Primo Seafoods Limited (in liq) HC Nelson M10/99

[2001] NZHC 366

IN THE HIGH COURT OF NEW ZEALAND
NELSON REGISTRY M10/99

UNDER THE COMPANIES ACT 1993

IN THE MATTER of PRIMO SEAFOODS LIMITED (in liq)

AND IN THE MATTER of applications for orders that transactions not be set aside

BETWEEN JEREMY GRAHAM HARRIS as trustee of the HARRIS FAMILY TRUST and JEREMY GRAHAM HARRIS and ACCOUNTING AND TAXATION CENTRE LTD
Applicants

AND BRUCE McCallum and DAVID STUART VANCE as liquidators of PRIMO SEAFOODS LTD (in liq)
Respondents

Date of Hearing: 5 April 2001

Judgment Released: 8 May 2001

Counsel: G P Malone for Applicants
G W Allan for Respondents

JUDGMENT OF MASTER VENNING
On Applications Transactions Not Be Set Aside

APPLICATIONS

[1] The Applicants seek orders that payments made to them by Primo Seafoods Ltd (Primo) not be set aside.

BACKGROUND

[2] Primo was incorporated on 4 March 1998. Its commercial life was brief. It was placed into liquidation on 17 June 1999. According to the records held at the Companies Office Jeremy Graham Harris was the sole director of the company from incorporation to liquidation. The company banked with Countrywide Bank, later National Bank of New Zealand Ltd. Mr Harris had sole cheque signing authority.

[3] Despite the company records Mr Harris says that he resigned as a director in May 1998 in favour of the other shareholder of the company, Abdul Balaa. It is Mr Harris’s evidence that from May 1998 his involvement with the company was more limited, although he remained interested in the company and became very actively involved in it again during 1999, immediately prior to its liquidation.

[4] The company was incorporated to market and export New Zealand seafood, particularly mussel product, overseas.

[5] Following liquidation the liquidators issued notices to set aside payments made to Mr Harris or entities associated with him as follows:

Payment	Date	Payee/Beneficiary
$30,375.00	25/5/98 (within specified period)	Harris Family Trust
$15,976.00	29/5/98 (within specified period)	Harris Family Trust
$10,00.00	26/8/98 (within specified period)	Accounting and Taxation Centre Ltd (now Com.Link Accounting Ltd)
$17,000.00	28/5/99 (within restricted period)	Mr Harris

[6] The parties accept that although the payment and notice refers to Accounting and Taxation Centre Ltd, that entity has changed its name to Com.Link Accounting Ltd.

[7] The liquidation has been a difficult exercise for the liquidators. The affairs of the company have not been well managed or documented. Mr Harris has confused the various and numerous entities that he has been involved in. Mr Harris has effectively used the bank account of the company at his own convenience at times and has intermingled his and his wife’s financial affairs with the family trust. In addition to the present company the liquidators’ search of the Companies Office records disclose that at the material time Mr Harris was recorded as a director of 15 New Zealand companies and company secretary of five companies. The same search reveals that he had previously been a director and/or secretary of a further 31 companies.

[8] The evidence has been given by affidavit. The principal witnesses were Mr Harris and Ms Griffin, a forensic accountant employed by the liquidators. In addition, a Mr Chandler has given evidence in support of Mr Harris in relation to one of the transactions. Both Mr Harris and Ms Griffin gave oral evidence and were cross-examined. Despite the confusion regarding the company’s affairs, after that evidence was completed and with counsels’ helpful submissions it has been possible to reach a clear view on the transactions before the Court.

THE LAW

[9] The applications are made under s292 of the Companies Act. The relevant subsections of s292 are:

“292 Transactions having preferential effect

(1) In this section, transaction, in relation to a company, means-
(a) A conveyance or transfer of property by the company:
(b) The giving of a security or charge over the property of the company:
(c) The incurring of an obligation by the company:
(d) The acceptance by the company of execution under a judicial proceeding:
(e) The payment of money by the company, including the payment of money under a judgment or order of a court.

