on Mr Butcher.   In the circumstances, I regard it appropriate to  dispense with the need for filing of a formal  notice  of opposition.

Discussion

[5] After receiving advice from the Court that Mr Butcher had filed his application for leave.

[12]     The present proceeding has a lengthy history, with Mr Butcher having raised his complaints now over many years, against his former co-shareholders, against former liquidators, and against the present liquidators.

[13]     I have read the second of the two judgments of Associate Judge Bell.  It is clear  that  the  underlying  disputes  have  had  substantial  consideration,  and  in particular the prospect of a proceeding under s 174 of the Act has been examined.[6]

Although Associate Judge Bell was not being asked in that proceeding to determine the issue, he considered that the claim is misconceived (in the circumstances now existing).  I agree with that view.  There is a legal issue as to whether the application will still lie after the company is in liquidation, but the significant factor for present purposes is that it will achieve nothing.  It is abundantly clear that the company is insolvent, and that there is no relief of any consequence available against the company.

[6] Finnigan v Butcher [2012] NZHC 2463 at [24] – [33].

[14]     I make the point, as I did to Mr Butcher in the hearing, that the issue for the

Court is whether a claim should be brought against the company, rather than whether

there is any other form of redress that could possibly be available to him.  It is not appropriate for me to embark on that, nor have I received any submissions in support of it.

[15]     In terms of the application before the Court today (for leave), the Court has a discretion.  One of the elements of the discretion is whether there is any purpose to the substantive application.   I am satisfied that there is no such purpose, for the following reasons:

(a)      The company has been struck off the register.   Whilst it is open to Mr Butcher to apply to have it restored, that application will involve the  same  exercise  of  discretion  in  relation  to  the  purpose  of restoration.

(b)The administration of the liquidation has been conducted with the benefit of directions from the Court, and after issues have been canvassed in a substantive proceeding.[7]

[7] Finnigan v Butcher, above n 6.

(c)      It is clear that any assets that the company possessed have now been distributed (as part of the liquidation).

(d)In addition to there being no apparent benefit to granting leave, to do so is potentially prejudicial to the liquidators in that they will be faced with having to answer the substantive application, when there are no longer any assets available.  In that respect, it is significant that the Court  has  already  made  substantial  orders  for  costs  against  Mr Butcher in the earlier proceeding, which remain unpaid.

(e)      Lastly, and as already commented upon by Associate Judge Bell in the earlier  proceeding,  the  only  potential  orders  potentially  available under  a  s  174  proceeding  are  an  order  requiring  the  company to acquire Mr Butcher’s shares and an order requiring the company to

pay Mr Butcher (and his wife) compensation, and those orders will

have no practical effect given the matters I have already mentioned

(namely that the company is no longer in existence, and has no funds).

In  light  of  all  of  the  above,  Mr  Butcher’s  application  for  leave  to  commence

proceedings against Dragon Flyte Farm Limited (in liquidation) is dismissed.

Costs

[16]     The liquidators have been put to expense in responding to this application. They seek costs.

[17]     Mr Butcher opposes an order for costs.  He maintains that was fully entitled to bring this application (and the underlying s 174 proceeding) because there are unresolved issues which he wishes to have properly considered by the Court.   He relies, in particular, on a statutory declaration given by his now separated wife, Lydia Butcher, dated 27 January 2013, which post-dates the findings of Associate Judge Bell.    I do  not  regard  that  document  as  changing  the  overall  outcome  on  this application, or as  justifying it.   The declaration appears to be merely repeating matters that Mr Butcher has been raising from an early stage.  If he was dissatisfied with the earlier decisions, he had appropriate avenues of redress by way of appeal. He filed, but did not pursue, an appeal.   As matters stand, this application was unsuccessful.

[18]     I make an order that Mr Butcher pay costs to the liquidators on a scale 2B basis, together with disbursements as fixed by the Registrar.  I consider that the case goes close to warranting an award of increased costs, on the basis that the application is entirely lacking in merit.  However, I see little practical advantage in making that

additional order.

Associate Judge Abbott