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Farrell v Fences & Kerbs Ltd

Farrell v Fences & Kerbs Ltd

Case [2013] NZCA 329 25 July 2013

Corporate Law & Governance

Insolvency Law

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IN THE COURT OF APPEAL OF NEW ZEALAND

CA773/2012
[2013] NZCA 329

BETWEEN	PETER ESMOND FARRELL AND SIMON PAUL ROGAN AS LIQUIDATORS OF CONTRACT ENGINEERING LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION) Appellants
AND	FENCES & KERBS LIMITED Respondent

CA783/2012
BETWEEN	PETER ESMOND FARRELL AND SIMON PAUL ROGAN AS LIQUIDATORS OF CONTRACT ENGINEERING LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION) Appellants

AND	ACME ENGINEERING LIMITED Respondent

CA864/2012

BETWEEN

JEFFREY PHILIP MELTZER AND LLOYD JAMES HAYWARD AS LIQUIDATORS OF WINDOW HOLDINGS LIMITED (IN LIQUIDATION)
Appellants

AND

HIWAY STABILIZERS NEW ZEALAND LIMITED
Respondent

Court:

O’Regan P, Randerson and French JJ

Counsel:

M D Branch, K I Bond and K F Shaw for Appellants in CA773/2012 and CA783/2012
B P Keene QC and J F Anderson for Appellants in CA864/2012
J P Temm and S A Hickman for Respondent in CA773/2012
S A Barker and E M Ritchie for Respondent in CA783/2012
G M Harrison and C Hunt for Respondent in CA864/2012

Judgment:

(On the papers)

25 July 2013 at 10:00am

FINAL JUDGMENT OF THE COURT

A All three appeals are allowed.
BThe appellants in CA773/2012 are entitled to judgment against the respondent for $57,944.16 together with interest thereon pursuant to the Judicature Act 1908 from the date on which the appellants’ notice to set aside was served on the respondent in CA773/2012 until the date of payment.
CThe appellants in CA783/2012 are entitled to judgment against the respondent in the sum of $105,484.50 together with interest pursuant to the Judicature Act from the date on which the appellants’ notice to set aside was served on the respondent in CA783/2012 until the date of payment.
D The appellants in CA864/2012 are entitled to judgment against the respondent for $13,021.55 together with interest pursuant to the Judicature Act from the date on which the appellants’ notice to set aside was served on the respondent in CA864/2012 until the date of payment.
ENo awards of costs are made in CA773/2012 and CA864/2012.
FThe appellants in CA783/2012 are entitled to costs against the respondent in this Court for a standard appeal and cross-appeal on a Band A basis together with usual disbursements.
GThe costs orders made in the High Court in all three appeals are set aside. Any remaining issues as to costs in the High Court are to be determined by that Court.

____________________________________________________________________

REASONS OF THE COURT

(Given by Randerson J)

Introduction

In our interim judgment delivered on 27 March 2013,[1] we determined that the giving of value under s 296(3)(c) of the Companies Act 1993 (the Act) must be proved to have occurred at the time the payment or other company property is received and does not include value given at the time the antecedent debt is created.
[1]Farrell v Fences & Kerbs Ltd [2013] NZCA 91 [Interim judgment].
We reserved all remaining issues including issues raised on the cross-appeal by ACME in CA783/2012. The remaining issues are:
(a)Whether the requirement for value to be given when the payment is made by the insolvent…

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 Fences & Kerbs Ltd

Details

AGLC: Farrell v Fences & Kerbs Limited [2013] NZCA 329
Case: [2013] NZCA 329
Decision Date: 25 July 2013

CaseChat Overview and Summary

The Court of Appeal of New Zealand has allowed three appeals concerning the interpretation and application of section 296(3) of the Companies Act 1993, focusing on the requirement for value to be given at the time of payments by insolvent companies to their creditors. The appeals involved the liquidators of Contract Engineering Limited, seeking to recover payments made to Fences & Kerbs Limited, ACME Engineering Limited, and Hiway Stabilizers New Zealand Limited, respectively. The central legal issues were whether the mere receipt of payment in satisfaction of an antecedent debt constituted the giving of value and whether forbearance to sue could satisfy the requirement for value to be given.

The court concluded that the mere receipt of payment in satisfaction of an antecedent debt did not constitute the giving of value. Instead, new value that is real and substantial must be given. The court emphasized that the objective of the voidable transaction regime is to achieve fairness among all creditors, and the receipt of payment does not swell the pool of funds available to the company. The court also held that forbearance to sue may constitute the giving of value but only if it is shown to have real and substantial value, which is often difficult to establish.

Regarding the solvency of Contract Engineering, the court found sufficient evidence to support the Associate Judge's conclusion that the company was unable to pay its debts as they fell due. The court further allowed the appeals and awarded the liquidators judgment against the respondents for the amounts of the impugned payments plus interest. Costs were awarded against ACME Engineering Limited for the appeal and cross-appeal in one of the cases. The court set aside the costs orders made in the High Court and left remaining issues as to costs to be determined by that Court.

Orders