Whitley v SDCIC NZ Architecture Limited - [2022] NZHC 1528

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-002301

[2022] NZHC 1528

UNDER the Companies Act 1993

IN THE MATTER OF

the liquidation of Ezybuilding Group Co. Limited (in liquidation)

BETWEEN

KEVIN JOHN WHITLEY as liquidator of Ezybuilding Group Co Ltd (in liquidation) Applicant

AND

SDCIC NZ ARCHITECTURE LIMITED

First Respondent

HUA WU

Second Respondent

Hearing: 11 April 2022

Appearances:

R B Hucker and A Moana-Howard for the Applicant A Ho and X Zhang for the Second Respondent

Judgment:

30 June 2022

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 30 June 2022 at 11.30 a.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar
Date.......................................

Solicitors:

Crimson Legal, Auckland Zhang Law Ltd, Auckland Hucker Law, Auckland

Alden Ho, Auckland

WHITLEY v SDCIC NZ ARCHITECTURE LTD [2022] NZHC 1528 [30 June 2022]

Introduction

[1] Shortly before Ezybuilding Group Co Limited (in liquidation) (Ezybuilding Group) was placed into liquidation, it paid $20,000 to SDCIC NZ Architecture Limited (SDCIC), a trade creditor, and gave possession of a 2017 Audi SQ7.

[2] The liquidator of Ezybuilding Group now applies for orders under s 295 of the Companies Act 1993 that SDCIC repay the $20,000; and that SDCIC and its former director, Hua Wu (also known as Danny Wu), pay Ezybuilding Group $112,500 as compensation for the motor vehicle. The liquidator maintains that these are voidable transactions under s 292 of the Act, as they were made within six months of the liquidation.

[3] Alternatively, the liquidator seeks an order that the vehicle was transferred at an undervalue and that SDCIC and Mr Wu should compensate Ezybuilding Group under s 297.

[4] SDCIC did not object to the liquidator’s notice to set aside these transactions as voidable transactions within the permitted 20 working days. The transactions are thus automatically set aside as against SDCIC.1 SDCIC has not taken any steps in this proceeding to oppose the orders the liquidator seeks against it.

[5] The dispute concerns the orders the liquidator seeks against Mr Wu. Mr Wu objected to the liquidator’s notice to set aside the conveyance of the vehicle and opposes the orders sought under ss 295 and 297. He maintains that SDCIC, not he, was the recipient of the motor vehicle. He also says he is not a creditor of Ezybuilding Group and, further, that the vehicle was not transferred at an undervalue. Initially, Mr Wu also maintained that he had a defence under s 296(3) but he abandoned that defence prior to the hearing.

[6]The application raises these issues:

(a)Who received the motor vehicle?

1 Companies Act 1993, s 294(3).

(b)Was the recipient of the motor vehicle a creditor of Ezybuilding Group?

(c)If yes, did the recipient receive more towards satisfaction of the debt than they would have received in the liquidation?

(d)If yes, should the Court exercise its discretion to make orders under s 295?

(e)Alternatively, was the motor vehicle transferred…

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: [2022] NZHC 1528
Decision Date: 30 June 2022

CaseChat Overview and Summary

In this case, the liquidator of Ezybuilding Group Co. Limited sought orders against SDCIC NZ Architecture Limited and its former director, Hua Wu, for transactions made within six months of the company's liquidation. The liquidator claimed that SDCIC had received $20,000 and a 2017 Audi SQ7 from Ezybuilding Group, which were voidable transactions under the Companies Act 1993. The court had to decide whether the vehicle was transferred to Hua Wu personally or to SDCIC, whether SDCIC was a creditor of Ezybuilding Group, and if the company received more towards satisfaction of the debt than it would have received in the liquidation. The court also had to consider if it should exercise its discretion to make orders under s 295 and whether the vehicle was transferred at an undervalue, justifying orders under s 297. The court found that the vehicle was conveyed to SDCIC to reduce the debt owed by Ezybuilding Group to SDCIC, and SDCIC was a creditor of Ezybuilding Group. The court concluded that SDCIC received more than it would have received in the liquidation, and therefore ordered SDCIC to repay the $20,000 to Ezybuilding Group and pay an amount that fairly represented the benefit the company received because of the transaction. The court dismissed the application for orders against Hua Wu and ordered the liquidators to pay Hua Wu's costs on the proceeding.

In summary, the court held that the transfer of $20,000 and the motor vehicle from Ezybuilding Group to SDCIC were voidable transactions under the Companies Act 1993, as they were made within six months of the liquidation and the company was presumed to have been insolvent at the time. The court found that SDCIC, not Hua Wu, was the recipient of the motor vehicle and that SDCIC was a creditor of Ezybuilding Group. The court concluded that SDCIC received more than it would have received in the liquidation, and therefore ordered SDCIC to repay the $20,000 to Ezybuilding Group and pay an amount that fairly represented the benefit the company received because of the transaction. The court dismissed the application for orders against Hua Wu and ordered the liquidators to pay Hua Wu's costs on the proceeding.

Orders