Levin v Lawrence - [2013] NZCA 394

IN THE COURT OF APPEAL OF NEW ZEALAND

CA430/2012
[2013] NZCA 394

BETWEEN	HENRY DAVID LEVIN AND VIVIEN JUDITH MADSEN-RIES (AS LIQUIDATORS OF PERSONAL HOMES LIMITED) Appellants
AND	STEPHEN MARK LAWRENCE AND ANTHONY JOHN McCULLAGH (AS LIQUIDATORS OF WATERMAN BUILDING SUPPLIES LIMITED) Respondents

Hearing:	6 August 2013
Court:	Wild, White and French JJ
Counsel:	N H Malarao and J M Blythe for Appellants D M Hughes and R J Brown for Respondents
Judgment:	23 August 2013 at 3 pm

JUDGMENT OF THE COURT

AThe appeal is dismissed.
BThe appellants are to pay the respondents’ costs for a standard appeal on a band A basis with usual disbursements.

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REASONS OF THE COURT

(Given by Wild J)

Introduction

Did the High Court err in not permitting the appellants to inspect the accounts and records of Waterman Building Supplies Ltd (Waterman), a company in liquidation? Did the High Court correctly state the test on an application by a creditor under s 256(1)(a)(ii) of the Companies Act 1993 to inspect? Those are the interrelated questions for decision on this appeal.
The appellants are the liquidators of Personal Homes Ltd (Personal). Personal is a creditor of Waterman. The respondents are the liquidators of Waterman.
The appellants applied to the High Court under s 256(1)(a)(ii) to inspect the accounts and records of Waterman.[1]
[1]The appellants’ application requested inspection of both “the accounts and records of the liquidation of Waterman and the accounts and records of Waterman”. However, this Court’s understanding is that the appellants are particularly interested in the records of the company pre-liquidation. They wish to check that there is no way of recovering money from Waterman, and whether a running account did in fact exist.
The relevant part of s 256 provides:
256 Duties in relation to accounts
(1)Subject to subsection (2) of this section, the liquidator of a company must—
(a)keep accounts and records of the liquidation and permit those accounts and records, and the accounts and records in the company, to be inspected by—
(i)any liquidation committee appointed under section 314 of this Act, unless the liquidator believes on reasonable grounds that inspection would be prejudicial to the liquidation; and
(ii) if the court so orders, a creditor or shareholder …
In a judgment delivered in the High Court at Auckland on 25 June 2012 Toogood J dismissed the appellants’ application.[2]

Issues on appeal

[2]Levin v Lawrence [2012] NZHC 1452 [High Court judgment].

The parties agreed that the issues on appeal are these:
(1)Presumption against inspection? Did Toogood J err in law in finding that there is a presumption against inspection under s 256(1)(a)(ii)?
(2)Good reason? Did the appellants establish they had ‘good reason’ to inspect the accounts and records of Waterman, pursuant to s 256(1)(a)(ii)?
(3)Relevance of fiduciary principles and s 256(1)(a)(i)? Did Toogood J err by failing to consider the appellants’ submissions that, when interpreting s 256(1((a)(ii):
(a)fiduciary principles are relevant; and
(b)s 256(1)(a)(i) can assist in the interpretation of s 256(1)(a)(ii)?

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 Levin v Lawrence

Details

AGLC: Levin v Lawrence [2013] NZCA 394
Case: [2013] NZCA 394
Decision Date: 23 August 2013 at 3 pm

CaseChat Overview and Summary

The appeal was brought by the liquidators of Personal Homes Ltd (Personal), a creditor of Waterman Building Supplies Ltd (Waterman), against the liquidators of Waterman. The appellants sought to inspect the accounts and records of Waterman under s 256(1)(a)(ii) of the Companies Act 1993. The appeal centred on whether the High Court was correct to dismiss the appellants’ application. The Court of Appeal held that the appeal should be dismissed. The Court endorsed the test of “good reason” for ordering inspection as set out by the High Court. The Court held that the appellants had not established a good reason for ordering inspection, as they had not provided any persuasive, tangible or concrete reason for inspection. Instead, their application was based on suspicion and distrust of the respondents’ discharge of their statutory duties. The Court further held that the High Court was correct not to consider fiduciary principles and s 256(1)(a)(i) of the Act in interpreting s 256(1)(a)(ii). The appeal was dismissed with costs.

Orders