RFD Plumbing Limited (in liq) v Dyhrberg

[2019] NZHC 151

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2018-485-724

[2019] NZHC 151

UNDER

the Companies Act 1993

IN THE MATTER

of the liquidation of RFD Plumbing (in liq)

BETWEEN

RFD PLUMBING LIMITED (in liq)

First Plaintiff

VIVIAN JUDITH FATUPAITO as liquidator of RFD Plumbing Ltd (in liq)

Second Plaintiff

AND

ROBERT FRANCIS DYHRBERG

First Defendant

NEHEMAIA POMALE

Second Defendant

Hearing:

13 February 2018

Appearances:

M Evans for plaintiffs

No appearance by or for the defendants

Judgment:

14 February 2018

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]    This is an undefended application for summary judgment by RFD Plumbing Ltd (in liq) and the company’s liquidator, Vivian Judith Fatupaito, who are, respectively, the first and second plaintiffs. They sue the first and second defendants, the shareholders of RFD, to recover the debit balances of their shareholder current accounts.

RFD PLUMBING LIMITED (in liq) v DYHRBERG [2019] NZHC 151 [14 February 2018]

[2]    On the application of the Commissioner of Inland Revenue, this Court made an order winding up RFD and appointing Ms Fatupaito as liquidator on 6 March 2018.

[3]    As  at  that  date,  the  most  recent  financial  statements,  signed   by   Messrs Dyhrberg and Pomale as the company’s directors, were in respect of the financial year ending 31 March 2016. These disclosed a debt to a company by the name of Regional Plumbers Ltd (the shareholders and directors of which were also Messrs Dyhrberg and Pomale) of $30,649 and outstanding tax obligations to the Inland Revenue Department totalling $13,013. As against those liabilities the financial statements disclosed that the company had assets of just over $3,000, and that the debit balances of the shareholder current accounts totalled $72,505; $34,025 in the case of Mr Dyhrberg and $38,480 in the case of Mr Pomale.

[4]    On 26 September 2018 the plaintiffs commenced this proceeding for the recovery of the debit balances of those accounts. They seek summary judgment. Initially, the defendants filed and served a notice of opposition and Mr Dyhrberg swore an affidavit setting out the factual basis for their opposition (Mr Pomale also swore an affidavit saying that he agreed with Mr Dyhrberg).

[5]    In due course, the matter was set down for a half day defended hearing. On  11 February 2019, two days before the scheduled hearing, the defendants’ counsel, Mr Gwilliam, filed a memorandum in which he informed the Court that for professional reasons both his instructing solicitors and he were seeking leave to withdraw, and indicating that the defendants no longer proposed to defend the claim against them. In a minute dated 13 February 2019 I declined to grant the defendants’ solicitors and counsel leave to withdraw, but excused Mr Gwilliam’s attendance. In the end, when the matter was called, there was no appearance by or for either defendant.

[6]Accordingly, the matter proceeded on an undefended basis.

[7]    Because the plaintiffs’ claim is for a liquidated sum, in the normal course of events, the plaintiffs would have been entitled to ask the Registrar to enter judgment. It is only because the claim was initially defended that it was set down for hearing. In

those circumstances, Mr Evans might have sought judgment upon that basis alone. However, he took the responsible course of outlining the basis for the claim and identifying and addressing the defences raised by the defendants in their notice of opposition and affidavit evidence. I express the Court’s gratitude for the care and attention that he took in doing so, and mean no disrespect by dealing with these matters relatively briefly.

[8]    Mr Evans began by referring me to what is now the leading authority on the obligations of a plaintiff — or other party — seeking summary judgment, the Court of Appeal’s judgment in Krukziener v Hanover Finance Ltd.1 In that case the Court of Appeal described the position in the following terms:2

[26]      The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1; (1986) 1 PRNZ 183 (CA), at p 3; p 185. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331; [199] 3 WLR 373 (PC), at p 341; p 381. In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).

[27]      Under r 141A the defendant need not file a statement of defence. The onus remains on the plaintiff, and summary judgment will be denied if on the hearing of the application it appeas that there is an issue worthy of trial.

[9]    In relation to the discharge of the plaintiffs’ obligations here, Mr Evans emphasised that it is well established that, prima facie, the signed financial statements of a company in liquidation are evidence of their accuracy.3

1      Krukziener v Hanover Finance Ltd 19 PRNZ162.

2      Krukziener v Hanover Finance Ltd at p 169.

3      In SDG Group (in liq) v Watson [2018] NZHC 398 I outlined the basis for this principle and referred to the different ways in which it had been expressed by Keane J in Thom Contractors Ltd (in liq) v Thom HC Auckland CIV-2008-404-6829, 28 April 2009 and Heath J in EBR Holdings (in liq) v Van Duyn and others [2017] NZHC 1698.

