Kiwi Deposit Building Society - [2016] NZHC 782

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV-2016-404-521

[2016] NZHC 782

UNDER The Trustee Act 1956

IN THE MATTER OF

KIWI DEPOSIT BUILDING SOCIETY

AND

IN THE MATTER OF

an application by PAUL GRAHAM SARGISON AND SIMON DALTON

Applicants

Hearing: On the papers

Counsel:

S O McAnally for Applicants

Judgment:

22 April 2016

JUDGMENT OF DAVISON J

This judgment was delivered by me on 22 April 2016 at 4.30pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:
Keegan Alexander, Auckland

Kiwi Deposit building Society [2016] NZHC 782 [22 April 2016]

Introduction

[1] On 18 April 2013, the applicants, Messrs Paul Graham Sargison and Simon Dalton, were appointed as trustees by an Instrument of Dissolution (the Instrument) for the purposes of the dissolution of a building society, Kiwi Deposit Building Society (KDBS).

[2] Contrary to what is set out in the Instrument, KDBS is insolvent. In the absence of powers and procedures setting out the appropriation or division of funds and property of KDBS in the circumstances, the applicants seek directions from the Court by originating application to proceed with a proposed process for the orderly dissolution of KDBS and the making of distributions to its creditors.

Background

[3] KDBS was incorporated under the Building Societies Act 1965 (the Act) on 13 March 2009. Its application for incorporation lists 20 founding members. In an affidavit dated 16 March 2016, Mr Dalton describes KDBS’s background as follows:

KDBS was formed as part of what might loosely be described as a group of finance companies largely based in Denmark. The “parent” of the group is apparently a company registered in Denmark called Defap Enterprises ApS. One of the directors of Defap Enterprises is an Australian resident in Denmark, Scott Macaw, who was, we believe, instrumental to the incorporation of KDBS. A great deal of money has flowed in and out of KDBS from or to members of the Defap group.

[4] The applicants were appointed as trustees by an instrument of dissolution (the Instrument) dated 18 April 2013.1 According to Mr Dalton, the purpose of the proposed dissolution of KDBS is set out as follows:

KDBS traded until our appointment on 18 April 2013. I understand that the directors have largely attributed the need for dissolution to an unexpected loss on a Danish subsidiary investment. That certainly is the case in part but its problems have always run deeper it seems.

1 In line with the requirements of s 115 of the Building Societies Act 1965, the Instrument was arrived at with the consent of three-fourths of the members, holding not less than two-thirds of the number of shares in KDBS.

[5] Pursuant to the requirements of s 115(2) of the Act, the Instrument provides that:

(a)the assets of KDBS are NZD$133,579,109 and liabilities are NZD$121,211,223;

(b)the number of members is 24; and the amount standing to their credit in the Society’s books is NZD$12,367,883;

(c)the claims of depositors is NZD$108,018,438 and other creditors is NZD$84,052;

(d)the…

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 782
Decision Date: 22 April 2016

CaseChat Overview and Summary

In this case, the applicants, Messrs Paul Graham Sargison and Simon Dalton, sought directions from the Court to proceed with the dissolution of the Kiwi Deposit Building Society (KDBS) and to make distributions to its creditors. The applicants were appointed as trustees by an Instrument of Dissolution (the Instrument) for the dissolution of KDBS, but it was later determined that KDBS was insolvent. The applicants sought directions from the Court to proceed with the dissolution and make distributions to its creditors.

The legal issues that the Court had to decide were whether the applicants were bound by the Instrument, and if not, what powers and duties the trustees owed to the creditors of KDBS. The Court also had to determine if the application should be dealt with on a without-notice basis.

The Court held that the trustees were not bound by the Instrument and that the trustees' fiduciary obligations were owed to the creditors of KDBS, rather than the members of the Society. The Court further held that the jurisdiction to apply for directions was contained in s 66 of the Trustee Act 1956. The Court declined to make an order giving the directions sought by the applicants and held that the proper and appropriate course was for the applicants to report to the members of KDBS and inform them of KDBS's insolvent position, and notify them of the process set out in s 118 for putting KDBS into liquidation. If any or all of the trustees were able and willing to assume the role of liquidator, subject to meeting the qualifications of liquidators, they were to make that plain to the members authorising an application for the appointment of a liquidator.

The final orders made by the Court were that the application was dismissed.

Orders