Gulf Projects Limited v Euro Fashion Brands Limited

[2016] NZHC 399

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV-2016-404-387

[2015] NZHC 399

IN THE MATTER

of Section 243 of the Companies Act 1993

BETWEEN

GULF PROJECTS LIMITED

Plaintiff

AND

EURO FASHION BRANDS LIMITED

Defendant

Hearing:	7 March 2016 (on papers)
Appearances:	Mr P Missingham and Mr R Latton for plaintiff
Judgment:	10 March 2016

JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

This judgment was delivered by me on

10.03.16 at 12 pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

GULF PROJECTS LIMITED v EURO FASHION BRANDS LIMITED [2015] NZHC 399 [10 March 2016]

[1]    The plaintiff has applied without notice for an order appointing an interim liquidator.

[2]The grounds upon which the application has been made are as follows:

a)A valid application to liquidate the defendant has been made to the High Court;

b)There is a high likelihood of the application succeeding;

c)There is a need for interim control of the defendant and its assets pending a final order;

d)It is in the best interests of the creditors of the defendant that the orders be made;

e)If the orders are not made there is a substantial risk that the defendant’s assets will be dissipated;

f)The overall justice of the case favours the granting of the orders;

[3]    The application is further made in reliance upon HCR 31.23 and Section 246 of the Companies Act 1993.

Background

[4]    Mr N G Gascoigne who is an architect and principal of the plaintiff has given evidence in support of an application  for  appointment  of  an  interim  liquidator. Mr Gascoigne explained that the defendant wished to set up two fashion clothing outlets. His firm was instructed to advise on the design and layout of the stores. In addition, Mr M O Franklin a building contractor in Auckland who carried out fit outs to the shops of the plaintiff has given evidence.

[5]    Mr Gascoigne deposes his company has not been paid the $46,448.45 in fees charged  to   the   defendant.   He   said   that   he   dealt   with   a   person   called  Mr Garcia-Tapetado who was apparently the director and shareholder of the plaintiff. Mr Garcia-Tapetado told him during the course of their business communications that he was a Spanish citizen and that his wife and children lived in Tokyo, Japan.

[6]    When  the  plaintiff’s  account  was  not   paid   Mr   Gascoigne  contacted Mr Garcia-Tapetado who said he was going to put the company into liquidation. On 17 February Mr Gascoigne telephoned Mr Garcia-Tapetado who he concluded was overseas. He again asked about his account and Mr Garcia-Tapetado said that he was going to put the company into liquidation and that it was unlikely that the plaintiff would be paid.

[7]    Mr Gascoigne has been in touch with the operations manager for the defendant company,    one    Will    Slater.    Mr    Slater    advised    Mr    Gascoigne    that   Mr Garcia-Tapetado has removed the majority of his stock from the defendant’s Albany store. He told Mr Gascoigne the defendant had another store at Onehunga in the DressMart Mall but that Mr Garcia-Tapetado and he had been unable to access that because the mall was locked. Mr Gascoigne said that Mr Slater told him he had assisted with moving stock to a storage unit and that there are about 70,000 items in the storage locker in 1,347 boxes. He also said that he had helped Mr Garcia-Tapetado to load two taxis with high value items from the Albany store being items like leather jackets and handmade Spanish shoes. Mr Slater had told Mr Gascoigne as well that Mr Garcia-Tapetado had asked him to arrange for the products and some shop fixtures to be moved into a container to be sent overseas. Will Slater said he had spoken to staff at the Morrin Road lockup facility to arrange this. Mr Slater apparently also said that the clothing items could not be shipped out until 7 March 2016.

[8]    The evidence which Mr Gascoigne has put forward concerning his discussions with Mr Garcia-Tapetado is hearsay evidence and I will deal with that aspect of the matter   briefly   below.   There   is   also   hearsay   evidence   put   forward   by    Mr Franklin which calls for comment as well.

[9]    Mr Franklin’s company is the plaintiff. His company was not paid for the work it carried out for the defendant and it served a statutory demand on the defendant on 5 February 2016. It has since filed liquidation proceedings on the ground that the defendant is unable to pay its debts. The statutory demand has not been satisfied or responded to.

[10]   Mr Franklin produced photographs as part of his affidavit evidence showing the defendants trading premises. One of them is empty. That is the Albany shop. The other has some clothing in it and he deposes that that is the shop at the DressMart Mall. He said that he had spoken to the manager and owner of the Morrin Road storage facility who said that he had been instructed by Mr Garcia-Tapetado that the stock stored there is to be moved overseas on Tuesday 8 March. He said that the clothing in the storage facility appears to be the only asset of the company in New Zealand. Mr Franklin also said that Mr Garcia-Tapetado told him that he was aware of the statutory demand and said that he was leaving New Zealand permanently. Mr Franklin on behalf of the plaintiff has given an undertaking as to damages.

