Buxton v Mainline Contracting Limited (in liq) HC Auckland CIV 2010-404-1224

[2010] NZHC 2060

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-1224

UNDER  Section 165 of the Companies Act 1993

IN THE MATTER OF     an application for leave to bring an appeal and stay application and an application for stay of a liquidation

BETWEEN  SUSAN ELIZABETH BUXTON Applicant

ANDMAINLINE CONTRACTING LIMITED (IN LIQUIDATION)

First Respondent

ANDISLAND VIEW ESTATES LIMITED (IN LIQUIDATION)

Second Respondent

CIV-2008-404-3840

IN THE MATTER OF     the Companies Act 1993

BETWEEN  ISLAND VIEW ESTATES LIMITED (IN LIQUIDATION)

Plaintiff

ANDMAINLINE CONTRACTING LIMITED Defendant

Hearing:         22 October 2010

Appearances: C T Patterson for the Applicant in CIV-2010-404-1224 and Defendant in CIV-2008-404-3849

R  B Hucker and D Lang Siu for the liquidators of both Respondent companies in CIV-2010-404-1224 and the Plaintiff in CIV-2008-404-

3849

Judgment:      22 October 2010

ORAL JUDGMENT OF WOODHOUSE J

Solicitors / Counsel:

Mr C T Patterson, Barrister, Auckland

Mr P Macky, Macky Roberton, Solicitors, Auckland

Mr R B Hucker, Hucker & Associates, Solicitors, Auckland

BUXTON V MAINLINE CONTRACTING LIMITED (IN LIQUIDATION) AND ANOR HC AK CIV-2010-

404-1224  22 October 2010

[1]      In CIV-2010-404-1224 Mrs Buxton has brought an application for leave to bring a derivative action under s 165 of the Companies Act.   The proceeding she wishes to bring is an appeal by Mainline against the decision of 5 February 2010, in CIV-2008-404-3840, to place Mainline in liquidation.   That was a decision of Venning J following a defended hearing and the background, which is relevant, is fully set out in his judgment.

[2]      Mrs  Buxton  was  the  sole  director  of  Mainline  when  it  was  placed  in liquidation and remains as a director.  However, following the order for liquidation s 248(1)(b) of the Companies Act applies with the result that Mrs Buxton ceased to have the “powers, functions or duties” of a director other than those set out in Part 16 of the Companies Act dealing with liquidations.

[3]      Mrs Buxton has brought the derivative proceeding application because it appeared that there was no other means for her to challenge the order for liquidation. There may have been other steps for Mrs Buxton to take, but I do not need to consider these.   The liquidators have not appealed the decision.   No creditor or shareholder of Mainline had been a party to the original liquidation proceeding and none has come forward seeking leave to appeal up to this point.

[4]      There is a fundamental question whether there is jurisdiction to grant leave to a director to bring a derivative action for a company in liquidation.  The decision in Headley v Albany Power Centre Ltd (in Liquidation)[1]  indicates that there is no jurisdiction  to  utilise  s 165  following  liquidation.    And  see  the  decision  of  the Supreme Court of New South Wales in Chahwan v Euphoric Pty Ltd trading as Clay

& Michel.[2]   Earlier in this proceeding Priestley J expressed a provisional view that there

was no jurisdiction.

[1] Headley v Albany Power Centre Ltd (in Liquidation) [2005] 2 NZLR 196.

[2] Chahwan v Euphoric Pty Ltd trading as Clay & Michel [2008] NSWCA 52.

[5]      I have been assisted by detailed submissions from Mr Grove, on behalf of Mrs Buxton, and from Mr Hucker, on behalf of the liquidators of both companies (who are the same people).  I have come to the clear view that there is no jurisdiction to grant

leave  to  Mrs  Buxton  as a  director  because  of the  provisions  of  s 248(1)(b).    That conclusion is reinforced by the decision, on different grounds, of Wild J in Headley v Albany Power Centre Ltd and the provisional view of Priestley J.

[6]      It is unnecessary to provide a fully reasoned judgment because counsel have constructively facilitated an agreement which will nevertheless enable steps to be taken to seek to test the decision of Venning J on the merits.

[7]      There has effectively been an oral application by Mr Grove, in CIV-2008-404-

3840, for an order to join the Mainline shareholder to that proceeding to enable the shareholder to seek leave of the Court of Appeal to appeal against the decision of 5

February 2010 to place Mainline in liquidation.  The liquidators of Mainline and Island View do not oppose the application and terms have been agreed.   Mr Grove and his client sought to contact the shareholder, Mr John Oliver Buxton, who, it is anticipated, may consent to being joined and being the party in whose name the application for leave to appeal will be made.   It was not possible to contact him today.   Consequently the order that I will now record is one which will need to lie in Court.

[8]      There will be an order, to lie in Court, and also subject to the conditions set out in the following paragraphs, that John Oliver Buxton be joined as a party to CIV-2008-

404-3840, as second defendant.   This order is to lie in Court pending the filing and service on the liquidators of the written consent of John Oliver Buxton to be joined for the purpose I have recorded and further subject to the liquidators being satisfied that Mr Buxton  was  properly  registered  as  the  shareholder  at  the  date  of  application  for liquidation of Mainline.

[9]      The order for joinder is made solely to enable an application for leave to appeal the liquidation order in the name of John Oliver Buxton and, if leave is granted, to pursue the substantive appeal.   No other steps may be taken by or on behalf of Mr Buxton without leave of the Court.

[10]     The order for joinder is made subject to the following further conditions:

a)       The written consent of John Oliver Buxton must be filed and served by Friday 29 October 2010.  If it is not filed the order for joinder will be vacated.

b)        The application for leave to appeal must be filed and served by Friday, 5

November 2010.

c)       A sum of $3,200 is to be paid into the trust account of Mrs Buxton’s solicitors, Macky Roberton, by Friday 29 October 2010 as security for the liquidators’ costs in respect of the application for leave to appeal with this sum to be held by Macky Roberton on that basis and to be disbursed only pursuant to an order of the Court or in terms of joint written instructions of the liquidators and Mrs Buxton, and, if he is the payee, Mr John Oliver Buxton.

[11]     Questions relating to security for costs on the substantive appeal, and any other matters relating to a substantive appeal, will be dealt with in accordance with the Court of Appeal Rules and require no further minuting.

[12]     The applications of Mrs Buxton in CIV-2010-404-1224 are dismissed.   On behalf of the companies in liquidation Mr Hucker has sought costs on a basic 2B basis.  The application is opposed by Mr Grove, for reasons he fully articulated.  I am satisfied that the liquidators are entitled to costs on a 2B basis and there will an order accordingly.  The essential reason is that the liquidators have been successful and the normal rule is that costs follow the event.

[13]     The parties do have leave to apply further for any incidental directions that may be needed or for modification of any of the precise terms of these orders.

Peter Woodhouse J