Shearing Services Kamupene Limited (in liquidation) (formerly Shearing Services Limited and Te Whata Shearing Limited) v Tarahau Farming Limited

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE

CIV-2019-488-000012

[2019] NZHC 1280

UNDER the Companies Act 1993

BETWEEN

SHEARING SERVICES KAMUPENE LIMITED (IN LIQUIDATION) (FORMERLY SHEARING SERVICES

LIMITED AND TE WHATA SHEARING LIMITED)

First Plaintiff

CRAIG ALEXANDER SANSON and
DAVID JOHN BRIDGMAN (as liquidators) Second Plaintiffs

AND

TARAHAU FARMING LIMITED

Defendant

Hearing: 6 June 2019

Counsel:

GAD Neil and BJ Hamilton for Plaintiffs

Judgment:

6 June 2019

ORAL JUDGMENT OF DOWNS J

Solicitors:
Meredith Connell, Auckland.

SHEARING SERVICES KAMUPENE LTD (IN LIQUIDATION) (FORMERLY SHEARING SERVICES LTD AND TE WHATA SHEARING LTD) v TARAHAU FARMING LTD [2019] NZHC 1280 [6 June 2019]

[1] Shearing Services Kamupene Ltd was placed in liquidation in 2016.1 Mr Pessiman Te Whata is Shearing Services sole director. Mr Te Whata was also a director of Tarahau Farming Ltd.2 Between 2013 and 2016, Shearing Services advanced $149,704.43 to Tarahau. Shearing Services’ liquidators seek this sum from Tarahau. Tarahau has not filed a statement of defence or otherwise engaged. So, the application is by formal proof.

[2] Mr Te Whata was examined on oath. He described the advances as loans, and inconsistently, as koha.

[3] Shearing Services issued a letter of demand on 5 February 2019. Tarahau has not responded.

[4] Shearing Services contends its advances are repayable as a loan. So too interest. I agree. Absent the presumption of advancement, if A pays money to B then B must repay A. If B claims the money was a gift, B must prove as much.3 The presumption of advancement does not arise. Tarahau has not filed a statement of defence. Or evidence. The first cause of action is established.

[5] Shearing Services also contends the advances constitute transactions for inadequate consideration (under s 298 of the Companies Act 1993) as an alternative to the first cause of action. Although it is not necessary to determine this cause of action, I would have found it proved. Shearing Services disposed of property— money—to Tarahau. The dispositions occurred within the three-year period contemplated by the section. They were made to a person who falls within the section. And, value exceeds consideration. It follows the second cause of action would also be established.

1      Shearing Services.
2      Tarahau.
3      Chitty on Contracts (32nd ed, Thomson Reuters (professional) UK, London, 2015) Vol 2 at 39-264.

[6] The liquidators of Shearing Services are entitled to $149,704.43. They are also entitled to interest of $28,961.73. And, 2B costs.

……………………………..

Downs J

CaseChat Overview and Summary

The case before the High Court of New Zealand involved Shearing Services Kamupene Limited, previously known as Shearing Services Limited and Te Whata Shearing Limited, in liquidation, represented by its liquidators Craig Alexander Sanson and David John Bridgman, against Tarahau Farming Limited. The plaintiffs sought the repayment of $149,704.43 advanced to the defendant between 2013 and 2016, plus interest and costs. The defendant did not file a statement of defence or otherwise engage in the proceedings, leading to the application proceeding by formal proof.

The primary legal issue before the court was whether the advances made by Shearing Services to Tarahau were repayable loans or gifts. The court also considered an alternative cause of action under section 298 of the Companies Act 1993, which addresses transactions for inadequate consideration. The liquidators argued that the advances were loans and, alternatively, that they constituted transactions for inadequate consideration.

The court determined that the advances were repayable loans, as the burden of proof for the gift claim lies with the defendant, and the defendant had not provided any evidence to support this claim. The court further found that the advances were made within the three-year period stipulated by section 298 of the Companies Act, and they exceeded the value of the consideration received. Consequently, the second cause of action would also have been established if necessary. The court granted the plaintiffs' claims for the repayment of the principal amount, interest, and costs.

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established

Hearing:	6 June 2019
Counsel:	GAD Neil and BJ Hamilton for Plaintiffs
Judgment:	6 June 2019