(2) A transaction by a company is voidable on the application of the liquidator if the transaction-
(a) Was made-
(i) At a time when the company was unable to pay its due debts; and
(ii) Within the specified period; and
(b) Enabled another person to receive more towards satisfaction of a debt than the person would otherwise have received or be likely to have received in the liquidation-
unless the transaction took place in the ordinary course of business.

(3) Unless the contrary is proved, for the purposes of subsection (2) of this section, a transaction that took place within the restricted period is presumed to have been made-
(a) At a time when the company was unable to pay its debts; and
(b) Otherwise than in the ordinary course of business.

(4) For the purposes of this section, in determining whether a transaction took place in the ordinary course of business, no account is to be taken of any intent or purpose on the part of a company-
(a) To enable another person to receive more towards satisfaction of a debt than the person would otherwise receive or be likely to receive in the liquidation; or
(b) To reduce or cancel the liability, whether in whole or in part, of another person in respect of a debt incurred by the company; or
(c) To contribute towards the satisfaction of the liability, whether in whole or in part, of another person in respect of a debt incurred by the company-
unless that other person knew that that was the intent or purpose of the company.

(5) For the purposes of subsection (2)(a)(ii) of this section, specified
period means-
(a) The period of 2 years before the date of commencement of the liquidation together with the period commencing on that date and ending at the time at which the liquidator is appointed; and
(b) In the case of a company that was put into liquidation by the Court, the period of 2 years before the making of the application to the Court together with the period commencing on the date of the making of that application and ending on the date on which[, and at the time at which,] the order was made[; and]
(c) If-
(i) An application was made to the Court to put a company into liquidation; and
(ii) After the making of the application to the Court a liquidator was appointed under paragraph (a) or paragraph (b) of section 241(2),-
the period of 2 years before the making of the application to the Court together with the period commencing on the date of the making of that application and ending on the date [and at the time] of the commencement of the liquidation.]

(6) For the purposes of subsection (3) of this section, restricted period means-
(a) The period of 6 months before the date of commencement of the liquidation together with the period commencing on that date and ending at the time at which the liquidator is appointed; and]
(b) In the case of a company that was put into liquidation by the Court, the period of 6 months before the making of the application to the Court together with the period commencing on the date of the making of that application and ending on the date on which[, and at the time at which,] the order of the Court was made[; and]
(c) If-
(i) An application was made to the Court to put a company into liquidation; and
(ii) After the making of the application to the Court a liquidator was appointed under paragraph (a) or paragraph (b) of section 241(2),-
the period of 6 months before the making of the application to the Court together with the period commencing on the date of the making of that application and ending on the date [and at the time] of the commencement of the liquidation.”

[10] The payment made on 28 May 1999 was made within the restricted period. The other payments were made within the specified period. In relation to those payments the liquidators must satisfy the Court that the payment was made at a time when the company was unable to pay its debts and that it was other than in the ordinary course of business.

[11] The principles to be applied have recently been set out in the Privy Council advice in Countrywide Banking Corp Ltd v Dean [1998] 1 NZLR 385 and Re Excel Freight Ltd (in liq); Waikato Freight & Storage (1988) Ltd v Meltzer (unreported, Court of Appeal, CA 164/00, 5/3/01).

THE MAY 1998 PAYMENTS

[12] The issues for the Court in relation to the May payments are:

•   The payee/beneficiary of the payments;

•   Whether at the time the payments were made the company was unable to pay its debts;

•   Whether the payment was made in the ordinary course of business;

•   Whether the payment enabled another person to receive more towards payment of a debt;

•   Whether relief ought to be granted under s296(3).

