Stanley v McDonald - [2012] NZHC 597

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-005898 [2012] NZHC 597

BETWEEN L N & M J STANLEY Applicants

ANDD P MCDONALD First Respondent

ANDMCDONALD TEXTURES PROPERTIES LIMITED
Second Respondent

ANDL MCDONALD Third Respondent

Hearing: 23 March 2012

Counsel: DJ Powell for Applicants
No appearance for First Respondent
RK Potter for Second and Third Respondents

Judgment: 30 March 2012

JUDGMENT OF RODNEY HANSEN J

This judgment was delivered by me on 30 March 2012 at 4.00 p.m., pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date: ………………………….

Solicitors: Grimshaw & Co, P O Box 6646, Auckland 1141 for Applicants
Martelli McKegg, P O Box 5745, Auckland 1141 for 2nd and 3rd Respondents

L N & M J STANLEY V D P MCDONALD HC AK CIV-2011-404-005898 [30 March 2012]

Introduction

[1] The applicants are the trustees of a family trust. They own a leaky home. They successfully brought a claim before the Weathertight Homes Tribunal against the first respondent who installed the cladding system in the house. They were awarded $332,897. An appeal to this Court failed.

[2] Before the appeal had been determined and while bankruptcy proceedings against him were outstanding, Mr McDonald sold to his wife, the third respondent,
49 of 50 shares he owned in the second respondent. He used the proceeds to pay other creditors. The applicants say the shares were sold at an undervalue and with intent to prejudice them. They apply under s 348 of the Property Law Act 2007 (the Act) to set aside the disposition.

Statutory provisions

[3] The application is governed by Part 6, subpart 6 of the Act.

[4] Section 346 defines the dispositions to which Subpart 6 applies, providing as follows:

346 Dispositions to which this subpart applies

(1) This subpart applies only to dispositions of property made after 31
December 2007—

(a) by a debtor to whom subsection (2) applies; and

(b) with intent to prejudice a creditor, or by way of gift, or without receiving reasonably equivalent value in exchange.

(2) This subsection applies only to a debtor who—

(a) was insolvent at the time, or became insolvent as a result, of making the disposition; or

(b) was engaged, or was about to engage, in a business or transaction for which the remaining assets of the debtor were, given the nature of the business or transaction, unreasonably small; or

(c) intended to incur, or believed, or reasonably should have believed, that the debtor would incur, debts beyond the debtor's ability to pay.

[5] Section 347(1) specifies who may apply under s 348:

347 Application for order under section 348

(1) Only the following may apply for an order under section 348:

(a) a creditor who claims to be prejudiced by a disposition of property to which this subpart applies (whether the disposition was made before or after the debtor became indebted to the creditor);

(b) the liquidator, if the debtor is a company in liquidation or an overseas company being liquidated under section…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Stanley v McDonald

Details

AGLC: Stanley v McDonald [2012] NZHC 597
Case: [2012] NZHC 597
Decision Date: 30 March 2012

CaseChat Overview and Summary

L N and M J Stanley, the applicants, successfully brought a claim for damages before the Weathertight Homes Tribunal against D P McDonald, the first respondent. The applicants, who own a leaky home, were awarded $332,897. An appeal to the High Court by Mr McDonald was unsuccessful. Before the appeal was determined and while bankruptcy proceedings against him were outstanding, Mr McDonald sold 49 of 50 shares he owned in McDonald Textures Properties Limited, the second respondent, to his wife, the third respondent, for $54,130.30. He used the proceeds to pay other creditors. The applicants say the shares were sold at an undervalue and with intent to prejudice them. They apply under s 348 of the Property Law Act 2007 (the Act) to set aside the disposition. The court found the disposition was made with intent to prejudice a creditor and without receiving reasonably equivalent value in exchange. The court found the third respondent did not acquire the shares in good faith and without knowledge that the disposition was made to prejudice creditors. The court made an order vesting the 49 shares in Mr McDonald for the purpose only of enabling the carrying out of any execution or similar process against him or the administration of a future bankruptcy of him or arrangement with his creditors.

Orders