IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2012-404-000433 [2013] NZHC 1656

UNDER	the Companies Act 1993	

IN THE MATTER OF	
an application to set aside default judgment	

BETWEEN	
HENRY DAVID LEVIN AND DAVID STUART VANCE AS LIQUIDATORS OF MULTI CONSTRUCTION CONCEPTS (MCC) LIMITED (IN LIQUIDATION) Applicants	

AND	
SHOT BLAST SERVICES (AUCK) LIMITED
Respondent	

Hearing:	By Memoranda	

Appearances:	
J Sumner/K Berry for applicants
J D McBride for respondent	

Judgment:	
2 July 2013	

FINAL JUDGMENT OF ASSOCIATE JUDGE ABBOTT INCLUDING COSTS

This judgment was delivered by me on 2 July 2013 at 5pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:
Ford Sumner, Wellington
Knight Coldicutt, Auckland

Counsel:
J McBride, Barrister, Auckland

LEVIN & ANOR v SHOT BLAST SERVICES (AUCK) LIMITED [2013] NZHC 1656 [2 July 2013]

[1]       The applicant liquidators issued this proceeding to recover payments made by the company to the respondent totalling $26,517.75.  The payments in question straddled a change to the Companies Act 1993 that took effect from 1 November
2007, and removed the defence previously available for payments made in the ordinary course of business.

[2]      At the time the applicants commenced the proceeding the respondent was resisting repayment of any amount.   Subsequently, however, it opposed only payments made prior to 1 November 2007 (relying on the “ordinary course of business” defence).  After the hearing, but before the decision was given, it sought leave to defend the subsequent payments also, dependent on appeals in similar cases that were pending before the Court of Appeal.

[3]       The earlier payments were found to have been made in the ordinary course of business, but no determination was made on the payments made after 1 November
2007 pending the decision of the Court of Appeal in the other cases (the decision was given as an interim judgment on the application).

[4]       The respondent withdrew its request to argue the balance of the application (namely whether it had a defence under s 296 of the Companies Act 1993 in respect of the post 1 November 2007 payments) after release of the Court of Appeal’s decision in March 2013.

[5]       There is now a dispute between the parties as to the incidence of costs, with each party seeking an award in its favour.

Substantive application

[6]       In the absence of opposition, the respondent having raised but subsequently withdrawn an application for leave to advance a defence under s 296, I find that the transactions identified in paragraph 1.4 to 1.7 of the liquidators’ notice dated 11 April
2011 are voidable under s 292 of the Companies Act 1993.  I further find that the applicants are entitled to an order for payment of the total sum represented by those voidable transactions, being $11,103.00.

[7]       The applicants have also sought an order that the respondent pay interest on the sum awarded at the rate of 5% per annum (being the rate prescribed under s 87 of the Judicature Act 1908 applicable as from 1 July 2011).  The Court has a discretion to order payment of interest, not exceeding that prescribed rate, in any proceeding for recovery of any debt, from the date when the cause of action arose until date of judgment.  Interest may be awarded on a sum payable pursuant to the making of an order setting aside a voidable transaction as the procedure is analogous to a claim for
recovery of a debt.1   Interest may be awarded from the date of the winding up, when

the liquidators’ rights accrued.2    In its notice of opposition, the respondent opposed all orders sought, but did not state any specific grounds of opposition in relation to interest, and counsel did not develop the point at all in the hearing.  The respondent has had the benefit of the money.  Although interest could be awarded from 11 July
2008, I consider that the appropriate starting point is the date of filing of the application, namely 19 January 2012.

Costs

[8]       Having considered the memoranda of counsel, I have reached the view that costs should lie where they fall for the following reasons.

[9]       The costs of the proceeding fall into three stages:

The costs of commencing the proceeding

(a)       The applicants were justified in issuing the proceeding given that the respondent was resisting any repayment.  In addition the respondent initially failed to take any steps to oppose the application, and the applicants were subsequently put to further costs when the respondent then sought leave to set aside judgment entered by default for the full
amount of the claim.

1 Westpac Banking Corporation v Nangeela Properties Ltd [1986] 2 NZLR 1 (CA).
2 Ibid.

Subsequent costs of opposition and hearing

(b)	After having the initial judgment set aside, the respondent opposed only the recovery of payments made before 1 November 2007. It took a view that the facts did not support a defence under s 296 of the Act, based upon counsel’s understanding of the law at that time.  The respondent was successful at this stage of the proceeding.