The payee/beneficiary

[13] The Harris family trust advanced monies to the company to enable it to continue to operate. On Mr Harris’s evidence payments totalling $85,855 were made by the trust to Primo. Of particular relevance are the payments of $15,000 on 1 April 1998 and of $30,000 on 20 May 1998. The liquidator says the two payments challenged were repayments of those two advances. It appears that the payment of $30,375 made on 25 May 1998 was made to Port Gore Marine Farms. The Harris family trust apparently leased a marine farm from Port Gore Marine Farms. Mr Harris’s evidence is that the $30,000 advance by the trust (on 20 May 1998) was initially going to be used by the trust to pay the marine farm rental due to Port Gore Marine Farms. The payment of $30,375 was to repay that advance. He says:

“8.  . . . Instead of repaying the loan the company instead paid Port Gore Marine Farms direct.”

That explains why the payment of 25 May 1998 of $30,375 is recorded in the general ledger of the company as a payment for farm lease. Mr Harris confirmed that Prime never leased a farm.

[14] In short therefore, on or about 25 May 1998 Primo owed the Harris Family Trust in excess of $45,000. On 25 May, and at Mr Harris’s direction, Primo paid a creditor of the Harris Family Trust, namely Port Gore Marine Farms, the sum of $30,375. As Mr Harris accepted in his evidence, the payment of $30,375 was a payment on behalf of and for the benefit of the family trust.

[15] The payment of $15,976 on 29 May 1998 was to the solicitors firm of Rout Milner & Fitchett. It was payment of an invoice rendered by that firm to the family trust. Again at Mr Harris’s direction Primo paid a creditor of the family trust using the company funds at a time when Primo was indebted to the family trust. Mr Harris accepted in cross-examination:

“q.  . . . I want to ask you - you have seen from the affidavits that there was evidence that this payment of $15,976 was paid to the firm of Rout Milner & Fitchett trust account. Do you accept that as correct?

a. Yes.

q. Would that payment to the trust account have been credited to the family trust account with the solicitors?”

And later:

“q. So we can be - you accept then that the effective beneficiary of that payment was the family trust?

a. Yes.”

[16] That the payments were for the benefit of the family trust is also consistent with the schedule prepared by Mr Harris on 26 July 1999. Mr Harris responded to the liquidators’ request for clarification of a number of matters arising out of the administration of the company. In a schedule Mr Harris noted inter alia:

“C Transactions recorded between Primo Seafoods Ltd and related party bank accounts

. . .
25/05/98         $30,375.00     Harris Family Trust

. . .
31/05/98         $15,976.80     Harris Family Trust

. . .”

[17] Despite that, Mr Malone submitted that as the first payment was made to Port Gore Marine Farms it was not a transaction between the company and the trust. He referred to the decision of Chilton Saint James School v Gray (1996) 9 PRNZ 349 (confirmed on appeal). However, the facts of that case are important and distinguish that case from the present.

[18] The applicant school was not a creditor of the company. The school was owed money by Mr and Mrs Truman. Their company, TCS, sold its assets to another company. At the direction of Mr Truman the purchaser paid part of the purchase price to the applicant school. Justice Greig accepted the payment was made by TCS. Although the payment was physically by the purchaser it was from money which it owed to TCS and at TCS’s direction. However, His Honour accepted the plaintiff’s argument that as the plaintiff had no claim in the liquidation of TCS and was not a creditor, the payment to TCS did not fall within the section as it could not enable the school to receive “more towards satisfaction of a debt than [the school] would otherwise have received or be likely to receive in the liquidation.” The school would not have received anything in the liquidation, it not being a creditor of the company.

[19] Essentially His Honour accepted the submission that the beneficiary of the payment was not a creditor and on that basis the section did not apply. The Court of Appeal approved that decision on appeal at (1997) 8 NZCLC 261, 306.

[20] The situation in the present case is quite different. The beneficiary of both payments is the family trust. The family trust was a creditor of the company. Section 292 deals with transactions, which include the payment of money by the company. The effect of the transaction in Primo’s records was to reduce the indebtedness of Primo to the family trust. The payment was a payment for the benefit of the family trust.

Was the company unable to pay its due debts?

