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McKay v Smith

McKay v Smith

Case [2016] NZHC 1691 25 July 2016

Secured Creditors

Liquidator’s Duties

Money Had and Received

Change of Position Defence

Commercial Law

Insolvency Law

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-2511 [2016] NZHC 1691

UNDER
Part 19 of the High Court Rules and

section 34 of the Receivers Act 1993

IN THE MATTER

of H.B. Garments Limited (in Liquidation and in receivership) and HAD Garments Limited (in liquidation and in receivership)

BETWEEN

ANDREW JOHN MCKAY Applicant

AND

CLIVE ASHLEY JOHNSON First Respondent (Discontinued)

GEOFF MARTIN SMITH Second Respondent

Hearing:
10 March and 9 June 2016

Further submissions received 16 June and 5 July 2016

Appearances:

R B Stewart QC and J Caird for the Applicant
First Respondent discontinued
Second Respondent in person (debarred from defence)

Judgment:

25 July 2016

JUDGMENT OF MUIR J

This judgment was delivered by me on Monday 25 July 2016 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date:………………………….

Counsel/Solicitors:
R B Stewart QC, Barrister, Auckland
J C Caird, Simpson Grierson, Auckland

Copy to: Second Respondent

MCKAY v JOHNSON & SMITH [2016] NZHC 1691 [25 July 2016]

Introduction

[1] In these proceedings Mr McKay, who was on 6 August 2014 appointed receiver of HAD Garments Ltd (In Liquidation and Receivership) (HAD) and H.B. Garments Ltd (In Liquidation and Receivership) (HB) (together, the Companies) by Westpac NZ Ltd (Westpac), seeks orders that Mr Smith, the Companies’ liquidator, pay him;

(a) The sum of $540,666.82; and

(b)Interest on that sum at the prescribed rate under the Judicature Act from the date of his receivership.

[2] The claim has a lengthy procedural history which I will set out in some detail

because it provides necessary context to the “unless” orders made by me on 10

March 2016, requiring payment by Mr Smith of the sum of $2,500 costs to Mr McKay by 28 April 2016, in default of which he was to be debarred from further defence of Mr McKay’s claims. This was the third occasion on which unless orders had been made against him during the interlocutory stages of the proceedings. In the event, the costs order was not paid by 28 April 2016 (or subsequently).

[3] At the resumed hearing on 9 June 2016 Mr Smith again appeared in person. I indicated to him that he was now debarred from further defence of the claim which would proceed on a basis analogous to that of formal proof, albeit that I would consider the affidavit evidence filed by him and already before the Court. Mr Smith was invited to remain in Court while Mr McKay presented his case, however he chose to leave, requesting the Court record show that he was “a living natural man subject to common law”. In a bench note dated 8 June 2016 I set out the relevant exchange in greater detail.

[4] The issue which I am required to decide is whether Mr McKay has, on the balance of probabilities, made out his claims that Mr Smith has received monies belonging to the Companies and secured to Westpac and which he has, without

lawful justification, failed to account…

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.

Continue reading McKay v Smith

Details

AGLC: McKay v Smith [2016] NZHC 1691
Case: [2016] NZHC 1691
Decision Date: 25 July 2016

CaseChat Overview and Summary

This case involved a dispute between Andrew John McKay and Geoff Martin Smith over the liquidation of two companies, HAD Garments Ltd and H.B. Garments Ltd. McKay, who was appointed as the receiver of the companies, sought compensation from Smith, the liquidator, for money he believed was wrongly disbursed by Smith during his tenure as liquidator. The court had to decide whether Smith had received and disbursed money that belonged to the companies and secured to Westpac, and if so, whether Smith had a lawful justification for doing so. The court found that Smith had indeed disbursed money that belonged to the companies and secured to Westpac without lawful justification, and ordered Smith to pay McKay $540,402.82 plus interest from the date of McKay's appointment as receiver. Smith's defences, including claims of improper appointment and abandonment of Westpac's security, were rejected by the court. The court also dismissed Smith's claims that McKay had failed to account for certain expenses or had caused loss to the companies. Smith's failure to provide necessary information about the companies' assets and expenses further weakened his position, leading to the court's decision in favour of McKay.

Orders