Grant v Lotus Gardens Ltd - [2014] NZCA 127

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IN THE COURT OF APPEAL OF NEW ZEALAND

CA399/2013 [2014] NZCA 127

BETWEEN
DAMIEN GRANT AND STEVEN KHOV

AS LIQUIDATORS OF QUANTUM GROW LTD (IN LIQUIDATION) Appellants

AND

LOTUS GARDENS LIMITED Respondent

Hearing: 20 February 2014

Court:

O’Regan P, Stevens and Asher JJ

Counsel:

B J Norling and J K Boparoy for Appellants
S I Perese for Respondent

Judgment:

4 April 2014 at 2.15 pm

Reissued:

15 April 2014: see minute of 15 April 2014

Effectivedate ofJudgment:

4 April 2014

JUDGMENT OF THE COURT

A The appeal is allowed.

B The order dismissing the liquidation application is quashed.

CThe matter is remitted to the High Court for the High Court to make such orders as to the appointment of a liquidator and any other orders as are considered appropriate.

D The appellants are entitled to costs for a standard appeal on a band B

basis and usual disbursements.

GRANT & ANOR v LOTUS GARDENS LTD CA399/2013 [2014] NZCA 127 [4 April 2014]

EThe costs order in favour of the respondent in the High Court is quashed, and in its place the appellants will have costs and reasonable disbursements calculated on a 2B basis. Any argument as to the
quantum of costs is to be dealt with in the High Court.

REASONS OF THE COURT

(Given by Asher J)

Introduction

[1] The issues in this appeal are the nature of the debt that arises in favour of a company in liquidation when a transaction is set aside as an insolvent transaction under s 294 of the Companies Act 1993 (the 1993 Act) and if there was an insolvent transaction, the ability of the liquidators to liquidate the respondent company based on a statutory demand.

[2] The appellants, Damien Grant and Steven Khov, are liquidators of Quantum Grow Ltd (in liquidation) selling hydroponic equipment and nutrients. Lotus Gardens Ltd (Lotus Gardens), the respondent, is a grower of vegetables. Alan Canavan who has provided affidavits and evidence is a director of both Quantum Grow Ltd (Quantum Grow) and Lotus Gardens, and the shareholders of the two companies are the same.

[3] Prior to its liquidation between 3 March 2009 and 20 July 2010 Quantum Grow transferred $113,280.63 to Lotus Gardens. On 20 March 2012 Quantum Grow was put into liquidation by order of the High Court at Christchurch. By a letter dated
30 May 2012 the liquidators noted certain transfers made between 23 March 2010 and July 2010 and requested a statement of account from Lotus Gardens summarising the purpose of the payments. There was no response to that request.

[4] On 24 July 2012 the liquidators issued a formal request under s 261 of the

1993 Act for a statement of account summarising what the payments were for. Lotus

Gardens did not respond to that notice.

[5] On 7 September 2012 another notice under s 261 was sent by the liquidators to Lotus Gardens. Again Lotus Gardens did not respond.

[6]…

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: [2014] NZCA 127
Decision Date: 4 April 2014 at 2.15 pm

CaseChat Overview and Summary

This appeal concerns the procedure for setting aside voidable transactions under the Companies Act 1993 (the Act) and the ability of liquidators to liquidate a company based on a statutory demand. The liquidators of Quantum Grow Ltd (Quantum Grow) sought to liquidate Lotus Gardens Ltd (Lotus Gardens) on the basis of a statutory demand, arguing that Lotus Gardens owed Quantum Grow $25,576.88 in relation to voidable transactions. The liquidators argued that the Associate Judge had erred in refusing to follow McKinnon v Falla Holdings NZ Ltd (in liq), in which it was held that a liquidator could rely on the common law action for money had and received by way of a fraudulent preference. The Court allowed the appeal. The Court found that the liquidators had taken the wrong procedure to recover the amounts paid under the allegedly voidable transactions. The Court considered that Lotus Gardens could not become indebted to the liquidators for the amounts of the alleged voidable transactions unless and until the Court made an order under s 295 of the Act. In the absence of such orders the liquidators were not creditors of Lotus Gardens and did not have standing to seek a liquidation order. The Court also found that Lotus Gardens had not raised a genuine and substantial dispute as to whether there was a voidable transaction. The Court held that the liquidators could rely on a statutory demand procedure. The Court found that Lotus Gardens had no defence under s 296(3) of the Act.

Orders