[21] The next issue is whether Primo was unable to pay its due debts at the time the payments were made in May 1998.

[22] Mr Malone submitted that at the time the payments were made Primo was able to pay its debts. In any event the onus is upon the liquidator to satisfy the Court that at the relevant time Primo was unable to pay its debts. The evidence about the financial position as at 25 May 1998 is as follows:

•   Primo was unable to pay its creditors from its own resources. Loans had been made to the company by the Harris Family Trust on 1 April 1998 and 20 May 1998 of $15,000 and $30,000 respectively. In addition Mr Harris, through Com.Link Accounting Ltd, advanced a further $40,855 on 28 May 1998.

•   There were a number of creditors unpaid as at that date - Construction Village Ltd, NZ Safety Ltd and Protector Safety Supply NZ Ltd totalling in excess of $3,900. More significantly the GST for the periods ended 31 March and 30 April 1998 was due and owing. It is also notable that these accounts still remained owing as at the date of liquidation.

•   In addition, it appears that Mr Balaa had applied $30,000 to Primo from another company controlled by him, Imperial Choice, during May 1998. That money funded the payment by Primo to Port Gore Marine Farms and effectively repaid the trust advance.

•   Primo was also operating with a substantially overdrawn bank account with no approved overdraft facility in place. The first time there was a temporary overdraft facility was on 24 September 1998.

[23] Mr Malone submitted that consideration had to be given to the realisable assets of the company as at 26 August and the liquidators had not given any evidence as to those assets. Mr Malone took up the point in cross-examination. Mr Malone asked Ms Griffin if she knew of the assets owned by the company as at 28 and 29 May. Ms Griffin answered:

“a. I believe the only asset, as Jeremy Harris keeps stating, of the company was the debt from Imperial Choice.

q. Did the company own plant and equipment as well?

a. No, I do not believe so. I believe it owned a few pallets which I sold on appointment as liquidators.

q. Are you able to - do you accept that in fact you cannot say with certainty what plant and equipment was owned by the company as at 28 and 29 May?

a. I accept that.”

But later:

“q. In respect of plant and equipment do you accept that there may in fact have been plant and equipment of substantial value as of both May and August 1998?

a. I can’t accept that because I have seen no large payments going out of the bank account to fund such an acquisition and had I done so I would have obviously - I have been through all payments out of the bank account for any significant amount and I have not seen any large payments for the acquisition of assets, no.

q. I understand that you in fact sold the company’s debooshing machine to Sealords for $30,000 after liquidation?

a. That was actually for $45,000 and that was new at the time we were appointed. It was still in its shrink wrap. It had never been used and therefore I could not answer your question to say that they had it at May ‘98 or August ‘98.”

[24] In answer to a question from the Bench Ms Griffin said:

“a. From the information I have I believe [the company] was unable to pay its debts as at [May 1998 and August 1998]. The information I have seen reflects, in respect to unsecured creditors and trade creditors and that they have claimed in the liquidation for amounts that were outstanding from May 1998 onwards. In respect of Crown monies - retention of Crown monies - GST per the Inland Revenue Department claim amounts from April 1998 on a monthly basis remain outstanding. Mr Harris was in the position where he was continually providing short term loans and financing the company and I can’t think of any other reason for doing that other than the company was unable to pay its debts so therefore he had to provide the company with funds at times. I believe on the information I have to hand in May and August the company was insolvent in respect to able to meet its debts as and when they fell due.”

[25] The evidence satisfies the Court that as at the date the two payments were made in May 1998 Primo was unable to pay its debts.

Ordinary Course Of Business

[26] Mr Malone submitted that the repayment of short term loans such as these did not fall outside the ordinary course of business.

