Grant v Montgomerie

[2021] NZHC 2389

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-759

[2021] NZHC 2389

BETWEEN

DAMIEN MITCHELL GRANT AS

RECEIVER OF BASSETT 43 LIMITED (IN RECEIVERSHIP)
Applicant

AND

ANDREW LAURIE MONTGOMERIE

Respondent

Hearing:	28 July 2021
Appearances:	W van Roosmalen for the Applicant S R J Hamilton for the Respondent
Further submissions:	5 August 2021
Date of Judgement:	13 September 2021

JUDGMENT OF POWELL J

This judgment was delivered by me on 13 September 2021 at 3.30 pm pursuant to R 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors:
Douglas M A Burgess, Auckland

Counsel:

W van Roosmalen, Auckland

S R J Hamilton, Southern Cross Chambers, Auckland

GRANT v MONTGOMERIE [2021] NZHC 2389 [13 September 2021]

[1]                 The applicant, Damien Grant, is the receiver of Bassett 43 Ltd (in receivership) (“Bassett 43”). He seeks an order pursuant to s 12 of the Receiverships Act 1993 requiring the respondent, Andrew Montgomerie, to:

(a)produce all books, records and documents of the company; and

(b)pay the costs of this proceeding on a 2B basis.

[2]                 Mr Montgomerie acknowledges that at the time of the receivership he was the sole director of Bassett 43 and there have been no other directors appointed. He nonetheless initially opposed the application on the basis that he had already provided all the documents pertaining to Bassett 43 that were in his power and control, that  Mr Grant otherwise knows the names and contact details of the company’s consultants and professional advisors, and/or that other relevant information is publicly available. Mr Montgomerie went so far as to assert that the application is in fact an abuse of process.

[3]                 Although at the hearing Mr Montgomerie took no issue with the jurisdiction of Mr Grant to make the application, his counsel Mr Hamilton subsequently filed a memorandum challenging the jurisdiction of the Court to make the orders sought on the basis that, as an undischarged bankrupt, Mr Montgomerie is precluded from holding office as a director of the company. In Mr Hamilton’s submission, not only was Mr Montgomerie legally barred from holding office pursuant to ss 151(2)(b) and 157(1)(c) of the Companies Act 1993 (and it is a criminal offence for him to do so),1 it follows that as he is not a director he has no control over any of the books, documents and records of Bassett 43 for the purposes of s 12 of the Receiverships Act.

[4]                 In response, Mr van Roosmalen submitted on behalf of Mr Grant that it was not necessary for the applicant to rely upon s 12 of the Receiverships Act for the orders at issue, but rather s 34 of the Receiverships Act provides sufficient jurisdiction to make an order against Mr Montgomerie whether or not he was a director. In Mr van Roosmalen’s submission receivers’ powers under s 12 parallel those of liquidators in relation to company documents pursuant to ss 261 to 266 of the Companies Act, and

1      Insolvency Act 2006, ss 149(1)(a) and 436(1).

it would therefore be odd if a disqualified director could still be ordered to provide documents in cases of liquidation under that Act but not in cases of receivership under the Receiverships Act.

[5]                 In the alternative, Mr  van  Roosmalen  submitted  that  any  in  any  event  Mr Montgomerie continues to be a de facto director of Bassett 43. He relies on Clark v Libra Developments Ltd, in which the Court of Appeal concluded:2

In our view, the combined effect of ss 158 and 126(1)(a) is that Mr Hyslop remained a de facto director of Libra during the period of his bankruptcy notwithstanding disqualification as a director by his adjudication and the fact that under the Insolvency Act 1967, s 62, he was forbidden from so acting and was open to prosecution for continuing to so act: Insolvency Act 1967, s 128(1)(a). Despite his disqualification and the prohibition statutorily imposed on him, he was still “occupying” the position as Libra’s director. In the management of its affairs and the operation of its business he was held out by Libra as its director. Even if such may not apply generally, in our view it clearly applies to a company with only one director who is disqualified after appointment because s 128(1) requires a company’s business and affairs to be managed under the direction of its board and s 127(b) expressly defines a sole director as the company’s board.

