Grant v Lawson Robinson Limited - [2019] NZHC 2465

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE

CIV-2019-441-96

[2019] NZHC 2465

UNDER the Companies Act 1993

IN THE MATTER

of GLW Group Ltd (in liq)

BETWEEN

DAMIEN GRANT

Applicant

AND

LAWSON ROBINSON LIMITED

Respondent

Hearing: 9 August and 26 September 2019

Appearances:

A Botterill for applicant

J Cameron for respondent

Judgment:

30 September 2019

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

Introduction and issues

[1] This is an application by the liquidator of GLW Group Ltd (in liq), Mr Damien Grant, pursuant to s 292 of the Companies Act 1993 for an order setting aside a payment of $51,733.93 made on 9 May 2017 by GLW to Lawson Robinson Ltd, a firm of solicitors that had provided legal services to GLW.

[2] The background is not without its complications, but, for present purposes, it can be summarised briefly.

[3] GLW was a property development company. It was incorporated in April 2009. Mr Garth Paterson was the driving force behind the company, and originally its sole

GRANT v LAWSON ROBINSON LIMITED [2019] NZHC 2465 [30 September 2019]

director until he was declared bankrupt in Australia in April 2015. Mr Paterson’s ex-wife, Ms Elizabeth O’Neil, who was the company’s sole shareholder, became its sole director in place of Mr Paterson.

[4] GLW engaged Lawson Robinson to assist with aspects of a development in Hawkes Bay. The contract of retainer appears to have begun in February 2013 and concluded in July 2016. Why the retainer came to an end is not important. At that point, the firm’s billed but unpaid costs totalled $51,733.93. On 1 September 2016, Lawson Robinson served a statutory demand for that amount. On 13 September 2016, GLW filed and served an application for an order setting aside the statutory demand. Lawson Robinson filed and served a notice of opposition on 27 September 2016. On 28 October 2016, the firm filed and served liquidation proceedings.

[5] Before GLW’s application for an order setting the statutory demand aside was heard, the parties entered into a settlement agreement pursuant to which GLW agreed to pay the full amount of Lawson Robinson’s outstanding fees upon the discontinuance by Lawson Robinson of the proceeding. GLW paid the settlement funds to its own solicitors in two tranches on 20 and 21 April 2017.

[6] With the Court’s leave, the proceeding was discontinued on 24 April 2017. On 9 May 2017, GLW’s solicitors paid the settlement funds to Lawson Robinson. By shareholder resolution dated 27 July 2018, GLW resolved to place itself into liquidation and appointed Mr Grant as liquidator.

[7] The liquidator now challenges the 9 May 2017 payment as a voidable transaction.

[8]Two sections of the Companies Act are engaged:

292 Insolvent transaction voidable

(1)A transaction by a company is voidable by the liquidator if it—

(a)is an insolvent transaction; and

(b)is entered into within the specified period.

(2)An insolvent transaction is a transaction by a company that—

(a)is entered into at a time when the…

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: [2019] NZHC 2465
Decision Date: 30 September 2019

CaseChat Overview and Summary

The case of Grant v Lawson Robinson Limited involves an application by the liquidator of GLW Group Ltd, Mr Damien Grant, under the Companies Act 1993, seeking to set aside a payment of $51,733.93 made by GLW to Lawson Robinson Limited, a firm of solicitors that provided legal services to GLW. The central issues before the Court were whether the payment constituted an insolvent transaction, whether GLW was insolvent at the time of the payment, if Lawson Robinson received more towards satisfaction of its debt than it would have in liquidation, and whether Lawson Robinson had a defence under section 296(3) of the Act.

The Court found that the payment made by GLW to Lawson Robinson was indeed capable of constituting an insolvent transaction, as it fell within the definition of a transaction under section 292(3)(e) of the Companies Act 1993, which includes the payment of money. Additionally, the Court determined that GLW was insolvent at the time of the payment, based on the substantial debt owed to secured and unsecured creditors, and the minimal liquid assets available to meet these obligations. The Court also held that Lawson Robinson received more towards satisfaction of its debt than it would have received in the liquidation, as GLW had no other material assets beyond the development property and unsecured obligations of over a quarter of a million dollars before considering the liquidator's costs. Finally, the Court ruled that Lawson Robinson did not have a defence under section 296(3) of the Act, as it was aware of GLW's financial difficulties and did not act in good faith or without suspicion of insolvency.

Consequently, the Court ordered Lawson Robinson Limited to repay the amount of $51,733.93 to the liquidator, with interest under section 10 of the Interest on Money Claims Act 2016. The Court reserved costs, allowing the parties 15 working days to settle the matter, with an expectation that the liquidator, as the successful party, would be entitled to costs on a 2B basis.

Orders