Dalton v Bentley's Chartered Accountants Limited

[2018] NZHC 2049

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-1441

[2018] NZHC 2049

BETWEEN

SIMON DALTON and MATTHEW KEMP

Applicants

AND

BENTLEYS CHARTERED ACCOUNTANTS LIMITED

Respondent

Hearing:

10 August 2018

Appearances:

Ms Alipour for the Applicants

No appearance for the Respondents

Judgment:

10 August 2018

ORAL JUDGMENT OF ASSOCIATE JUDGE SMITH

This judgment was delivered by me on 10 August 2018, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors / Counsel:

Shieff Angland, Auckland

DALTON and KEMP v BENTLEYS CHARTERED ACCOUNTANTS LTD [2018] NZHC 2049 [10 August 2018]

[1]    The applicants (the liquidators) are the liquidators of a company called Fabri-Cell International Limited (In Receivership and In Liquidation) (Fabri-Cell). They were appointed by order of the Court made on 9 November 2017.

[2]    In the course of their investigations, Mr Dalton and Mr Kemp noted that Fabri-Cell had made a payment of $19,672.34 (the payment) to the Respondent on 22 July 2016. They considered that the payment was an insolvent transaction, within the meaning of s 292 of the Companies Act 1993 (the Act).

[3]    On 14 May 2018 the liquidators sent a notice to the Respondent under s 294 of the Act, stating their wish to set aside the payment. I am satisfied that the notice complied with the requirements of s 294(2) of the Act.

[4]    An affidavit of service has been filed showing that the liquidators' notice under s 294 was served on the Respondent on 25 May 2018.

[5]    The respondent filed a notice of objection dated 13 June 2018. The notice of objection contended that the payment was made by Fabri-Cell from funds paid into Fabri-Cell by a Mr Cook, whose company Adava Pty Limited was a shareholder in Fabri-Cell. The notice of objection contended that, if the payment was made through Fabri-Cell, it was on the strict basis that the funds were being held in trust for the Respondent and never became the property of Fabri-Cell. The notice of objection contended that the funds were received by Fabri-Cell after the sale of shares to new shareholders that provided additional capital, or resulted in an obligation on the new shareholders to provide additional capital to Fabri-Cell. The notice of objection also contended that Fabri-Cell was solvent at the time.

[6]    The liquidators did not accept the contentions in the notice of objection, and they have filed an application for orders setting aside the payment and directing the respondent to pay the $19,672.34 to the liquidators.

[7]    The liquidators' application was served on the respondent on 31 July 2018. No notice of opposition has been filed, and Ms Alipour tells me that there has been no communication from the respondent.

[8]    I am satisfied that the liquidators have shown that the payment was an insolvent transaction, made within the specified period defined by s 292(5) of the Act.1

[9]    Mr Kemp has provided an affidavit in support, in which he produced copies of bank statements showing that the payment appears to have been sourced from a payment of $29,000 made by Adava or Mr Cook into Fabri-Cell's bank account on 21 July 2016. Contrary to the contention in the notice of objection that Mr Cook or Adava provided these funds to Fabri-Cell on trust for the purpose of on-payment to the respondent, a letter from Adava's solicitors dated 28 July 2017 made demand for repayment of the $29,000, contending that it was a loan repayable on demand.

[10]   Mr Kemp has satisfactorily shown that Fabri-Cell was probably insolvent at the time the payment was made. He said that Fabri-Cell had trade creditors of approximately $720,000, but only had $500,000 in current assets available to pay creditors. Also, he produced a copy of a letter from the Inland Revenue Department dated 1 October 2015 recording an arrangement for Fabri-Cell to pay a debt to the Commissioner by instalments over a 12 month period. The Commissioner's letter noted that it appeared that Fabri-Cell was insolvent. Mr Kemp said in his affidavit that there was no evidence to suggest Fabri-Cell's financial position had improved between October 2015 and the date the payment was made in July 2016. In addition, Mr Kemp produced copies of a statement from the respondent showing that, as at   30 June 2016, Fabri-Cell was late with at least one payment owing to the respondent itself.

[11]   The other matter required to be addressed by s 292 is whether the insolvent transaction has enabled another person (in this case the respondent) to receive more towards satisfaction of a debt owed by a company than the person would receive, or would be likely to receive, in the company's liquidation.2 Again, I am satisfied that this has been sufficiently proved. The respondent received the payment in full, whereas there appears to be no prospect of the unsecured creditors in the liquidation of Fabri-Cell being paid in full. Mr Kemp's evidence is that there are unsecured creditors' claims totalling $973,152.37, and one preferential creditor claiming

1      Within the period of two years before the commencement of the liquidation.

2      Section 292(2)(b).

$183,670.71. Mr Kemp also referred to a further two claims which are expected, likely to exceed (in total) $200,000.

[12]   For all of the foregoing reasons, I am satisfied that the liquidators have established that the payment was an insolvent transaction under s 292(2), which is voidable by the liquidator under s 292(1). I therefore make the following orders:

(a)Setting aside the payment of $19,672.34 made by Fabri-Cell to the respondent.

(b)Ordering the respondent to pay that sum to the liquidators.

(c)Ordering the respondent to pay costs to the liquidators on a 2B basis, with disbursements to be fixed by the Registrar.

Associate Judge Smith