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Petterson v Browne

Petterson v Browne

Case [2018] NZHC 2379 11 September 2018

Statutory Construction

Corporate Law & Governance

Insolvency Law

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-970

[2018] NZHC 2379

UNDER the Companies Act 1993

AND

IN THE MATTER

of the liquidation of POLYETHYLENE PIPE SYSTEMS LIMITED (in liquidation)

BETWEEN

DAVID ROSS PETTERSON as liquidator of Polyethylene Pipe Systems Limited (in

liquidation) Applicant

AND

McCONNELL DOWELL

CONSTRUCTORS LIMITED
First Respondent

DAVID CHARLES BROWNE

Second Respondent

Hearing: 20 August 2018

Appearances:

B Gustafson for the Applicant G Neil for the First Respondent

D Russ for the Second Respondent

Judgment:

11 September 2018

JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on 11 September 2018 at 11:30 a.m. pursuant to r 11.5 of the High Court Rules 1985.

Registrar/Deputy Registrar

……………………………………

PETTERSON v McCONNELL DOWELL CONSTRUCTORS LTD [2018] NZHC 2379 [11 September 2018]

[1] Liquidators sometimes lack the resources and funds to get in and realise assets of the company for creditors. Parliament has decided that one solution is to incentivise unsecured creditors to fund the recovery of assets or give an indemnity for expenses by promoting such a creditor in the preferential claims under schedule 7 of the Companies Act 1993. That is found in cl 1(1)(e) of the schedule:

(1) The liquidator must first pay, in order of priority in which they are listed-

…

(e)to any creditor who protects, preserves the value of, or recovers assets of the company for the benefit of the company’s creditors by the payment of money or the giving of an indemnity-

(i)the amount received by the liquidator by the realisation of those assets, up to the value of the creditor’s unsecured debt; and

(ii)the amount of the costs incurred by that creditor in protecting, preserving the value of or recovering of those assets.

[2] In this proceeding, the liquidator of Polyethylene Pipe Systems Ltd (in liquidation) seeks directions whether he should recognise two claims to priority under cl 1(1)(e). He believes that McConnell Dowell Constructors Ltd has a sound claim, but not Mr D C Browne. He also seeks a direction that the amount of Mr Browne’s claim as a non-preferential unsecured creditor is $201,316.

[3] McConnell Dowell says that it is an unsecured creditor for $2,236,940.49 and that it has funded litigation by the liquidator, which has recovered $1,114,253 for creditors. It paid the liquidator $297,748.80 to bring those proceedings and it is funding further litigation by the liquidator: this application and a claim under s 301 of the Companies Act. It seeks priority under cl 1(1)(e)(i) for $1,114,253 and under cl 1(1)(e)(ii) for $297,748.80. If the further proceedings it is funding result in more recoveries it seeks similar priority under the clause for the unpaid balance of its unsecured debt plus the costs it incurs for those recoveries.

[4] Mr Browne, a director and shareholder of the company, is a failed secured creditor. He held a general security agreement as security for his advances to the

company and appointed a receiver. He funded litigation…

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 Petterson v Browne

Details

AGLC: Petterson v Browne [2018] NZHC 2379
Case: [2018] NZHC 2379
Decision Date: 11 September 2018

CaseChat Overview and Summary

This case involved a proceeding brought by the liquidator of Polyethylene Pipe Systems Ltd, a company in liquidation, against McConnell Dowell Constructors Ltd and David Charles Browne, seeking directions about preferential claims under cl 1(1)(e) of Schedule 7 of the Companies Act 1993. The liquidator sought to reject the preferential claims made by McConnell Dowell and Mr Browne. McConnell Dowell sought to be recognised as a preferential creditor in the liquidation of Polyethylene Pipe Systems Ltd for the amounts it had paid to fund litigation, including for the costs of the proceedings. Mr Browne sought to be recognised as a preferential creditor for the costs he had incurred in litigation that had resulted in a recovery. The liquidator argued that McConnell Dowell's and Mr Browne's claims did not meet the requirements of cl 1(1)(e) of Schedule 7 and that Mr Browne's unsecured claim was limited to $201,316. The court found that McConnell Dowell's claim was sound and that it was a preferential creditor in the liquidation of Polyethylene Pipe Systems Ltd for $1,114,253 under cl 1(1)(e)(i) and for $297,748.80 under cl 1(1)(e)(ii). It found that Mr Browne's claim did not meet the requirements of cl 1(1)(e) and that he was not a preferential creditor in the liquidation. The court found that Mr Browne's claim in the liquidation was not limited to $201,316. It awarded three-quarters of standard costs to the liquidator.

Orders