Madsen-Ries v Kemp

[2012] NZHC 327

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV2009-404-007876 [2012] NZHC 327

UNDER  the Companies Act 1993

IN THE MATTER OF     Freestyle Stainless Steel (In Liquidation and in Receivership)

BETWEEN  VIVIEN JUDITH MADSEN-RIES AND HENRY DAVID LEVIN AS LIQUIDATORS OF FREESTYLE STAINLESS STEEL LIMITED Applicants

ANDEVAN LANCE KEMP, TRACEY MICHELLE SOFFE AND GLYNIS MONEY

Respondents

Hearing:         9 March 2012

Appearances: K M Wakelin for the Applicants

E L Kemp and T M Soffe in person, the Respondents

Judgment:      9 March 2012

ORAL JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

Solicitors/Counsel: [email protected]

VIVIEN JUDITH MADSEN-RIES AND HENRY DAVID LEVIN AS LIQUIDATORS OF FREESTYLE STAINLESS STEEL LIMITED V EVAN LANCE KEMP, TRACEY MICHELLE SOFFE AND GLYNIS MONEY HC AK CIV 2009-404-007876 [9 March 2012]

[1]      On 18 October 2011 the matter of the liquidator’s application to set aside insolvent  transactions  concerning Mr Kemp’s  company Freestyle Stainless  Steel Limited, was called before me.

[2]      The application concerned three sums, $25,000, $12,000 and $6,000.  At that time the Court heard evidence from the respondents, Mr Kemp and Ms Soffe.  In the outcome I informed the Court of my impression that I was then presently inclined to accept a balance of probabilities argument favouring the respondents in connection with its explanation concerning the payment from the company account to the Kemp Family Trust of $25,000 on 12 November 2009.   I also advised that  I did not consider a balance of probabilities argument existed for the respondents in relation to the other two sums of money.

[3]      I noted that those two payments came from funds being held by the company as business receipts.

[4]      Concerning the sum of $25,000 Mr Kemp deposed that his Trust had been served with a Property Law Act notice and that he had borrowed the $25,000 from three friends/associates and that he had deposited the funds in the company’s bank account intending to arrange a direct transfer for payment of that sum to the mortgagee’s account.

[5]      As  I  noted  then  that  proposition  seemed  improbable.    A  copy  of  the company’s bank account and its financial statements suggested the payment was received into the company’s account and for the company’s use.   Mr Kemp then explained that he did not operate a personal bank account and had simply used the company’s account for personal purposes.

[6]      I considered then that the opportunity for further evidence ought to be given by Mr Kemp to support his account.   Among documents requested were written statements from those three persons Mr Kemp said lent him funds for the purpose of enabling the trust’s mortgage to be paid.

[7]      In  due  course  Mr  Kemp  duly  forwarded  copies  of  statements  from  the persons concerned.   They were not sworn.   The statements were brief.   Each statement provider indicated having made a payment to assist with Mr Kemp’s mortgage.

[8]      In response the liquidators made enquiries which revealed that two of Mr Kemp’s friends  were indeed directors  of companies that  were customers of Mr Kemp’s company.  References were made to bank statements which showed those companies of the friends had made numerous payments in the normal course of business to Mr Kemp’s company.

[9]      Over Mr Kemp’s opposition I, on 29 November 2011 provided a Mr Kemp with an opportunity for his friends to provide evidence to show from what account the funds were paid along with details evidencing repayment of their loans by Mr Kemp.

[10]     The matter was to be considered further on 2 February but that hearing was adjourned upon advice that Mr Kemp was unwell.  Nevertheless I directed that any further evidence on behalf of the respondents was to be filed and served by 17

February.  I directed the matter would again be heard by me on 9 March 2012.

[11]     Since, an affidavit has been filed by Ms Soffe, one of the respondents.  Ms Soffe asserts that the sum of $25,000 was paid for the purposes previously indicated by the evidence given and the statements of friends received.   She said that the Court’s request for further provision has “since proven a difficult task”.  It advises that Mr Kemp was bankrupted in December 2011.  Ms Soffe reports also that the three friends were reluctant “to become further involved in this matter... [and] are not willing to provide Evan [Mr Kemp] with extra evidence to assist him other than the statements... provided to the Court already”.

[12]     Ms Soffe concludes:

This has gone on long enough and there needs to be a conclusion to the hearing  and  I consider  the  Court  should  make  a  decision  based  on  the evidence and written material it has now.

[13]     Also provided for this hearing is a fourth affidavit of Mr Levin, one of the applicants.  He deposes that he and his staff have undertaken a further review of the records of the company.   He notes the lack of company records prevents the liquidators from providing any further evidence regarding the payments made by Mr Kemp’s three friends to the company.

[14]     He reiterates his view that the company records clearly show the deposits are sale revenues, loans to the company or other business dealings with people who have been customers, and that there is no independent evidence in the company records that they are anything else.   Further, GST records have been located indicating a provision of GST payable on the $25,000 received from Mr Kemp’s friends.

Conclusion

[15]     My initial view of the matter was that although Mr Kemp’s claims of his use of the company’s bank account for the purposes of receiving advances from friends, was improbable, I provided an opportunity for sufficient evidence to prove that claim, on the balance of probabilities.

[16]     In the outcome I am satisfied that the statements of the friends are insufficient for Mr Kemp’s purposes on behalf of his company.  To the contrary I conclude the liquidators’ application should be granted and that the respondents are liable for repayment  to  Freestyle  Stainless  Steel  Limited,  the  said  payments  of  $25,000,

$12,000  and  $6,000  identified  by  the  liquidators’’  application.    There  will  be

judgment accordingly.

[17]     Costs  are  payable  to  the  applicants  against  the  respondents  jointly  and severally on a 2B basis together with disbursements approved by the Registrar.

Associate Judge Christiansen