[27] In Countrywide Banking Corp Ltd v Dean (supra) the Privy Council approved the approach taken by Fisher J in Re Modern Terrazzo Ltd (in liq); Bowden v Macdonald [1998] 1 NZLR 160 that:

“ . . .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 businesses as going concerns, not responses to abnormal financial difficulties.” Per Gault J at P394

[28] In Re Modern Terrazzo Ltd (in liq) Fisher J had noted that a transaction will fall outside the ordinary course of business if it is abnormal in the commercial world and not commercially routine.

[29] In the Countrywide Bank case the Privy Council held:

“The section therefore requires examination of the actual transaction in its factual setting (excluding the intent or purpose of the company save as required by subs (4)). Because the examination is undertaken objectively by reference to the standard of the ordinary course of business, there may be circumstances where a transaction, exceptional to a particular trader, will none the less be in the ordinary course of business - as for example its first transaction of a particular type. It may be that transactions undertaken in the past will, because of changed circumstances, no longer be considered as in the ordinary course of business. The payment of some accrued indebtedness may be within the ordinary course of business as may the payment of moneys owing under a lease to secure a lessor’s consent to an assignment of the lessee’s interest. The particular circumstances will require assessment in each case.” P394-395

[30] In Re Excel; Waikato Freight (supra) the Court of Appeal said:

“[31] In our view the judicial approach has become over-complicated and over-refined. The question is whether, at the time it was made, the relevant transaction was made in the ordinary course of business. That is a question of objective fact. General business practices are relevant to that question, as are any particular customs or practices within the field of commerce concerned. So too is the previous commercial relationship between the parties. The observer spoken of in the Privy Council is in reality the Court which must look at the circumstances, as objectively apparent at the time of the transaction. The ultimate question is whether on the evidence before the Court the transaction or payment can be said to have been made in the ordinary course of business. Was it in its objective commercial setting an ordinary or an out of the ordinary transaction for the parties to have entered into?”

[31] In the present case the advances and repayments were not in the ordinary course of business for the following reasons:

• The payments were random payments made at the direction of Mr Harris. Firstly he directed the advances by his family trust, and secondly then directed the payments by the company. In relation to the payment of $30,375 $30,000 was provided from another company associated with Primo. The payments were effectively made by and to interests associated with a director and at that director’s (Mr Harris’s) control.

• The payments were not documented or properly accounted for at any stage. It was only after the liquidation of the company that any attempt was made to formalise them.

• Mr Harris, as a director of Primo, ought to have known the state of its finances at the time the repayments were made. At that time monies were owing and unpaid to creditors and the Commissioner of Inland Revenue. Mr Harris would also have known that without the funding by his family trust and other interests Primo would have faced critical cashflow difficulties. So much so that shortly after the payment by the family trust an additional payment had to be made by Mr Harris’s other company Com.Link Accounting Ltd.

• It is not commercially routine for the repayment of an advance by a director’s family trust to be sourced from another associated company. The payments were not made in the ordinary course of business. They enabled the trust to receive monies that it would not have received upon liquidation. Other minor accounts that were unpaid at the time remained unpaid at the date of liquidation.

[32] The application on behalf of the family trust in relation to the two payments of $30,375.00 and $15,976.00 must be dismissed.

SECTION 296(3)

[33] In the alternative Mr Malone submitted that recovery ought to be denied in whole or in part in reliance upon s296(3). Section 296(3) provides:

“Recovery by the liquidator of property or its equivalent value, whether under section 295 of this Act or any other section of this Act, or under any other enactment, or in equity or otherwise, may be denied wholly or in part if-

(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.”

Relief under the section is discretionary.

[34] The fact the payments may not have been made in the ordinary course of business for the purposes of s292 does not necessarily mean that the payments were received in other than good faith: Re Island Bail Masonry Ltd (in liq); Firth Industries Ltd v Gray (1998) 8 NZCLC 261, 751.

[35] In this case Mr Harris, as a director, was or ought to have been intimately aware of the position of the company when the payments were made. In the circumstances it cannot be said for the purposes of the rule that he could have held a reasonably held belief that the repayments were valid and would not be set aside. As a trustee he is fixed with that knowledge.

