Ebert Construction Limited v Sanson - [2017] NZCA 239

IN THE COURT OF APPEAL OF NEW ZEALAND

CA627/2015
CA43/2016
[2017] NZCA 239

BETWEEN	EBERT CONSTRUCTION LIMITED Appellant
AND	CRAIG ALEXANDER SANSON AND DAVID JOHN BRIDGMAN Respondents

Hearing:	22 and 23 November 2016
Court:	Kós P, Wild and French JJ
Counsel:	D J Goddard QC and R J Gordon for Appellant M J Tingey and N F D Moffatt for Respondents
Judgment:	8 June 2017 at 3.00 pm

JUDGMENT OF THE COURT

AThe appeal is allowed.
BThe orders made in the High Court are set aside.
CThe respondents must pay the appellant costs for a complex appeal on a band A basis together with usual disbursements.

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REASONS OF THE COURT

(Given by Kós P)

This appeal concerns a method of construction project financing called a “direct agreement”.[1] This is a three-way agreement between developer, builder and financier. The financier is empowered to step in and complete the project if the developer defaults. And during the ordinary life of the project the financier is permitted (or required) to make payments direct to the builder. The primary question in these appeals is this: if the developer is put into liquidation, are such payments made to the builder by the financier voidable preferences recoverable by the liquidator?
[1]They are also known as “direct payment agreements” or “tripartite agreements”.
In the High Court, Associate Judge Doogue set aside two pre-liquidation payments totalling $1.063 million made by financier BOS International (Australia) Ltd (“BOSI”) direct to builder Ebert Construction Ltd (“Ebert”) on the application of the liquidators of developer Takapuna Procurement Ltd (“TPL”).[2] He also set aside a pre-liquidation transfer of an apartment in the development worth some $540,000 from TPL to Ebert. He ordered Ebert to pay $1,603,892 back to the liquidators, together with interest from the date of the liquidation.[3]
[2]Sanson v Ebert Construction Ltd [2015] NZHC 2402, [2016] NZCCLR 11.
[3]Sanson v Ebert Construction Ltd [2015] NZHC 3046 [Interest judgment].
Ebert now appeals.

Facts

TPL was created to develop the 134-unit Shoalhaven Apartments complex at Takapuna. It entered into a number of contractual arrangements with financiers and a builder from October to November 2005.
In October 2005 TPL entered a construction contract with Ebert, pursuant to which Ebert would construct the apartments for a fixed lump sum of $32,497,188 plus GST.
On 3 November 2005 TPL entered a “Senior Facility Agreement” with BOSI. Pursuant to it BOSI was to provide a cash advances facility with a limit of $36.8 million, in two tranches. Tranche A was limited to $36 million, to assist finance the construction of the apartments. Tranche B was for $800,000 to pay GST to the Revenue in respect of the apartments. This facility was secured by mortgage over the apartment site and a general security deed.
On the same date TPL entered a “Junior Facility Agreement” with Strategic Nominees Ltd (“Strategic”), the terms of which are not material to this appeal. Strategic stood behind BOSI’s securities.
Also on that date TPL entered a “direct agreement” with…

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 Ebert Construction Limited v Sanson

Details

AGLC: Ebert Construction Limited v Sanson [2017] NZCA 239
Case: [2017] NZCA 239
Decision Date: 8 June 2017 at 3.00 pm

CaseChat Overview and Summary

Ebert Construction Limited appealed against the decision of the High Court to set aside two pre-liquidation payments totalling $1.063 million made by financier BOS International (Australia) Ltd (“BOSI”) to Ebert, as well as a pre-liquidation transfer of an apartment worth some $540,000. The High Court ordered Ebert to pay $1,603,892 back to the liquidators, together with interest from the date of the liquidation. The primary issue in the appeal was whether the payments made by BOSI were voidable preferences recoverable by the liquidator. The Court held that the payments were not made by the insolvent company, but by BOSI pursuant to its own obligation to Ebert. The Court also held that the payments were not insolvent transactions, as they did not give Ebert a preferential outcome compared to the position it would have been in if the payments had not been made pre-liquidation. The Court further held that the conveyance of the apartment was not an insolvent transaction. The appeal was allowed, and the orders made in the High Court were set aside.

Orders