Shale v Cairnfield Care Limited
[2013] NZHC 3191
•2 December 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2013-404-003946 [2013] NZHC 3191
BETWEEN BOGDANA SHALE AND SHALE INDEPENDENT TRUSTEE LIMITED Plaintiffs
ANDCAIRNFIELD CARE LIMITED Defendant
CIV 2013-404-003951
BETWEEN BOGDANA SHALE AND SHALE INDEPENDENT TRUSTEE LIMITED Plaintiffs
ANDHAMILTON CONSTRUCTION LIMITED
Defendant
Hearing: 2 December 2013
Appearances: L J Turner for plaintiffs (both matters)
J E M Lethbridge for P Beric, director and shareholder in opposition
Judgment: 2 December 2013
(ORAL) JUDGMENT OF ASSOCIATE JUDGE ABBOTT
Solicitors:
Whaley Garnett, Auckland
Grove Darlow & Partners, Auckland
Counsel:
L J Turner, Auckland
SHALE v CAIRNFIELD CARE LIMITED [2013] NZHC 3191 [2 December 2013]
[1] These related applications for liquidation were listed for defended hearing at
10am today. The applications are made on the ground that there is an irretrievable breakdown between the 50 per cent shareholders (the plaintiffs on the one hand and Peter Beric and his interests on the other) and that it is just and equitable for an order for liquidation to be made.
[2] The applications came before the Court first on 4 October 2013. At that time the defendant companies had taken no steps, but Mr Beric had filed what was described as a statement of defence in which he added himself as a defendant. A direction was made that day that that document would be received as a notice of appearance by Mr Beric in opposition to the application.
[3] In his notice of appearance, Mr Beric admitted the respective 50 per cent shareholdings, and that he and the plaintiff, Bogdana Shale (Mr Beric and Ms Shale are brother and sister) had developed irreconcilable differences. He also admitted that the companies were no longer trading, although he maintained that they were solvent. He said that there were ongoing discussions between the shareholders regarding placing the companies into liquidation, but no agreement had been reached. He added that it was expected that agreement would be reached to enable the companies to be wound up in an orderly manner in a solvent liquidation. He denied that it would be just and equitable to order liquidation, contending that he was a successful businessman and it would hurt his reputation for liquidation to occur other than through a solvent liquidation.
Procedural history
[4] The Court gave directions on 4 October 2013 for the filing of further affidavits by the plaintiffs (at that point the plaintiffs had simply filed the usual affidavit verifying the statement of claim). Directions were also given for Mr Beric to file affidavits in support of his opposition and for any affidavits in reply. The parties were directed to file and serve synopses of argument ahead of today’s hearing, with the plaintiffs’ synopsis due at the beginning of last week, and Mr Beric’s synopsis due on Thursday of last week.
[5] The commencement of the timetable set on 4 October 2013 was extended from what might otherwise have been given to allow the parties time to try to come to some agreement.
[6] The plaintiffs filed further evidence in support of the applications (an affidavit by, Bogdana Shale) on 7 November 2013. Mr Beric did not file an affidavit in support of his opposition on the date that he was directed (15 November 2013) or subsequently. The casebook for today’s hearing and the plaintiffs’ synopsis of submissions, were filed on Monday, 25 November 2013, in accordance with the Court’s timetable.
[7] On 28 November 2013 counsel for Mr Beric filed a memorandum confirming Mr Beric’s position that it had been hoped that some form of agreement could be reached between the shareholders to avoid the company being placed in liquidation, but stating that no agreement could be reached. Counsel stated that the position had also been overtaken to some extent by a notice given by the Commissioner of Inland Revenue to the defendants’ bank requiring it to deduct sums owed to the Commissioner from funds held on behalf of or receivable from the defendants. Counsel advised that as a consequence Mr Beric was no longer opposing a liquidation, but that instead he would be asking the Court to appoint liquidators that he intended to nominate.
[8] In response to that memorandum, counsel for the plaintiffs filed a memorandum last Friday (29 November 2013) noting that opposition had been withdrawn and identifying two remaining issues, namely the identity of the liquidator, and costs.
The issues
[9] The plaintiffs wish to have the Court appoint different liquidators to either of those put forward by Mr Beric. They first put forward their preferred liquidator a considerable period ago. They also seek an order for costs, with standard costs being increased to reflect the lack of merit in Mr Beric’s notice of opposition. In the
plaintiffs’ submission Mr Beric has caused them to incur costs unnecessarily from the time of filing the notice of appearance.
Order for liquidation
[10] The plaintiffs have established the prima facie criteria for the order for liquidation sought in each case. I am satisfied from the evidence before me that there is an irretrievable breakdown of relationships between the shareholders, and that the companies are no longer trading. I also accept that there is no agreement between the parties (as shareholders) to appoint a liquidator themselves. Finally, I accept, given the withdrawal of Mr Beric’s notice of opposition and the lack of any evidence to support the pleaded opposition (that Mr Beric’s reputation would suffer from a Court appointed liquidator), that the plaintiffs’ have established the grounds for the order sought, and that there is no basis on which to challenge the prima facie entitlement to an order for liquidation.
The liquidator to be appointed
[11] The parties have each nominated liquidators from well-known and respected insolvency practices. Mr Beric has proposed two possibilities for appointment.
