Robt. Jones Holdings Limited v McCullagh

IN THE SUPREME COURT OF NEW ZEALAND

I TE KŌTI MANA NUI

SC 87/2018
[2018] NZSC 120

BETWEEN	ROBT JONES HOLDINGS LIMITED Applicant
AND	ANTHONY JOHN McCULLAGH AND STEPHEN MARK LAWRENCE Respondents

Court:	Glazebrook, O’Regan and Ellen France JJ
Counsel:	D G Chesterman for Applicant B P Keene QC and L M Van for Respondents
Judgment:	6 December 2018

JUDGMENT OF THE COURT

ALeave to appeal is granted (Robt Jones Holdings Ltd v McCullagh [2018] NZCA 358).

BThe approved question is whether the payments totalling $262,758.05 made to the applicant by MSH No 2 Pty Ltd on behalf of Northern Crest Investments Ltd were insolvent transactions as defined in s 292 of the Companies Act 1993.

____________________________________________________________________

REASONS

The approved question is worded to provide a framework for the applicant’s argument that a payment of the company will not be an insolvent transaction within s 292 of the Companies Act 1993 unless, in addition to the requirements of s 292(2), it diminishes the assets that would be available to creditors in the liquidation of the company or otherwise disadvantages the general body of creditors.
The Court of Appeal indicated that it would be content to find that the basis on which MSH No 2 Pty Ltd (MSH) made the payments to the applicant on behalf of Northern Crest Investments Ltd (Northern Crest) was that the payments were either a loan or the redirection of licence fees payable to Northern Crest.[1] If the applicant’s argument outlined at [1] above is upheld, it may become necessary to resolve the issue of whether the payments were a loan or a redirection of licence fees. If the payments were a loan, it appears that the assets available to creditors of Northern Crest were not diminished and the general body of creditors were not disadvantaged, but that would not appear to be the case if the payments were a redirection of licence fees payable to Northern Crest.
[1]Robt Jones Holdings Ltd v McCullagh [2018] NZCA 358 (Cooper, Winkelmann and Williams JJ), at [120]. In the High Court, Gordon J found the payments were a loan by MSH to Northern Crest: McCullagh v Robt Jones Holdings Ltd [2017] NZHC 2182, [2018] NZCCLR 8 at [163].
The parties should address in their submissions on the appeal whether it will be necessary to resolve the basis on which the payments by MSH to the applicant were made if the applicant’s argument outlined at [1] above succeeds and, if so, how the Court should resolve it. Submissions should address whether, if the issue requires resolution, this Court should deal with the issue itself or the case should be remitted to the Court of Appeal for that Court to deal with it.

Solicitors:
Gillespie Young Watson, Lower Hutt for Applicant
Anthony Harper, Auckland for Respondents

CaseChat Overview and Summary

Robt Jones Holdings Limited brought this application for leave to appeal against the Court of Appeal's decision, which found that certain payments made to the applicant by MSH No 2 Pty Ltd on behalf of Northern Crest Investments Ltd were insolvent transactions. The payments, amounting to $262,758.05, were made in the context of a complex arrangement between MSH, Northern Crest, and the applicant, and the central issue was whether these payments constituted insolvent transactions under section 292 of the Companies Act 1993. The Supreme Court was required to decide whether the applicant’s argument that such payments are not considered insolvent transactions unless they diminish available assets or disadvantage creditors could be upheld.

The Court of Appeal had already indicated that it would be content to find the basis of the payments as either a loan or a redirection of licence fees payable to Northern Crest. If the applicant's argument is upheld, the court will need to determine whether these payments were a loan or a redirection of fees. If they were a loan, the assets available to Northern Crest's creditors were not diminished, and the general body of creditors was not disadvantaged. However, if the payments were a redirection of licence fees, the outcome could be different. The Court of Appeal had previously found that the payments were a loan, but this interpretation was contested.

The Supreme Court granted leave to appeal and directed the parties to address specific issues in their submissions, including whether the basis of the payments needed to be resolved and how the court should approach this issue. The court emphasized that if the issue needed to be resolved, it should be determined whether this Court should address it directly or if the matter should be remitted to the Court of Appeal. This decision ensures that the legal interpretation and implications of the payments are thoroughly examined.

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established