Farrell v Acme Engineering Limited - [2012] NZHC 2874

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

CIV 2012-463-000175 [2012] NZHC 2874

UNDER the Companies Act

IN THE MATTER OF the liquidation of Contract Engineering
Limited

BETWEEN PETER ESMOND FARRELL AND SIMON PAUL ROGAN AS LIQUIDATORS OF CONTRACT ENGINEERING LIMITED (IN LIQUIDATION)
Applicants

ANDACME ENGINEERING LIMITED Respondent

Hearing: 24 October 2012

Appearances: K F Shaw for the Applicants
S A Barker for the Respondent

Judgment: 1 November 2012

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on
01.11.12 at 4:30pm, pursuant to
Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar
Date……………

Solicitors/Counsel:
K Shaw, Harkness Henry, Hamilton –Karen.shaw@harkness.co.nz
S Barker, Buddle Findlay, Auckland – scott.barker@buddlefindlay.com

PETER ESMOND FARRELL AND SIMON PAUL ROGAN AS LIQUIDATORS OF CONTRACT ENGINEERING LIMITED (IN LIQUIDATION) V ACME ENGINEERING LIMITED HC ROT CIV 2012-463-
000175 [1 November 2012]

[1] This judgment ought to be read together with that issued simultaneously in another case of like kind affecting the liquidators of Contract Engineering in CIV
2012-463-514, in particular with respect to s 296(3)(c) of the Companies Act 1993.

The application

[2] The applicants are the liquidators of Contract Engineering Limited (the

Company). The Company was put in liquidation by its shareholders on 5 July 2011.

[3] On 3 April 2012 the applicants served a Notice to Set Aside Voidable Transactions on the respondent. The notice claimed that the applicants wanted to set aside nine payments of $10,000 each made weekly by the Company to the respondent beginning on 13 August 2010 and concluding on 8 October 2010; together with a payment of $15,484.50 made on 22 October 2010. The payments totalled the sum of $105,484.50.

The respondent’s case in defence of the voidable transaction claim

[4] On about 30 April 2012 the respondent served a notice of objection in which it asserted the Company was able to pay its due debts and that the respondent did not receive more towards satisfaction of its debt than it would likely have received in the Company’s liquidation. It also claimed that the respondent:

(a) Received the payments in good faith.

(b) Did not have reasonable grounds for suspecting the Company’s actual

and impending insolvency.

(c) Gave value for the payments or altered its position in the reasonably held belief that the payments were valid and would not be set aside.

[5] The respondent relies upon the affidavit of its Mr Fraser. He says the respondent is a large and versatile general engineering company; that on 22 February
2010 the Company sought a quote from the respondent for the construction and

supply of a flash silencer - an item of equipment used in relation to the production of geothermal energy, which reduces the noise of discharged steam.

[6] After Mr Fraser received the Company’s request for a quote he performed his own due diligence on the Company; he searched the Company’s website and reviewed the current project the Company was involved in. He learned that the Company was a well established engineering company with over…

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 Farrell v Acme Engineering Limited

Details

AGLC: Farrell v Acme Engineering Limited [2012] NZHC 2874
Case: [2012] NZHC 2874
Decision Date: 1 November 2012

CaseChat Overview and Summary

In the High Court of New Zealand, the liquidators of Contract Engineering Limited sought to recover payments made by their insolvent company to Acme Engineering Limited. The liquidators contended that the payments, totalling $105,484.50, were voidable transactions under the Companies Act 1993, as the company was insolvent at the time of the payments and Acme Engineering had no reasonable grounds to suspect insolvency. Acme Engineering defended the claim, asserting that it acted in good faith and provided value for the payments received. The central legal issues were whether the company was insolvent at the relevant time and whether Acme Engineering had reasonable grounds to suspect insolvency.

The Court considered the evidence presented by both parties. The liquidators argued that the company's financial difficulties, including overdue debts and the imposition of receivers, demonstrated insolvency. They further contended that Acme Engineering should have been alerted to the company's financial issues by the overdue payment and the instalment repayment plan. Acme Engineering, on the other hand, presented evidence of its due diligence and belief in the company's financial stability. The Court found that the liquidators had proven the company's insolvency at the relevant time. However, the Court concluded that Acme Engineering had acted in good faith and reasonably believed the company was solvent, as it had no specific information to suggest otherwise.

The Court held that Acme Engineering satisfied the requirements of section 296(3) of the Companies Act, as it had acted in good faith and reasonably believed the company was solvent. The evidence showed that Acme Engineering had provided value for the payments received and had altered its position in the reasonably held belief that the payments would not be set aside. Therefore, the Court dismissed the application and ordered the liquidators to pay Acme Engineering's costs.

Orders