[12] Counsel for Mr Beric submitted that the Court should appoint either of his nominees, suggesting that in some undefined way that the plaintiffs’ nominees are not properly independent. There is no evidential basis for that statement. The consent to act filed by the proposed liquidators, Justin Bosley and Andrew McKay of the firm Corporate Finance Ltd, states that they know of no bar under s 280(1) of the Companies Act 1993 which would disqualify them from acting, and that neither they, nor Corporate Finance Ltd, have prior association with either company or the shareholders.
[13] The mere fact that these persons have been nominated by the plaintiffs does not detract from that prima facie independence. If that were the case, the same could be said in respect of Mr Beric’s nominees. There needs to be some evidential basis for any allegation of lack of independence. As I have already said there was no such basis in my view.
[14] If there is any issue over the suitability of the appointed liquidator(s), I consider that the appropriate place for that to be raised and determined is at the first creditors’ meeting, at which time other creditors will have an opportunity to have a say, and in particular the Commissioner of Inland Revenue.
Costs
[15] The plaintiffs seek an order for costs generally, and for those costs to be paid by Mr Beric, and to be increased from the time that Mr Beric filed his notice of opposition. They say that they have been put to costs unnecessarily in continuing to take steps in preparation for today’s hearing. Apart from the appearance today, those steps were completed before Mr Beric’s counsel advised that he was withdrawing his notice of opposition.
[16] Counsel for Mr Beric opposes the order for costs sought against Mr Beric following his notice of opposition. He accepts that costs are payable on the usual basis in respect of commencement of the liquidation proceedings – in other words against the companies themselves.
[17] At the start of her argument, counsel for Mr Beric sought leave to hand up to the Court an affidavit sworn by Mr Beric today. The gist of that affidavit is to establish that the discussions that Mr Beric referred to in his notice of opposition were ongoing, and indeed only came to an end on 28 November 2013, immediately before counsel filed her memorandum advising that he was withdrawing his notice of opposition.
[18] Counsel for the plaintiffs objects to the late filing of this affidavit, contending that statements in it are inaccurate, and that the documents annexed to it are selective. He said that the plaintiffs are prejudiced in that they have had no ability to respond to it.
[19] I am prepared to allow the affidavit to be filed simply to evidence the fact that the parties were continuing to try to find a solution through to 28 November
2013. I have noted correspondence to that affect, but do not take into account the
content of that correspondence, and particularly do not accept that it is necessarily all the correspondence that there was between the parties.
[20] Counsel for Mr Beric contended that no order for costs should be made against him because the parties at all stages up until 28 November 2013 were working towards a common objective of endeavouring to resolve matters as a solvent liquidation, and it was common ground (or at least the plaintiffs ought to have been aware) that no other steps needed be taken in preparation for today. She pointed to the fact that Mr Beric had not filed an affidavit in support of his opposition as required by 15 November 2013, and argued that his position should have been self-evident.
[21] Although there is no evidence before me to this effect, but taking into account the late filing of this affidavit, I accept the statement from the bar by counsel for the plaintiffs that the plaintiffs made it clear that if the parties did not reach agreement they would be proceeding on their application today, and that there was no communication from Mr Beric stating one way or another whether he would proceed with his opposition in the event that agreement was not reached (prior, of course, to counsel’s memorandum of 28 November 2013).
[22] It is not unusual for parties to continue negotiations with a view to trying to reach agreement before a matter comes to defended hearing. I am prepared to accept that the parties had such negotiations from the time that Mr Beric filed his notice of opposition, and that they continued in one form or another until it became apparent that they were unable to agree on terms, and that this occurred at about the same time as the parties learned of the notice served by the Commissioner.
[23] I do not accept, however, that there is adequate evidence before the Court to support the submission that the plaintiffs knew that Mr Beric would not be maintaining his notice of opposition in the event that agreement was not reached.
[24] I take into account that at no time was there any request from the parties to defer the timetable set on 4 October 2013, and that the plaintiffs largely complied
with that timetable (there was a delay of five days in the filing of the affidavit by
Bogdana Shale in support of the application).
[25] The critical point in my view is that there is no express statement by Mr Beric that he would not be proceeding, and the plaintiffs saw no need to approach the Court and seek deferral of the timetable for filing of the casebook and synopsis of argument. Rather, they proceeded to file those documents on 25 November 2013. I am satisfied that the plaintiffs’ position (that they would proceed unless the parties reached agreement) was known, and in face of that position, it was encumbent upon Mr Beric to communicate clearly that he would not be proceeding if he wished to avoid an order for costs.
[26] Having said that I also take into account that this is obviously a long-running, and now bitter dispute, between family members, and that latterly at least there were genuine attempts to find a resolution which both parties could accommodate. That did not occur, but I consider that Mr Beric was justified, to some extent, in his position of deferring his advice to the Court and to the plaintiffs until it became apparent that there was no prospect of an agreement being reached. I express these views to state why in my view I feel that an order for increased costs should not be made today, but that a standard order for costs should be, in respect of Mr Beric, from the time of the filing of his notice of opposition.
Orders
[27] For the reasons I have traversed above, I make the following orders:
(a) In each case the defendant company (Cairnfield Care Ltd and Hamilton Construction Ltd) is put into liquidation and Andrew John McKay and Justin James Bosley are appointed liquidators.
(b)The plaintiffs are entitled to costs, including the costs of appearance today, on a scale 2B basis. The costs up to the time that Mr Beric filed his notice of appearance are payable by the defendant companies. The costs subsequent to that time are to be paid by Mr
Beric. The plaintiffs are also entitled to their disbursements as fixed by the Registrar.
[28] These orders are made at 11.41am.
Associate Judge Abbott
0
0
0