Lawrence v Secret World Limited

[2019] NZHC 1242

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2019-485-205

[2019] NZHC 1242

UNDER THE

Companies Act 1993

BETWEEN

CHRISTINA MARIE LAWRENCE

Plaintiff

AND

SECRET WORLD LIMITED

Defendant

Hearing:

4 June 2019

Appearances:

E J Collins and F Boyd for the Plaintiff No appearance for the Defendant

R J Buchanan for Mr B C Vincent Mr BC Vincent (in person)

Judgment:

4 June 2019

JUDGMENT AND REASONS OF ASSOCIATE JUDGE LESTER

[1]    When this matter was called in the List on Tuesday 4 June 2019, it being the last matter called, I heard from Mr Collins for the plaintiff and Mr Buchanan for the Mr Vincent, a director of Secret World Ltd. Mr Vincent was also present in person and addressed the Court.

[2]    Mr Buchanan advised that since he had filed an appearance in opposition to the application for putting the defendant company into liquidation, his instructions were that Mr Vincent wanted to defend the application. He sought an adjournment to allow a defence to be filed.

LAWRENCE v SECRET WORLD LIMITED [2019] NZHC 1242 [4 June 2019].

[3]    The plaintiff has sought the liquidation of the defendant under s 241(4)(d) of the Companies Act 1993 on the grounds that it is just and equitable that the company be put into liquidation.

[4]    The statement of claim pleads that the mutual respect, trust and confidence between the plaintiff and Mr Vincent has broken down.

[5]    The statement of claim pleads that the plaintiff and her husband (Mason Lawrence) (“the Lawrences”) assisted Mr Vincent in obtaining finance for a property at 49 John Street, Stokes Valley, Lower Hutt (“the property”). The property was purchased by the defendant company and subject to a Bank of New Zealand mortgage. That mortgage is supported by guarantees from the plaintiff and her husband and related entities.

[6]    The plaintiff says that her getting involved with the property was in effect     a stop-gap measure with it being intended that Mr Vincent would eventually refinance and take over ownership of the property on his own. Until then, Mr Vincent was to pay rent to the company, that being the equivalent of the loan repayment and rates.

[7]    Mr Vincent is said not to have made any rent payments to the company since approximately September 2016, which meant the plaintiff and her husband have had to meet mortgage repayments in the meantime.

[8]    Mr Buchanan appeared for Mr Vincent at the hearing. While Mr Buchanan sought leave to withdraw, at my request he remained for the duration of the hearing. Mr Buchanan presented brief submissions and acknowledged that trust between the directors, that is Ms Lawrence and Mr Vincent, had evaporated. Mr Buchanan referred to claims Mr Vincent said he had against the Lawrences and indeed there is produced by Ms Lawrence in her affidavit a charging document dated March 2019 in which Mr Vincent accuses the Lawrences of obtaining by deceit shares in the defendant company.

[9]    There is a disagreement between the Lawrences and Mr Vincent as to the nature of the arrangement leading to the Lawrences becoming involved. As I have

said, on the one hand the Lawrences’ position was that they were essentially providing guarantee assistance as a stop-gap measure. Mr Vincent alleges that the Lawrences were to be actively involved in a subdivision of the land and that they were to provide finance and funding for the subdivision and to receive a section in the following subdivision.

[10]   As I explained in Court, that is not a dispute that I can resolve. The record shows the Lawrences, as soon as the suggestion was made, rejecting that was the deal.

[11]   As early as 31 January 2018, the Lawrences instructed their solicitors to write to Mr Vincent seeking resolution. That letter included saying that the Lawrences would be happy for Mr Vincent to purchase the land from the company for the value of the current mortgage plus reimbursement to them of advances they have made to meet outgoings and that Mr Vincent meet the cost of transferring the land. In effect, the Lawrences would walk away on a breakeven basis.

[12]   That letter raised the possibility of liquidation on the basis that the parties had come to an impasse and that the conflict between the parties meant their relationship could not continue.

[13]   There was then correspondence between the plaintiff’s lawyer and different solicitors then instructed by Mr Vincent. The proposal where Mr Vincent would acquire the plaintiff’s share in the company, obtain a discharge of the Lawrences’ liability, and repay the expenses the Lawrences had met, was said by Mr Vincent’s then solicitor to be of interest.

[14]   Mr Vincent’s solicitors in an email of 31 May 2018 referred to Mr Vincent having received some expressions of interest in the property, but not unconditional offers.

[15]   It appeared that in mid-2018 the parties were looking at finalising the terms of a settlement agreement, but at the same time Mr Vincent texted the plaintiff claiming he had just “filed two charges against [the plaintiff] in Lower Hutt District Court”.

[16]   At the hearing on 4 June 2019, I was advised that the company did not have any other creditors. It is a non-trading asset holding company.

[17]   The extent of the breakdown in the relationship between Ms Lawrence and Mr Vincent is such that each has lost trust and confidence in the other.

[18]In West v Shaftspry Ltd, liquidation was ordered, there being evidence of:1

… the collapse of the relationship between the two shareholders and the contentious manner in which the company has transacted its business affairs…

[19]   In that case, the Court recorded there was no real benefit in delaying the company’s winding up.

[20]   Given  the  plaintiff’s  solicitors  have  been  exploring  for  approximately  18 months an alternative commercial means of separating the parties without success, this was not a case where I saw any advantage in the matter being adjourned to allow further settlement discussions.

[21]   The reality is the appointment  of  the  independent  liquidator  will  allow  Mr Vincent a chance to strike terms with the liquidator over the land. The liquidator in this case will understand that his appointment was driven by the need to break the current impasse. If Mr Vincent is able to refinance the land and raise funds to pay out the Lawrences, then the liquidator may well consider there is no point in placing the land on the open market for sale. The Lawrences’ interests will have been addressed, as will Mr Vincent’s and the liquidator’s role in those circumstances may be quite limited.

[22]   However, I had no confidence that if the matter was adjourned for two or three weeks that there was any real prospect of matters being able to be advanced any more than had occurred in the past 18 months, particularly as Mr Buchanan sought leave to withdraw if an adjournment was granted. I was informed that a proposal had been advanced by Mr Buchanan prior to the hearing but terms could not be reached.

1      West v Shaftspry Ltd HC Auckland CIV-2008-404-921, 3 April 2009.

[23]   While there is a disagreement between the parties as to what the nature of their agreement was, it cannot be said that there is a clear apportionment of blame, and so the real determinant for granting relief is the existence of the breakdown in the relationship.2 The breakdown in the relationship is profound and uncontested. I do not consider the plaintiff has acted unreasonably in seeking liquidation given, via her solicitor, she has sought an agreed resolution since January 2018. Mr Vincent did not have concrete plans for a resolution, only general ideas of sale or refinancing. Again, such have been on the table for nearly 18 months.

[24]   It is for these reasons that the application for an adjournment was declined and an order placing the defendant company in liquidation was made.

Associate Judge Lester

Solicitors:

Collins & May Law, Lower Hutt Buchanan Gray, Wellington

Copy to the Liquidator: Murray G Allot, Christchurch

2      See Company and Securities Law (loose-leaf ed, Brookers) at [CA241.03(4)].