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Levin v Lawrence

Levin v Lawrence

Case [2012] NZHC 1452 25 June 2012

Liquidation

Inspection of Records

Fiduciary Obligations

Insolvency Law

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-0956 [2012] NZHC 1452

UNDER the Companies Act 1993

IN THE MATTER OF of the liquidation of WATERMAN BUILDING SUPPLIES LIMITED (In Liquidation)

BETWEEN HENRY DAVID LEVIN AND VIVIEN JUDITH MADSEN-RIES AS LIQUIDATORS OF PERSONAL HOMES LIMITED
Applicants

ANDSTEPHEN MARK LAWRENCE AND ANTHONY JOHN MCCULLAGH AS LIQUIDATORS OF WATERMAN BUILDING SUPPLIES LIMITED Respondents

Hearing: 18 June 2012

Counsel: N Malarao and J Blythe for Applicant
D Hughes and P Gautam for Respondents
K Fulton for Fletcher Developments Limited

Judgment: 25 June 2012

JUDGMENT OF TOOGOOD J

This judgment was delivered by me on 25 June 2012 at 4:00 pm
Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors:
NH Malarao, Meredith Connell, Auckland: nick.malarao@meredithconnell.co.nz
DM Hughes/P Gautam, Kensington Swan, Auckland: Daniel.hughes@kensingtonswan.com tista.gautam@kensingtonswan.com
CL Waugh, Craig Griffin & Lord:
Copy:
K Fulton, Auckland: kerryfulton@xtra.co.nz

LEVIN & ORS V LAWRENCE & ORS HC AK CIV-2012-404-0956 [25 June 2012]

Introduction

[1] This is an application for orders that a company in liquidation, in respect of which a final liquidators’ report has been filed, not be removed from the Register and that the liquidators be directed to permit inspection of the accounts and records of the liquidation and the accounts and records in the company in liquidation, under s 256(1)(a)(ii) of the Companies Act 1993 (“the Act”).

[2] The essence of the application is a dispute between professional insolvency practitioners who have been appointed the liquidators of two companies, one a creditor of the other.

Background

[3] The issue arises in this way. Waterman Building Supplies Limited (“Waterman”) was the company vehicle for a joint venture between Waterman Enterprises Limited, Trade Mart Limited (“Trade Mart”) and Fletcher Distribution Limited (“FDL”) for the operation of a PlaceMakers franchise, trading as PlaceMakers Westgate. Trade Mart is a wholly owned subsidiary of FDL.

[4] Waterman had been trading at a loss and, on or about 30 November 2008, the joint venture was dissolved and Waterman ceased to trade. No distributions were made to Waterman’s shareholders at that time. Following dissolution of the joint venture, Waterman’s liabilities to its creditors were paid by FDL in accordance with what I was told was standard practice for PlaceMakers branches throughout New Zealand, no doubt for brand protection reasons.

[5] FDL then acquired all of the shares in Waterman. By a shareholder resolution on 20 December 2010 the respondents (“the Waterman liquidators”) were appointed joint and several liquidators. At the time Waterman was placed into liquidation, it had no assets or liabilities.

[6] On 13 November 2009, the applicants were appointed joint and several

liquidators of Personal Homes Limited (“Personal Homes”) which had been a

customer of Waterman and, latterly, FDL (which operated PlaceMakers Westgate after Waterman ceased to trade. The applicant liquidators discovered that, in the period between 28 September 2007 and 6 November 2008, Personal Homes had paid a total of $789,725.87 to Waterman and FDL. The payments were made within the period of two years before…

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 [2012] NZHC 1452
Case: [2012] NZHC 1452
Decision Date: 25 June 2012

CaseChat Overview and Summary

The High Court of New Zealand heard an application by Henry David Levin and Vivien Judith Madsen-Ries, liquidators of Personal Homes Limited, against Stephen Mark Lawrence and Anthony John McCullagh, liquidators of Waterman Building Supplies Limited, and Fletcher Developments Limited. The applicants sought orders that Waterman Building Supplies Limited not be removed from the Register and that the liquidators permit inspection of the accounts and records of the liquidation and the company. The applicants, liquidators of Personal Homes, had discovered that Personal Homes had made payments to Waterman and Fletcher Developments Limited within two years before Personal Homes was placed into liquidation. They suspected that the payments constituted voidable preferences. The respondents, liquidators of Waterman, had investigated the matter and found that the payments were made in the ordinary course of business as part of a continuing business relationship. The applicants sought to inspect the records of the liquidation and the company to test the respondents' conclusions. The court considered the statutory provisions and the arguments of both parties. The court held that there was no good reason to impede the orderly liquidation of Waterman by permitting the inspection. The applicants' suspicions about possible sources of additional funds did not provide a sufficient basis for the court to order inspection. The court dismissed the application and reserved costs.

Orders