Young & Associates Ltd v Ruscoe - [2012] NZHC 1438

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2012-485-65 [2012] NZHC 1438

UNDER the Companies Act 1993

IN THE MATTER OF Optimisationz Limited (in liquidation) BETWEEN YOUNG & ASSOCIATES LIMITED
Plaintiff

ANDDAVID IAN RUSCOE AND RICHARD GRANT SIMPSON
Defendants

Hearing: 22 June 2012

Counsel: C J Tennet and K R Smith for Plaintiff
S R Sparksman and S H Backhouse for Defendants

Judgment: 27 June 2012

In accordance with r 11.5, I direct the Registrar to endorse this judgment with the delivery time of 11.00am on the 27th June 2012.

JUDGMENT OF WILLIAMS J

Solicitors:
C J Tennet, Barrister, Wellington
Kensington Swan, Wellington

YOUNG & ASSOCIATES LIMITED V DAVID IAN RUSCOE AND RICHARD GRANT SIMPSON HC WN CIV-2012-485-65 [27 June 2012]

[1] The plaintiff seeks an order removing the defendants as liquidators of Optimisationz Limited (Optimisationz). It says that the liquidators have not been sufficiently vigorous in pursuing the shareholders of that company in relation to the shareholders’ current account deficit of $364,778. They accuse the defendants of being “friendly” to the shareholders.

[2] The plaintiff wants the defendants replaced by Michael Morley and John Fisk in whom they presumably repose greater trust.

[3] The plaintiff acted as accountant for Optimisationz and, at the date of liquidation, was owed $13,944.32 of which $1,394.43 was recognised as a preferential claim and subsequently paid out. The Commissioner of Inland Revenue is a creditor to a much larger extent. IRD held preferential claims totalling $8,607 and unsecured claims of $176,582. The Commissioner made no appearance, but in a memorandum filed by the manager of legal and technical services, the Commissioner lent his support to the application. There are no other creditors.

[4] Four matters were of particular concern to the plaintiff in terms of the way in which the defendants carried out their functions as liquidators. They were:

(a) The liquidators settled their claims against the shareholders Brett Annan and Christine Millar, their family trust, and a related company (ProjectIQ Limited), on terms that were too favourable to the shareholders. The settlement deed records that the shareholders and the trust together owed $563,622 to Optimisationz but this debt was settled for the sum of $96,000 payable in 48 monthly instalments of $2,000.

(b)The settlement failed to take into account the future earning capacity of Mr Annan, a consulting contractor to Greenstone (NZ) Limited. The argument was that while the economical outlook may be grim at present, that would not always be New Zealand’s case, and the liquidators should have provided for the possibility of greater

contribution from Mr Annan in the future. A similar submission was made with respect to Ms Millar, though the plaintiff admitted having less knowledge of her circumstances.

(c) Mr Annan and Ms Millar had extracted $728,000 in capital distributions from the family trust in 2008 and 2009, made possible through the refinancing of the family home. The plaintiff argued that there was no evidence that the liquidators had attempted to trace this money.

(d) A valuation in…

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 Young & Associates Ltd v Ruscoe

Details

AGLC: Young & Associates Ltd v Ruscoe [2012] NZHC 1438
Case: [2012] NZHC 1438
Decision Date: 27 June 2012

CaseChat Overview and Summary

Young & Associates Limited (Young) brought an application for the removal of David Ian Ruscoe and Richard Grant Simpson (the defendants) as liquidators of Optimisationz Limited (Optimisationz). Optimisationz was in liquidation and Young, who was owed $13,944.32, sought to have the defendants replaced by other liquidators in whom they had greater trust. The defendants had settled the claims against the shareholders of Optimisationz for $96,000 payable over 48 months. Young claimed that the settlement was too favourable to the shareholders, did not account for future earnings and that the liquidators had not attempted to recover funds extracted by the shareholders from a family trust. The defendants argued that the settlement was a prudent decision and that they had taken proper advice before making their decision.

The court considered whether the liquidators' actions were unreasonable. The court held that the liquidators' decisions were reasonable and in good faith and that the court would not interfere with the liquidators' decisions unless there was fraud or an obvious lapse in judgment. The court held that the liquidators were not unreasonable in treating future income earning capacity as too contingent and that they had taken proper advice before making their decisions. The court also held that the liquidators were not unreasonable in not obtaining a recent valuation of the family home as the property was heavily mortgaged and a sale would have been unlikely to produce a full payout to creditors. The court held that the liquidators were not unreasonable in deciding whether a bird in the hand was better than two in the bush.

The court dismissed the application and reserved costs.

Orders