Levin v BCS Holding Account Limited - [2015] NZHC 1564

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-12 [2015] NZHC 1564

UNDER the Companies Act 1993

IN THE MATTER OF

ZENITH KITCHEN & JOINERY LIMITED (IN LIQUIDATION)

BETWEEN

HENRY DAVID LEVIN AND VIVIEN JUDITH MADSEN-RIES AS LIQUIDATORS OF ZENITH KITCHEN

& JOINERY LTD (IN LIQUIDATION) Plaintiff

AND

BCS HOLDING ACCOUNT LIMITED Defendant

Hearing: 15 June 2015

Appearances:

R P Coltman and J C Muggeridge for Applicants
P W Michalik for Respondent

Judgment:

15 June 2015

ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL

Solicitors:
Fortune Manning (R P Coltman/J C Muggeridge) Auckland, for Applicants
Lloyd Dodson Pringle (M Pringle) Dannevirke, for the Respondent

Counsel:
P W Michalik, Wellington, for Respondent

LEVIN AND MADSEN-RIES AS LIQUIDATORS OF ZENITH KITCHEN & JOINERY LTD (IN LIQUIDATION) v BCS HOLDING ACCOUNT LIMITED [2015] NZHC 1564 [15 June 2015]

Introduction

[1] In this voidable transaction case, the liquidators of Zenith Kitchen & Joinery Ltd apply for orders setting aside payments to BCS Holding Account Ltd and for payment of $95,177.61 plus interest and costs. For ease of reference, I refer to BCS Holding Account Ltd by the shorter name “Holding Account Ltd”. “BCS” is short for “Beauty Craft Surfaces”. That is the name of a business which was under the control of different people at different times. I refer to Holding Account Ltd as the company that had control over and ownership of that business during the times relevant to this proceeding.

[2] These questions arise:

(a) What payments did Zenith make to Holding Account Ltd?

(b)What preference, if any, did Holding Account Ltd receive from those payments?

(c) Was Zenith unable to pay its due debts at the times of those payments?

(d)Were payments before 1 November 2007 made in the ordinary course of business?

(e) Does Holding Account Ltd have a defence under s 296(3) of the

Companies Act 1993?

(f) What relief, if any, should the court order in its discretion under s 295 of the Companies Act?

Background

[3] BCS is the name of a business in Maungaturoto, Northland, that made bench tops. The original owner of the business was a Mr Hoyle. He did not have a company. In March 2005 Mr Brian Smith and his wife bought the BCS business

from Mr Hoyle. They incorporated a company which they called “Beauty Craft Surfaces Ltd”. That is the company I am referring to as “Holding Account Ltd”. The company supplied Zenith with bench tops and, with increasing supplies, became one of Zenith’s creditors. Zenith installed kitchens in Auckland apartments and similar developments.

[4] In 2006 Mr and Mrs Smith sold the business to a Mr and Mrs Cochrane. Mr and Mrs Cochrane incorporated a new company with the permission of the Smiths which was called “Beauty Craft Surfaces Ltd”. Mr and Mrs Smith changed the name of their company to “BCS Holding Account Ltd”. Mr and Mrs Cochrane’s company took over the business with effect from 1 September 2006. Holding Account Ltd did not make any supplies…

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: [2015] NZHC 1564
Decision Date: 15 June 2015

CaseChat Overview and Summary

The case of Levin v BCS Holding Account Limited involves the liquidators of Zenith Kitchen & Joinery Ltd, applying for orders to set aside payments made to BCS Holding Account Ltd and for the recovery of $95,177.61 plus interest and costs. The key issues were whether the payments were made in the ordinary course of business, whether the company was unable to pay its due debts, and whether the creditor had a defence under s 296(3) of the Companies Act. The court found that the payments were not made in the ordinary course of business, Zenith was unable to pay its due debts, and the creditor's defence under s 296(3) was unsuccessful. The court exercised its discretion under s 295 of the Companies Act to order the recovery of $31,586.42 and limited the interest recoverable by the liquidators to two years from liquidation. Costs were reserved, and the parties were granted leave to apply for a re-call of the decision if there were any calculation errors.

Orders