Mason v Lewis Ca267/04 - [2006] NZCA 55

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IN THE COURT OF APPEAL OF NEW ZEALAND
CA267/04
BETWEENKAREN BETTY MASON & JEFFREY PHILIP MELTZER AS LIQUIDATORS OF GLOBAL PRINT STRATEGIES LIMITED (IN LIQUIDATION)

Appellants

ANDCONWAY LEWIS

First Respondent

ANDJOHANNA LEWIS

Second Respondent

Hearing:7 December 2005

Court:Hammond, Chambers and Robertson JJ
Counsel:P L Rice for Appellants

P J Davey for Respondents

Judgment:30 March 2006

JUDGMENT OF THE COURT

A The appeal is allowed.
B The proceeding is remitted to the High Court to determine:
(a)whether a declaration should be made under s 300 of the Companies Act 1993 and, if so, its terms; and
(b)whether an order should be made under s 301(1) of the Companies Act 1993 and, if so, its terms.

CThe appellants’ application for leave to adduce further evidence is referred to the High Court for determination by the Judge who determines the remission.
DThe costs order in the High Court is set aside.

EAll costs in the High Court, both on the trial and on the remission, are to be determined by the Judge who determines the remission.
FIn this Court, the appellants will have costs of $8,000 and usual disbursements.

REASONS
(Given by Hammond J)
Table of Contents

PARA NO

Introduction  [1]
Background  [5]
Liability
         (a) The claims in the High Court  [36]
         (b) The basis of the appeal  [42]
         (c) The law: s 135  [44]
         (d) This case: s 135  [53]
                  (i) The law  [53]
                  (ii) Application of the law to the facts  [57]
         (c) This case: s 300  [84]
Quantum
         (a) A remission to the High Court?  [90]
         (b) The principles to be applied  [107]
         (c) Culpability  [112]
         (d) The format of the revised hearing  [119]
         (e) Towards a resolution  [122]
Conclusion  [124]
~~Introduction~~    ~~[1]~~
~~Background~~    ~~[5]~~
~~Liability~~
~~(a) The claims in the High Court         [36]~~
~~(b) The basis of the appeal        [42]~~
~~(c) The law: s 135          [44]~~
~~(d) This case: s 135~~
~~(i)     The law   [53]~~
~~(ii)    Application of the law to the facts      [57]~~

~~(e) This case: s 300        [84]~~
~~Quantum~~
~~(a) A remission to the High Court?~~      ~~[90]~~
~~(b) The principles to be applied [107]~~
~~(c) Culpability     [113]~~
~~(d) The format of the revised hearing       [119]~~
~~(e) Towards a resolution     [122]~~
~~Conclusion     [124]~~
Introduction
[1]       The appellant liquidators brought this proceeding against the two respondents, as directors of Global Print Strategies Ltd (Global Print), for the debts incurred while that company was trading, but insolvent. The liquidators said this was in breach of the obligations of the directors not to allow the company to trade recklessly (s 135 Companies Act 1993), and to keep proper books of account (s 300 Companies Act 1993).
[2]       Salmon J found in favour of the respondents (HC AK M459-IM03 25 November 2004).
[3]       The liquidators appeal on the basis that, in some important respects, the Judge misstated the relevant legal test under s 135; and that, on the facts, judgment should have been entered for them.
[4]       The quantum of 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: [2006] NZCA 55
Decision Date: 30 March 2006

CaseChat Overview and Summary

The Court of Appeal of New Zealand heard an appeal against the decision of the High Court which dismissed claims by liquidators for the debts incurred while Global Print Strategies Ltd (Global Print) was trading, but insolvent. The liquidators alleged breaches of the directors' duties under s 135 of the Companies Act 1993 and s 300 of the Companies Act 1993. Salmon J found in favour of the respondents. The liquidators appealed on the basis that the Judge misstated the relevant legal test under s 135 and, on the facts, judgment should have been entered for them. The Court of Appeal found the liquidators were entitled to favourable findings on both causes of action. However, the Court was not able to assess the quantum of an award in this Court and the proceeding was remitted to the High Court to determine the appropriate relief. The Court made some observations as to the general principles to be applied, for such assistance as they might afford the trial Judge. The liquidators were entitled to a holding that there was a breach of s 135 from September 2000 and proper accounting records were not kept at any stage. The defence under s 300(2) was not available to the Lewises. The Lewises were in breach of s 135 from September 2000 and Section 138 did not provide them with a defence. The Court noted that the outer limits of liability were likely to be between $100,000 and $560,000.

Orders