Owens v T R Group Limited - [2016] NZHC 427

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2015-485-836 [2016] NZHC 427

UNDER the Companies Act 1993

IN THE MATTER OF

the liquidation of Brothers Haulage
Limited (in liquidation)

BETWEEN

COLIN DAVID OWENS AND DAVID STUART VANCE

Applicants

AND

T R GROUP LIMITED Respondent

Hearing: 23 February 2015

Counsel:

K C Francis and P J Arnold for the Applicants
C F J Reid for the Respondent

Judgment:

14 March 2016

JUDGMENT OF ASSOCIATE JUDGE SMITH

Introduction

[1] Brothers Haulage Limited (in liquidation) (the company) was put into liquidation by this Court on 9 December 2014 on the application of the Commissioner of Inland Revenue. The company had been incorporated in February
2013, and had carried on the business of providing road freight services throughout

New Zealand.

[2] The respondent (T R Group) operates a business renting or leasing certain goods, including trucks and trailers. In April 2013 the company opened a trade credit account with T R Group, on T R Group’s standard terms and conditions.
Payment was to be made on the 20th of the month following invoicing.

COLIN DAVID OWENS AND DAVID STUART VANCE v T R GROUP LIMITED [2016] NZHC 427 [14
March 2016]

[3] The company rented vehicles from T R Group until 31 December 2013, under a series of individual rental agreements.

[4] The company paid T R Group a total of $59,000 by instalments between
5 February 2014 and 30 September 2014. The following table shows the dates and amounts of the payments:

Date
Amount

5 February 2014

$5,000.00

14 February 2014

$20,000.00

21 March 2014

$8,000.00

30 April 2014

$8,000.00

30 May 2014

$8,000.00

30 June 2014

$8,000.00

15 August 2014

$1,000.00

30 September 2014

$1,000.00

Total

$59,000.00

[5] Mr Owens and Mr Vance (the liquidators) are the company’s liquidators. In the course of investigating the company’s affairs following their appointment, they formed the view that the payments listed in the table at para [4] above were
“insolvent transactions”1 within the meaning of s 292(2) of the Companies Act 1993

1 An “insolvent transaction” is a transaction entered into by a company at a time when the company is unable to pay its due debts, which enables another person to receive more towards satisfaction of a debt owed by the company than the person would receive, or would be likely to

(the Act), which had been entered into within the “specified period” of two years prior to the commencement of the liquidation.2 They concluded that the payments were voidable under s 292(1) of the Act. The liquidators say that T R Group knew, or ought to have known, that the company was insolvent when it made the payments, and that T R Group should not be allowed to retain the payments to the detriment of the general body of creditors. They accordingly served notice to set aside the
transactions on T R Group, in accordance with the requirements in that regard which are set in s 294 of the Act.

[6] When…

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: [2016] NZHC 427
Decision Date: 14 March 2016

CaseChat Overview and Summary

The applicants, Mr Owens and Mr Vance, liquidators of Brothers Haulage Limited, sought orders setting aside certain payments made by the company to the respondent, T R Group Limited, on the basis that they constituted insolvent transactions voidable under the Companies Act 1993. T R Group opposed the application and argued that the payments were made as part of a continuing business relationship between the parties, and thus were not voidable as insolvent transactions under section 292 of the Act. Alternatively, T R Group submitted that it had a defence under section 296(3) of the Act, which provides that a court must not order the recovery of property if the recipient acted in good faith, would not have suspected insolvency, and provided value for the property. The court was required to determine whether the payments were part of a continuing business relationship, and if not, whether T R Group could rely on the section 296(3) defence. The court found that the payments were not part of a continuing business relationship, as their predominant purpose was to discharge the company's debt to T R Group, not to induce further supply. The court also concluded that T R Group could not rely on the section 296(3) defence for payments made on and after 21 March 2014, as a reasonable person in T R Group's position would have suspected insolvency by that date. The court ordered T R Group to repay $34,000 to the liquidators, plus interest, in relation to the payments made on and after 21 March 2014.

Orders