Lucas v Avetar Properties Limited

[2023] NZHC 2552

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2023-409-100

[2023] NZHC 2552

UNDER

the Companies Act 1993

AND

IN THE MATTER

of an application for appointment of an

interim liquidator and an abridgment of time

BETWEEN

SCOTT ALUN LUCAS

Plaintiff

AND

AVETAR PROPERTIES LIMITED

Defendant

Hearing:	(On the papers)
Counsel:	T M C Te Whaiti for Plaintiff S Caradus for Defendant
Judgment:	13 September 2023

JUDGMENT OF ASSOCIATE JUDGE LESTER

(Costs)

LUCAS v AVETAR PROPERTIES LIMITED [2023] NZHC 2552 [13 September 2023]

[1]    This liquidation proceeding was commenced on 10 March 2023 relying on an unsatisfied statutory demand. The proceeding was served prior to 23 March 2023 as counsel for the director of Avetar Properties Limited (Avetar) sought by memorandum that the proceeding be struck out. The plaintiff and the director of Avetar (Ms Taylor) are involved in proceedings in another jurisdiction. As a result, Ms Taylor’s solicitor considered the liquidation proceedings were an abuse of process. This Court was not prepared to deal with a strike out application based on a memorandum. A statement of defence was filed on 30 March 2023.

[2]    On 3 April 2023, the plaintiff, Mr Lucas, filed an application for the appointment of an interim liquidator to Avetar. The application was made on the basis that the assets of Avetar were in jeopardy. The application noted Avetar had, prior to November 2022, owned three properties in Ashburton (the properties) but that on   7 November 2022, one of the properties (property A) was transferred to another company whose director and shareholder is a relative of Ms Taylor’s.

[3]    The application to appoint an interim liquidator was made on the basis that the status quo should be maintained, that is, Avetar still owned two of the properties, which should be safeguarded from being transferred away. It was said the interests of the creditors required the assets of Avetar  not be disposed of pending the hearing of    the liquidation application. The application to appoint an interim liquidator was made some five months after the disposal of property A by Avetar in November 2022.

[4]    The application to appoint an interim liquidator was accompanied by an application for the abridgement of time. The filing of the opposition to that application was subject to a telephone conference with Associate Judge Paulsen on 5 April 2023. The Judge recorded the advice of counsel for Avetar (Mr Caradus), that he had only just received the application and had not had time to read Mr Lucas’ affidavit, but had taken instructions. The proposal made by Mr Caradus was that the application be resolved on the basis that Avetar provide an undertaking that the two remaining properties would not be sold without the consent of Mr Lucas or, further order of the Court.

[5]    The application to appoint the interim liquidator was eventually resolved by the giving of undertakings. Costs were reserved.

Avetar’s submissions in support of costs

[6]    Mr Caradus notes that an open offer to resolve the application to appoint an interim liquidator on the basis of undertakings was made on 5 April 2023. He notes there was no indication that Avetar’s assets were at risk. Here, the application to appoint an interim liquidator came some weeks after the liquidation proceedings were filed and five months after the November 2022 transfer of property A.

[7]    Mr Caradus submits that given this was not a case where the assets were in imminent risk and the fact the proceedings were underway, meant undertakings should have been sought by Mr Lucas before applying for the appointment of an interim liquidator.

[8]    Mr Caradus submits the offer of undertakings should have been an end to any application based on safeguarding Avetar’s assets.

Mr Lucas resists costs

[9]    Ms Te Whaiti, counsel for Mr Lucas, submits the purpose of the application to appoint an interim liquidator was to preserve Avetar’s assets and that this was achieved, albeit via undertakings.

[10]   Ms Te Whaiti  refers  to  an  email  sent  by  her  office  to  Mr Caradus  on  24 March 2023 seeking a satisfactory explanation for the November 2022 transfer of property A. That email raised the possibility that an application for an interim liquidator  would  be  made  if  a   satisfactory   explanation   was   not   provided. Ms Te Whaiti notes the email did not result in the offer of an undertaking by Avetar.

[11]   Accordingly, a “letter before action” was sent which did not prompt any assurances in respect of the remaining two properties. Ms Te Whaiti submits that costs should be reserved until the substantive liquidation application has been disposed

of or otherwise, it is Mr Lucas who should be awarded costs on the basis that its application resulted in the assets being protected.

Decision

[12]   There is merit in Ms Te Whaiti’s submission that the email from her office of 24 March 2023 called for a response. The email was sent on Friday 24 March 2023 at 3.46pm and sought a response by 3:00pm Monday 27 March 2023. The timeframe could be described as at best ‘tight’, at worst ‘unreasonable’. However, there is no suggestion Avetar sought to provide a substantive reply or sought further time to do so. The application to  appoint  an  interim  liquidator  was  not  filed  until  Friday 31 March 2023, that is, the Friday after the Monday deadline.

[13]   The considerations are balanced. Here there was a “letter before action” calling for an explanation as to the transfer of property A in November 2022, with the possibility of an interim liquidator being raised. No immediate response was provided. On the other hand, there was no evidence of an immediate threat to the two remaining properties.

[14]   Rule 14.8 of the High Court Rules 2016 provides that costs on interlocutory applications should be fixed when the application is determined. Here, the application to appoint an interim liquidator was resolved through undertakings. The application was discontinued.

[15]   Criticism can be made of Mr Lucas not immediately accepting an undertaking that the properties not be sold without agreement or further order of the Court. Undertakings are a conventional way of dealing with such applications.

[16]   I do not consider that costs should be reserved until the outcome of the substantive proceeding. The resolution of the substantive proceeding will not provide an answer as to the merits of the application for the appointment of an interim liquidator.

[17]   I am satisfied that this is an appropriate case where there should be no order for costs in respect of the interlocutory application, that is, costs should lie where they

fall. As I have said, the factors are balanced. There was no immediately apparent risk of the properties being dissipated. Had transfer of the properties been intended then no doubt all three properties could have been transferred in November 2022 or such could have occurred after the statutory demand was served on 1 February 2023. However, a request for an explanation of the transfer went unanswered.

[18]   Accordingly, costs are to lie where they fall in respect of the interlocutory application.

[19]   Finally, the Court apologises to the parties for the delay in dealing with the application  for  costs.  The  memoranda  were  not  referred  through  to  me  until  11 September 2023.

Associate Judge Lester

Solicitors:

Canterbury Legal, Christchurch (for Plaintiff) Duncan Cotterill, Christchurch (for Defendant)