McMahon v Ah Sam - [2014] NZHC 659

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-4735 [2014] NZHC 659

IN THE MATTER OF
SEASTONE C ONSTRUCTION AND

CIVIL LIMITED (In Liquidation)

BETWEEN

KIRSTINA MARY McMAHON Applicant

AND

DEREK AH S AM First Respondent

PAUL VLASIC Second Respondent

Hearing: 26 March 2014

Appearances:

K M McMahon - Applicant in person
M L Broad with C P Piho for Respondents

Judgment:

26 March 2014

ORAL JUDGMENT OF ASSOCIATE JUDGE BELL

Solicitors:
Kensington Swan, Auckland, for Respondents

McMAHON v AH SAM and VLASIC [2014] NZHC 659 [26 March 2014]

[1] In February this year, Judge Abbott made an order putting Seastone Construction and Civil Ltd into liquidation on the application of Lorraine Edkins. Judge Abbott appointed Mr Ah Sam and Mr Vlasic liquidators.

[2] Ms McMahon is a director of the company. She has applied for an order removing Mr Ah Sam and Mr Vlasic as liquidators. The grounds she gives in her application are that Mr Ah Sam and Mr Vlasic have falsely signed their consent to act as liquidators and that there is a conflict of interest.

[3] In response, the liquidators say that they gave their consent to be appointed liquidators properly, and they deny that they are under any conflict of interest. They counter that Ms McMahon has failed to comply with her obligations under the Companies Act 1993.

Preliminary matters

[4] At the start of the hearing, Mr Broad objected to an affidavit that Ms McMahon had sworn and filed on 17 March 2014 as it was not served on the offices of the lawyers for the liquidators on that date. In fact, it was yesterday that Ms McMahon sent them a copy of that affidavit. I have still allowed the affidavit to be used in evidence. I accept the point that as the lawyers received the affidavit only yesterday, the liquidators had not had the opportunity to reply to it. I have taken that into account in the weight I have placed on it. In the end I am not sure that much turns on the matter.

[5] Ms McMahon filed the application with Seastone Construction and Civil Ltd named as the applicant. I am treating her as the applicant. There are reasons why she could not use the name of the company to seek orders to remove Mr Ah Sam and Mr Vlasic as liquidators.

[6] The first is that once a company goes into liquidation, the liquidators assume

custody and control of the company.1 They have the power to initiate or continue

proceedings in the name of the company.2

On the other hand, although directors

remain in office, they cease to have powers, functions and duties other than those which are required or permitted to be exercised under Part 16 of the Companies Act. The powers of directors under Part 16 of the Act do not extend to issuing
proceedings in the name of the company.

[7] The second is that – as I shall elaborate more fully – any…

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 McMahon v Ah Sam

Details

AGLC: McMahon v Ah Sam [2014] NZHC 659
Case: [2014] NZHC 659
Decision Date: 26 March 2014

CaseChat Overview and Summary

Kristina McMahon applied to the High Court to have Derek Ah Sam and Paul Vlasic removed as liquidators of Seastone Construction and Civil Ltd. The basis for her application was that the liquidators had falsely signed their consent to act as liquidators and that there was a conflict of interest. The liquidators opposed the application and denied the allegations. The court considered whether Ms McMahon's application was validly brought and if the liquidators should be removed under the Companies Act. The court found that Ms McMahon could not use the company name to bring the application, but as a director, she was entitled to apply in her own right. The court considered the provisions of the Companies Act and found that the proper way to consider the application was under s 286. The court found that Ms McMahon had not given the liquidators a notice that complied with s 286(2) of the Companies Act and therefore, the court did not have jurisdiction to make any orders under s 286(3). The court also found that there was no basis for removing the liquidators as Ms McMahon had not raised any seriously arguable question. Finally, the court ordered Ms McMahon to pay costs of $14,925 plus disbursements, if any, to the liquidators.

Orders