Lucas v Avetar Properties Limited - [2023] NZHC 3232

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2023-409-100

[2023] NZHC 3232

UNDER the Companies Act 1993

IN THE MATTER

of an application for putting a company into liquidation

BETWEEN

SCOTT ALUN LUCAS

Plaintiff

AND

AVETAR PROPERTIES LIMITED

Defendant

Hearing: 9 November 2023

Appearances:

G P Davis and for Plaintiff

S Caradus and C M G Sykes for Defendant

Judgment:

16 November 2023

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 16 November 2023 at 11.30 am pursuant to rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:

LUCAS v AVETAR PROPERTIES LIMITED [2023] NZHC 3232 [16 November 2023]

[1] The plaintiff (Mr Lucas) applies for an order putting the defendant, Avetar Properties Ltd (Avetar), into liquidation. The application is made against the background of the breakdown in the domestic relationship of Mr Lucas and the sole director of Avetar, Julianne Taylor (Ms Taylor).

[2]Mr Lucas applies for an order for liquidation on the grounds that:

(a)Avetar is unable to pay its debts;1 and

(b)it is just and equitable that Avetar be put into liquidation.2

[3] Avetar opposes the application. It says Mr Lucas is not a creditor, it is not insolvent and the Court should exercise its discretion to refuse to appoint a liquidator in any event. It also says there is no basis in fact or law to appoint a liquidator on the just and equitable ground.

[4]The issues that arise are:

(a)Is Mr Lucas a creditor of Avetar?

(b)Is Avetar insolvent?

(c)How should the Court’s residual discretion be exercised?

(d)Is it just and equitable to put Avetar into liquidation.

Background

[5] Avetar is a landholding company which owns properties at 311 and 311A Tancred Street, Ashburton.

[6] Ms Taylor is the sole director of Avetar and owns 99 of the 100 shares in the company.

1 Companies Act 1993, s 241(4)(a).
2 Section 241(4)(d).

[7]Mr Lucas and Ms Taylor met through mutual friends in around 2011.

[8] Ms Taylor and a former business partner, Tony Farrow, had formed a company called Annona Holdings Ltd.

[9] On 21 June 2012, Mr Lucas purchased shares in Annona Holdings Ltd from Mr Farrow pursuant to a share purchase agreement (the share agreement). The share agreement is relevant because Mr Lucas relies on it as the basis upon which he made advances to Avetar.

[10] Mr Lucas and Ms Taylor began a de facto relationship in around 2013. Mr Lucas became a director of Avetar that same year.

[11] Mr Lucas and Ms Taylor separated in 2019, and Mr Lucas resigned as a director of Avetar in November 2021.

[12] Mr Lucas and Ms Taylor are currently engaged in proceedings in the Family Court for a division of their relationship property. Among the issues the Family Court will decide is whether Avetar owes a debt to Mr Lucas and, if so, the amount. The Family Court proceedings were set down for hearing in June 2023, but the…

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: [2023] NZHC 3232
Decision Date: 16 November 2023

CaseChat Overview and Summary

The plaintiff, Mr Scott Lucas, applied for an order to put the defendant, Avetar Properties Limited (Avetar), into liquidation on the grounds that Avetar is unable to pay its debts and that it is just and equitable to liquidate the company. Avetar opposed the application, asserting that Mr Lucas is not a creditor, it is not insolvent, and there is no basis for appointing a liquidator on the just and equitable ground. The issues to be determined were whether Mr Lucas is a creditor, whether Avetar is insolvent, whether the court's residual discretion should be exercised, and whether it is just and equitable to liquidate Avetar. The court found that there was a genuine and substantial dispute as to whether Mr Lucas was a creditor of Avetar, primarily because of the intermingling of personal and company finances during the relationship between Mr Lucas and Ms Julianne Taylor, the sole director and shareholder of Avetar. As a result, the court could not rely on the presumption of insolvency under the Companies Act 1993. Additionally, the court found that Avetar was not insolvent because it had sufficient assets to meet its liabilities. The court also found that the just and equitable ground did not justify the liquidation of Avetar, as the relationship between Mr Lucas and Ms Taylor had ended and was not affecting the management or operation of Avetar. Consequently, Mr Lucas's application for the appointment of a liquidator was dismissed, and Avetar was awarded costs.

Orders