Pub Charity Inc v Gibraltar Hospitality Limited (in liquidation)

[2015] NZHC 2554

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2015-409-000040 [2015] NZHC 2554

BETWEEN

PUB CHARITY INC

First Plaintiff

AND

SWEET LIMITED Second Plaintiff

AND

GIBRALTAR HOSPITALITY LIMITED (in liquidation)

Defendant

Appearances:

J R Parker and J A Herd for Plaintiffs

A J Nash for AIG New Zealand Ltd
No appearance for Defendant

Judgment:

19 October 2015

(Determined on the papers)

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

granting leave to continue proceedings

[1]      The plaintiffs pursue against the defendant claims in negligence.

[2]      This proceeding was issued on 3 February 2015.  The defendant was put into liquidation on 12 February 2015.  The liquidator has not agreed to the continuation of the proceeding but does not oppose continuation.

[3]      The plaintiffs apply for an order under s 248(1)(c)(i) Companies Act 1993 granting leave to the plaintiffs to continue the proceeding against the defendant.

[4]      The plaintiffs applied in the alternative for an order joining AIG Insurance New Zealand Ltd as a defendant in the proceeding pursuant to s 9(4) Law Reform Act 1936.  Given the order which I make below, it is unnecessary for me to consider

further the alternative application.

PUB CHARITY INC v SWEET LIMITED [2015] NZHC 2554 [19 October 2015]

[5]      AIG has, through counsel, undertaken to abide the decision of the Court in relation to the s 248 application.

The s 248 jurisdiction

[6]      I adopt as principles applicable to an application under s 248(1)(c) of the Act those identified by Master Faire in Fisher v Isbey.1

[7]      Those principles are:

(a)      The Court has a discretion whether to grant leave.   It is a cardinal principle that there must be equality among various creditors and the bringing of proceedings should not produce a comparative advantage to any particular creditor.2

(b)The assets of a company should not be dissipated in wasteful litigation particularly if there is a more convenient method for determining the claim.  The onus is on the party seeking leave to satisfy the Court that leave should be granted.3

(c)      The Court must determine whether it is appropriate for the creditor’s claim to be approved in liquidation, or whether leave should be given to allow the claim to be established by way of civil proceedings.4

(d)The appropriate test is that the Court be satisfied that the proposed claim is not clearly unsustainable.  The Court should not examine the merits of the case.5

I adopt also the additional considerations identified by Frater J in Birchall v Project

Works Construction Ltd (in liq):6

1      Fisher v Isbey (1999) 13 PRNZ 182 (HC) at 185 – 187.

2      Steel & Tube Co of NZ Ltd v Barker & Pollock Ltd [1993] 2 NZLR 30 (SC) at 32.

3      McPhail v Durbridge Developments Ltd (in liq) (1998) 8 NZCLC 261,610 (HC) at 261,262.

4      Pacific Produce Co Ltd v Franklin Coop Growers Ltd (in liq) [1969] NZLR 65 (CA).

5      Saimei v McKay (1998) 6 NZBLC 102,611 (HC) at 5.

6      Birchall v Project Works Construction Ltd (in liq) (2004) 9 NZCLC 263,547 (HC) at [24].

(e)       Leave  will  usually  be  declined  if  the  proceedings  sought  to  be commenced or continued, even if successful, are likely to be fruitless.7

(f)       Delay by the applicant may be taken into account.8

Discussion

[8]      It is common ground that the defendant company was insured.   If leave is granted and the plaintiffs are successful in their claims, there will be insurance cover to meet the amounts awarded (subject to any relevant limitations).  Counsel for AIG have helpfully filed a memorandum through which  AIG recognises the existence of an AIG policy which responds to the matters alleged in the statement of claim and that, through s 9(1) Law Reform Act 1936, there is a charge automatically attaching to the “insurance money that is or may become payable” under the liability policy.

[9]      I accept in these circumstances, as submitted by Ms Nash for AIG, that there was nothing to be gained by joining AIG to the proceeding.

[10]   On the other hand, the circumstances of insurance make it particularly appropriate  in  this  case  that  the  plaintiffs  have  leave  so  that  they  have  the opportunity to obtain judgment with the benefit of the underlying insurance policy.

Order

[11]     I order:

(a)       The  plaintiffs  have  leave  to  continue  this  proceeding  against  the defendant.

(b)      The time for the filing of the defendant’s defence is extended to 20

November 2015.

7      Johnson v CBD Real Estate Ltd (in liq) (1999) 14 PRNZ 320 (HC) at 322.

8      McPhail v Durbridge Developments Ltd (in liq), above n 3.

(c)      The defendant at the same time as filing any defence is to comply with its duty of initial disclosure.

(d)      The plaintiffs’ alternative application (against AIG New Zealand Ltd)

is dismissed with no order as to costs.

(e)      The costs of the interlocutory application as against the defendant are fixed on a 2B basis and are, together with disbursements to be fixed by the Registrar, costs in the cause.

Associate Judge Osborne

Solicitors:

Morrison Kent, Wellington

Parker Cowan, Queenstown