Grant v Lotus Gardens Ltd - [2014] NZHC 829

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

CIV-2013-488-5 [2014] NZHC 829

IN THE MATTER OF the Companies Act 1993

IN THE MATTER OF

the liquidation of LOTUS GARDENS LIMITED

BETWEEN

DAMIEN GRANT and

STEVEN KHOV as liquidators of QUANTUM GROW LIMITED (In Liquidation)

Plaintiffs

AND

LOTUS GARDENS LIMITED First Defendant

ALAN CANAVAN Second Defendant

Hearing: 16 April 2014

Appearances:

B J Norling and J K Boparoy for Plainitffs
S I Perese for Defendants

Judgment:

16 April 2014

ORAL JUDGMENT OF ASSOCIATE JUDGE BELL

Solicitors:
Waterstone Insolvency (Brent J Norling/Jes Boparoy) Auckland, for Plaintiffs
Teei & Associates Lawyers (P N Teei) Henderson, for Defendants

Copy for:
S I Perese, Barrister, for Defendants

GRANT and KHOV as liquidators of QUANTUM GROW LIMITED (In Liquidation) v LOTUS GARDENS LIMITED [2014] NZHC 829 [16 April 2014]

[1] On 4 April 2014 the Court of Appeal gave its decision on the plaintiff’s appeal from my decision of 17 May 2013 dismissing their liquidation application. The Court of Appeal allowed the appeal. In its first iteration of its decision it tried to make a liquidation order. In its second iteration, the Court of Appeal remitted the matter to this Court to make such orders as to the appointment of a liquidator and any other orders as are considered appropriate. I am dealing with that matter now.

[2] It is clear from the decision of the Court of Appeal that a liquidation order should be made. The matters for decision are these:

(a) How should I deal with the intimation from Lotus Gardens Limited that it wishes to seek leave of the Supreme Court to appeal against the decision of the Court of Appeal?

(b) Who should be appointed liquidators?

(c) What costs should be awarded in favour of the plaintiffs for having succeeded in the High Court proceeding?

Proposed appeal

[3] Mr Perese has been receiving instructions from Mr Canavan, the director of Lotus Gardens Limited. Mr Canavan has so far had management and control of Lotus Gardens Limited as director. As such he has had charge of the conduct of the defence for Lotus Gardens Limited.

[4] Once a liquidation order is made he will no longer be allowed to direct any proceedings on behalf of the company. Instead custody and control of the company’s assets will pass to the liquidator. That includes the right to take proceedings in the name of the company. That is one of the powers conferred on a liquidator under sch 6 of the Companies Act 1993.

[5] While Mr Canavan will remain in office as a director he will cease to have powers, functions and duties other than those required or permitted to be exercised by Part 16 Companies Act.1 That does not include the power to conduct proceedings in the name of the company.

[6] The difficulty is that any liquidator appointed by this Court is unlikely to run an appeal in the name of the company against the order putting that liquidator in…

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] NZHC 829
Decision Date: 16 April 2014

CaseChat Overview and Summary

The case of Grant v Lotus Gardens Ltd involved the liquidation of Lotus Gardens Limited, with Damien Grant and Steven Khov as liquidators of Quantum Grow Limited (In Liquidation) pursuing the matter. The primary legal issues that the court needed to address included the handling of Lotus Gardens Limited's intention to seek leave of the Supreme Court to appeal the Court of Appeal's decision, the appointment of liquidators, and the determination of costs awarded in favour of the plaintiffs. The court's reasoning revolved around ensuring that the right to appeal is preserved while also considering the potential for conflict of interest and ensuring that the company's assets are protected during the interim period.

The court decided to join Alan Canavan, the director of Lotus Gardens Limited, as a second defendant to allow him to apply to the Supreme Court for leave to appeal the Court of Appeal's decision. The court believed that the right to seek leave of the Supreme Court must be a real and not a theoretical right and that the potential for the Court of Appeal's decision to be overturned justified the appointment of an independent liquidator to hold the fort in the meantime. The court appointed the Official Assignee as liquidator due to his relatively low costs and independence, while also allowing for the possibility of Quantum Grow Limited's liquidators stepping down if more active steps were required.

The court awarded costs in favour of Quantum Grow Limited in the amount of $17,915.00 plus disbursements, to be paid out of the assets of Lotus Gardens Limited. The court also granted leave for any party to request a conference to address any issues that may arise during the liquidation process.

Orders