Events subsequent to hearing

(c)       After the hearing, the respondent sought to change its position in respect of payments made by the company subsequent to 1 November
2007 in light of cases on s 296 defences that had been decided shortly before  the  hearing.    The  respondent  considered  that  those  cases (which were subject to appeals) provided a defence to the later payments and asked for the determination of the application to be deferred until the appeals were determined.  As the appeals would not affect the decision on the earlier payments, judgment was released on an interim basis in respect of the matters argued at the hearing. The application was reserved in respect of the possibility of a defence under s 296 to the previously unopposed aspect of the application (including the question of whether it was still open to the respondent to rely on this defence) until there was an opportunity to hear counsel. That aspect of the proceeding fell away following the Court of Appeal’s decision, which did not support the respondent’s position.  In the meantime, the respondent’s position had resulted in the applicants incurring further costs.

[10]     Taking these matters into account, it can be said that both parties have had some success in respect of the application.

[11]     Counsel for the respondent has also relied on an offer made by the respondent in June 2012 to settle at a sum which covered the post 1 November 2007 payments plus a small amount towards the applicants’ costs (I note that the sum offered was not  sufficient  to  have  met  the  applicants’  costs  on  a  scale  2B  basis  plus

disbursements, at that point).  Although I can take that offer into account in looking at the overall outcome, I do not consider that it should change my final view, for two reasons.  First, the respondent had been resisting all payment up to that point, and that offer did not meet all of the costs.  Secondly, the respondent did not tender the amount of the post 1 November 2007 payments, and subsequently attempted to resist doing so.   It is also significant that as at 8 May 2013 the respondent had still not repaid the post 1 November 2007 payments (and there is nothing before the Court to say that that position has changed).

Decision

[12]     I make orders pursuant to s 295(a) of the Companies Act 1993 that:

(a)       the   respondent   is   to   pay  the   applicants   the   sum   of  $11,103 representing payments made by the company to the respondent that are voidable in terms of s 292 of the Companies Act 1993; and

(b)	the respondent is to pay the applicants interest at the prescribed rate under s 87(3) of the Judicature Act 1908 on the sum of $11,103 from
19 January 2012 to date of this judgment.

[13]     In all the circumstances of the case I make no order as to costs.

Associate Judge Abbott

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2012-404-000433

UNDER	the Companies Act 1993	

IN THE MATTER OF	
an application to set aside default judgment	

BETWEEN	
HENRY DAVID LEVIN AND DAVID STUART VANCE AS LIQUIDATORS OF MULTI CONSTRUCTION CONCEPTS (MCC) LIMITED (IN LIQUIDATION) Applicants	

AND	
SHOT BLAST SERVICES (AUCK) LIMITED
Respondent	

Date:	22 July 2013	

Counsel:	
J Sumner for applicants
J D McBride for respondent	

MINUTE OF ASSOCIATE JUDGE ABBOTT [re clarification of judgment]

Solicitors:
Ford Sumner, Wellington	jaesen@fs-lawyers.com/kirsty@fs-lawyers.com
Knight Coldicutt, Auckland	brett@kclaw.co.nz

Counsel:
J McBride, Barrister, Auckland	josh@joshmcbride.co.nz

[14]       This file has been put back before me with the memorandum of counsel for the  applicants  dated  10  July  2013,  and  the  memorandum  of  counsel  for  the respondent dated 17 July 2013.

[15]       The applicants have noted that in the final judgment that I delivered on 2 July

2013 I ordered the respondent to pay a sum of money representing a voidable payment made by the company in liquidation to the respondent.

[16]       Counsel has sought clarification from the Court as to whether a determination had been made on interest (which was sought in paragraph 1.3 of the application dated 19 January 2012).  Counsel submitted that it was appropriate for interest to be awarded in terms of s 87 of the Judicature Act 1908 on the basis that the sum constitutes a debt.  The applicants wish to seal judgment for the principal amount together with interest of $1,209.16, said to represent interest at the Judicature Act rate from the date of filing of the application until date of judgment.

[17]       The respondent opposes the addition of any award of interest.   It contends that  this  was  a  final  judgment,  and  the  Court  is  now  functus  officio,  and  the applicants will need either to appeal or file an application seeking recall rather than merely filing a memorandum (counsel relies on Walker, Dick & Associates v Best Pacific Institution of Education Ltd [2013] NZHC 378).

[18]     The memoranda raise the following issues:

(a)	Whether a formal application is required;

(b)	Whether the Court has jurisdiction to recall; and

(c)	If the answer to both of the above questions is affirmative, whether the judgment should be recalled so as to add an award of interest.

