Superior Blocklayers Ltd (in liq) v Bacon - [2016] NZHC 2601

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-001301 [2016] NZHC 2601

UNDER the Companies Act 1993

IN THE MATTER

of the liquidation of Superior Blocklayers
Limited (in Liquidation)

BETWEEN

SUPERIOR BLOCKLAYERS LIMITED (IN LIQUIDATION)

First Plaintiff

VIVIEN JUDITH MADSEN-RIES AND HENRY DAVID LEVIN as liquidators of Superior Blocklayers Limited (In Liquidation)

Second Plaintiffs

AND

MICHAEL EDWARD BACON First Defendant

LAURA JEAN SIMPSON Second Defendant

Hearing: 3 October 2016

Appearances:

K Morrison and J Angelson for the Plaintiffs
No appearance by or on behalf of the Defendants

Judgment:

2 November 2016

JUDGMENT OF EDWARDS J

This judgment was delivered by Justice Edwards
On 2 November 2016 at 11.30 am, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar
Date:

Solicitors: Meredith Connell, Auckland

SUPERIOR BLOCKLAYERS LTD (In liq) v BACON [2016] NZHC 2601 [2 November 2016]

Introduction

[1] Superior Blocklayers Ltd (in liq) (Company) and its liquidators seek

judgment against the Company’s directors, being the first and second defendants. [2] The claims are as follows:
(a) A claim against both defendants based on the overdrawn shareholders’

current account in the sum of $63,819; and

(b) Claims for breaches of directors’ duties imposed under ss 131(1), 135,

136 and 137 of the Companies Act 1993 (Act) and pursuant to s 301. Damages are sought in the sum of $96,175.95, being the amount owed to the Inland Revenue Department (IRD), which is the Company’s only creditor to have made a claim in the liquidation.

Formal proof

[3] The proceeding was filed in the High Court at Auckland on 10 June 2016, and was served on the defendants on 20 June 2016. An affidavit of service sworn on
5 August 2016 has been filed.

[4] Any statement of defence was due to be filed and served by the defendants on

25 July 2016.1 No statement of defence has been received and there has been no other communication from either defendant in relation to the claim. Accordingly, the plaintiffs seek judgment by way of formal proof under r 15.9.

[5] To obtain judgment by way of formal proof, r 15.9(4) requires the plaintiffs to file affidavit evidence establishing, to a Judge’s satisfaction, each cause of action relied on and providing sufficient information to enable the Judge to calculate and fix the damages. This sub-r imposes an onus which is “much the same” as if the
proceeding had gone to trial.2

1 High Court Rules, r 5.47.
2 Ferreira v Stockinger [2015] NZHC 2916 at [35].

Factual background

[6] The Company was incorporated on 7 May 2004. It traded in the block-laying business. The defendants were the directors of the Company since its incorporation. They were each allocated one share as shareholders with the remaining 98 shares allocated to Annette Giles Trustee Ltd and each of the defendants.

[7] The Company ceased trading on 27 November 2015. It was placed into liquidation on the same day on the application of the Commissioner of the IRD. The second plaintiffs were appointed as liquidators…

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.

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Details

Case: [2016] NZHC 2601
Decision Date: 2 November 2016

CaseChat Overview and Summary

The plaintiffs, Superior Blocklayers Ltd (in liquidation) and its liquidators, sought judgment against the company's directors, the defendants, for overdrawn shareholders' current accounts and breaches of directors' duties under the Companies Act 1993. The defendants failed to appear or defend themselves, leading to a judgment by formal proof. The court found that the company was insolvent from at least May 2009 and that the directors breached their duties by continuing to draw funds from the company and allowing it to trade while insolvent. The court awarded the plaintiffs the amount owed to the Inland Revenue Department, totaling $96,175.95, plus interest, and ordered the defendants to repay the shareholders' current account debt of $63,819, also with interest. The defendants were held jointly and severally liable for both amounts. Costs were awarded to the plaintiffs on a standard basis.

Orders