Grant v Nauhria Precast Limited - [2014] NZHC 800

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-404-004935 [2014] NZHC 800

UNDER The Companies Act 1993

IN THE MATTER OF

the liquidation of Insulae Building
Consultants Limited (In Liquidation)

BETWEEN

DAMIEN GRANT and STEVEN KHOV as liquidators of Insulae Building Consultants Limited (In Liquidation) Applicants

AND

NAUHRIA PRECAST LIMITED Respondent

Hearing: 15 April 2014

Appearances:

B J Norling and A Ho for the Applicants
K W Fulton for the Respondent

Judgment:

16 April 2014

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

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

Registrar/Deputy Registrar
Date……………

D GRANT and S KHOV as liquidators of Insulae Building Consultants Limited (In Liquidation) v NAUHRIA PRECAST LIMITED [2014] NZHC 800 [16 April 2014]

[1] The applicants are the liquidators of Insulae Building Consultants Limited (In Liquidation) (Insulae). They seek orders that the amount of $62,371.69 received by the respondent (NPL) from Insulae be set aside and that NBL pay that amount to the liquidators.

[2] The liquidators claim that that amount received by NPL as payment for the supply of goods to Insulae is an insolvent transaction pursuant to s 292(2) of the Companies Act 1993 (the Act).

Facts

[3] On February 2011 Insulae and NPL entered into a credit agreement whereby NPL supplied goods to Insulae on credit. The credit application stated that NPL retained ownership of the goods supplied until full payment was made. The relevant clause of their agreement states:

Ownership in the goods remained with us until full payment is made regardless of where the goods are stored.

[4] NPL did not register its security interest. The parties traded between 28

March 2011 and 22 August 2011. On 20 September 2011 Insulae was put into liquidation by special resolution of its shareholders.

[5] Upon the liquidators review of Insulae’s accounts it considered the transactions with NPL were voidable. A notice to set aside those was served on 12
June 2013. In that notice the liquidators accepted that the account between the parties was a running account (in terms of s 292(4B)) (4B) of the Act. The liquidators sought the net improvement from the peak point selected by the liquidators. The present application before the Court proceeded on the same basis.

Characterisation of the parties trading relationship

[6] NPL responded by filing a notice of objection. After receipt of that the liquidators replied maintaining their position with the concession of a running account.

[7] NPL says that the start date for the running account is 7 February 2011 and there is a net loss of $6,186.61; therefore that there is no improvement or advantage during that trading period identified by the liquidators.

[8] It is now clear that the liquidators have selected a date from which they have chosen to start the period of the transaction under s 292. In their notice and their application there was never a change to the end date that being the date of the last payment.

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 800
Decision Date: 16 April 2014

CaseChat Overview and Summary

The High Court of New Zealand was asked to determine whether certain payments made by Insulae Building Consultants Limited (Insulae) to Nauhria Precast Limited (NPL) were voidable as insolvent transactions under the Companies Act 1993. The liquidators of Insulae, Damien Grant and Steven Khov, sought orders that the amount of $62,371.69 received by NPL be set aside and returned to the liquidators. The liquidators argued that these payments, made within six months before Insulae's liquidation, were insolvent transactions as the company was unable to pay its debts at the time. The key issues included whether the payments were part of a running account under section 292(4B) of the Act, the correct start and end dates of the trading relationship, and whether NPL had a change of position defence.

The Court considered the nature of the relationship between the parties, which began with a credit agreement on February 7, 2011, where ownership of goods remained with NPL until full payment was made. The liquidators argued for a peak indebtedness approach to determine the start date of the running account, while NPL maintained that the relationship began on February 7, 2011, and ended before the last payment on August 22, 2011. The Court rejected the liquidators' attempt to selectively pick a peak indebtedness date, emphasizing that the whole course of trading should be considered. The Court found that the relationship did not end before the last payment and thus, the entire period of trading should be assessed as part of a continuing business relationship.

The Court also examined whether NPL received preferential payments and whether it had a change of position defence. The Court found that NPL's unregistered security interest was effective and that it had the right to access the proceeds of Insulae's sales. The Court concluded that NPL had altered its position by not registering its security interest due to the payments received. Consequently, the Court dismissed the liquidators' application and awarded costs to NPL.

Orders