Grant v ML Trustees 2711 Limited - [2015] NZHC 1503

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2015-404-000347 [2015] NZHC 1503

BETWEEN
DAMIEN GRANT AND STEVEN

KHOV Applicants

AND

ML TRUSTEES 2711 LIMITED Respondent

Hearing: 29 June 2015

Appearances:

B J Norling and A Ho for the Applicants
A R Nicholls for the Respondent

Judgment:

1 July 2015

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on
01.07.15 at 4:30pm, pursuant to
Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar
Date……………

D GRANT AND S KHOV v ML TRUSTEES 2711 LIMITED [2015] NZHC 1503 [1 July 2015]

Background

The special resolution

[1] On or about 15 January 2014 Mr Laurence Pope consulted with Mr Grant an insolvency practitioner regarding placing Mr Pope’s company, Easy Group Limited (Easy Group) into liquidation.

[2] On 16 January 2014 Easy Group was placed into liquidation by special resolution.

[3] It appears the form of the special resolution was prepared by Mr Grant in accordance with instructions received from Mr Pope. A copy of that document notes:

[4] Mr Pope signed ‘as trustee of Osaurus Trust’, and for himself as a

shareholder. As drafted, it does not provide for the signature of anyone else.

[5] Ninety nine of 100 shares in Easy Group were held by Mr Pope and ML Trustees 2711 Limited (MLT) as trustees of the Osaurus Trust. One of 100 shares was held by Mr Pope personally.

Events post liquidation

[6] Mr Grant and Mr Khov (the applicants) produced their first liquidator’s

report on 29 January 2014. It noted a surplus of assets over liabilities in the sum of

$1,489,000.

[7] The liquidators’ enquiries revealed that MLT was incorporated on 9 October

2009 to act as the corporate trustee of the Osaurus Trust. Those enquiries disclosed

Mr Hemphill, lawyer as the sole director of MLT.

[8] On two occasions in August 2014 the liquidator sent letters to Mr Hemphill informing them of their appointment and requesting the provision of documents relating to the Osaurus Trust.

[9] In October 2014 Mr Hemphill was interviewed under oath as s 261 of the

Companies Act 1993 (the Act) allowed.

[10] The applicants’ communications to Mr Hemphill reported that a significant number of payments had been made by Easy Group to various trusts that Mr Hemphill may have acted for or indeed been a trustee of. The liquidators requested trustee details and trust deeds of three trusts including the Osaurus Trust. The liquidators also requested advice regarding the nature of the relationship between the Trusts and Easy Group.

[11] Mr Hemphill responded to those. Later by email dated 4 November 2014 Mr

Hemphill stated:

As should have been apparent from the notice of appointment, ML Trustees
2711 Limited did not consent to your appointment as liquidator. We are instructed to apply to the High Court to rescind your appointment as
liquidator.

MLT’s application to declare the special resolution invalid

[12] On 23 December 2014 MLT applied to the High Court for a declaration that the special resolution of shareholders…

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: [2015] NZHC 1503
Decision Date: 1 July 2015

CaseChat Overview and Summary

In the High Court of New Zealand, the case of Grant and Khov v ML Trustees 2711 Limited (MLT) was heard and determined. The applicants, Damien Grant and Steven Khov, sought a declaration of the validity of their appointment as liquidators of Easy Group Limited, a company placed into liquidation on 16 January 2014. The respondents, MLT, sought to declare the special resolution invalid. The primary issue was whether the special resolution appointing the applicants as liquidators was valid. Under the Companies Act 1993, a special resolution requires the approval of 75% of the shareholders entitled to vote. The resolution was signed by Laurence Pope as trustee of the Osaurus Trust and as a shareholder, but not by MLT, the other trustee of the Osaurus Trust, which held 99% of Easy Group's shares.

The court examined the principle that trustees must act unanimously and that one trustee cannot delegate responsibility for voting on a liquidation resolution to another trustee. The court found that Mr. Pope did not have the authority of the Osaurus Trust to deal with trust matters because that authority had not been given to him by MLT. However, the court held that the appointment had been ratified by MLT through their inaction and the fact that MLT did not challenge the appointment until after significant work had been done by the applicants. The court concluded that the applicants' appointment on 16 January 2014 had been retrospectively validated by the actions and lack of action taken by MLT. The application was granted, and the appointment of the applicants as liquidators on 16 January 2014 at 9:50am was confirmed. Costs were reserved for determination upon application made in writing to the court.

Orders