Regal Castings Ltd v Lightbody - [2007] NZCA 396

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IN THE COURT OF APPEAL OF NEW ZEALAND
CA234/05
[2007] NZCA 396
BETWEENREGAL CASTINGS LIMITED

Appellant

ANDG M AND G N LIGHTBODY

First Respondents
ANDA C HORROCKS, G M LIGHTBODY AND G N LIGHTBODY

Second Respondents

Hearing:22 August 2006

Court:William Young P, Glazebrook and Arnold JJ
Counsel:J McCartney for Appellant

D K Wilson for Respondents

Judgment:7 September 2007 at 3 pm

JUDGMENT OF THE COURT

A The appeal is dismissed.
BThe appellant must pay the respondents $6,000 costs in this Court plus usual disbursements.

REASONS
PARA NO
Glazebrook and Arnold JJ  [1]
William Young P (Dissenting)  [87]
GLAZEBROOK AND ARNOLD JJ
(Given by Arnold J)
Table of Contents
Para No
Introduction  [1]
Background  [4]
High Court  [19]
Basis of appeal  [25]
Discussion  [28]
           Legal principles  [28]
           This case[60]
           A voluntary alienation by an insolvent debtor?  [63]
           Capro’s performance as at 1998      [69]
           Length of time between alienation and Capro’s liquidation  [77]
           Secrecy and reliance  [80]
           Mr Horrock’s evidence  [82]
           Conclusion[84]
Decision  [86]

Introduction
[1]       This appeal raises the question of what must be established to show an intention to defraud creditors for the purposes of s 60 of the Property Law Act 1952 (PLA). Subsection (1) of that section renders voidable at the instance of the person prejudiced “every alienation of property with intent to defraud creditors”. Subsection (3) protects purchasers in good faith without notice of the intention to defraud.
[2]       The appellant claimed that the first respondents, Glen and Gaynor Lightbody, transferred their home, which they owned jointly, to a family trust with intention to defraud it as a creditor. The trustees of the family trust are the Lightbodys and the solicitor who set up the trust, Mr Horrocks.
[3]       The appellant sought an order under s 60 that the transfer be set aside. Ellen France J refused to grant the order, holding that the appellant had not established that the Lightbodys had the necessary intention to defraud: HC AK CIV 2005-404-352 29 September 2005. The appellant now challenges that finding.
Background
[4]       Glen Lightbody was a manufacturing jeweller. He operated through a company known as Capro III Limited (Capro), of which he and his wife Gaynor were directors and shareholders. The appellant was a supplier and refiner of precious metals and supplier of precious stones. Capro had entered into a supply agreement with it. The terms of that agreement were contained in a form headed “Application to open credit account” dated 23 August 1990. The application attached a set of conditions, which Glen Lightbody had signed.
[5]       Among other things, the conditions:
(a)Required that goods be paid for “by the 20^th day of the month next following date of delivery”;
(b)Provided that the purchaser would pay interest at a rate of 25 per cent per annum for late payment;
(c)Provided that Glen Lightbody accepted “full personal liability” for meeting the terms of the contract should Capro fail to make any payment.

[6] In…

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.

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Details

Case: [2007] NZCA 396
Decision Date: 7 September 2007

CaseChat Overview and Summary

This appeal raises the question of what must be established to show an intention to defraud creditors for the purposes of s 60 of the Property Law Act 1952 (PLA). The appellant claimed that the first respondents, Glen and Gaynor Lightbody, transferred their jointly owned home to a family trust with intention to defraud it as a creditor. The trustees of the family trust are the Lightbodys and the solicitor who set up the trust, Mr Horrocks. The appellant sought an order under s 60 that the transfer be set aside. Ellen France J refused to grant the order, holding that the appellant had not established that the Lightbodys had the necessary intention to defraud: HC AK CIV 2005-404-352 29 September 2005. The appellant now challenges that finding. The appeal was dismissed. The Court found that the Judge was entitled to conclude that there was no intention to defraud. The Court accepted that there are factors pointing to such an intention and that the Judge erred in treating the transfer as being for full value rather than at an undervalue to the extent of the initial debt forgiveness. But equally there are factors pointing to an absence of an intention to defraud. Overall, the Court did not consider that the circumstances were sufficiently compelling to enable it to say that the Judge's conclusion was wrong and must be overturned. The appellant must pay the respondents costs in the sum of $6,000 plus usual disbursements. William Young P dissented. He would have allowed the appeal.

Orders