This interim judgment was delivered by me on 23 November 2012 at 4:30pm
pursuant to Rule 11.5 of the High Court Rules.
...................................
Registrar/Deputy Registrar

HORTON AS LIQUIDATOR OF SHAFTSPRY LIMITED (IN LIQ) V COWLEY AND COWLEY AS TRUSTEES OF THE RENTALENGTH TRUST HC AK CIV-2011-404-5022 [23 November 2012]

Table of Contents

Paragraph No.

Introduction [1] Background Facts [11] Creditors [41]

Secured creditors [43] Preferential creditors [44] Unsecured creditors [48]

Can Mr Horton require the mortgagees to account for sums [53]
retained for interest on the mortgages under s 305 of the Companies Act?

Did the shareholders’ resolution bind the company? [57]
Did the shareholders’ resolution effectively vary the
registered mortgages? [62]

Does the shareholders’ resolution provide for backdated interest? [70]

Was Shaftspry Ltd able to pay its due debts on 8 May 2008? [90] Was Shaftspry Ltd able to pay its due debts on 22July 2008? [105] Are the charges given by the shareholders’ resolution of May 2008
and the agreement to mortgage of July 2008 voidable under s 293
of the Companies Act? [106]

Are the shareholders’ resolution, the term loan contracts and the
agreement to mortgage voidable transactions under s 292? [112]

Can the term loan contracts be set aside?  [112]
Are the shareholders’ resolution and the agreement to mortgage
transactions under s 292(3)  [115]
Did the transactions enable the Cowleys to receive more towards satisfaction of a debt owed than would be received in
the liquidation?  [116]

Should the shareholders’ resolution be set aside under s 299? [127] Does Mr Cowley have good grounds to challenge the conduct of
the liquidation and Mr Horton’s remuneration? [130]

Can Mr Cowley be ordered to pay the remuneration and expenses
of the liquidator? [153]

Result [157]

Introduction

[1] In late 2009 Brian and Garth Cowley sold a 13 ha property at 26 Paddy Road, Te Kauwhata for $895,000 plus GST. Shaftspry Ltd owned the property. The company was in liquidation. The Cowleys had a registered first mortgage over the property and sold the property as mortgagees.

[2] The dispute in this case is about the distribution of the proceeds of sale. The Cowleys say that after paying GST and the costs of sale, the proceeds of sale are to be paid to them as first mortgagees, and to Brian Cowley and Calvin West under a second mortgage. After those payments, there is nothing left for Shaftspry Ltd, the mortgagor. They…

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 Horton v Cowley

Details

AGLC: Horton v Cowley [2012] NZHC 3089
Case: [2012] NZHC 3089
Decision Date: 23 November 2012

CaseChat Overview and Summary

This case concerns a dispute over the distribution of the proceeds of sale of a property owned by Shaftspry Ltd, which was in liquidation. The liquidator, Christopher Horton, challenged the distribution of the proceeds of sale, arguing that the mortgagees were not entitled to retain the full amount of interest on the mortgages. The Cowleys, who held mortgages over the property, argued that they were entitled to retain the interest as per a shareholders' resolution and term loan contracts. The court had to determine whether the shareholders' resolution was effective to vary the mortgages and whether the term loan contracts and agreement to mortgage were voidable transactions. The court also had to consider whether the shareholders' resolution should be set aside and whether the liquidator's conduct and remuneration were appropriate. The court found that the shareholders' resolution did not effectively vary the mortgages, and the mortgagees were accountable for the sums retained for interest. The agreement to mortgage was set aside as voidable, but the term loan contracts could not be set aside in this proceeding. The court also found that the liquidator's conduct was inefficient, but his decision to bring the proceeding was not improper. The court ordered the Cowleys to pay the liquidator for backdated interest and set aside the agreement to mortgage. The court also directed the liquidator to decide which creditors' claims to admit or reject and reserved costs until the outstanding issues were determined.

Orders