Dalton v Mico Development Limited

[2023] NZHC 95

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-002035

[2023] NZHC 95

UNDER

the Companies Act 1993

BETWEEN

SIMON DALTON AND MATTHEW PETER KEMP

Plaintiffs

AND

MICO DEVELOPMENT LIMITED

Defendant

Hearing:

3 February 2023

Appearances:

A McCabe for Plaintiffs

P C Murray for Defendant

Judgment:

3 February 2023

RESULTS JUDGMENT OF ASSOCIATE JUDGE LESTER

DALTON v MICO DEVELOPMENT LIMITED [2023] NZHC 95 [3 February 2023]

[1]    The plaintiffs’ application to liquidate Mico Development Limited (Mico) was called in the 10am List on Friday 3 February 2023.

[2]    Mr Murray, counsel for the defendant, had filed a brief statement of  defence a few days out of time. He orally sought leave for that statement of defence to be accepted. At the hearing on 3 February 2023, I declined Mr Murray’s application and said I would issue a brief reasons judgment.

[3]    As I have said, Mr Murray’s statement of defence was relatively brief, no doubt due to the limited time available for the preparation of such defences.

[4]    I asked Mr Murray to expand on why his client said the Court should exercise its discretion not to place Mico in liquidation when it is deemed to be insolvent. .

[5]    Mr Murray referred to the circumstances of my judgment that gave rise to the debt upon which the liquidation is based. This involved Mico being ordered to pay to the plaintiffs’ liquidators, amounts held to be voidable transactions.1 Mr Murray explained his client’s position was that it was having to pay twice, having paid sub-contractors of the plaintiffs (being the payments held to be voidable) but having to pay again by virtue of the judgment which held those payments were voidable.

[6]    The fact is, the Court determined that Mico owes a substantial sum to the plaintiffs. If the plaintiffs’ liquidation proceeding is halted, there is no other avenue open to the plaintiffs to recover their judgment debt – nor did Mr Murray suggest there was.

[7]    Mico completed a development in Queenstown – details of which I referred to in the voidable transaction judgment – and I understand the units in the development have been sold. There are no other assets Mico could use to satisfy the plaintiffs’ debt. The plaintiffs are entitled to have a liquidator appointed to Mico, to examine what profits it achieved from the development and where those profits have gone.

1      Dalton and Kemp v Mico Development Ltd [2022] NZHC 1913.

[8]    In the voidable transaction judgment, Mico’s alteration of position defence was rejected – that defence depending on similar factors that Mico would rely on here to stave off liquidation. While the considerations relevant to the alteration of position defence in the voidable  context transaction and the considerations that apply when   a defendant seeks to avoid liquidation, relying on the Court’s discretion are not exactly the same, there is a substantial overlap.

[9]    At the end of the day, I was satisfied it was not appropriate to allow the late filing of the statement of defence when the plaintiffs are entitled to proceed and where the defence that Mico wants leave to run, would leave the plaintiffs with a barren judgment. The Court having ordered Mico to repay the voidable transactions in one judgment will not, in another, deprive the plaintiffs of the benefit of their judgment. This is not a situation where the defendant company wants to dispute the claimed debt, claims it has a counterclaim or seeks time to recover funds from a third party (albeit in the latter case a defence is in reality an application for an adjournment).

[10]   Upon my advising Mr Murray of my decision, he sought an adjournment to take instructions.

[11]This proceeding is adjourned to 9:45am on Monday 13 February 2023.

[12]   The practical reality is that unless a commercial outcome is reached, liquidation is likely inevitable on 13 February 2023. It is of course for the parties to consider the desirability of a commercial outcome, but no doubt the liquidators would take into account that liquidation of Mico would only be the start of a process to secure a recovery for creditors. There are obvious benefits in favour of a “clean” settlement. Again, that is a matter for the parties to consider.

Costs

[13]Costs of the 3 February 2023 call are reserved.

Associate Judge Lester

Solicitors:

Jackson Russell, Auckland for Plaintiffs)
Paterson Legal Limited, Auckland (for Defendant)

Copy to counsel:

P C Murray, Barrister, Auckland (for Defendant)