Grant v Stinson HC Auckland CIV-2008-404-8244

[2011] NZHC 915

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2008-404-8244

UNDER  the Companies Act 1993

IN THE MATTER OF     Grastin Investments Limited (previously Coldmaster Industries Limited) (In Liquidation)

BETWEEN  DAMIEN GRANT AND STEVEN KHOV Applicants

ANDGRANT ERROLL STINSON Respondent

Hearing:         16 August 2011

Counsel:         R M Dillon for Applicants

R B Hucker for Respondent

Judgment:      16 August 2011

INTERIM JUDGMENT OF ASSOCIATE JUDGE ABBOTT

Solicitors:

Queen City Law, P O Box 6908 Auckland 1141, for Applicants

Email:   [email protected]

Hucker & Associates, P O Box 3843 Auckland 1140, for Respondent

Email:   [email protected]

Case Officer:      [email protected]

GRANT AND KHOV V STINSON HC AK CIV-2008-404-8244 16 August 2011

[1]      An application by the liquidators of Grastin Investments Ltd (In Liquidation) is listed for a defended hearing today.   The liquidators are seeking orders for production of documents and for the sole director of the company to attend this court for examination.

[2]      The application had been listed for a previous defended hearing, but prior to the hearing date the parties were able to reach agreement on a proposed course of action,  which  they hoped  would  resolve  the  application.    Counsel  filed  a  joint memorandum as to the course proposed, and the hearing was vacated.

[3]     Documents were produced by the respondent in accordance with that arrangement (with a reservation of his legal position) but the applicants took the view   that   there   were   still   other   documents   available,   or   alternatively   that explanations were needed either about the documents that were produced or matters where there were no documents.   Accordingly, the application was re-listed for a defended hearing today.

[4]      The  central  issue  in  this  case  is  whether  the  documents  in  question  are properly considered documents of the company or whether they are documents of a trust, for which the company was a corporate trustee.   Counsel have prepared argument on whether the documents being sought fall within the provisions of s 261 of the Companies Act 1993, and whether the Court is able to make orders under s 266(2) of the Act.  There are also other bases for the applications advanced by the applicants, but it is not necessary to relate those at this point.

[5]      At  the  commencement  of  the  hearing  I  confirmed  with  counsel  that  the essential point of the application at this stage is to establish facts as to the company’s asset and liability position, as at the date of liquidation, and factors leading to that position.  Central to this are loan arrangements in early 2006, which have since been repaid by a different entity (a related family trust), with the latter taking an assignment of the debt instruments.  The applicants’ concern is that this has put the related  family  trust  into  the  position  of  a  secured  creditor  (apparently  with  an

entitlement to any recoveries in the liquidation), but the position as to assets acquired from that debt is still unclear.

[6]      At the start of the hearing I indicated to counsel my preliminary view was that the Court would have power to order production of most, if not all, of the documents still being sought (there is a convenient list in a letter from the liquidators dated 4 May 2011 which is Exhibit A to the affidavit of the liquidator, D M Grant sworn on 8 July 2011).  Equally, however, I could understand the opposition being advanced by the respondent that he was unable to locate any further of these documents,  and  that  the  applicants’  further  inquiries  (particularly  the  wish  to examine him) were directed more towards  a  claim  against  him  personally than establishing the position of the company.

[7]      I invited counsel to confer on a course of action which might accommodate those two positions and avoid the need for the remainder of the hearing today, albeit with any issues arising out of the further documents, and the respondent’s opposition to any examination on matters attributable to his personal position, being reserved for resumption of the hearing in due course, should that be necessary.

[8]      Counsel have taken up the invitation, and have prepared a draft proposal for dealing with both aspects of the application by:

(a)      the respondent providing an affidavit addressing the documents that the applicants are still seeking (giving an explanation as to any documents no longer in his possession or control);  and

(b)the applicants subsequently providing a list of matters on which they still require answers, having considered any further documents produced and the respondent’s explanation.

[9]      The parties seek to have the application adjourned to allow this course to be followed, but on the basis that it may still be necessary to resume the hearing if there are any issues which the parties find they are unable to resolve.

[10]     Both counsel informed me that they will recommend this proposal to their clients, but neither has been in a position to obtain firm instructions this morning. At this stage the proposal is contained in a handwritten draft, a copy of which has been left on the Court file.   It represents an outcome that counsel consider appropriate, and which they will be recommending to their clients.  I add that it is my view that it reflects a likely outcome to these aspects of the application, and is in the nature of the directions that I would have contemplated had the matter proceeded.

[11]     The   application   is   adjourned   to   the   chambers   list   at   2:15pm   on

21 September 2011, for such further directions as may be needed.   That should allow counsel time to obtain instructions and, assuming that they are to proceed on the basis of the draft proposal, for at least the first stage of the proposal (provision of an affidavit by the respondent) to be completed and for the applicants to consider that affidavit and any further documents.  Hopefully, it will also allow sufficient time for the applicants to prepare a list of any further questions which they would want the respondent to answer.

[12]     Costs on today’s hearing are reserved.

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Associate Judge Abbott