Reynolds v IMC NZ Limited - [2024] NZHC 3935

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-1807

[2024] NZHC 3935

BETWEEN
GRANT BRUCE REYNOLDS as liquidator of IMC LIMITED (in liquidation)

Applicant

AND

IMC NZ LIMITED

Respondent

Hearing: On the papers

Appearances:

B Pamatatau for the Applicant Liquidator No appearance for the Respondent

Judgment:

19 December 2024

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 19 December 2024 at 3.30 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:
Craig Griffin & Lord, Auckland

REYNOLDS v IMC NZ LTD [2024] NZHC 3935 [19 December 2024]

Introduction

[1] Grant Bruce Reynolds, the liquidator of IMC Ltd (Company), has filed an application for an order that a transaction be set aside as an insolvent transaction pursuant to s 292 of the Companies Act 1993 and for orders either for payment of
$119,718.45 plus interest by the respondent, IMC NZ Ltd (Respondent) or that the Respondent transfer two vehicles to the Applicant within 10 working days of the Court’s order.

[2] The Respondent has taken no steps and did not appear at the first call of the application on 30 August 2024. An affidavit of service has been filed confirming that the Respondent was served on 8 August 2024 at their registered office.

[3] I have now considered the documents filed and make orders setting aside part of the transaction and for transfer of one of the vehicles for the reasons set out below. I begin by setting out the relevant legal provisions and the principles that apply.

Relevant legal principles

[4] Section 292(1) and (1A) set out the circumstances in which a transaction by a company is voidable by a liquidator. These sub-sections provide:

(1)A transaction by a company is voidable by the liquidator if it—

(a)is an insolvent transaction; and

(b)is entered into within the restricted period.

(1A) A transaction by a company is voidable by the liquidator if it—

(a)is an insolvent transaction; and
(b)is entered into with a related party of the company within the related party period.

[5] Section 290(2) defines an “insolvent transaction” as a transaction by a company that:

(a)is entered into at a time when the company is unable to pay its due debts; and

(b)enables another person to receive more towards satisfaction of a debt owed by the company than the person would receive, or would be likely to receive, in the company’s liquidation.

[6] Section 292(3) defines “transaction” for the purposes of s 292 and includes “conveying or transferring the company’s property”. This term has been given the widest possible meaning by the courts which have been said to have embraced every means by which property may be passed from one person to another.1

[7] Where the relevant company was put into liquidation by the court, the “restricted period” referred to in s 292(1) is the period of six months before the making of the application to the Court.2 A transaction entered into…

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: [2024] NZHC 3935
Decision Date: 19 December 2024

CaseChat Overview and Summary

The case of Reynolds v IMC NZ Limited involves Grant Bruce Reynolds, the liquidator of IMC Limited, who applied to the High Court for an order to set aside a transaction as an insolvent transaction under section 292 of the Companies Act 1993. The application was against IMC NZ Limited, a related company, which did not take any steps or appear at the hearing. The application sought to set aside a transaction involving the transfer of two vehicles and the recovery of a sum of money. The court had to decide whether the transaction was an insolvent transaction and whether it could be set aside, and if so, what orders should be made to recover the assets or value of the transaction.

The court considered the relevant legal provisions, including the definition of an insolvent transaction and the circumstances under which a transaction could be voidable by a liquidator. It examined the evidence provided by the liquidator, which included an affidavit and an invoice recording the sale of motor vehicles owned by IMC Limited to IMC NZ Limited for $119,718.45. The court found that the transaction was within the restricted period and that the presumption applied that the company was unable to pay its debts at the time of the transaction. The court also found that there was sufficient evidence to set aside the transaction in respect of the Toyota Hilux ute but not the LDV G10 van due to a credit note issued in respect of the van.

The court concluded that the transaction involving the Toyota Hilux ute was an insolvent transaction and should be set aside. It directed that the vehicle be transferred to the liquidator within a specified timeframe. The court declined to make orders in respect of the LDV G10 van due to the credit note and reserved leave for the liquidator to reapply if further evidence was provided. The court's reasoning was based on ensuring that any preferential benefit received by the respondent was eliminated without resorting to a punitive approach, in line with the principles established in previous cases.

In summary, the court set aside the transaction involving the Toyota Hilux ute and ordered its transfer to the liquidator. The court declined to make orders in respect of the LDV G10 van but left the door open for a future application if more evidence was provided. The orders were made to ensure fairness and to avoid a punitive outcome for the respondent.

Orders