Hearsay evidence

[11]   The filing of hearsay evidence in this matter is subject to s 18 of the Evidence Act 2006 which provides as follows:

18       General admissibility of hearsay

(1)A hearsay statement is admissible in any proceeding if—

(a)the circumstances relating to the statement provide reasonable assurance that the statement is reliable; and

(b)either—

(i)the maker of the statement is unavailable as a witness; or

(ii)the Judge considers that undue expense or delay would be caused if the maker of the statement were required to be a witness.

(2)This section is subject to sections 20 and 22.

[12]   I consider that the evidence of Mr Gascoigne and Mr Franklin satisfies the requirements of s 18 of the Evidence Act 2006. The evidence of Mr Gascoigne is consistent with Mr Garcia-Tapetado closing the business and travelling overseas. There is physical evidence in the form of photographs showing the state of the premises which indicates that the company has stopped trading. That corroborates the evidence of Mr Slater to some extent. Stock has plainly been emptied out of the Albany shop and Mr Slater describes how that was done and where the stock was taken to at the lockup facility.

[13]   Hearsay evidence is also put forward by Mr Gascoigne and Mr Franklin about statements made concerning Mr Garcia-Tapetado’s intention of taking the stock overseas in a container. Mr Gascoigne deposes to the conversation he had with Mr Slater, the operations manager, and Mr Franklin to his conversation with the manager of the lockup facility. I consider that, overall, the evidence about the closure of the stores, the removal of the stock and Mr Garcia-Tapetado being a foreign national and having apparently re-located offshore provides some corroboration of the statements made by the two separate persons who have deposed to the intention to move the stock offshore. Further, separate sworn statements from Mr Gascoigne and Mr Franklin are the basis for placing theses statements before the Court. That, too, provides an assurance of the truth of their accounts of the statements. Then there is consideration that the hearsay statements themselves are mutually corroborating and come from apparently independent people. For those reasons I consider that the requirements of s 18 of the Evidence Act 2006 are met and there is a reasonable assurance that the statements are reliable.

[14]   Because of the time pressures on  the  plaintiff,  obtaining  affidavits  from Mr Slater and the manager of the deposit lock up would take too long to obtain. The flavour of the evidence suggests they may not be willing to involve themselves as deponents. I consider it is reasonable for the Court to conclude that requiring affidavit evidence from them would cause undue delay. The hearsay evidence is therefore admitted.

Section 246

[15]Section 246 of the Companies Act provides as follows:

246     Interim liquidator

(1)If an application has been made to the Court for an order that a company be put into liquidation, the Court may, if it is satisfied that it is necessary or expedient for the purpose of maintaining the value of assets owned or managed by the company, appoint a named person, or an Official Assignee for a named district, as interim liquidator.

(2)Subject to subsection (3) of this section, an interim liquidator has the rights and powers of a liquidator to the extent necessary or desirable to maintain the value of assets owned or managed by the company.

(3)The Court may limit the rights and powers of an interim liquidator in such manner as it thinks fit.

[(4) The appointment of an interim liquidator takes effect on the date on which, and at the time at which, the order appointing that interim liquidator is made.]

[(5)   The Court must record in the order appointing the interim liquidator  the date on which, and the time at which, the order was made.]

[(6) If any question arises as to whether on the date on which an interim liquidator was appointed an act was done or a transaction was entered into or effected before or after the time at which the interim liquidator was appointed, that act or transaction is, in the absence of proof to the contrary, deemed to have been done or entered into or effected, as the case may be, after that time.]

[16]   On the assumption that the stock from the two stores are the only assets of significance which the company has, then it is vital that those assets not be removed from New Zealand, if the objective of maintaining the value of assets owned or managed by the company is to be achieved.1

[17]   There is a risk that unless Mr Garcia-Tapetado is prevented from doing so, the stock will be taken out of New Zealand and be placed beyond the reach of creditors. I consider that an order is necessary.

[18]   Given that the company has apparently ceased trading there will not be present in this case a factor often present when an interim liquidation order is made that it leads to disruption of the operations of the defendant and interference with its daily

1      Section 246(1) of the Companies Act 2006.

business activities. That can be a strong factor weighing against the making of an order under s 246.

[19]   Taking all those matters into account I am satisfied that an order ought to be made.

[20]   There will be orders in terms of the draft order which was filed together with the application on 7 March 2016.

[21]The orders are made on the 8 March 2016 at 10.06 a.m.

[22]   There will be an added direction that the interim liquidator is to file a brief report summarising the steps that have been taken in the interim liquidation which is to be filed in the present proceedings so that it is available for consideration by the Judge who hears the substantive application. That report is to be filed within 10 working days.

[23]Costs on the proceeding are reserved.

J.P. Doogue

Associate Judge