Thompson v Thomas - [2018] NZHC 1495

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2015-404-001319 [2018] NZHC 1495

BETWEEN
IAN ALLEN THOMPSON

Applicant

AND

DAVID THOMAS as liquidator of DD Construction Ltd (in liq)

Respondent

Hearing: 13 June 2018

Appearances:

W A McCartney for Applicant J K Grimmer for Respondent

Judgment:

21 June 2018

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

on application to reverse decision of liquidator

This judgment was delivered by me on …….. at …….
Pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:…………………………

THOMPSON v THOMAS [2018] NZHC 1495

Introduction

[1] A sum of $20,041.62 (plus interest) (“the fund”) is held on trust pending resolution of a dispute between the applicant and a company now in liquidation. The dispute has not been settled some three years after it arose. The liquidator of the company has refused to agree to the release of the fund back to the applicant.

[2] The applicant seeks an order under s 284(1)(b) Companies Act 1993 reversing the decision of the liquidator.

Background

[3] The applicant, Ian Thompson, owns two of eight townhouses in a Ponsonby complex. The complex was a leaky building and required repair. The body corporate engaged DD Construction Ltd (DDC) to undertake the repairs.

[4] Mr Thomas raised disputes as to some payment claims (totalling $20,014.62) (the disputed sum) made by DDC and did not pay the disputed sum. Around the same time, he issued proceedings against DDC and others for damages in relation to alleged overrun on the repair costs.

[5] DDC, in purported exercise of its rights under the repair contract, registered mortgages against the titles to Mr Thompson’s units. Mr Thompson applied to this Court for orders that the mortgages be removed.

[6] Mr Thompson arranged to pay the disputed sum into his solicitor’s trust account to be held pending resolution of the dispute. His solicitor undertook to this Court on 26 June 2015 to hold the fund for the benefit of Mr Thompson and DDC pending determination of the dispute by agreement, order of the Court or determination pursuant to the Construction Contracts Act 2002.

[7] The parties agreed to refer the dispute to mediation on the earliest possible date after exchange of relevant documents and repleading of Mr Thompson’s claim, with

any proceedings for a determination under the Construction Contracts Act not to occur before 30 September 2015.

[8] The Court made a consent order requiring DDC to cause the registration of the mortgages to be removed from Mr Thompson’s titles.

[9] Under the parties’ arrangements, the relevant documents were to have been provided not less than four weeks prior to a mediation. The documentary record establishes that, between July and September 2015, Mr Thompson’s solicitors unsuccessfully sought the relevant records from DDC. The mediation did not occur.

[10] DDC was subsequently liquidated by special resolution of its shareholders on 25 May 2017. The respondent in this proceeding, David Thomas, was appointed liquidator.

[11] It was only six…

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 Thompson v Thomas

Details

AGLC: Thompson v Thomas [2018] NZHC 1495
Case: [2018] NZHC 1495
Decision Date: 21 June 2018

CaseChat Overview and Summary

In the High Court of New Zealand, Ian Allen Thompson, the applicant, applied to reverse the decision of David Thomas, the liquidator of DD Construction Ltd (in liquidation), who refused to agree to the release of a fund held in trust. The fund in question, amounting to $20,041.62 plus interest, had been paid into the applicant's solicitor's trust account pending the resolution of a dispute between the applicant and the now liquidated company. The legal issues before the Court were whether the Court should interfere with the liquidator's decision and if so, under what grounds and principles.

The Court considered the statutory provisions of section 284(1) of the Companies Act 1993 and relevant case law on the supervision of liquidations. The Court found that it would only intervene in the liquidator's decision if it was so unreasonable that no reasonable liquidator could have acted in such a way. The Court examined the liquidator's position, which was based on the assertion that the fund represented unpaid invoices for work and materials supplied to the applicant. However, the Court found that the fund was, in fact, the applicant's money provided as security and not the liquidated company's property.

The Court held that the liquidator's decision not to consent to the release of the fund back to the applicant was unreasonable, as it did not take into account the failure of the liquidated company to honour the dispute resolution process agreed upon by the parties in 2015. The Court also found that the liquidator had not obtained any legal opinion to support his conclusion that the liquidated company had a relatively strong claim to the fund. Instead, the liquidator had relied on his own conclusion as to the legal merits of the liquidated company's claim. The Court found that the only reasonable solution in these circumstances was to permit the release of the fund back to the applicant.

The Court granted the applicant's application to reverse the liquidator's decision and ordered that the respondent pay the applicant's costs of the application on a 2B basis, together with disbursements to be fixed by the Registrar. The Court also ordered that the solicitor be released from its undertaking dated 25 June 2015.

Orders