[36] The family trust is not entitled to relief under s296(3).

THE AUGUST 1998 PAYMENT

[37] In the case of the August payment there is no issue that the payment was made by the company, that it was made within the specified period and that Com.Link Accounting Ltd was a creditor. The issues for the Court are:

• Whether the company was unable to pay its due debts when the payment was made;

• Whether the payment preferred Com.Link Accounting Ltd; and

• Whether the payment was otherwise than in the ordinary course of business.

[38] For the reasons given above Primo was unable to pay its debts as at May 1998. If anything the position had worsened by August 1998. On 8 June 1998 Mr Harris received a fax from the office staff detailing 13 urgent accounts classified as either “very urgent” or “next urgent” totalling in excess of $15,000. By 11 August 1998 the accounting staff member wrote to Mr Harris in the following terms:

“Can you please authorise me to send apology letters to outstanding creditors re: late & overdue accounts. I will blame staff changes for the disruption in payments. This will hopefully elliviate (sic) further payment demands until there is finances to pay account. Please advise.”

Clearly Primo was unable to pay its debts in August 1998.

[39] Mr Malone conceded that in the circumstances of this payment Com.Link Accounting Ltd did not suggest payment was made in the ordinary course of business or that the payment did not enable Com.Link Accounting Ltd to be preferred.

[40] Mr Malone also accepted that Com.Link Accounting Ltd had a difficulty with a claim for relief under s296 on the basis that the company could not claim to have altered its position in reliance on the payment as it did not make any further payments following receipt of the repayment of $10,000. That was a realistic concession in light of the Court of Appeal decision in Westpac Banking Corp v Nangeela Properties Ltd [1986] 2 NZLR 1.

[41] The Applicants must establish that they altered their position on the reasonably held belief the payments were validly made and would not be set aside. Section 296(3)(a) literally requires the alteration of position to be on the basis that the payment was validly made, not will be validly made. In other words, read temporally, the section requires the alteration of position to follow the receipt of the payment.

[42] In Westpac Banking Corp v Nangeela Properties Ltd the Court of Appeal had to consider the application of s311A(7) of the Companies Act 1955, a section that is not materially different to s296(3)(a). In that case the bank received payment of the company’s overdrawn account. However, it did not do anything more. Richardson J concluded:

“First, it is implicit in the scheme and language of the subsection that the receipt of a payment cannot in itself constitute an alteration of position. It is what is done subsequently that has to be considered.  . . . The next is that he “has altered” his position and on an ordinary reading that contemplates that the alteration has occurred subsequent to the receipt. That is reinforced by the associated requirement that at the time he altered his position he believed that the payment was validly made and would not be set aside .  . . . Second, ‘altered’ is used as a transitive verb.” P5 (emphasis added)

[43] The application by Com.Link Accounting Ltd in relation to the $10,000 must be dismissed.

THE AUGUST 1999 PAYMENT

[44] The situation in relation to the payment of $17,000 is different. The circumstances surrounding the transaction are quite extraordinary but on the balance of probabilities the Applicant satisfies the Court that Mr Harris was effectively using the company’s bank account and the company’s letterhead (with minor alterations) to facilitate and complete a personal transaction, and the funds were never Primo’s monies.

[45] The payment was within the restricted period. The only issue is whether the transaction that led to the payment was one that Mr Harris or a company to be formed by him were to conclude rather than the company.

[46] The payment was made to a bank account operated by Mr and Mrs Harris. At the time Mr and Mrs Harris were not personal creditors of the company. Mr Harris’s explanation for the transaction is as follows. In late April/May 1999 a client of his, Mr Broadbent, contacted him and advised him that an English company, Iceni Marketing Services (Iceni), needed mussel powder. They had previously ordered product from Mr Balaa but he had failed to supply it. Mr Harris rang Mr Chandler of Iceni and made an agreement to supply the order and future orders.

