Island View Estates Ltd (in liq) v Mainline Contracting Ltd (in liq) HC Auckland CIV 2008-404-3840

[2010] NZHC 2151

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV2008-404-003840

UNDER  Section 266 of the Companies Act 1993

IN THE MATTER OF     compliance with a notice issued pursuant to s 261 of the Companies Act 1993

BETWEEN  ISLAND VIEW ESTATES LTD (IN LIQUIDATION)

Plaintiff

ANDMAINLINE CONTRACTING LTD (IN LIQUIDATION)

Defendant

Hearing:         On the papers

Appearances: C T Patterson for Plaintiff

R B Hucker for Defendant

Judgment:      30 November 2010 at 4:30 pm

JUDGMENT OF ASSOCIATE JUDGE BELL

This judgment was delivered by me on 30 November 2010 at 4:30 pm pursuant to Rule 11.5 of the High Court Rules. Registrar/Deputy Registrar

Date: ……………….....

Solicitors/Counsel:

Macky Roberton, PO Box 37622, Parnell, Auckland

Hucker & Associates, PO Box 3843, Auckland

C T Patterson, PO Box 2886, Auckland

ISLAND VIEW ESTATES LTD (IN LIQUIDATION) V MAINLINE CONTRACTING LTD (IN LIQUIDATION) HC AK CIV2008-404-003840  30 November 2010

[1]      The matter for decision is an application for costs by Mainline Contracting Ltd (In Liquidation) on its application under s 266 of the Companies Act 1993 for orders requiring compliance with notices under s 261 of the Companies Act, the filing of affidavits, and the production of records of Mainline Contracting Ltd (In Liquidation).  The application was directed at Susan Elizabeth Buxton, a director of Mainline Contracting Ltd (In Liquidation), and Peter Macky, a solicitor who had acted for the company.

[2]      On 5 February 2010, Venning J made an order that Mainline Contracting Ltd be put into liquidation.  The application being brought by Island View Estates Ltd (In  Liquidation).    Island  View  Estates  Ltd  (In  Liquidation)  was  a  developer. Mainline Contracting Ltd was a construction company.   Simon and Susan Buxton were the people behind both companies.   Island View Estates Ltd owned land at Leigh that it subdivided and sold.  It sold lots 7 and 31 in the subdivision to Mainline Contracting  Ltd.     It  also  entered  into  construction  contracts  with  Mainline Contracting Ltd to build houses on those lots.  The contract for lot 7 was $258,000. The contract for lot 31 was $1,100,000.  Venning J held that Mainline Contracting Ltd gave no consideration for these contracts.  Those lots have been onsold.  In the case of lot 31, it was sold to a Buxton family trust called Lax Trust.  It was in turn onsold for a price of $2,900,000.

[3]      At [43], Venning said:

The liquidators of Island View are properly concerned that actions seem to have been designed to defeat the creditors of Island View Estates who have effectively financed the construction of the houses, the benefit of which has gone to Mainline and, through Mainline, the Buxton interests.   It is appropriate that the inquiries the liquidators wish to make be made and that access be had to Mainline’s records so the liquidators can take appropriate action to investigate further and trace the payments if necessary.

[4]      Since then, the liquidators have been trying to do just that.  On 5 February

2010, the liquidators’ lawyer served a notice under s 261 of the Companies Act 1993 on Macky Roberton requiring production of all records of Mainline Contracting Ltd. They served a similar notice on Mrs Buxton on 19 March 2010.   There was no response from either.

[5]      On 21 April 2010, the lawyers wrote to Macky Roberton requiring Mr Macky to attend for an examination at the liquidators’ offices on 29 April.

[6]      Mr Macky was out of the country.   He could not comply.   His partner, Mr Roberton, had not acted for Mainline Contracting Ltd and could give limited assistance. No one appeared for the examination.

[7]     The liquidators also made their own inquiries with Mainline’s former accountants, Hounsell Accounting Ltd.  The accountants appear to have co-operated.

[8]      On 1 June 2010, the liquidators’ lawyers wrote again to Macky Roberton requesting production of documentation relating to Mainline Contracting Ltd.   In their request, they included the following:

1)Full disclosure of the financial position of the Lax Trust including financial statements.

2)        Full disclosure of the financial position of Mainline Investments Ltd including financial statements.