Discussion

[6]                 Although the jurisdictional issue was raised after the hearing, there can be no dispute that this Court must have jurisdiction before the orders sought by Mr Grant can be made. Having considered the question, I conclude that this Court does not in fact have the necessary jurisdiction to grant the application.

[7]                 First, it is clear that an order under s 12 of the Receiverships Act can only be made against Mr Montgomerie if he is a director for the purposes of that Act. The section provides:

(1)A grantor and, in the case of a grantor that is a body corporate, every director of the grantor, must—

(a)make available to the receiver all books, documents, and information relating to the property in receivership in the grantor’s possession or under the grantor’s control:

(b)if required to do so by the receiver, verify, by statutory declaration, that the books, documents, and information are complete and correct:

2      Clark v Libra Developments Ltd [2007] 2 NZLR 709 (CA) at [179].

(c)give the receiver such assistance as he or she may reasonably require:

(d)if the grantor is a body corporate that has a common seal, make the common seal available for use by the receiver.

(2)On the application of the receiver, the court may make an order requiring the grantor, or if the grantor is a body corporate, a director of the grantor to comply with subsection (1).

[8]                 The definition of director contained in s 2(1) of the Receiverships Act effectively mirrors that set out in s 126 of the Companies Act. Given that position, it is clear that Mr Montgomerie’s bankruptcy not only disqualifies him from acting as a director,3 but means that he vacated the office of director at the point at which he was made bankrupt,4 subject only to continuing to hold such duties and obligations as imposed by the Companies Act.5

[9]                 In this case, there is no issue as to whether Mr Montgomerie has at any point held himself out to be a director following his bankruptcy. On the contrary, the purpose of the orders sought require Mr Montgomerie to act as a director again at this point so as to obtain and/or otherwise make available the books, records and documents of Bassett 43. As a result, it is clear the position is quite different from the position before the Court in Clark. There, the Court considered whether a bankrupt remained a director for the purposes of the Companies Act for actions taken on behalf of the company after he was made bankrupt. In these circumstances, it would be plainly inconsistent with the scheme of the Companies Act and indeed ss 149 (1)(a) and 436(1) of the Insolvency Act 2006 to make orders requiring Mr Montgomerie to continue to act as a director so as to comply with s 12 when by law he has already vacated his position as a director and where it is a criminal offence for him to purport to continue to act in that capacity.

[10]              Finally, it is clear s 12 does not grant receivers a general power to obtain company documents but a specific power to get the company to provide documents and, if necessary, to action that through getting the director to provide those documents. In this regard it is clear that the powers of liquidators pursuant to ss 261-

3      Companies Act 1993, s 151(2)(b).

4      Companies Act 1993, s 157(1)(c).

5      Companies Act 1993, s 151(4).

266 of the Companies Act are considerably wider in scope than those contained in s 12 of the Receiverships Act. Section 261(1) in particular provides a liquidator with the power to require delivery of books, records and documents of a company by not only directors, but shareholders and “and other person” as well, with even more extensive powers to obtain information from third parties associated with the company (including, specifically, former directors) specifically provided for in s 261(2) and (3).

[11]              Taking these various matters together I am therefore satisfied that there is no jurisdiction under s 12 of the Receiverships Act to require Mr Montgomerie to make available the records of Bassett 43.

[12]              I likewise conclude there is no jurisdiction to make the orders sought pursuant to s 34 of the Receiverships Act. This section is concerned with the performance of the functions of a receiver,6 including addressing issues with regard to the remuneration of a receiver or the validity of a receiver’s appointment.7

[13]              There is however nothing in s 34 that would provide jurisdiction for a court to require a third party like Mr Montgomerie to produce books, records and/or documents to a receiver such as that provided for in s 12.

Decision

[14]The application is dismissed.

[15]              Costs on the application are reserved. Should Mr Montgomerie seek costs, he is to file a memorandum within five working days of the date of this  judgment.     Mr Grant will then have five working days to respond and I will determine the issue on the papers.

Powell J

6      Receiverships Act 1993, s 34(1).

7      Receiverships Act 1993, s 34(2).