[47] Mr Harris (who seems to regularly confuse personal and company dealings) then placed an order with a New Zealand supplier of mussel powder, Nutri-Zeal Ltd, through his company, Accounting and Taxation Centre Ltd. There is evidence of a response from Nutri-Zeal Ltd to Accounting and Taxation Centre Ltd in mid May 1999. Mr Harris confirmed the order and supplied a pro forma invoice to Iceni. Mr Harris says that for convenience he used the letterhead of Primo Seafoods Ltd. Primo’s logo was crossed out and replaced in handwriting by “NZ Primo Supplements Ltd”. Mr Harris says that he did not have time to “set things up properly” but had decided that as the relationship with Iceni was to be ongoing he would establish a company called NZ Primo Supplements Ltd to undertake that and later transactions. In the meantime he used Primo’s stationery.

[48] Mr Harris then sought a client code from New Zealand Customs. He supplied a company registration number, being the receipt from the Companies Office for the name application, and his own GST number. The Customs documentation went through in the name of NZ Supplements Ltd even though that company did not at that time formally exist.

[49] Iceni paid the invoiced amount to Primo’s bank account. Mr Harris’s explanation for that is that at the time he did not have a bank account for the company he intended to incorporate, but still had access to Primo’s account.

[50] While Mr Harris’s actions show a total failure to understand a director’s responsibilities in terns of keeping his own personal affairs separate from the affairs of companies in which he was a director, having considered the course this transaction took and having observed Mr Harris give evidence, I am satisfied that he structured the sale of product to Iceni in this way and that he did intend to incorporate a company to carry on future business with Iceni. He simply used the bank account of the company as it was convenient and available to him. He genuinely saw nothing untoward in acting that way.

[51] I also note that Mr Chandler, the manager of Iceni in the United Kingdom, has sworn an affidavit that supports Mr Harris’s position. He confirms that he had earlier dealt with Mr Balaa in 1998 and had been let down. Mr Chandler confirms that given that experience he would not deal with Mr Balaa nor any of his companies again. Mr Chandler’s evidence is clear. He intended to deal with Mr Harris direct regarding this transaction.

[52] In short, the money received from Iceni, although channelled through Primo’s bank account and paid out to Mr Harris, was never Primo’s money. It was always due to Mr Harris and his wife or the company that Mr Harris was to incorporate. Mr Harris might well be properly criticised for his actions. Mr Malone put it rather blandly that “the documentation and procedures were lax” and that Mr Harris “accepts this and in fact acknowledges that if this matter has taught him anything, it is the need to ensure his own affairs are recorded and dealt with in a far more formal fashion”. The position could be stated rather more firmly than that. Mr Harris is involved in the business of giving financial advice. He has been involved in a number of companies in the role of director and secretary. However he seems to have no comprehension or appreciation of the responsibilities an officer of a company owes to the company. It may well be that Mr Harris has acted in breach of the Companies Act 1993.

[53] However, in spite of all that the evidence satisfies me that the payment of $17,000 is not a payment to which s292 applies. The application in relation to that payment is successful. There will be an order that the transaction dated 31 May 1999, namely the payment of $17,000 made from the company’s cheque account to Mr Harris, is not to be set aside.

INTEREST/COSTS

[54] The Court of Appeal have made it clear in the case of Westpac Banking Corp v Nangeela Properties Ltd (supra) that the monies are to be repaid together with interest from the date of liquidation. There will be orders directing the recipients of those payments, namely the trustees of the Harris family trust and Com.Link Accounting Ltd, to repay the sums of $30,375.00, $15,976.00 and $10,00.00 respectively together with interest on those sums from the date of liquidation.

Costs

[55] The liquidators have successfully opposed two of the applications. Although Mr Harris has succeeded on the other application, the liquidators were quite entitled to issue the notice given the confused state of affairs. In the circumstances there will be an order for costs in the liquidators’ favour on a 2A basis in respect of the two applications on which they were successful together with disbursements. Costs to lie where they fall on the $17,000 transaction.