Vance v Sumners Appliance Limited - [2012] NZHC 2881

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-488-000385 [2012] NZHC 2881

UNDER the Companies Act 1993

IN THE MATTER OF the liquidation of Manukau Road 380
Limited (in liquidation)

BETWEEN DAVID STUART VANCE AND VIVIEN JUDITH MADSEN-RIES AS LIQUIDATORS OF MANUKAU ROAD
380 LIMITED (IN LIQUIDATION) Applicants

ANDSUMNERS APPLIANCE LIMITED Respondent

Hearing: 29 October 2012

Appearances: N H Malarao and W N Fotherby for the Applicants
A G Stuart for the Respondent

Judgment: 1 November 2012

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

This judgment was delivered by me on 01.11.12 at 3.00 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date ........................

Solicitors:
Meredith Connell, Auckland – nick.malarao@meredithconnell.co.nz
Webster Malcolm & Kilpatrick, Warkworth – a.stuart@wmklaw.co.nz

DAVID STUART VANCE AND VIVIEN JUDITH MADSEN-RIES AS LIQUIDATORS OF MANUKAU ROAD 380 LIMITED (IN LIQUIDATION) V SUMNERS APPLIANCE LIMITED HC AK CIV-2012-488-
000385 [1 November 2012]

[1] The applicants are the liquidators of Manukau Road 380 Limited. On

26 November 2008 Manukau Road 380 Limited paid $30,500 to Sumners Appliance Limited by way of arrears of rental due under its lease of a property owned by that company. The next day the Commissioner of Inland Revenue applied to the High Court for appointment of a liquidator of Manukau Road 380 Limited. The liquidators were appointed on 9 February 2009. On 28 January 2011 they issued a notice under s 292 of the Companies Act 1993 to set aside this payment. As Manukau Road 380 Limited opposed the notice, the liquidators then applied for an order, which Manukau Road 380 Limited opposes.

Relevant provisions of the Companies Act 1993

[2] Section 292 of the Companies Act 1993 provides, to the extent relevant:

292 Insolvent transaction voidable

(1) A transaction by a company is voidable by the liquidator if it –

(a) is an insolvent transaction; and

(b) is entered into within the specified period.

(2) An insolvent transaction is a transaction by a company that –

(a) is entered into at a time when the company is unable to pay its due debts; and

(b) enables another person to receive more towards satisfaction of a debt owed by the company than the person would receive, or would be likely to receive, in the company’s liquidation.

(3) In this section, transaction means any of the following steps by the company:

...

(a) conveying or transferring the company’s property:

(4A) A transaction that is entered into within the restricted period is presumed, unless the contrary is proved, to be entered into at a time when the company is unable to pay its due debts.

...

(6) For the purposes of subsection (4A), restricted period means—

(a) The period of 6 months before the date of commencement of the liquidation together with the period commencing on that date and ending at the time at which the liquidator is appointed; and

(b) In the case of a company that was put into liquidation by the court, the period of 6 months before the making…

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: [2012] NZHC 2881
Decision Date: 1 November 2012

CaseChat Overview and Summary

The liquidators of Manukau Road 380 Limited sought an order setting aside a payment of $30,500 made to Sumners Appliance Limited by way of arrears of rental. Sumners Appliance Limited opposed the application. The central issue was whether the payment was an insolvent transaction within the meaning of the Companies Act 1993. Sumners Appliance Limited accepted that the payment was made within the restricted period but argued that it did not enable it to receive more than it would have received in the liquidation. Sumners Appliance Limited also argued that it had established the defence under section 296(3) of the Companies Act. The Court found that the payment was an insolvent transaction as it enabled Sumners Appliance Limited to receive more than it would have received in the liquidation. The Court found that Sumners Appliance Limited had not established the defence under section 296(3) as it had actual knowledge of the company's financial difficulties. The Court ordered the payment to be set aside and ordered Sumners Appliance Limited to pay the liquidators' costs on a 2B basis plus disbursements.

Orders