[19]       I propose to treat the applicants’ memorandum as a request for recall.  The power to recall a judgment lies in r 11.9 of the High Court Rules.  The rule does not stipulate that recall must be sought by way of formal application.  In some cases a

formal application may well be appropriate, but essentially this is a procedural question and the Court has power to determine its own procedure (the decision of the Court in Walker, Dick & Associates does not address this point).  It must exercise this power on a proper basis, but this includes taking into account the objective of the procedural rules, namely to secure the just, speedy, and inexpensive determination of a matter.  I also take into account that the Court must be able to exercise the power of recall of its own motion in appropriate circumstances.  Given the sums involved, and the clear view I have of the matter, I do not require a formal application.

[20]       Turning to the question of the Court’s power, I note first that the judgment has not been sealed.  Accordingly, the discretion available under r 11.9 is available. This discretion must be exercised in accordance with principles: refer McGechan on Procedure HR 11.9.01(2).  In Erwood v Maxted [2010] NZCA 93 at [23] the Court of Appeal set out guidelines for recall which distinguish between correction of accidental slips and omissions and applications for recall proper (in the latter case the criteria in Horowhenua County v Nash (No.2) [1968] NZLR 632, 633 are to be applied).  Recall has been permitted under the third category in Horowhenua County v Nash in circumstances where the Judge has failed to determine an issue that was properly put to him (Brake v Boote (1991) 4 PRNZ H6) or has overlooked a matter (Matua Finance Ltd v Bank of New Zealand High Court Auckland CP 490/04, 4
August 1995).   In Unison Networks Ltd v Commerce Commission (CA 284/05, 7

March 2007) the Court of Appeal accepted the possibility of a wider formulation and expressly acknowledged (at [32]) the possibility of recall in the case of a “plain mistake on the part of the courts”.

[21]       Turning to the facts of this case, I overlooked the applicant’s request for interest on any sum that the respondent was ordered to pay.  I deferred giving final judgment when I dealt with the majority of the issues (my judgment of 21 December
2012), because there was still a potential issue over the statutory defence in s 296 of the Companies Act 1993.   When that fell away, the matter came back before the Court on memoranda as to costs.  It was only as I was about to issue my judgment on costs that I realised that final judgment had not been given, and added paragraphs [6] and [11] to the judgment.   In doing so I overlooked the applicants’ request for interest.  There is authority for awarding interest upon the making of an order setting

aside a voidable transaction on the basis that the procedure is analogous to a claim for recovery of a debt: McGechan on Procedure J87.03(6).

[22]       I consider that this is an appropriate case to exercise the Court’s discretion to recall the judgment either to correct an accidental omission, or on the basis of a plain mistake on the part of the Court.

[23]       The judgment issued on 2 July 2013 is recalled accordingly.  It is to re-issued with:

(a)	Inclusion of the following as paragraph [7]:

[7]       The applicants have also sought an order that the respondent pay interest on the sum awarded at the rate of 5% per annum (being the rate prescribed under s 87 of the Judicature Act 1908 applicable as from 1 July 2011).  The Court has a discretion to order payment of interest, not exceeding that prescribed rate, in any proceeding for recovery of any debt, from the date when the cause of action arose until date of judgment.   Interest may be awarded on a sum payable pursuant to the making of an order setting aside a voidable transaction
as the procedure is analogous to a claim for recovery of a debt.3

Interest may be awarded from the date of the winding up, when the liquidators’ rights accrued.4   In its notice of opposition, the respondent opposed all orders sought, but did not state any specific grounds of opposition in relation to interest, and counsel did not develop the point at all in the hearing.  The respondent has had the benefit of the money.  Although interest could be awarded from 11 July 2008, I consider that the appropriate starting point is the date of filing of the application, namely 19 January 2012.

(b)	Existing paragraph [11] rescinded and the following (re-numbered)

paragraph inserted (as paragraph [12]):

3 Westpac Banking Corporation v Nangeela Properties Ltd [1986] 2 NZLR 1 (CA).
4 Ibid.

[12]	I make orders pursuant to s 295(a) of the Companies Act 1993 that:

(a)	the  respondent  is  to  pay  the  applicants  the  sum  of

$11,103 representing payments made by the company to the respondent that are voidable in terms of s 292 of the Companies Act 1993; and

(b)	the respondent is to pay the applicants interest at the prescribed rate under s 87(3) of the Judicature Act 1908 on the sum of $11,103 from 19 January 2012 to date of
this judgment.

Associate Judge Abbott