Rai v Chapman HC Auckland CIV 2010-404-2300

[2010] NZHC 2299

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-002300

UNDER  the Companies Act 1993

AND

UNDER  Part 19 of the High Court Rules

IN THE MATTER OF     East Tamaki Curry House Ltd (In

Liquidation)

BETWEEN  RAMAKRISHNA KULOOR RAI First Applicant

ANDGILBERT STANLEY REA AND PAUL GRAHAM SARGISON

Second Applicants

ANDGILBERT DALE CHAPMAN Respondent

Hearing:         17 December 2010

Appearances: S McAnally for Second Applicants

R Griffin for Respondent

Judgment:      17 December 2010

ORAL JUDGMENT OF ASSOCIATE JUDGE BELL

Solicitors/Counsel:

Keegan Alexander, PO Box 999, Auckland

Whitlock & Co ( M Whitlock), PO Box  100449, North Shore City

R Griffin, PO Box  5444, Wellesley Street, Auckland

R K RAI AND ANOR V G D CHAPMAN HC AK CIV-2010-404-002300  17 December 2010

[1]      On  8  September  2010,  I  made  orders  requiring  Gilbert  Dale  Chapman, former liquidator of East Tamaki Curry House Ltd (In Liquidation) to hand over to Mr Rea and Mr Sargison, the new liquidators of the company, all records relating to the liquidation of that company within five working days of the order being served on the respondent.  The Court file has an affidavit as to the service of the order on Mr Chapman on 16 September 2010.

[2]      Mr Chapman has sworn an affidavit explaining that on 21 September 2010, he took documents to the offices of the new liquidators.  In his affidavit he has listed those documents.  I will recite them:

[1]       All   bank    statements    of   East    Tamaki    Curry    House    Ltd   (In

Liquidation);

[2]       Chequebooks and deposit books;

[3]       Filed proof of debts and supporting documents;

[4]       All financial records which were limited at Atac Consultancy Ltd refused to hand them over;

[5]       Print-out of all accounts paid by the liquidator;

[6]       Management report reconciling all proofs of debt to pre and post- liquidation;

[7]       Copies of all emails between the liquidator and Ram Rai and other creditors;

[8]       Valuation of company vehicles;

[9]       Sale  and  purchase  agreements  for  the  company  and  settlement statement;

[10]     Copies of liquidator’s reports that were also filed on line.

[3]      Later, an application was made which was called before me on 10 October

2010.    In  that  application,  the  present  liquidators  sought  further  orders  against

Mr Chapman and also sought an order that Mr Chapman be fined for contempt for non-compliance with that earlier order.   In support of that application, one of the liquidators, Mr Sargison, swore an affidavit, in which he said that he had received the company records but he then said there was also missing documentation.  He was concerned that there were not records as to funds held by Mr Chapman, as liquidator.

[4]      When the matter was called before me, Mr Chapman was not present in Court but his lawyer, Mr Swan, was.   In the absence of any evidence from Mr Chapman at that time, I made a finding based on what Mr Sargison set out in his affidavit that Mr Chapman had breached the order I had made in September.  I stood over the matter of penalty.   I later made orders under s 266 for Mr Chapman to attend Court to be examined, and that occurred on 1 December 2010. Mr Chapman duly  complied  with  that.     In  the  intervening  period,  he  handed  over  further documents to the liquidators.  The liquidators’ position today is that all they have got is as good as they are likely to get from Mr Chapman.

[5]      Ultimately, the order I made in September 2010 has been complied with and the issue before me today is that, although there was some initial partial compliance, it was not fulsome compliance.   The liquidators were put to trouble by having to make further applications to obtain information from Mr Chapman.  I do regard the documentation that was withheld as relevant because it related to the funds actually held by Mr Chapman and how he had disposed of the funds that he was holding. The omission of that from his initial delivery of documents to the liquidators is significant.   It is unfortunate that the liquidators have had to go to trouble with further applications and then carry out an examination of Mr Chapman before they received the full information they required.

[6]      This slow compliance, having to be chivvied along by other parties, reflects badly on Mr Chapman.  The orders made in September were clear enough.  He ought to have been in no doubt at all as to what was required.

[7]      I confirm my earlier finding that he was in contempt of Court.  In the light of the further information that has come to me, given by Mr Chapman’s own affidavit, and also from the subsequent affidavit sworn by Mr Sargison of 13 December 2010, I am satisfied that the documents handed over in September by Mr Chapman did not contain all the records.  There was, by 10 November 2010, a short delivery of the documentation that was held by Mr Chapman and relevant to the liquidation.

[8]      Mr Chapman has since redeemed himself to the extent of now handing over documents, but it has been done in response to enforcement action taken by the liquidators.     In  my  view,  Mr  Chapman’s  tardiness  does  deserve  punishment. Mr McAnally cited to me cases of Alice, who was fined $5000 for breaching a Court order as to the disclosure of information to his clients, which he was required not to do, where a fine of $5000 was imposed, and the Siemer case where there was a more flagrant of a Court order and a fine of $15,000 was imposed.

[9]      Taking those cases as guidance, I regard Mr Chapman’s conduct as far less culpable than those cases.  In this case, there was an attempt to comply.  Regrettably, he held back key documents of importance to the liquidators and the creditors.  To that extent, he is at fault and it is a fault that is serious enough to require some punishment, more than simply admonishment by the Court.  In my view, it would be met by a fine of $2000.

[10]     There is also the question of costs.  It is normal in cases of contempt that the person in contempt pay costs on an indemnity basis.  That is the standard practice. There is nothing here that suggests that an exception should be made for Mr Chapman. Accordingly, on the liquidators’ application for a fine, he is also to pay the liquidators’ fees on a solicitor/client basis.

[11]     I direct the liquidators’ lawyers to write to Mr Chapman’s lawyers setting out what the fees are.   If there any difficulties over the amount of costs, a memorandum can be filed.

R M Bell

Associate Judge