David Browne Contractors Ltd v Petterson

[2017] NZSC 116

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IN THE SUPREME COURT OF NEW ZEALAND

SC 57/2016
[2017] NZSC 116

BETWEEN	DAVID BROWNE CONTRACTORS LIMITED AND DAVID BROWNE MECHANICAL LIMITED Appellants
AND	DAVID ROSS PETTERSON AS LIQUIDATOR OF POLYETHYLENE PIPE SYSTEMS LIMITED (IN LIQUIDATION) Respondent

Hearing:	10 November 2016
Court:	William Young, Glazebrook, Arnold, OʼRegan and Ellen France JJ
Counsel:	C R Carruthers QC and D J C Russ for Appellants B D Gustafson and D R Duffield for Respondent
Judgment:	7 August 2017

JUDGMENT OF THE COURT

A        The appeal is dismissed.

BThe appellants must pay the respondent costs of $30,000 plus reasonable disbursements (to be determined by the Registrar in the absence of agreement).  We certify for two counsel.

____________________________________________________________________

REASONS

(Given by Glazebrook J)

Table of Contents

Para No
Introduction	[1]
The relevant legislation	[3]
Background	[13]
General background	[13]
Insurance and indemnity	[29]
Decision to restructure	[34]
Implementation of restructuring	[42]
Adjudication	[47]
Insurance claim	[50]
Liquidation	[53]
The proceedings	[56]
High Court judgment	[60]
Court of Appeal judgment	[64]
Issues	[70]
Was a concession as to solvency made in the High Court?	[73]
What should be included in “due debts”?	[78]
Submissions of Contractors and Mechanical	[78]
Submissions of the liquidator	[83]
What is taken into account under s 292(2)(a)?	[88]
Application of s 292(2)(a)	[97]
Should the McConnell Dowell claim have been taken into account?	[97]
Was Polyethylene cash flow solvent?	[110]
Conclusion	[113]
Do Contractors and Mechanical have any defences?	[115]
Submissions of Contractors and Mechanical	[115]
Submissions of the liquidator	[118]
Our assessment	[120]
Is there a discretion under s 295?	[131]
Court of Appeal decision	[131]
Submissions of Contractors and Mechanical	[135]
Submissions of the liquidator	[138]
Our assessment	[139]
Result and costs	[143]

Introduction

1. The issue in this appeal is whether the Court of Appeal was correct to order David Browne Contractors Ltd (Contractors) and David Browne Mechanical Ltd (Mechanical) to repay $565,303 and $347,634 respectively to Polyethylene Pipe Systems Ltd (Polyethylene).[1]  These sums had been paid to them pursuant to transactions which had subsequently been automatically set aside under s 294 of the Companies Act 1993.

   [1]Petterson v Browne [2016] NZCA 189 [Petterson (CA)] (Winkelmann, Dobson and Gilbert JJ).

2. The application for leave to appeal by these companies was granted by this Court on 16 August 2016.[2]  The Court refused Mr Browne’s application for leave to appeal against the decision of the Court of Appeal to set aside a general security agreement (the GSA) entered into between him and Polyethylene, a related company to Mr Browne, and ordering him to repay $201,316 he received as a creditor under the GSA.[3]

The relevant legislation

[2]Browne v Petterson [2016] NZSC 107 [Leave judgment].

[3]At [4]–[11].  This Court, at [4], recorded that Mr Browne wished to challenge the Court of Appeal’s factual findings.  The Court said that it could see no appearance of error in those findings.  Many of those factual findings are also relevant to…