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Fatupaito v Stewart

Fatupaito v Stewart

Case [2021] NZHC 1679 6 July 2021

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IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2021-409-000131

[2021] NZHC 1679

UNDER the Companies Act 1993

IN THE MATTER

of EVERSONS INTERNATIONAL

LIMITED (in liquidation)

BETWEEN

VIVIAN JUDITH FATUPAITO and ELIZABETH HELEN KEENE

Applicants

AND

EVAN KERRY STEWART

Respondent

Hearing: 22 June 2021

Appearances:

M J Tingey for Applicants K W Clay for Respondent

Judgment:

6 July 2021

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 6 July 2021 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

FATUPAITO and KEENE v STEWART [2021] NZHC 1679 [6 July 2021]

The application

[1] Eversons International Ltd (in liq) (the company) went into liquidation owing the Commissioner of Inland Revenue (the Commissioner) unpaid taxes in excess of
$3,700,000. The only significant asset of the company in its financial accounts is described as “overseas investments”. There is no detail of what the investments comprise but they are valued at more than $6,500,000.

[2] The company’s liquidators wish to identify the overseas investments and recover, realise and distribute them. For this they have required the cooperation of the company’s sole director and shareholder. The liquidators say cooperation has not been forthcoming. They apply for orders under ss 261 and 266 of the Companies Act 1993 that the director be examined before the Court and produce records of the company. The director opposes the application arguing, amongst other matters, the orders sought are unnecessary and oppressive.

The facts

[3] The company was incorporated on 24 July 2006. Its business was the importation and sale of synthetic legal high products and it was very profitable until the sale of such products was banned on 7 May 2014. The company then ceased trading.

[4] At the material times the respondent, Evan Kerry Stewart (Mr Stewart), was the sole shareholder and director of the company.

[5] The Commissioner completed an income tax audit of the company for unpaid income taxes up to and including the 2015 tax year. As the company was unable to meet the Commissioner’s demand for payment of assessed arrears, Mr Stewart elected to liquidate the company.

[6] On 9 April 2018, the company was placed into liquidation by special resolution pursuant to s 241(2)(a) of the Companies Act 1993. Andrew Marchel Oorschot of Ashton Wheelans, Chartered Accountants, was appointed liquidator of the company.

[7] The Commissioner lodged a claim in the company’s liquidation for $3,766,118. The Commissioner appears to be the only creditor.

[8] To date, no realisable assets have been identified in the liquidation and no recoveries have been made.

[9] In his first liquidator’s report of 13 April 2018, Mr Oorschot noted the company’s single, “biggest asset [was] described in the Company’s accounts as Overseas Investments totalling $6,592k”. Mr Oorschot’s report said he was awaiting details from Mr Stewart, “of the nature and process to realise these investments”.

[10] In relation to this, Mr Oorschot wrote to Mr Stewart on 13 April…

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 Fatupaito v Stewart

Details

AGLC: Fatupaito v Stewart [2021] NZHC 1679
Case: [2021] NZHC 1679
Decision Date: 6 July 2021

CaseChat Overview and Summary

The High Court of New Zealand Christchurch Registry considered an application by the liquidators of Eversons International Limited (in liquidation) for orders under ss 261 and 266 of the Companies Act 1993 that Evan Kerry Stewart, the company's sole director and shareholder, be examined before the Court and produce records of the company. The liquidators sought the orders due to Mr Stewart's lack of cooperation in identifying the company's overseas investments and recovering them. Mr Stewart opposed the application, arguing it was unnecessary and oppressive.

The court found that it had jurisdiction to make the orders sought, as the matters to be examined related to the business, accounts, and affairs of the company. The court considered the factors relevant to the exercise of its discretion under s 266 and concluded that the orders were necessary to enable the liquidators to fulfill their primary duty of recovering the company's assets. The court rejected Mr Stewart's submissions that the orders were unnecessary, oppressive, or that there would be prejudice in making them. The court found that the liquidators' primary purpose in making the application was to identify and recover the company's assets, and that the potential benefits to Mr Stewart of doing so outweighed any hypothetical risk of prejudice.

The court made an order under s 266(2)(a) and (b) of the Companies Act 1993 that Mr Stewart attend before the High Court at Christchurch on 10 August 2021 to be examined on oath or affirmation by a barrister or solicitor on behalf of the liquidators on any matter relating to the business, accounts, or affairs of the company. The court also ordered Mr Stewart to produce to the liquidators any books, records, or documents relating to the company in his possession or under his control by 27 July 2021. The order for Mr Stewart's examination was conditional upon the liquidators providing an undertaking that they would not rely on the record of the examination in any other proceedings as an acknowledgment under s 47 of the Limitation Act 2010 by Mr Stewart of liability to pay any sum owing in respect of his shareholders current account.

Orders