Dalton v Innes - [2024] NZHC 3775

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-1430

[2024] NZHC 3775

UNDER Part 19 of the High Court Rules 2016

AND UNDER

the Companies Act 1993

IN THE MATTER

of the liquidation of Podular Housing Systems Limited (in liquidation)

BETWEEN

SIMON DALTON as Liquidator of PODULAR HOUSING SYSTEMS LIMITED (IN LIQUIDATION)

Applicant

AND

CHARLES LEWIS INNES

Respondent

Hearing: 26 November 2024

Appearances:

B D Gustafson and K K Kommu for Applicant S M Kilian for Respondent

Judgment:

11 December 2024

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 11 December 2024 at 4pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar
………………………..

DALTON v INNES [2024] NZHC 3775 [11 December 2024]

[1] Mr Dalton, as the Liquidator of Podular Housing Systems Limited (in liquidation) (Podular), applies to have payments made to the respondent, Mr Innes, between 9 December 2020 and 21 October 2022 set aside as voidable transactions. From 2 February 2021, Mr Innes was the sole registered director of Podular which was incorporated on 28 July 2020. Mr Innes was first appointed a director on 1 September 2020 and was a 50 per cent shareholder from 22 September 2020 but by the time Podular was liquidated by this Court on 12 December 2022, Mr Innes’ shareholding had decreased in stages to five per cent.

[2] The application to liquidate Podular was filed in this Court on 9 December 2022 and dealt with under urgency. On 15 June 2023, Mr Innes was examined under oath in the Auckland High Court by counsel for the applicant. The Liquidator says Mr Innes in his evidence acknowledged Podular was unable to pay its debts when it made the challenged payments to him and that Podular paid him in preference to other creditors.

[3] The payments the Liquidator seeks to recover were categorised within Podular’s Xero’s financial accounts as follows:

Transfers $82,645.00

Owner Drawings $61,187.17

Shareholder Current Account $11,500.00

Wages $299,775.22

Motor Vehicle Expense $4,800.03

Office Equipment $3,203.78

Expenses $13,001.16

Suspense $3,000.00

$479,112.36

[4]The voidable transaction notice included nearly 370 transactions totalling

$493,938.30.

[5]The Liquidator in this proceeding challenges transactions totalling

$479,112.36 — the amount less than in the notice due to the Liquidator identifying date discrepancies and payments not otherwise within s 292 of the Companies Act 1993 (the Act). Nonetheless, there remain hundreds of individual payments challenged by the Liquidator making up the above categories. Neither counsel sought

to examine each and every transaction but were content (with some exceptions) to deal with the payments by category.

[6] Podular was in the business of building and selling architecturally designed modular residential buildings. The buildings were constructed at facilities in Christchurch and Hamilton and when complete were trucked to the purchaser’s property and installed on foundations constructed by Podular.

[7] A Mr Gross, and a company associated with Mr Gross, provided substantial funding to Podular. Podular entered into two General Security…

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 Dalton v Innes

Details

AGLC: Dalton v Innes [2024] NZHC 3775
Case: [2024] NZHC 3775
Decision Date: 11 December 2024

CaseChat Overview and Summary

Simon Dalton, as the Liquidator of Podular Housing Systems Limited (in liquidation), applied to the High Court of New Zealand to set aside payments made to Charles Lewis Innes between 9 December 2020 and 21 October 2022 as voidable transactions under the Companies Act 1993. Innes, who was the sole registered director of Podular from 2 February 2021, was also a 50 per cent shareholder from 22 September 2020 but by the time Podular was liquidated, his shareholding had decreased to five per cent. The Liquidator sought to recover payments categorised as transfers, owner drawings, shareholder current account, wages, motor vehicle expenses, office equipment expenses, and other expenses. The court had to decide whether the challenged transactions were insolvent and preferential under s 292 of the Act, and if so, whether they were voidable. The court found that Podular was unable to pay its debts as they fell due and that the payments permitted Innes to receive more than he would have received in liquidation. The court also found that there was a debtor/creditor relationship between Podular and Innes for most of the categories of payments. The court concluded that the Liquidator was entitled to set aside the payments as voidable transactions except for the payment from the suspense account which did not arise from a debtor/creditor relationship. The court ordered Innes to pay the Liquidator the amount of the voidable transactions and to pay costs to the Liquidator.

Orders