Scutter v Architectural Window Solutions Limited (in liquidation)

[2022] NZHC 2046

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

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

CIV 2022-485-374

[2022] NZHC 2046

UNDER

Subpart 2A of the Construction Contracts Act 2002

IN THE MATTER OF

the liquidation of Architectural Window Solutions Limited

BETWEEN

JOHN MARSHALL SCUTTER as

liquidator of ARCHITECTURAL WINDOW SOLUTIONS LIMITED (IN
LIQUIDATION)
Applicant

AND

ARCHITECTURAL WINDOW SOLUTIONS LIMITED (IN

LIQUIDATION)

Respondent

Hearing:

15 August 2022

Counsel:

K Dixit for Applicant

No appearance for Respondent

Judgment:

17 August 2022

JUDGMENT OF MALLON J

Introduction

[1]    The applicant, John Scutter, as liquidator of Architectural Window Solutions Limited (in Liquidation) (AWS) seeks orders appointing himself as receiver and manager of a retention fund AWS holds for its retention creditors. He also seeks orders allowing him to deduct from the retention fund his reasonable costs and expenses relating to the management and administration of the retention fund, including the costs reasonably incurred in the present application.

SCUTTER v ARCHITECTURAL WINDOW SOLUTIONS LIMITED (IN LIQUIDATION) [2022] NZHC 2046
[17 August 2022]

Background

[2]    AWS was a specialist aluminium window solutions company. It designed and manufactured aluminium window joinery for large commercial buildings. It commenced operations in 2002 and operated throughout New Zealand.

[3]    AWS was placed into liquidations by shareholders resolution on 24 March 2022. Mr Scutter was appointed the sole liquidator. His appointment was confirmed at a creditors’ meeting on 14 April 2022 called for that purpose.

[4]    AWS subcontracted some of the work, particularly for installation. It deducted retention monies from the subcontractors in accordance with its commercial construction contracts and the Construction Contracts Act 2002.

[5]    Mr Scutter has set aside $200,000 in his trust account to meet the claims of the subcontractors. There are eight subcontractors (retention creditors) who have made a claim from the retention fund.

[6]    On 8 April 2022 Mr Scutter wrote to the retention creditors explaining his proposal to be appointed as receiver and manager, how he proposed to carry out his role and the fees he would charge against the retention fund. He received unanimous support from the retention creditors for his appointment.

The application

[7]    On 30 June 2022 Mr Scutter filed his originating application. The application seeks the following substantive orders:

1.2Mr Scutter be appointed receiver and manager of the Retention Fund.

1.3That the Retention Fund is held by [AWS] on trust in accordance with ss 18A to 18I of the Construction Contracts Act 2002 (the CCA) for the subcontractors who:

(a)had a contract that was recorded in [AWS’] retention tracing system as being entered into with [AWS] after 31 March 2017; and

(b)for whom [AWS] subsequently transferred a portion of the retention moneys related to their contracts to the Retention Fund; and

(c)for whom retention moneys did not cease to be retention moneys pursuant to s 18C(3) of the CCA.

1.4As receiver Mr Scutter may determine and pay valid claims on the Retention Fund, including by way of interim distribution, in accordance with the terms of the relevant subcontract, the CCA and the orders or directions of the Court.

1.5That the Retention Fund is to be distributed to subcontractors with valid claims:

(a)on a pro rata basis in relation to their respective retention amounts; and

(b)on a basis which does not pay any interest claims unless or until all valid (non-interest) claims on the Retention Fund are paid in full; and

(c)that any surplus funds are to be made available to the creditors of [AWS] and distributed in accordance with the 7^th schedule of the Companies Act 1993.

1.6Allowing Mr Scutter to deduct from the Retention Fund his reasonable costs and expenses relating to the management and administration of the Retention Fund, including the costs reasonably incurred in this application without further approval of the Court.

1.7Reserving leave for the appointed receiver and the retention creditors to apply to Court for further directions.

[8]    In accordance with the directions of service given by the Court on 20 July 2022, the application and supporting affidavit were served by email on the retention creditors. An affidavit of service was filed. The retention creditors had 10 working days after the date of service to file any notice of opposition or response to the application. As anticipated by Mr Scutter (in view of their earlier unanimous support of his appointment), none of the retention creditors has taken any steps in response to the application.

Assessment

[9]    Appointing a liquidator as the receiver and manager of a retention fund is an exercise of the Court’s inherent power.1 It is appropriate to appoint Mr Scutter in this role in view of his familiarity with the company and the support of the retention creditors. This has been the approach in other cases.2 The orders sought are appropriate. In relation to [1.6] above, Mr Scutter will set out in a brief memorandum to be filed by 5 pm on Wednesday 17 August 2002, these costs and expenses. Subject to the Court’s review of this memorandum, the application is accordingly granted.

Mallon J

Postscript

[10]Since finalising this judgment I have received the memorandum referred to in

[9] above. The costs incurred to date are $7,000 exclusive of GST for Mr Scutter and his staff together with legal fees associated with this application of $9,967 exclusive of GST plus the filing fee of $469.57 exclusive of GST. I have been provided with the invoices for the legal fees and informed of Mr Scutter’s hourly rate ($275) and that of his staff ($160). The quantum is similar to the amount incurred in the case referred to at footnote 2. I approve the costs and legal fees incurred to date as reasonable. It is not necessary for Mr Scutter to return to the court for approval of his final fee. The order at 1.7 above is sufficient in the unlikely event that there is a dispute over this.

Mallon J

1      Rea v Omana Ranch Ltd [2013] 1 NZLR 587 at [7]; Oorschot v Corbel Construction Ltd (in liquidation) [2020] NZHC 723.

2      Oorschot v Corbel Construction Ltd (in liquidation), above; Bennett and Fisk v Ebert Construction Ltd (in receivership and liquidation) [2018] NZHC 2934.