Meltzer v Axiom International Ltd - [2001] NZCA 209

IN THE COURT OF APPEAL OF NEW ZEALAND

CA246/00

IN THE MATTER OF

NUMBER ONE MEN LIMITED
(IN LIQUIDATION)

BETWEEN	JEFFREY PHILLIP MELTZER
Appellant

AND	AXIOM INTERNATIONAL LIMITED
Respondent

Hearing:	12 June 2001
Coram:	Gault J Anderson J Randerson J
Appearances:	J N Bierre and A J Wedekind for Appellant K F Gould for Respondent
Judgment:	26 June 2001

JUDGMENT OF THE COURT DELIVERED BY GAULT J

This appeal is against a judgment of Master Gambrill delivered in the High Court at Auckland on 10 October 2000. She found in favour of the creditor Axiom International Ltd on an application for an order that payment to it by the company Number One Men Ltd in the six months prior to liquidation not be set aside in accordance with a notice by the liquidator, Mr Meltzer.
The application was made pursuant to s268(2) Companies Act 1955. That Act is applicable because the company had not re-registered under the 1993 Act. There were two grounds. The first was that the payments were not voidable having been made in the ordinary course of business so as to negate the presumption in s266(3) and to take them outside the reach of s266(2). The second ground was that recovery by the liquidator should be denied under s270(3) on the ground that:
(a)The person from whom recovery is sought received the property in good faith and has altered his or her position in the reasonably held belief that the transfer to that person was validly made and would not be set aside; and
(b)In the opinion of the Court, it is inequitable to order recovery or recovery in full.
The case for the appellant provides another example of the repeated efforts to graft onto the statutory exclusion of transactions made in the ordinary course of business criteria or qualifications that are not there. It is unproductive to extract from passages in previous judgments references to relevant indicia and regard them as mandatory elements to be established as a matter of law.
In Countrywide Banking Corporation Ltd v Dean [1998] 1 NZLR 385, 394 the following passages appear in the judgment of the Privy Council:
Plainly the transaction must be examined in the actual setting in which it took place. That defines the circumstances in which it is to be determined whether it was in the ordinary course of business. The determination then is to be made objectively by reference to the standard of what amounts to the ordinary course of business. As was said by Fisher J in the Modern Terrazzo Ltd case [1998] 1 NZLR 160, the transaction must be such that it would be viewed by an objective observer as having taken place in the ordinary course of business. While there is to be reference to business practices in the commercial world in general, the focus must still be the ordinary operational activities of business as going concerns, not responses to abnormal financial difficulties. Their Lordships respectfully agree with the Judge’s conclusion…

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: [2001] NZCA 209
Decision Date: 26 June 2001

CaseChat Overview and Summary

The appeal in this case was against a judgment of Master Gambrill delivered in the High Court at Auckland on 10 October 2000. The Master had found in favour of the creditor, Axiom International Ltd, on an application for an order that payment to it by the company Number One Men Ltd in the six months prior to liquidation not be set aside in accordance with a notice by the liquidator, Mr Meltzer. The application was made pursuant to s268(2) of the Companies Act 1955. The appeal raised two grounds: the first was that the payments were not voidable having been made in the ordinary course of business so as to negate the presumption in s266(3) and to take them outside the reach of s266(2). The second ground was that recovery by the liquidator should be denied under s270(3) on the ground that the person from whom recovery is sought received the property in good faith and has altered his or her position in the reasonably held belief that the transfer to that person was validly made and would not be set aside; and in the opinion of the Court, it is inequitable to order recovery or recovery in full.

The Court of Appeal found that the first ground of appeal should be rejected. The Court found that the Master’s assessment that the payments made in the first period were in the ordinary course of business should not be set aside. The Court found that there was evidence to support the Master’s conclusion that Axiom received the payments in good faith and had altered their position in the reasonably held belief that the payment was validly made and would not be set aside. The Court also found that the Master’s conclusion that recovery by the liquidator would be inequitable was open to her and should not be interfered with. The Court found that the Master’s assessment of the lax and unsatisfactory conduct of the liquidator was relevant to the exercise of her discretion. The Court found that the necessary prerequisites for the exercise of the discretion were present and that the Master’s conclusion was open to her.

The appeal was dismissed and the respondent was entitled to costs in this Court which were fixed at $5,000 together with disbursements including the reasonable travel and accommodation expenses of counsel, approved, if necessary, by the Registrar.

Orders