| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA443/2018 [2019] NZCA 353 |
| BETWEEN | FAIRWAY HOLDINGS LIMITED AND QUEST PROJECTS LIMITED |
| AND | CHRISTOPHER CAREY McCULLAGH AND STEPHEN MARK LAWRENCE, INSOLVENCY PRACTITIONERS IN THEIR CAPACITIES AS LIQUIDATORS OF HAMILTON STREET INVESTMENTS LIMITED (IN LIQUIDATION) |
| Hearing: | 12 June 2019 |
Court: | Brown, Venning and Whata JJ |
Counsel: | G Brittain QC for Appellants |
Judgment: | 9 August 2019 at 3.30 pm |
JUDGMENT OF THE COURT
AThe appeal is dismissed.
BThe respondents are entitled to costs against the appellants for a standard appeal on a band A basis and usual disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by Whata J)
Hamilton Street Investments Ltd (Hamilton) oversaw the construction of the Cayman Apartments in Mount Maunganui in 2006 by CBC Construction Ltd (now known as XMP & D Ltd). From 2008 to 2014 defects emerged in the Cayman Apartments (the Apartments). Hamilton and another company, CBC Construction Ltd 2010 (CBC 2010) attempted to remedy them without apparent success. Mr Peter Cooney, a then-director of Hamilton, CBC 2010 and XMP & D Ltd, met with a subcommittee of the Apartments’ Body Corporate in January 2014 following which verbal agreements were reached, he says, between Hamilton, CBC 2010 and XMP & D Ltd to repair the defects. The Apartments’ owners have since sued, among others, Mr Cooney, CBC 2010 and the directors of CBC 2010 (Messrs Beekie and Lagerberg) for their losses on the defects.
In March 2014 Hamilton declared a gross dividend of $513,899 to its shareholders Fairway Holdings Ltd (Fairway) and Quest Projects Ltd (Quest) by crediting their current accounts. It also entered into transactions that resulted in the reduction of $2,177,935 in shareholder debt owed to Fairway and Quest. We refer to these as the March dividend and transactions. Following payment of the dividend, Hamlton’s net assets according to the insolvency test were $2,045. That figure did not take into account any liability in respect of the defects in the Apartments. Hamilton was then liquidated in July 2014. The March dividend and transactions are now impugned by the liquidators of Hamilton as, among other things, voidable.
This is an appeal against the decision of Associate Judge Andrew[1] to decline to consolidate proceedings about:
(a)Liability for the claimed defects; and
(b)Whether Hamilton could meet the solvency test when it made the March dividend; and
(c)Whether the March transactions were impugnable under the Companies Act 1993 because no provision had been made for the contingent defects liability.
[1]McCullagh v Fairway Holdings Ltd [2018] NZHC 1084. Leave to appeal under s 56(3) of the Senior Courts Act 2016 was refused in the High Court: McCullagh v Fairway Holdings Ltd [2018] NZHC 1883. Leave to appeal was granted by this Court under s 56(5): Fairway Holdings Ltd v McCullagh and Lawrence [2018] NZCA 605. It was common ground that the Senior Courts Act applied because the application for consolidation…
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- [2019] NZCA 353
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