Harrington v Te Mania Livestock Ltd - [2016] NZHC 785

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2015-409-000777 [2016] NZHC 785

UNDER the Companies Act 1993

IN THE MATTER

of an application for putting a company into liquidation by the Court

BETWEEN

JONATHAN OWEN HARRINGTON Plaintiff

AND

TE MANIA LIVESTOCK LIMITED Defendant

Hearing: 19 April 2016

Appearances:

I G Hunt for Plaintiff, as Respondent
P J Dale for Defendant, as Applicant
R J Hopkins for W H Holdings Limited, a creditor in support

Judgment:

22 April 2016

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

Introduction

[1] This is one of two proceedings in which issues arising from the governance of Te Mania Livestock Limited (TML) are raised in this court. In this case Mr Harrington, a shareholder and director of TML, applies for an order placing TML into liquidation under s 241(4) of the Companies Act 1993 on the ground that TML is unable to pay its debts. The second proceeding is CIV-2014-409-000899 Wilding and Te Mania Properties Limited v Te Mania Livestock Limited and Others. I refer to this as the 899 proceeding.

[2] Mr Harrington initiated this proceeding by a statement of claim in which he sued as a creditor of TML, and relied on a presumption that TML was unable to pay
its debt to him as it had not complied with a notice issued under s 289 of the

HARRINGTON v TE MANIA LIVESTOCK LTD [2016] NZHC 785 [22 April 2016]

Companies Act. He now claims as a shareholder of TML rather than a creditor, and in addition to relying on the presumption of insolvency also pleads that TML is unable to pay its debts on the basis of other facts presented in affidavits in support. This change came about because the sum in which TML was indebted to Mr Harrington was paid to him six days after the proceeding was filed and served. At that point he ceased to be a creditor of TML but nonetheless elected to continue with this proceeding.

[3] The directors of TML decided not to defend Mr Harrington’s application for liquidation. One director, and the holder of the largest parcel of shares in TML, Mr T Wilding, applies for leave to file a defence. He also seeks an order restraining publication of Mr Harrington’s application for liquidation and staying it until the
second proceeding to which I have referred is heard and determined by the Court.1

He seeks consolidation of the two proceedings. Mr Harrington opposes all these orders being made, and is supported by W H Holdings Limited which is another shareholder in TML and has filed a notice of intention to appear in support of Mr Harrington.

[4] As this is an application for a stay of this liquidation proceeding, r 31.11 requires the Court to treat it as though it were an application for an interim injunction. Accordingly, it is necessary for the Court to consider first whether there is a serious question to be tried and secondly, if there is, to determine whether an order staying…

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: [2016] NZHC 785
Decision Date: 22 April 2016

CaseChat Overview and Summary

Jonathan Harrington applied to the High Court for an order placing Te Mania Livestock Limited (TML) into liquidation on the basis that the company was unable to pay its debts. TML's directors did not oppose the application. However, one director, Timothy Wilding, applied for leave to file a defence and for the proceeding to be stayed until another proceeding between TML and various other parties was heard and determined. The court considered four issues: whether Mr Wilding should be given leave to file and present a defence to Mr Harrington's proceeding; whether Mr Wilding had established a serious question to be tried in relation to whether or not TML was able to pay its debts; whether the balance of convenience favoured restraining advertising and staying the proceeding; and whether the proceeding should be consolidated with another proceeding. The court found that Mr Wilding should be given leave to file a defence and that he had established a serious question to be tried in relation to whether or not TML was able to pay its debts. The court also found that the balance of convenience favoured restraining advertising and ordering a stay of the proceeding. The court adjourned the proceeding to be heard at the same time as the other proceeding. The court restrained Mr Harrington from advertising the proceeding until further order of the court.

Orders