Levin v Rastkar - [2011] NZCA 210

IN THE COURT OF APPEAL OF NEW ZEALAND

CA755/2009
[2011] NZCA 210

BETWEEN HENRY DAVID LEVIN AND BARRY PHILLIP JORDAN
Appellants

AND SOMBOUN RASTKAR
Respondent

Hearing: 17 November 2010

Court: Chambers, MacKenzie and Simon France JJ

Counsel: T J Cooley and M L Broad for Appellants
R A A Weir for Respondent

Judgment: 23 May 2011 at 11 am

Reissued 19 August 2011: see recall judgment of 19 August ([2011] NZCA 399)

Effective date of judgment: 23 May 2011

JUDGMENT OF THE COURT

AThe appeal is allowed, to the extent that we make:
(i)An order under s 294(5) of the Companies Act 1993 setting aside the transaction dated 24 May 2004 by which a loan of $17,000 to Amarine Sirichak was credited to the respondent’s loan account with Western Clothing Ltd; and
(ii)An order under s 295(a) that the respondent pay to Western Clothing Ltd the sum of $17,000; and
(iii)An order under s 295(g) that the respondent is entitled to claim as a creditor in the liquidation for that amount, in addition to any other amount owing to the respondent.

BIn all other respects, the appeal is dismissed.
C No order as to costs in this Court. The costs order made in the High Court is quashed and the respondent must repay the costs of $5,920 paid to her by the appellants.

____________________________________________________________________

REASONS OF THE COURT

(Given by MacKenzie J)

Table of Contents

Para No

Background  [1]
The liquidators’ claim  [3]
The issues  [11]
The transactions  [12]

Preliminary observations  [12]
The “Loan Amarine” transaction  [16]
The “Loan Sisavath” transaction  [23]
The “Loan Joman” transaction  [31]
The “Additional Payments” transaction  [37]

Unable to pay its due debts  [40]
The General Security Agreement  [41]
The ordinary course of business  [49]
Does s 296 preclude recovery?  [53]
Result  [57]

Background

This is an appeal against a judgment of Associate Judge Doogue delivered on 9 November 2009[1] dismissing an application by the appellants, the liquidators of Western Clothing Limited, to set aside, under s 294 of the Companies Act 1993 (the Act), several transactions by the company alleged to be voidable under s 292 of the Act. Section 292 was amended, with effect from 1 November 2007, by s 27 of the Companies Amendment Act 2006. By s 27(5) of the Amendment Act, s 292 in its previous form applies.
[1] Levin v Rastkar HC Auckland CIV2008-404-3965, 9 November 2009.
Western Clothing Ltd (Western, or the company) carried on a clothing sewing business. Its sole director and shareholder was Mr Siamac Rastkar. His wife, the respondent, was involved with managing and running the company. The company ceased trading in June 2004, when it sold its assets to Essential Apparel Limited, a company owned and operated by the respondent’s daughter, Amarine Sirichak. The company’s main creditor is the Commissioner of Inland Revenue, who has a total claim of some $183,000. The company was put into liquidation on 12 May 2005 pursuant to an application by the Commissioner filed on 24 February…

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 Rastkar

Details

AGLC: Levin v Rastkar [2011] NZCA 210
Case: [2011] NZCA 210
Decision Date: 23 May 2011

CaseChat Overview and Summary

This appeal concerns the liquidators of Western Clothing Ltd's application to set aside several transactions under s 292 of the Companies Act 1993. The Court of Appeal allowed the appeal, in part, and set aside a transaction by which a $17,000 loan to Amarine Sirichak was credited to the respondent’s loan account with Western Clothing Ltd. The Court held that the liquidators had established that the transaction was a payment by the company within the specified period, the company was unable to pay its due debts at the time of the transaction, and the transaction enabled the respondent to receive more towards satisfaction of a debt than she would have received in the company’s liquidation. The Court also held that the transaction was not in the ordinary course of business and that s 296 did not preclude recovery by the liquidators. The Court ordered that the respondent pay Western Clothing Ltd the sum of $17,000 and that the respondent is entitled to claim as a creditor in the liquidation for that amount, in addition to any other amount owing to the respondent. The Court dismissed the appeal in all other respects and quashed the High Court costs order, directing the respondent to repay the costs the appellants paid to her.

Orders