Design Electronics Ltd v Lookman - [2019] NZHC 2400

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE

CIV-2019-442-00035

[2019] NZHC 2400

UNDER Section 290 of the Companies Act 1993

IN THE MATTER OF

an Application to set aside a Statutory Demand

BETWEEN

DESIGN ELECTRONICS LIMITED

Applicant

AND

MICHAEL ANDREW LOOKMAN and 187 BRIDGE TRUSTEES 53 LTD as

Trustees of the LOOKMAN FAMILY TRUST

Respondents

Hearing: 16 September 2019

Appearances:

S J Jamieson for Applicant

G M Downing for Respondents

Judgment:

23 September 2019

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 23 September 2019 at 3.30pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 23 September 2019

DESIGN ELECTRONICS LTD v LOOKMAN [2019] NZHC 2400 [23 September 2019]

[1] Design Electronics Ltd (“DEL”) applies to set aside a statutory demand issued by the Lookman Family Trust (“LFT”) which demands the sum of $1,855,794.50 described as being “the amount due and payable for the repayment of the principal and interest under an investment and shareholder agreement dated 14 December 2016”. Of the sum demanded, $35,794.50 is interest.

[2] This is the third proceeding between the parties to come before this Court in about 18 months. All the proceedings concern a document titled “Investment and Shareholding Agreement 14 December 2016”.

[3] The background is summarised in two paragraphs from Associate Judge Matthews decision of 2 May 2018:1

[12] On 14 December 2016 the parties entered an agreement titled “Investment and Shareholding Agreement 14 December 2016.” The agreement was for a term of five years “unless terminated earlier in accordance with its conditions”. It recorded that the Lookman trustees would advance $2,100,000 “on a reimbursement model” to Design Electronics from the date of an earlier promissory note issued on 8 May 2016. The funds were to be interest free for a period of one year from the date of the first advance, after which interest would be charged at 10 per cent per annum payable monthly. The document is expressed to be the entire agreement between the parties in relation to its subject matter, replacing and extinguishing all prior agreements, draft agreements, arrangements, undertakings or collateral contracts of any nature made by the parties, whether oral or written, in relation to such subject-matter.

[13] …

[14] The Lookman trustees have advanced $1,820,000 pursuant to this agreement. The security to be given to the Lookman trustees was “security over SenSys IP” the name SenSys being the defined name of Design Electronics in this agreement. A personal guarantee was also to be given to the Lookman trustees from the director of Design Electronics, Mr Warwick Jones.

[4] At issue in the 2 May 2018 judgment was whether the amount advanced by LFT was repayable on demand. Associate Judge Matthews concluded that DEL had established an arguable case that the advances made by LFT were not repayable on demand. LFT had issued a statutory demand for its advance of $1.82 million based on the debt being repayable on demand.…

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 Design Electronics Ltd v Lookman

Details

AGLC: Design Electronics Ltd v Lookman [2019] NZHC 2400
Case: [2019] NZHC 2400
Decision Date: 23 September 2019

CaseChat Overview and Summary

Design Electronics Ltd (“DEL”) sought to set aside a statutory demand issued by the Lookman Family Trust (“LFT”) which demanded the sum of $1,855,794.50, described as being “the amount due and payable for the repayment of the principal and interest under an investment and shareholder agreement dated 14 December 2016.” This is the third proceeding between the parties to come before this Court in about 18 months. All the proceedings concern a document titled “Investment and Shareholding Agreement 14 December 2016.”

The court was required to determine whether the cancellation of the agreement by LFT made the advance due and payable, and if the statutory demand could be set aside. LFT argued that cancellation of the agreement made the advance due and payable, while DEL argued that cancellation did not make the advance due and payable. The court had to consider the effect of specific performance orders made by Associate Judge Matthews in a previous proceeding between the parties.

The court found that once a contract is subject to an order for specific performance, the contract comes under the supervision of the Court that made the order. The preponderance of authority is that a party with the benefit of a specific performance order cannot unilaterally cancel the contract without bringing an application on notice. The court found that LFT’s cancellation was invalid, meaning that its demand cannot stand on its own case. The court further found that the cancellation of itself did not make the loan which was arguably for a five-year term immediately due and payable. The court concluded that the application by DEL to set aside the statutory demand must be granted.

The court ordered that the statutory demand be set aside, and that costs be awarded to DEL on a 2B basis together with disbursements as fixed by the Registrar, including counsel’s reasonable travel expenses. The court declined to allow an uplift in part as the statutory demand was valid as to part, but only a very small part of the total amount claimed.

Orders