Grant v Shears and Mac Limited - [2012] NZHC 1772

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-3866 [2012] NZHC 1772

UNDER The Companies Act 1993

IN THE MATTER OF Voidable Transaction

BETWEEN DAMIEN GRANT AND STEVEN KHOV AS LIQUIDATORS OF BLUNDELL COFFEE CLUB LIMITED (IN LIQUIDATION)
Applicant

ANDSHEARS AND MAC LIMITED Respondent

Hearing: 10 May 2012

Counsel: D Grant for Applicants
J Lethbridge for Respondents

Judgment: 19 July 2012

RESERVED JUDGMENT OF ASSOCIATE JUDGE SARGISSON (Application to set aside Voidable Transaction)

This judgment was delivered by me on 19 July 2012 at 4.30 pm pursuant to
Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date ..........................

Solicitors:
Waterstone Insolvency, PO Box 352, Shortland Street, Auckland
Grove Darlow & Partners, PO Box 2882, Auckland

GRANT AND KHOV AS LIQUIDATORS OF BLUNDELL COFFEE CLUB LIMITED (IN LIQUIDATION) V SHEARS AND MAC LIMITED HC AK CIV-2011-404-3866 [19 July 2012]

[1] This is an application to set aside certain payments made by Blundell Coffee Club Limited (in Liquidation) to Shears and Mac Limited as voidable transactions. The application is brought under ss 292 and 294 of the Companies Act 1993.

[2] The application is opposed.

Background

[3] Blundell set out to establish a franchise of Coffee Club Franchising (NZ) Limited in Hastings. Shears and Mac had an existing relationship with Coffee Club Franchising a franchisor, having fitted out premises for over 30 of its franchisees throughout the country.

[4] On 10 July 2009 Shears and Mac provided a quotation to Blundell to fit out its coffee shop premises in Hastings for $407,084.00 (plus GST). The quotation was accepted by Blundell, and the contract finalised, on 4 August 2009. Blundell’s director gave a personal guarantee for the agreed cost of the fit out. Clause 8.1 of the agreement’s terms and conditions gave Shears and Mac a registerable security interest in the fit out:

... Shears and Mac4 [sic] holds a security interest in all such materials and improvements for payment of any moneys due.

[5] Pursuant to the contract, Shears and Mac issued the following invoices:

(a) 10 July 2009 invoice 15915 $ 137,390.85 (including GST) (b) 10 August 2009 invoice 16082 $ 22,680.18 (including GST) (c) 10 August 2009 invoice 16081 $ 297,680.15 (including GST)

[6] Invoice 15915 comprised a 30% deposit and was due for payment on 20

August 2009. By 5 August 2009, Blundell had paid the invoice in full.

[7] Invoice 16082 comprised a 5% contribution to be paid by Coffee Club

Franchising and not Blundell. It was due for payment on 12 November 2009. On 14

December 2009, Coffee Club Franchising paid the invoice in full.

[8] Invoice 16081 comprised the remaining 65% of the contract value. It was due to be paid by Blundell by 20 September 2009. Blundell paid the majority of the
$297,680.15 invoice by 12 August 2009, leaving only $47,680.15 to be paid. That outstanding sum was not paid on time. Pursuant to invoice 16081, Blundell made the following payments to Shears and Mac, which are the subject of this application:

(a)…

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.

Continue reading Grant v Shears and Mac Limited

Details

AGLC: Grant v Shears and Mac Limited [2012] NZHC 1772
Case: [2012] NZHC 1772
Decision Date: 19 July 2012

CaseChat Overview and Summary

This case involves an application to set aside certain payments made by Blundell Coffee Club Limited (in Liquidation) to Shears and Mac Limited as voidable transactions under the Companies Act 1993. The application was brought by the liquidators of Blundell, Damien Grant and Steven Khov. The central issues were whether the $10,000 payment and the $8,750 payments were voidable transactions and whether Shears and Mac could invoke the s 296(3) defence.

The court found that the $10,000 payment was not a voidable transaction as the liquidators failed to prove that Blundell was unable to pay its due debts as of 20 October 2009. Regarding the $8,750 payments, the court concluded that they were voidable transactions. Shears and Mac bore the onus of proving that the payments did not enable it to receive more towards satisfaction of the debt than it would receive in Blundell's liquidation, but it failed to do so. The court also found that Shears and Mac could not rely on the s 296(3) defence as it did not alter its position in the reasonably held belief that the payments were valid and would not be set aside.

In conclusion, the application was allowed in part, and the $8,750 payments made by Blundell Coffee Club Limited prior to its liquidation were set aside as voidable transactions. The liquidators were granted judgment against Shears and Mac Limited in the sum of $8,750. No costs were awarded as each party enjoyed partial success.

Orders