[1] Henry David Levin and Judith Madsen-Ries are the liquidators of Northside Construction Limited (in liquidation) (Northside). Northside purchased construction materials from Timberworld Limited for several years prior to Northside’s liquidation.

[2] After their appointment the liquidators formed the view that a number of payments made by Northside to Timberworld in the two year period prior to Northside’s liquidation are voidable under s 292 of the Companies Act 1993 (the Act). They say that Northside was insolvent at the time the payments were made and that Timberworld has received a preference of $92,213.95 by reason of the payments. They seek an order that Timberworld repay that amount to them, for the benefit of all creditors of Northside.

[3] Timberworld opposes any order for repayment. It says first that the liquidators have not shown that Northside was insolvent at the time that each payment was made, and secondly that the payments are not recoverable as they were made as part of a continuing business relationship in the form of a running account (relying on s 292(4B) of the Act). It also says that if, contrary to its view, the payments are prima facie voidable as insolvent transactions, it has a defence to the liquidators’ claim under s 296 of the Act. Additionally it says that the circumstances are such that the Court should exercise its discretion under s 295 of the Act not to order repayment.

[4] The liquidators do not dispute that there was a continuing business relationship between Northside and Timberworld from the start of their trading until about a year prior to the commencement of liquidation. However, the liquidators say that their claim allows for that by claiming only the amount by which Northside reduced its account in that period. They also say that there can be no question that Timberworld received a preference by payments made after the end of the continuing business relationship.

[5] The principle questions that the Court must decide are whether the liquidators have proved that Northside was insolvent at material times, and, if so, whether

Timberworld has established the necessary matters for a defence under s 296. As part of the first question the Court has to also consider when the running account started, and the amount by which Northside reduced…

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 Timberworld Limited

Details

AGLC: Levin v Timberworld Limited [2013] NZHC 3180
Case: [2013] NZHC 3180
Decision Date: 29 November 2013

CaseChat Overview and Summary

Henry David Levin and Judith Madsen-Ries, the liquidators of Northside Construction Limited (in liquidation) (Northside), have brought proceedings against Timberworld Limited seeking recovery of payments made by Northside to Timberworld in the two year period prior to Northside’s liquidation. The liquidators seek a declaration that the payments are voidable under s 292 of the Companies Act 1993 (the Act) and that Timberworld has received a preference of $92,213.95 by reason of the payments. Timberworld opposes any order for repayment and raises a number of defences to the claim. The court must decide whether the liquidators have proved that Northside was insolvent at the relevant times, and, if so, whether Timberworld is entitled to the statutory defence under s 296 of the Act. The court must also decide whether there is any reason for refusing to make the order sought. The court found that the liquidators had proved that Northside was insolvent throughout the specified period. Timberworld’s evidence of substantial sales, payments to tax, and relatively modest trade creditor debt was not sufficient to displace the conclusions that can be drawn from the evidence on which the liquidators relied. The court found that Timberworld had received a preference of $73,490.46. The court found that Timberworld was not entitled to the statutory defence under s 296(3) of the Act as it had reason to suspect insolvency. The court found that it was not inequitable to order repayment. The liquidators were awarded the sum of $73,490.46 together with interest and costs.

Orders