Reynolds v Eurovision Limited - [2013] NZHC 3015

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

CIV-2013-442-000262 [2014] NZHC 3015

IN THE MATTER of the liquidation of Ebode Construction
Limited (In Liquidation)

UNDER Section 292 of the Companies Act 1993

BETWEEN GRANT BRUCE REYNOLDS as liquidator of EBODE CONSTRUCTION LIMITED (In Liquidation)
Applicant Liquidator

ANDEUROVISION LIMITED Respondent Creditor

Hearing: 8 November 2013

Appearances: B Pamatatau for Applicant
D J Ballantyne for Respondent

Judgment: 14 November 2013

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1] Mr Reynolds is the liquidator of Ebode Construction Limited (Ebode). He has applied to the court under s 292 of the Companies Act 1993 for orders that three payments made by Ebode to Eurovision Limited (Eurovision) be set aside as insolvent transactions. He has also applied for an order that Eurovision pay to him a sum comprising the total of the three payments less a credit, which I shall describe later.

[2] The relevant facts may be stated briefly. At all relevant times Ebode was building a house in Auckland. On 14 March 2001 it contracted with Eurovision for the supply of timber and aluminium joinery for the house. The total contract price
including GST was $124,522. A deposit of 35 per cent of the contract price was

G REYNOLDS as liquidator of EBODE CONSTRUCTION LTD (In Liq) v EUROVISION LTD [2013] NZHC 3015 [14 November 2013]

required upon acceptance. $5,806.35 was paid the next day, and the balance of the deposit was paid on 15 April 2011.

[3] The contract provided that the balance of the contract sum was payable

14 days after delivery of the joinery to the site. The joinery was delivered on

19 October 2011 so the balance was due on 3 November 2011. On 10 November

2011 Eurovision sent an invoice for the balance of $74,250. This sum was paid thus:

On 18 November $15,000

On 29 November $20,750

On 22 December $38,500

[4] In December the director of Eurovision, Mr Roberts, and a staff member travelled to Auckland and on 20 December completed on-site work required on some of the joinery. Evidently some of the larger items had been delivered unassembled and it was their task to assemble them, and complete glazing. They also assisted the builder with fitting the joinery.

[5] Ebode went into liquidation on 18 May 2012. The liquidator found that the company had virtually no assets, apart from a debt owing by an associated entity which has proved to be irrecoverable as that entity is insolvent. It had creditors approaching $400,000.

[6] Section 292 of the Companies Act 1993 provides:

• a transaction by a company is voidable by the liquidator if it is an insolvent transaction, and is entered within a specified period of the commencement of the liquidation

• an insolvent transaction is a transaction by a company that is entered into at a time when the company is unable to pay its due debts, and which enables another person to receive more towards satisfaction of a debt owed by the company than…

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: [2013] NZHC 3015
Decision Date: 14 November 2013

CaseChat Overview and Summary

In Reynolds v Eurovision Limited, the court was tasked with determining whether three payments made by Ebode Construction Limited to Eurovision Limited were voidable as insolvent transactions under the Companies Act 1993. The liquidator of Ebode Construction Limited argued that the payments were made within six months of the company's liquidation and were therefore presumed to be insolvent transactions. Eurovision Limited, on the other hand, contended that the payments were not insolvent transactions as they did not enable it to receive more than it would have in the liquidation. The court had to decide whether the payments enabled Eurovision Limited to receive more than it would have received in the liquidation, whether Eurovision Limited acted in good faith in accepting the payments, and whether Eurovision Limited altered its position in the reasonably held belief that the payments were valid and would not be set aside.

The court found that the payments were indeed insolvent transactions as they enabled Eurovision Limited to receive more than it would have in the liquidation. However, the court also found that Eurovision Limited acted in good faith in accepting the payments, as it did not have reasonable grounds for suspecting that Ebode Construction Limited was or would become insolvent. The court further found that Eurovision Limited had altered its position in the reasonably held belief that the payments were valid and would not be set aside in relation to the payments made on 18 November and 29 November 2011, but not in relation to the payment made on 22 December 2011. Therefore, the court ordered Eurovision Limited to pay the liquidator the net sum of $26,695.25, being the sum of the two payments made on 18 November and 29 November 2011, less the credit for other work done for Ebode Construction Limited, plus interest from the date of filing the application to the date of judgment.

In conclusion, the court found that two of the three payments made by Ebode Construction Limited to Eurovision Limited were insolvent transactions that could be set aside, but only in relation to the amounts that enabled Eurovision Limited to receive more than it would have in the liquidation. The court also found that Eurovision Limited had altered its position in the reasonably held belief that the payments were valid and would not be set aside in relation to the two payments, but not in relation to the third payment. The court ordered Eurovision Limited to pay the liquidator the net sum of $26,695.25, plus interest.

Orders