ML Trustees 2711 Limited v Khov - [2015] NZHC 276

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2014-404-3374 [2015] NZHC 276

UNDER the Companies Act 1993

IN HE MATTER OF

EASY GROUP LIMITED (IN LIQUIDATION)

BETWEEN

ML TRUSTEES 2711 LIMITED Applicant

AND

STEVEN KHOV and DAMIEN GRANT Respondents

Hearing: 25 February 2015

Counsel:

K T Glover for ML Trustees 2711 Limited
B J Norling for Messrs Khov and Grant

Judgment:

25 February 2015

JUDGMENT OF HEATH J

This judgment was delivered by me on 25 February 2014 at 3.30pm pursuant to Rule
11.5 of the High Court Rules
Registrar/Deputy Registrar

Solicitors:
Metro Law, Auckland
Waterstone Insolvency, Auckland
Counsel:
K T Glover, Auckland

ML TRUSTEES 2711 LIMITED v KHOV and GRANT [2015] NZHC 276 [25 February 2015]

Introduction

[1] Easy Group Ltd was purportedly put into liquidation by a special resolution of its shareholders on 16 January 2014, by the appointment of Messrs Khov and Grant as liquidators.1 The special resolution had been signed by Mr Laurence Pope (who owned one share in the company), ostensibly on his own behalf and as a trustee of the Osarus Trust. The trustees of that Trust, Mr Pope and ML Trustees 2711 Ltd (ML Trustees), owned the remaining 99 shares.

[2] ML Trustees disputed Mr Pope’s authority to bind the Trust in executing the special resolution. It applied to this Court for an order declaring the resolution invalid. Somewhat inconsistently, a declaration was also sought that the office of liquidator was vacant and appointment of another named person as liquidator.2

[3] In an affidavit sworn in support of the application, the sole director of ML Trustees, Mr Hemphill, did not dispute that the circumstances justified a special resolution putting Easy Group Ltd into liquidation. His concern was with the appointment of Messrs Khov and Grant. Mr Hemphill said that his objections were based on their reputation in the commercial community; particularly the way in which Messrs Khov and Grant were perceived to carry out duties as liquidators.

[4] An application for security for costs was made by Messrs Khov and Grant. That was set down for hearing on 2 March 2015. Timetabling directions for that application were made by Venning J, on 22 January 2015. There was no compliance with those directions. For that reason, the proceeding was listed before me in the Duty Judge List today.

The substantive application

[5] In a joint memorandum filed yesterday, Mr Glover, for ML Trustees and
Mr Norling, for Messrs Khov and Grant, indicated that ML Trustees was now satisfied that Easy Group Ltd had validly been put into liquidation and did not wish

1 Companies Act 1993, s 241(2)(a).
2 Liquidation is commenced by the appointment of liquidators: s 241(1) of the Companies Act
1993. An invalid appointment would invalidate the liquidation.

to pursue its substantive application. As a result, the application for security for costs was rendered redundant.

[6] Nevertheless, having had their appointment put in issue in this Court, Messrs Khov and Grant wish to obtain an order confirming…

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: [2015] NZHC 276
Decision Date: 25 February 2015

CaseChat Overview and Summary

ML Trustees 2711 Limited (ML Trustees) applied to the High Court of New Zealand to declare a special resolution invalid, which purportedly put Easy Group Limited (the company) into liquidation and appointed Messrs Khov and Grant as liquidators. The company's remaining shares were held by the trustees of the Osarus Trust, namely Mr Laurence Pope and ML Trustees. ML Trustees disputed Mr Pope's authority to bind the Trust in executing the special resolution. They sought a declaration that the resolution was invalid and that the office of liquidator was vacant, with a request for another individual to be appointed. The respondents, Messrs Khov and Grant, applied for security for costs. The matter was heard on 25 February 2015.

The court needed to decide whether the special resolution was valid and whether Messrs Khov and Grant were duly appointed as liquidators. The court also had to consider whether it should grant an order confirming the validity of the liquidators' appointment and the procedural ramifications of doing so.

The court found that ML Trustees was satisfied that the company had validly been put into liquidation and did not wish to pursue its substantive application. As a result, the application for security for costs was rendered redundant. The court indicated that it was not prepared to make a confirmation order without a proper application and argument. It advised counsel that it would consider the procedural ramifications of what was proposed and give directions. The court concluded that it would be preferable for Messrs Khov and Grant to commence a separate proceeding to seek a declaration of valid appointment. It provided directions for the proposed application, including the filing of an originating application and affidavits, an application for directions as to service, and the service of relevant parties. The court also considered that it would be appropriate for the application for directions to be referred to an Associate Judge.

The court dismissed the substantive application and the application for security for costs, with no order as to costs. It agreed with the parties that costs lie where they fall on the basis that ML Trustee would support the validity of the liquidators' appointment on the proposed application for a confirming declaration which will be made separately. The hearing scheduled for 2 March 2015 was vacated and appearances excused. The proceeding was regarded as at an end.

Orders