Reynolds v James - [2012] NZHC 2132

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-2869 [2012] NZHC 2132

UNDER the Companies Act 1993

IN THE MATTER OF the liquidation of JAMES DEVELOPMENTS LIMITED (In Liquidation)

BETWEEN GRANT BRUCE REYNOLDS AS LIQUIDATOR OF JAMES DEVELOPMENTS LIMITED (IN LIQUIDATION)
Applicant

AND CHRIS JAMES Respondent

Hearing: 13 August 2012

Appearances: M J McCartney SC for Applicant
M H Morrison and K D Puddle for Respondent

Judgment: 22 August 2012

JUGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on ...22 August 2012 at ...4:00pm
pursuant to Rule 11.5 of the High Court Rules.

...................................
Registrar/Deputy Registrar

Solicitors:
Whitlock & Co (M D Whitlock) P O Box 100-449 Auckland for Applicant
Email: mwhitlock@internet.co.nz

Anderson Lloyd (F B Barton/A M Cunninghame) Dunedin, for Respondent
Email: frazer.barton@andersonlloyd.co.nz / alexandra.cunninghame@andersonlloyd.co.nz

Copy for:
M J McCartney SC, P O Box 47-114 Ponsonby, Auckland 1144, for Applicant
Email: jan.mccartney@gmail.com

REYNOLDS V JAMES HC AK CIV-2011-404-2869 [22 August 2012]

[1] This is an insolvent transaction case. The liquidator of James Developments Ltd applies for orders setting aside payments totalling $60,904 that the company made in 2009, plus a general security agreement dated 22 May 2009 and seeks judgment for $60,904. He says that the respondent, Mr James, the respondent, has received $60,904 more than he would in the actual liquidation and that he should not be able to rely on a charge taken shortly before the company went into liquidation. In opposition Mr James relies on later payments he made which he says were for the company.

[2] It is undisputed that James Developments Ltd was not able to pay its due debts when it made the payments and the general security agreement. That was within two months of liquidation, well inside the specified periods under ss 292(5) and 293(6) of the Companies Act 1993. Mr James does not raise any defences under s 296.

Issues

[3] These questions arise:

(a) Is the general security agreement voidable under s 293 of the Companies Act

1993 as giving a charge for past debts?

(b) Did Mr James receive payments from the company?

(c) Who funded the liquidators’ fees and the post-liquidation litigation expenses? (d) Did Mr James remedy the preference?
(e) Is the general security agreement voidable under s 292 of the Companies Act

1993 as enabling Mr James to receive more than in the liquidation?

Facts

[4] James Developments Ltd was established as a property developer. Mr James is the director. A trustee holds the only shares in the company for interests associated with him. Mr James is a land agent of Queenstown. There he is the director and sole shareholder of a real estate agency, Otago Real Estate Ltd.

[5] In October 2007 James Developments Ltd entered into an agreement to buy a property near Cromwell from Mana Property Trustee Ltd. Settlement was to take place after new titles had issued. The purchase price was $4.5 million plus GST. James Developments Ltd paid a deposit…

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.

Continue reading Reynolds v James

Details

AGLC: Reynolds v James [2012] NZHC 2132
Case: [2012] NZHC 2132
Decision Date: 22 August 2012

CaseChat Overview and Summary

This case concerns an insolvent transaction brought by Grant Bruce Reynolds, the liquidator of James Developments Limited, against Chris James. The liquidator seeks to set aside payments totalling $60,904 made by the company in 2009, as well as a general security agreement dated 22 May 2009. The liquidator argues that Mr. James has received more than he would in the actual liquidation and that he should not be able to rely on a charge taken shortly before the company went into liquidation. In opposition, Mr. James relies on later payments he made which he says were for the company.

The issues to be decided are whether the general security agreement is voidable under s 293 of the Companies Act 1993 as giving a charge for past debts, if Mr. James received payments from the company, who funded the liquidators’ fees and the post-liquidation litigation expenses, if Mr. James remedied the preference, and if the general security agreement is voidable under s 292 of the Companies Act 1993 as enabling Mr. James to receive more than in the liquidation.

The court found that the general security agreement is voidable under s 293 insofar as it gives a charge for past debts, and that Mr. James received payments from the company. The court also found that Mr. James funded the liquidators’ fees and the post-liquidation litigation expenses. The court held that Mr. James remedied the preference by paying higher-ranking claims after liquidation. Finally, the court found that the general security agreement is voidable under s 292 insofar as it gives a charge for any claims Mr. James might make against the company for expenses he has met on behalf of the company or for other indebtedness accruing after 22 May 2009.

The court made orders setting aside the general security agreement as voidable under s 293 insofar as it gives a charge for past debts, and under s 292 insofar as it gives a charge for any claims Mr. James might make against the company for expenses he has met on behalf of the company or for other indebtedness accruing after 22 May 2009. The court also set aside the company’s payments of $60,904 to Mr. James in June 2009 as voidable under s 292, but dismissed the liquidator’s application for orders for payment of that amount plus interest. The court made an order under s 295(g) of the Companies Act that if Mr. James makes any claim in the liquidation for reimbursement for remuneration of the original liquidators and the costs of litigation that he has met, the first $60,904 of that claim is not preferential under s 312 and the 7th Schedule of the Companies Act, but is to rank as an unsecured claim under s 313(1).

Orders