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Fisk v Galvanising (HB) Ltd

Fisk v Galvanising (HB) Ltd

Case [2013] NZHC 3543 20 December 2013

Contract Formation

Unconscionable Conduct

Insolvency of Company

Compensatory Damages

Injunction

Corporate Law & Governance

Commercial Law

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IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2013-441-000124 [2013] NZHC 3543

UNDER the Companies Act 1993

BETWEEN

JOHN HOWARD ROSS FISK AND TONY WAYNE PATTISON AS LIQUIDATORS OF EAST QUIP LIMITED (IN LIQUIDATION) Applicants

AND

GALVANISING (H.B.) LIMITED First Respondent

AND

STUART DAVID EASTON AND ROBERT ELVIDGE EASTON AS TRUSTEES OF THE EASTON PROPERTY TRUST

Second Respondents

AND

HOOKED ON TRANSPORT LIMITED Third Respondent

AND

STUART DAVID EASTON AND VIVIENNE JANE EASTON Fourth Respondents

Hearing: 9 - 10 December 2013

Appearances:

D Chan for Applicants
R P Harley for Respondents

Judgment:

20 December 2013

JUDGMENT OF ASSOCIATE JUDGE OSBORNE
on applications under s 294 Companies Act 1993

Introduction

[1] Stuart and Vivienne Easton (Mr and Mrs Easton) owned and controlled a group of companies (the Easton Group) in Napier. Two of those companies,

FISK v GALVANISING (H.B.) LIMITED [2013] NZHC 3543 [20 December 2013]

Galvanising (H.B.) Limited (Galvanising) and Hooked on Transport Limited (HOT) survived and are first and third respondents in this proceeding. One of the companies, East Quip Limited (East Quip) did not and was put into liquidation on
10 July 2009.

[2] The companies operated a range of businesses – Galvanising in galvanising; HOT in transport, and East Quip in steel production. The entities frequently provided goods or services to one another.

[3] This case concerns a number of transactions which the liquidators of East Quip say occurred within the “specified period” of a little over two years which has significance in relation to the definition of insolvent transactions under s 292
Companies Act 1993.

[4] In particular, the liquidators allege that East Quip entered into transactions with four sets of related entities or people. Two were Galvanising and HOT. The other two sets of respondents are respectively the trustees of the Easton Property Trust (the Trust) (a family trust of Mr and Mrs Easton), and Mr and Mrs Easton themselves. Galvanising had been Mr Easton’s first company and it has traded profitably as a provider of galvanising services. Other companies in the Easton Group, including East Quip, were established later. Mr Easton deposed in relation to East Quip that –

It has always been the case that East Quip Limited (In Liquidation) had financial support from other companies and entities within the wider Easton Group.

[5] Mr Easton might have added that East Quip’s survival through to 2009 had been further assisted by not meeting its tax liabilities as they fell due. It was ultimately the Commissioner of Inland Revenue who applied for and obtained East Quip’s liquidation.

[6] Somewhat surprisingly the respondents have maintained through to this hearing the proposition that there is an issue as to whether East Quip was insolvent at

the time of each of the impugned transactions.1 Mrs Harley did not present any closing submissions on the topic.2 For reasons I come to, East Quip was clearly insolvent throughout the specified period.

The nature of the impugned transactions

[7] The liquidators assert that East Quip entered into a variety…

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 Fisk v Galvanising (HB) Ltd

Details

AGLC: Fisk v Galvanising (HB) Ltd [2013] NZHC 3543
Case: [2013] NZHC 3543
Decision Date: 20 December 2013

CaseChat Overview and Summary

The case involved a dispute over a number of transactions which occurred within the specified period prior to the liquidation of East Quip Limited. The liquidators of East Quip brought proceedings against various respondents, including Galvanising (H.B.) Limited, the Easton Property Trust, Hooked on Transport Limited, and Stuart and Vivienne Easton as individuals, seeking to have certain transactions set aside as insolvent. The court was required to determine whether the transactions were indeed insolvent and, if so, whether they could be set aside under the Companies Act 1993. The court also had to consider whether the transactions were part of a running account and whether the respondents were entitled to the funds as wages.

The court found that East Quip was insolvent throughout the specified period and that the transactions in question enabled the respondents to receive more towards satisfaction of the debts owed by East Quip than they would have received in the liquidation. The court rejected the respondents' arguments that the transactions were part of a running account or that the funds were paid as wages. The court concluded that the liquidators were entitled to set aside the transactions and recover the funds from the respondents. The court also ordered the respondents to pay costs and interest on the amounts recovered.

Orders