Madsen-Ries v Rapid Construction Limited - [2012] NZHC 3572

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2012-404-001044 [2012] NZHC 3572

UNDER S 295 of the Companies Act 1993

IN THE MATTER OF Giant Engineering Limited (in Liquidation) BETWEEN VIVIEN JUDITH MADSEN-RIES AND
HENRY DAVID LEVIN
Applicants

AND RAPID CONSTRUCTION LIMITED Respondent

Hearing: 27 June 2012

Appearances: R P Coltman/C L Bell for applicants
B D Gustafson for respondent

Judgment: 20 December 2012

JUDGMENT OF ASSOCIATE JUDGE ABBOTT

This judgment was delivered by me on 20 December 2012 at 4.30pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:
R P Coltman/C L Bell, Fortune Manning, PO Box 4139, Auckland
B Gustafson, PO Box 1297, Shortland Street, Auckland 1140

VIVIEN JUDITH MADSEN-RIES AND HENRY DAVID LEVIN V RAPID CONSTRUCTION LIMITED HC AK CIV 2012-404-001044 [20 December 2012]

[1] The liquidators of Giant Engineering Limited (in liquidation) (Giant) have applied for an order that Rapid Construction Limited (Rapid) pay to Giant the sum of
$113,551.84. The liquidators seek that order on the grounds that a payment of that amount made by Giant to Rapid in January 2011 is a voidable transaction in terms of s 292 of the Companies Act 1993 (the Act).

[2] The liquidators gave Rapid notice that they wished to set aside the transaction, in accordance with s 294 of the Act. Rapid failed to give notice of objection within the statutory period and the transaction was set aside automatically as a result. The liquidators have since applied under s 295 of the Act for an order that Rapid pay to Giant an amount equal to the sum paid to it under the transaction.

[3] Rapid has filed a notice of opposition, relying on the statutory defence set out in s 296(3) of the Act. It says that the transaction was part of a cheque swap arrangement made to assist Giant get its business running after a fire in its business premises, and that any order should be limited to the difference between the value of the swapped cheques, being $22,838.34.

[4] It is common ground that the onus is on Rapid to make out the grounds for a defence under s 296.

Background

[5] Rapid is in the business of event management and construction. Prior to its liquidation, Giant was in the business of manufacturing and supplying equipment in the scrap metal and rubbish collection industry.

[6] Rapid and Giant began a trading relationship in or about 2007. Under that relationship, each provided services to the other.

[7] In or about August 2009 a fire at Giant’s premises destroyed its office area and caused damage to its plant and tools. In or about September 2009, Rapid and another of Giant’s customers came to an arrangement with Giant to help Giant re-

establish its business, which had been disrupted by the fire. Under this arrangement, Rapid was to provide Giant with materials both for work that Giant undertook on its (Rapid’s) behalf, and for work that Giant was undertaking for other…

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: [2012] NZHC 3572
Decision Date: 20 December 2012

CaseChat Overview and Summary

The liquidators of Giant Engineering Limited applied for an order that Rapid Construction Limited pay to Giant the sum of $113,551.84, arguing that the payment was a voidable transaction under s 292 of the Companies Act 1993. Rapid opposed the application, arguing that it was entitled to a statutory defence under s 296(3) of the Act. The primary issue was whether Rapid had a valid defence under s 296(3). The court considered whether Rapid had acted in good faith, without reasonable grounds for suspecting insolvency, and whether Rapid had altered its position in reliance on the payment. The court found that Rapid had acted in good faith and had altered its position by issuing a cheque to Giant in the reasonably held belief that the payment was valid. However, the court held that the defence was limited to the extent of Rapid's payment of $90,713.50, resulting in an order that Rapid pay to Giant the balance of $22,838.34. The parties were to file memoranda as to costs by 1 February 2013, with leave reserved to seek an extension of time if necessary.

Orders