McCullagh v Robt Jones Holdings Ltd - [2017] NZHC 2182

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2013-404-3475 [2017] NZHC 2182

UNDER
Sections 292, 294 and 295 of the

Companies Act 1993

IN THE MATTER

of the liquidation of Northern Crest
Investments Limited (In liquidation)

BETWEEN

ANTHONY JOHN MCCULLAGH AND STEPHEN MARK LAWRENCE Applicants

AND

ROBT JONES HOLDINGS LIMITED Respondent

Hearing: 19-21 and 23 June 2017

Appearances:

B P Keene QC and L M Van for the applicants
D G Chesterman for the Respondent

Judgment:

8 September 2017

JUDGMENT OF GORDON J

This judgment was delivered by me
on 8 September 2017 at 2.00 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar
Date:

Solicitors: Anthony Harper, Auckland
Gillespie Young Watson, Lower Hutt

Counsel: B Keene QC, Auckland
D Chesterman, Auckland

MCCULLAGH v ROBT JONES HOLDINGS LIMITED [2017] NZHC 2182 [8 September 2017]

Contents

Introduction .................................................................................................................... [1] The companies ............................................................................................................... [5] The relationship between NCI and RJH......................................................................... [9] The liquidation ............................................................................................................. [18] The impugned payments .............................................................................................. [27] Section 292 of the Companies Act 1993 ...................................................................... [28] Were the payments by Columbus and MSH2 transactions by NCI? ........................... [31] The law in relation to third party payments ............................................................. [32] The licence agreements ............................................................................................ [44] Theory of the case – the liquidators ......................................................................... [64] Theory of the case – Robt. Jones Holdings Ltd........................................................ [68] Were the payments by Columbus a transaction by NCI? ............................................. [73] Were the payments by Columbus before 1 April 2010 a redirection of licence fees?[75] Were the payments by Columbus after 1 April 2010 a redirection of licence fees? . [95] Was the Nov09 agreement a legitimate licensing agreement? ............................... [102] The existence of the intellectual property .............................................................. [104] The ownership of the intellectual property ............................................................ [120] The legitimacy of the licence fee ............................................................................ [134] Conclusion regarding the legitimacy of the Nov09 agreement .............................. [143] Were the payments made at the direction of, or with the consent of, NCI? ........... [144] Conclusion.............................................................................................................. [148] Were the payments by MSH2 a transaction by NCI? ................................................ [150] Were the payments by Columbus and MSH2 insolvent transactions? ....................... [166] “The company is unable to pay its due debts” – the restricted period .................. [169] Was NCI “unable to pay its due debts” at the relevant times? .............................. [181] Did RJH receive more money than it would have received in the liquidation? ..... [198] Conclusion.............................................................................................................. [204] Were the payments to RJH voidable transactions by NCI? ....................................... [205] Was there an abuse of process by the liquidators? ..................................................... [207] The orders sought by the liquidators .......................................................................... [213] Result ......................................................................................................................... [217] Costs ........................................................................................................................... [220]

Introduction

[1] Between 22 January 2010 and 5 November 2010, Robt. Jones Holdings Ltd (RJH) received $751,941.52 in discharge of a debt owed by Northern Crest Investments Ltd (NCI). The money was not paid by NCI itself, but by two Australian-registered companies, Columbus Property Marketing Pty Ltd and MSH No. 2 Ltd. On 2 June 2011, NCI was placed into liquidation by order…

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: [2017] NZHC 2182
Decision Date: 8 September 2017

CaseChat Overview and Summary

In the High Court of New Zealand, Gordon J considered whether payments totalling $751,941.52 made by Columbus Property Marketing Pty Ltd and MSH No. 2 Ltd to Robt Jones Holdings Ltd (RJH) were voidable transactions under the Companies Act 1993. The payments were made between January and November 2010 to discharge a debt owed by Northern Crest Investments Ltd (NCI) to RJH. The liquidators of NCI sought to set aside the payments as voidable transactions, arguing that they were a redirection of licence fees owed by Columbus to NCI under the terms of the Nov09 agreement. RJH argued that the payments were voluntary and not transactions by NCI. Gordon J found that the payments by Columbus to RJH were a redirection of licence fees owed to NCI under the Nov09 agreement. This conclusion was based on documentary evidence and statements by individuals involved in the affairs of NCI. Gordon J also found that the payments by MSH2 to RJH were a loan to NCI, made with the knowledge and consent of NCI. The Court determined that the payments by Columbus and MSH2 to RJH were insolvent transactions by NCI, as NCI was unable to pay its due debts at the relevant times. Additionally, the payments enabled RJH to receive more in satisfaction of NCI’s debt than it would have received in the liquidation. Consequently, the payments were voidable transactions by NCI within the terms of s 292 of the Act. The Court set aside the payments and ordered RJH to pay the sum of $751,941.52 to NCI, along with interest at the rate of five per cent per annum from the date of the liquidator's appointment. The Court declined to make an order preventing RJH from taking any further part in the liquidation, as such an order would be punitive in nature.

Orders