[10]   Mr Evans submitted, and I accept, that  RFD’s  financial  statements  as  at  31 March 2016, signed by Messrs Dyhrberg and Pomale, are therefore strong evidence of the debts owed by them to the company.

[11]   The defendants’ essential  case  appears  to  have  been  that,  although  the  31 March 2016 financial statements may have accurately identified their indebtedness to the company as at that date, the position changed between then and the date of liquidation. Their case came down to the contention that the liquidator had not discharged her responsibility of updating those accounts to reflect the position as at the date of liquidation and that the claim must fail on that basis.

[12]   As Mr Evans submitted, an assertion at that level of generality would not have taken the defendants very far.

[13]   In his affidavit, Mr Dyhrberg contended that although RFD ceased to trade towards the end of the financial year ending 31 March 2015 he and Mr Pomale were engaged in “… various outstanding tasks related to the closing down of RFD’s business. This work related to the finalisation of all outstanding work matters and invoices, work for which [Mr Pomale] and I were entitled to be paid. The provision for a salary for [Mr Pomale] and me in the 2017 Director’s minutes, relating to the completion of these tasks and the final closing down of RFD’s business.” As Mr Evans emphasised the financial statements for the year ending 31 March 2016 indicated that as at that date there was no outstanding work in progress or creditors. It is therefore very difficult to imagine what the outstanding tasks referred to by Mr Dyhrberg in his evidence might have involved. Without further detail, I am entirely unconvinced that there were any such tasks to which the defendants gave any attention.

[14]   Mr Dyhrberg’s evidence was that, in addition, “… various accounting adjustments …” to the statements of account as between RFD and Regional Plumbers Ltd should have been made as a result of arrangements between those parties which occurred after 31 March 2016. Here is how he expanded on this point:

10.… Those adjustments would have resulted in further adjustments being made to our shareholder current accounts as RFD by that stage had no assets or income to reduce the debt it owed to Regional

Plumbers  Ltd.   Unfortunately with RFD’s liquidation no further accounts were able to be prepared to show this.

11.Therefore in light of the fact that no further financial statements were drawn up after the 2016 financial statements, the plaintiffs claim is disputed. I believe that adjustments can be made between the financial statements of Regional Plumbers Ltd and RFD to effectively show an extinguishment of the overdrawn shareholder’s current account with RFD or at least a substantive reduction, as both companies have a common shareholding.

[15]   I find that evidence difficult to follow. Essentially, Mr Dyhrberg seems to be saying that “… various accounting adjustments …” would have reduced or eliminated the debt owed by RFD to Regional Plumbers Ltd and that somehow that would have involved set-offs as between the shareholders’ current accounts and the debt to Regional Plumbers Ltd. It is not obvious to me how that might have happened.

[16]   To the extent that the defendants say that further financial statements should have been prepared to reflect these things, they had ample opportunity to prepare or arrange for the preparation of  such  statements  during  the  financial  year  ending 31 March 2017 prior to the liquidation. For example they put in place a mechanism for setting the remuneration payable to them during this last full year prior to the company’s liquidation but never passed a resolution finally fixing their remuneration. Following the liquidation they might have raised these matters with the liquidator and sought the adjustments they now say should have been made. There is no evidence that they did so.

[17]   The  plaintiffs  have  filed  affidavit  evidence  in  response  from  one   of  Ms Fatupaito’s colleagues, Mr Luke Norman. Mr Norman describes in some detail the lengths to which the liquidator went in considering the financial material available to them. The thrust of his evidence, which I accept, is that there was nothing in the financial material which the defendants provided to the liquidator that would have justified the liquidator in adjusting the financial position of the company as reflected in the financial statements for the year ending 31 March 2016.

[18]   In short then, even if it were necessary to consider the defences put up by the defendants in response to the claim against them I would regard them as lacking in creditability and reject them.

[19]   There will be judgment for the plaintiffs against the first defendant in the sum of $34,025 and against the second defendant in the sum of $38,480 together with interest calculated, in each case, pursuant to ss 10 and  12  of  the  Interest  on  Money Claims Act 2016 for the period from 10 May 2018 until the date of judgment. The plaintiffs are entitled to their costs, but those costs are to be calculated on a 2B basis on the District Court scale having regard to the quantum of their claims.

[20]Finally, the defendants’ solicitors and counsel are given leave to withdraw.

Associate Judge Johnston

Solicitors:

Buddle Findlay, Wellington for plaintiffs

Main Street Legal Ltd, Upper Hutt for defendants