Petterson v Hutt - [2016] NZHC 1394

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-916 [2016] NZHC 1394

UNDER the Companies Act 1993

IN THE MATTER

of HIGH STREET MANAGEMENT LIMITED (In Receivership and Liquidation)

BETWEEN

DAVID ROSS PETTERSON Applicant

AND

GREGORY ALEXANDER HUTT AND FR TRUSTEE (HUTT) LIMITED

First Respondents

AND

DAMIEN GRANT AND STEPHEN KHOV

Second Respondents

Hearing:
26 May 2016; further submissions filed on 30 May 2016 and 1,

14 and 16 June 2016

Appearances:

GP Blanchard and T Refoy-Butler for applicant
K Crossland and W Buckham for first respondents
A Ho for second respondents

Judgment:

24 June 2016

JUDGMENT OF TOOGOOD J

This judgment was delivered by me on 24 June 2016 at 12:30 pm
Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Petterson v Hutt [2016] NZHC 1394 [24 June 2016]

Introduction

[1] Mr David Petterson, the applicant, is the liquidator of High Street Management Ltd (in receivership and in liquidation) (“HSM”). On 8 March 2016, HSM entered into two general security agreements (“GSAs”) with the first respondents, Mr Gregory Hutt and FR Trustee Ltd. Five weeks later, on
18 April 2016, HSM was put into voluntary liquidation.

[2] On 3 May 2016, Mr Petterson issued a proceeding applying to have the GSAs set aside pursuant to ss 293 and 299 of the Companies Act 1993. The basis of the s
299 claim is that Mr Hutt was acting as a shadow director of HSM when the GSAs were issued. The s 293 claim rests on the contention that the GSAs are voidable because they were entered into at a time when HSM was unable to pay its debts. It is necessarily the case that, if the GSAs were voided, any appointment of receivers pursuant to the GSAs would also be of no effect. Mr Petterson, therefore, also sought an order that the second respondents, Mr Grant and Mr Khov, be made to retire as receivers of HSM.

[3] Pending the substantive decision on that proceeding, Mr Petterson sought an interim injunction (without formal notice but on a “Pickwick” basis) restraining the second respondents, in their capacities as receivers, from taking any steps to realise or recover any HSM asset, and preventing the first respondents from incurring any debt on behalf of HSM, pending a full hearing of the application for an interim injunction.

[4] Wylie J considered the urgent application on the papers and granted temporary relief pending a full interim injunction hearing. A fixture was allocated on an urgent basis, and I heard the matter on 26 May 2016. Mr Petterson asks the Court to maintain the interim orders which Wylie J imposed pending a substantive hearing on the voidability of the GSAs. The first respondents seek to have the interim orders set aside.

[5] So far as remains relevant, the interim orders made by Wylie J on

5 May 2016 pending a further order of the Court are:

(a) The first and second respondents are restrained from taking any steps to realise or recover any HSM…

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 Hutt

Details

AGLC: Petterson v Hutt [2016] NZHC 1394
Case: [2016] NZHC 1394
Decision Date: 24 June 2016

CaseChat Overview and Summary

The case of Petterson v Hutt involved an application by David Ross Petterson, the liquidator of High Street Management Ltd (HSM), to have two general security agreements (GSAs) set aside under sections 293 and 299 of the Companies Act 1993. The GSAs were entered into by HSM with Mr Gregory Hutt and FR Trustee (Hutt) Ltd, who were the first respondents. The second respondents, Mr Grant and Mr Khov, were appointed as receivers of HSM under the GSAs. The application sought to restrain the receivers from taking steps to realise or recover any HSM asset, and to prevent the first respondents from incurring any debt on behalf of HSM. The primary legal issues were whether the GSAs were voidable under sections 293 and 299 of the Companies Act. The court considered whether there was an arguable case that the GSAs were voidable because they were entered into when HSM was unable to pay its debts (section 293) and whether Mr Hutt was acting as a shadow director of HSM at the time the GSAs were issued (section 299). The court held that there were serious questions to be tried on both issues. It found that the timing of the GSAs, coupled with the presumption in section 293(2) of the Companies Act, created an arguable case that HSM was unable to pay its debts at the time the GSAs were issued. The court also found that there was an arguable case that Mr Hutt was acting as a shadow director of HSM, given the level of control he exercised over the company. The court considered the balance of convenience and the overall interests of justice, and decided that the interim orders should be maintained pending the substantive hearing. The court held that the balance of convenience favoured maintaining the interim relief, as the unsecured creditors could suffer considerable harm if the interim injunctions were not maintained. The court also found that the overall interests of justice warranted maintaining the interim relief. The substantive hearing was set down for the first available date, with an estimated hearing time of five days. Costs were to be determined on a category 2B basis.

Orders