Madsen-Ries v Boyd-Dunlop - [2013] NZHC 2153

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-988 [2013] NZHC 2153

UNDER The Companies Act 1993

IN THE MATTER

of the liquidation of Shepton Investments Limited (In liquidation)

BETWEEN

VIVIEN JUDITH MADSEN-RIES AND HENRY DAVID LEVIN AS LIQUIDATORS OF SHEPTON INVESTMENTS LIMITED (IN LIQUIDATION)

Applicants

AND

JOHN EYRE BOYD-DUNLOP

First Respondent

AND

NANETTE JACQUELINE BOYD- DUNLOP AS TRUSTEE OF THE BOYD DUNLOP FAMILY TRUST

Second Respondent

AND

JAMES GAVIN DONOVAN
Third Respondent

AND

JOHN EYRE BOYD-DUNLOP

Fourth Respondent

AND

NANETTE JACQUELINE BOYD- DUNLOP

Fifth Respondent

Hearing:	13 May 2013
Appearances:	N Malarao for Applicants J Bates for Respondents
Judgment:	5 September 2013

RESERVED JUDGMENT OF ASSOCIATE JUDGE SARGISSON
(Set aside voidable transactions)

MADSEN-RIES AND LEVIN AS LIQUIDATORS OF SHEPTON INVESTMENTS LIMITED (IN LIQUIDATION) v BOYD-DUNLOP [2013] NZHC 2153 [05 September 2013]

This judgment was delivered by me on Thursday 05 September 2013 at 11.30 am pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:………………………….

Solicitors:
Meredith Connell, Auckland Gresson Grayson, Hastings

Introduction

[1] Shepton Investments Limited was placed into liquidation on the application of the Commissioner of Inland Revenue on 28 June 2012. The liquidators, Ms Madsen-Ries and Mr Levin, apply in this proceeding for orders against the respondents under s 295 of the Companies Act 1993. The respondents are sued in their personal capacity as shareholders and/or in their capacity as trustees of the Boyd-Dunlop Family Trust.

[2] Relevantly, s 295 applies to a company’s insolvent transaction that has been set aside under s 294 and affords the court the discretion to make consequential offers requiring a person to surrender the benefits received from the transaction.

[3] The essence of the liquidators’ claim for orders is as follows:

(a)That on account of a notice that they filed in this court in December 2012, a transaction Shepton had made on 28 Febuary 2011 was automatically set aside. The transaction, described in the notice, was:

The transaction ... whereby a debt of $1,036,379.11 owed by the Company to John Eyre Boyd-Dunlop, Nanette Jacqueline Boyd-Dunlop and James Gavin Donovan as trustees of the Boyd-Dunlop Family Trust was satisfied in full.

(b)This transaction was related to a simultaneous transaction, whereby Shepton extinguished a debt of $1,012,095 that was recorded as owing to it in the current account of its shareholders, Mr and Mrs Boyd-Dunlop.

(c)The simultaneous transactions constituted two parts of an overall transaction under s 292(3): the first part effectively constituted “paying money” to the trustees of the Boyd-Dunlop Family Trust under s 292(3)(e) and the second part constituted a step under s 292(3)(f) as it was done in order to give effect to the payment to the trustees. The trustees and the shareholders have benefitted from the

overall transaction; the former to the tune of $1,036,379.11 and the latter to the tune of $1,012,095.

(d)The two part transaction is a voidable transaction within the meaning of s 292(2) and warrants the making of orders, as sought in the application, consequential upon the automatic setting aside of…

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: [2013] NZHC 2153
Decision Date: 5 September 2013

CaseChat Overview and Summary

The case of Madsen-Ries and Levin as liquidators of Shepton Investments Limited (in liquidation) v Boyd-Dunlop [2013] NZHC 2153 involved an application by liquidators to set aside a transaction made by the company, Shepton Investments Limited, prior to its liquidation. The liquidators sought orders against the respondents, who were either shareholders or trustees of a family trust, for the return of benefits received from the transaction. The key legal issue was whether the transaction constituted a voidable preference under the Companies Act 1993 and, if so, what relief should be ordered under section 295 of the Act.

The court found that while the transaction did constitute a voidable preference, it did not result in the trustees receiving a payment or equivalent benefit from the company. Instead, the benefit accrued to the shareholders. Consequently, the court held that the appropriate relief was to order the shareholders to repay the company the amount of the voidable transaction. The trustees, on the other hand, were entitled to claim their original debt after other creditors in the liquidation process.

In conclusion, the court ordered that the shareholders, Mr and Mrs Boyd-Dunlop, pay the liquidators the sum of $1,012,095, and that the trustees of the Boyd-Dunlop Family Trust be entitled to claim their original debt in the liquidation. The court reserved leave to file and serve memoranda for further orders regarding interest and costs within specified timeframes.

Orders