[9]      The liquidators filed the present application on 15 June 2010.   The matter was called before me on 30 June 2010.  After discussion with counsel, I gave agreed directions for Mr Macky to file an undertaking with the Court as to the inquiries he has made and for Mrs Buxton to file an affidavit as to inquiries she had made, and whether she still had any documents in her possession.  These were to be filed by

9 July 2010.

[10]     I recorded that the parties may be able to resolve matters without a full defended hearing.

[11]     Mr  Macky  gave  an  undertaking  on  30  June  2010,  Mr  Hounsell,  the company’s  former  accountant,  swore  an  affidavit  on  8  September  2010  as  to inquiries he had made.

[12]     Mrs Buxton signed a document as to inquiries she had made.  The document is described as an affidavit but it is not clear that it is.  She signed it on 31 August

2010 at the town hall in St Jean-de-Losne, France.  The document has this stamp:

“Vu  par  Nous,  Maire  de  la  Ville  de  St  Jean-de-Losne,  pour  légalisation  de  la signature de Madame Susan Buxton opposée ci-dessus”.  These words suggest only that Mrs Buxton’s signature has been witnessed, not that she has given an oath or affirmation as to the veracity of her statements.   The person who has signed is described as “L’agent municipal délégué”.  There is nothing to show that this person, apparently a borough official, has authority to administer oaths under the laws of France.  It is not clear that the affidavit complies with r 9.86.  Mrs Buxton ought to swear her affidavit before someone authorised to take oaths.

[13]     The liquidators elected no longer to pursue the application.  They gave notice to the Court.  Lang J gave leave to withdraw the application and gave directions for costs to be determined.

[14]     Mr  Matthew  and  Mrs  Buxton  oppose  the  application  for  costs  for  these reasons:

a)        The liquidators withdrew the application;

b)In seeking records of the Lax Trust and Mainline Investments Ltd, the liquidators were seeking documentation outside the scope of ss 261 and 266 of the Companies Act;

c)      In the event, the liquidators did not obtain much by way of documentation.

[15]     The withdrawal of the application by itself is not grounds for refusing costs in this case.  The application under s 266 was properly made.  Up until that point, they had had limited success with obtaining documentation.  They were making a proper investigation.   They were entitled to ask the Court for its assistance in obtaining more information.  Liquidators may properly come to the view after further inquiries that there may be little useful purpose served by going to a defended hearing.  They are entitled to decide to withdraw the application.  They should not be discouraged from withdrawing the application by the refusal of costs or the threat of costs being

ordered against them.  In this case, the withdrawal of the application does not disentitle them from applying for costs.

[16]     Mr Macky and Mrs Buxton are on sounder ground in taking the point that the letter of the liquidators’ lawyers to Macky Roberton of 1 June 2010 went too far in seeking  disclosure  for  financial  statements   of  the  Lax   Trust  and  Mainline Investments Ltd.  Those are not company records under s 261 and s 266.  To that extent, they were entitled to resist the application.

[17]     The  third  ground,  the  relative  lack  of  success,  does  not  go  against  the liquidators.     As  it  turns  out,  the  solicitors  have  not  been  able  to  locate  a conveyancing file relating to the sale of lot 31 in the subdivision.  That file may well be relevant to the liquidators’ inquiries.  The fact that the solicitors cannot find this file any more does not mean that the liquidators were wrong to ask for it.

[18]     It is clear that the Buxtons and their advisors will give co-operation to the liquidators only to the extent that the law requires them to co-operate.  Given that, it is reasonable for the liquidators to make applications such as the present one to ensure that they have diligently investigated the transactions in issue.  The fact that inquiries such as the present application do not always result in a lot of documents coming  to  light  does  not  count  against  the  liquidators  for  having  made  the application.

[19]     If there had been more fulsome co-operation from the Buxtons and their advisors at an earlier stage, the liquidators may not have had to make the present application.  The liquidators make a fair point that the costs of this application ought not to have to fall entirely on the creditors.

[20]     Costs are given on a 2B basis against Mr Macky and Mrs Buxton.   The liquidators have sought an increase which they claim for the lack of co-operation by Mrs Buxton and Mr Macky.  An increase is not merited.  In particular, I note that the liquidators did cast their net too wide, which triggered some of the opposition.  I fix costs at $2,632 on the basis of 1.4 days.   The liquidators claimed 1.6 days, but I deduct .2 because the matter was not in fact called in Court on 16 June 2010.

[21]     Disbursements are fixed at $612.25.

R M Bell

Associate Judge