Fairway Holdings Ltd v McCullagh - [2018] NZCA 605

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA443/2018
[2018] NZCA 605

BETWEEN	FAIRWAY HOLDINGS LIMITED AND QUEST PROJECTS LIMITED Applicants
AND	CHRISTOPHER CAREY MCCULLAGH AND STEPHEN MARK LAWRENCE IN THEIR CAPACITIES AS LIQUIDATORS OF HAMILTON STREET INVESTMENTS LIMITED (IN LIQUIDATION) Respondents

Court:	Brown and Clifford JJ
Counsel:	G Brittain QC for Applicants J Burt and J R F Cochrane for Respondents
Judgment: (On the papers)	18 December 2018 at 4.00 pm

JUDGMENT OF THE COURT

AThe application for leave to appeal under s 56(5) of the Senior Courts Act 2016 is granted.
BThe respondents must pay the applicants costs for a standard application for leave to appeal on a band A basis together with usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Brown J)

Introduction

This application is for leave under s 56(5) of the Senior Courts Act 2016 (the Act) to appeal from a judgment of the High Court made on an interlocutory application.
The following three proceedings in the Tauranga Registry of the High Court are relevant to the present matter:
(a)An application by the liquidators of Hamilton Street Investments Ltd (Hamilton) against Fairway Holdings Ltd (Fairway) and Quest Projects Ltd (Quest) who were shareholders of Hamilton to set aside insolvent transactions (the voidable proceeding).[1]
(b)A proceeding by Hamilton and its liquidators against Fairway, Quest and Hamilton’s directors (Mr Peter Cooney and Mr Robert Turner) seeking to recover distributions under s 56 of the Companies Act 1993 (the dividend proceeding).[2]
(c)A proceeding by the body corporate and unit owners of the Cayman Apartments in Mount Maunganui, a building developed by Hamilton, against 21 entities alleging negligence and estoppel in relation to 50 pleaded defects in construction and design (the defective building proceeding).[3]
[1]CIV 2018-470-26.
[2]CIV 2018-470-33. This proceeding and CIV-2018-470-26 are together referred to as the Companies Act proceedings.
[3]CIV 2016-470-138.
Fairway and Quest made an application under r 10.12 of the High Court Rules 2016 for an order for consolidation of the three proceedings. That application was declined in a judgment of Associate Judge Andrew dated 17 May 2018 (Consolidation decision).[4]
[4]McCullagh v Fairway Holdings Ltd [2018] NZHC 1084 [Consolidation decision].
Fairway and Quest applied under s 56(3) of the Act for leave to appeal against that judgment. Their application was dismissed by Associate Judge Andrew in a judgment dated 27 July 2018 (Leave decision).[5] Fairway and Quest now seek the leave of this Court to appeal under s 56(5) of the Act.

Material facts

[5]McCullagh v Fairway Holdings Ltd [2018] NZHC 1883 [Leave decision].

The background to the application for consolidation is succinctly explained in the Consolidation decision as follows:
[10] Defects in the Cayman Apartments became apparent in 2008, shortly after the building was completed. Ongoing issues were then raised at Body Corporate meetings and with Hamilton and CBC.
[11] CBC, the builder, ceased to trade in 2010, changed its name to XMP & D Ltd in 2012 and was put into liquidation in 2014.…

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.

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Details

Case: [2018] NZCA 605
Decision Date: 18 December 2018 at 4.00 pm

CaseChat Overview and Summary

Fairway Holdings Ltd and Quest Projects Ltd sought leave to appeal from a High Court decision which declined their application for consolidation of three proceedings. The Court of Appeal allowed the application for leave and directed that the proceedings be consolidated. The first proceeding was an application by the liquidators of Hamilton Street Investments Ltd (Hamilton) against Fairway and Quest to set aside insolvent transactions. The second proceeding was a proceeding by Hamilton and its liquidators against Fairway, Quest and Hamilton’s directors seeking to recover distributions under the Companies Act 1993. The third proceeding was a proceeding by the body corporate and unit owners of the Cayman Apartments in Mount Maunganui against 21 entities alleging negligence and estoppel in relation to defects in construction and design. The Court of Appeal found that the interests of justice warranted a reconsideration of the issue of consolidation in the particular circumstances of this case. The Court also found that the positions of CBC (2010) and Messrs Lagerberg and Beekie could be prejudiced if the Companies Act proceedings are heard and determined separately and before the defective building proceeding. The Court further found that the Tauranga City Council, which has claims against the liquidators and a contingent claim in the defective building proceeding, stood to gain a significant tactical advantage if the three proceedings are not heard together. The Court held that it was in the interests of justice that the opportunity should be afforded for a second look at the issue of consolidation in the particular circumstances of this case. The Court granted the application for leave to appeal and directed that the proceedings be consolidated. The liquidators were ordered to pay the applicants’ costs for a standard application for leave to appeal on a band A basis together with usual disbursements.

Orders