New Zealand Yahua International Limited v Global Yuhua Building Supplies Limited (in liq) HC Auckland CIV 2009-404-006982 [2011] NZHC 1480 (26 May 2011)

Last Updated: 14 November 2011

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV 2009-404-006982}

UNDER The Companies Act 1993

BETWEEN NEW ZEALAND YUHUA INTERNATIONAL LIMITED AND NZ YUHUA LIMITED

Applicants

AND GLOBAL YUHUA BUILDING

SUPPLIES LIMITED (IN LIQUIDATION) First Respondent

AND HONG QUIANG ZHANG Proposed Second Respondent

AND GRACE WANG

Proposed Third Respondent

AND YUE QIN

Proposed Fourth Respondent

Hearing: 26 May 2011

Appearances: E Kuo for the Applicants

JST Nguy for the Proposed Second and Third Respondents

Judgment: 26 May 2011

INTERIM JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on

26.05.11 at 4:30pm, pursuant to

_{Rule 11.5 of the High Court Rules.}

_{Solicitors/Counsel:}

Registrar/Deputy Registrar

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

E Kuo, Dawsons, Manukau – [e-mail]

J Nguy, Jesse & Associates, Auckland – [e-mail]

NEW ZEALAND YUHUA INTERNATIONAL LIMITED AND NZ YUHUA LIMITED V GLOBAL YUHUA BUILDING SUPPLIES LIMITED (IN LIQUIDATION) HC AK CIV 2009-404-006982 26 May 2011

[1] On 29 October 2010 the applicants applied for orders that:

(a) The proposed respondents be joined as parties to the proceeding.

(b) The proposed respondents pay the applicant $69,567.77 plus interest. [2] Various grounds for the application were cited. In conclusion the application

noted it was made in reliance upon r 4.65 and ss 135 and 301 of the Companies Act

1993.

[3] By his minute dated 16 February 2011 Abbott AJ noted that the applicants’ application for orders adding respondents required timetable orders to a defended hearing. At that time he set today’s date for that hearing and required the parties’ pre-hearing documents including synopses of submissions to be filed.

[4] Those submissions were filed.

[5] At the beginning of today’s hearing counsel for the applicants advised that the s 301 application was not being pursued today but was to be deferred to another time. Counsel advised that she believed such an application ought to be heard at a time when cross examination of evidence could occur.

[6] Section 301 provides, inter alia, that a Court may, on the application of a creditor, in the course of the liquidation of a company, enquire into the conduct of a promoter or director or manager or administrator or liquidator or receiver of that company and order that person to repay or restore money or property to the creditor.

[7] It appeared from counsels’ opening submission that the applicants were applying for Court approval to proceed against the proposed second and third respondents. Attached to counsels’ submissions was a draft of a statement of claim in which the applicants were noted as the plaintiffs and the second and third respondents were noted as the first and second defendants respectively.

[8] As it transpires the application for hearing today is a pre-commencement application whereby the applicants are requesting the Court to approve the merits of their suit against the proposed second and third respondents.

[9] In the course of my discussions with counsel I opined that what was proposed by this application was a process this Court was unfamiliar with. I suggested to counsel that there was nothing which prevented a proceeding being filed in the form of the draft attached to counsel’s submissions. In due course further enquiry would determine whether the claim had properly been brought against the defendants but until trial or earlier upon a strike out application it was not usual for an assessment to be made about the propriety of bringing a claim.

[10] In the course of my discussions with counsel I mentioned that the provisions of r 4.56, by which additional parties are added to a proceeding, operate in connection with the proceeding that has already been filed. I mentioned to counsel that r 7.9(3) permitted an application without notice for directions where a party or intended party was in doubt about whether it was correct or appropriate to join a person as a party. I said such a rule was utilised for a plaintiff who was not sure against whom proceedings should be instituted. It was not, I suggested, meant to be utilised to test the merits or strength of a case against a party the plaintiff was determined to proceed against in any event.

[11] In this case the issue involving the proposed second and third respondents concerns their actions, among others, in allegedly removing stock owned by an insolvent company to the warehouse of another company with which those persons had some connection. In their s 301 application the applicants have asserted that the proposed second and third respondents acted at all times as directors of the insolvent company. Whilst the evidence of such a claim against the proposed third respondent is sparse, it does not seem so tenuous against the proposed second respondent. In making those comments I have drawn upon my assessment of affidavits filed in support of and in opposition to the s 301 application. Of course, a more accurate assessment can only be made when all affidavit evidence has been reviewed, and counsels’ submissions have been heard.

[12] At the conclusion of my discussions with counsel, counsel for the applications requested an opportunity to file further written submissions and requested an adjournment for this purpose. Counsel wished to examine the availability of authority to show the Court has, and in this instance should, make an assessment of the merits of the claim against the defendants prior to proceedings against those defendants being filed.

[13] Accordingly I directed:

(a) That the applicants’ further brief written submissions are to be filed

and served by 3 June 2011.

(b) The respondents’ brief submissions in reply are to be filed and served

no later than 10 June 2011.

[14] Thereafter I will deliver my judgment upon the application.

[15] I also urged counsel to provide one or two paragraphs in their submissions addressing the issue of costs. I noted that behind this application and other applications filed by the applicants was their disappointment in not being able to collect a judgment of around $69,000. It was the applicants who successfully applied for the liquidation of the first respondent, having earlier failed in its application to appoint an interim liquidator.

[16] Since, the applicants have applied for directions and orders that: (a) The liquidator’s refund a $3,000 retainer fee.

(b) Fixing the liquidator’s fee and remuneration.

(c) Granting leave for an order declaring that the liquidator’s decision in

selling a vehicle, is an undervalue transaction.

(d) Granting leave to direct the liquidators to serve a s 261 notice to deliver books, records or documents relating to all transactions involving the first respondent.

(e) Granting leave to direct the liquidators to make an application against the proposed second respondent in connection with an alleged failure to keep adequate records.

(f) Granting leave to direct the liquidators to file and serve a s 294 notice against the proposed second and third respondents and an associated company for the return of all stock and assets transferred from the first respondent.

(g) Granting leave to direct the liquidators to obtain the first respondent’s

IRD records within one month.

[17] Obviously the applicants’ dispute has a dynamic far greater than is otherwise immediately apparent from the application for present consideration by me.

Associate Judge Christiansen