Dalton v Reeves - [2023] NZHC 2779

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-1213

[2023] NZHC 2779

IN THE MATTER OF
FIRSTBUILD CONSTRUCTION LIMITED

(in Receivership and in Liquidation)

BETWEEN

SIMON DALTON as liquidator of

FIRSTBUILD CONSTRUCTION LIMITED

(in Receivership and in Liquidation) Applicant

AND

JON BLAIKLOCK REEVES and SILVIA

ELISABETH REEVES as trustees of the REEVES FAMILY TRUST

First Respondents

AND

DAMIEN GRANT and ADAM

BOTTERILL as receivers of FIRSTBUILD CONSTRUCTION LIMITED

(in Receivership and in Liquidation) Second Respondents

Hearing: 11 September 2023

Appearances:

A W Johnson for Applicant

D Purusram for First Respondent K A Cocks for Second Respondent

Judgment:

6 October 2023

JUDGMENT OF ANDERSON J

This judgment was delivered by me on 6 October 2023 at 3.00 pm pursuant to r 11.5 of the High Court Rules 2016.

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

Solicitors: Martelli McKegg, Auckland
Victorian Lawyers Ltd, Auckland Waterstone Insolvency, Auckland

DALTON v REEVES [2023] NZHC 2779 [6 October 2023]

Introduction

[1] Mr Simon Dalton, as liquidator (the Liquidator) of FirstBuild Construction Ltd (FB Construction) seeks directions from the court pursuant to s 284 of the Companies Act 1993 as to whether the Reeves Family Trust (the Trust) had an equitable lien in certain building materials that were held by Mr Dalton as liquidator.

[2]As to what is an equitable lien:1

An equitable lien is an equitable right conferred by law upon the plaintiff to have resort to a specific asset to secure the discharge of a liability owed by the owner of the asset to the plaintiff. An equitable lien arises as a matter of law in respect of claims “which equity considers the other party is in conscience bound to perform in order to do justice between the parties”.

[3] A person entitled to an equitable lien is regarded in equity as a secured creditor. In Maginness v Tiny Town Projects Ltd (in liq) (Maginness)2 and Francis v Gross (Francis)3 (together the Tiny Homes cases) it was held that an equitable lien is outside the Personal Property Securities Act 1999 (PPSA) regime and not subject to the priorities under that Act.

[4] The Trust says there was an equitable lien in the building materials. The Liquidator disagrees.

Background

[5] The business of FirstBuild Homes Ltd (FB Homes) was to enter into contracts for the construction of modular homes. FB Construction and FB Homes are sister companies wholly owned by FirstBuild Ltd (together the Group). All three companies are in receivership. FB Construction and FB Homes went into liquidation on 12 May 2023. Mr Dalton is liquidator for both companies.

[6] The Group had one bank account which had sub-accounts for FB Homes and FB Construction. Although contracts were entered into by FB Homes, it otherwise did not trade. Funds were advanced by FirstBuild Ltd to a sub-account of FB Construction

1 Maginness v Tiny Town Projects Ltd (in liq) [2023] NZHC 494 at [107] (footnotes omitted).
2 Maginness v Tiny Town Projects Ltd (in…

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 Reeves

Details

AGLC: Dalton v Reeves [2023] NZHC 2779
Case: [2023] NZHC 2779
Decision Date: 6 October 2023

CaseChat Overview and Summary

The High Court of New Zealand was asked to decide whether the Reeves Family Trust had an equitable lien on certain building materials held by the liquidator of FirstBuild Construction Ltd. The Trust argued that an equitable lien existed, while the liquidator disagreed. The court had to determine whether the circumstances supported an equitable lien. The Trust relied on cases involving tiny homes where an equitable lien was recognised, but the court found that those cases did not support an equitable lien in this situation. The materials in question were generic and could be used for other builds, unlike the specific goods in the tiny homes cases. The court also noted that the contract specified that materials would remain the property of FirstBuild until full payment was made, which did not support an equitable lien. Therefore, the court directed that no equitable lien or security interest or ownership existed in favour of the Trust and ordered the sum held in a trust account to be released to the liquidator.

Orders