West v Grant [2014] NZHC 1104 (23 May 2014)

Last Updated: 24 July 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2014-404-000462 [2014] NZHC 1104

IN THE MATTER	of the Companies Act 1993
IN THE MATTER	of the liquidation of MEADOWLANE LIMITED (IN LIQUIDATION)
BETWEEN	BRUCE GILBERT WEST Applicant
AND	DAMIEN GRANT and STEVEN KHOV Respondents

Hearing:	22 May 2014
Appearances:	R J Hucker for the Applicant B Norling for the Respondents
Judgment:	23 May 2014

_{JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN}

This judgment was delivered by me on

23.05.14 at 9.30am, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

_{Date...............}

B G WEST v D GRANT and S KHOV [2014] NZHC 1104 [23 May 2014]

[1] This proceeding challenges the respondent liquidator’s rejection of the applicants’ proof of debt in the liquidation of Meadowlane Limited (In liquidation). The applicant seeks an order reversing the liquidator’s decision and directing them to accept the proof of debt.

[2] This matter was called in the chambers list before me today. In issue is the applicant’s application for leave to commence his proceeding by way of an originating application under Rule 19.5 of the High Court Rules and for leave to be granted under Section 284 of the Companies Act 1993 to the applicant to apply to set aside the respondents decision to reject his proof of debt.

[3] The applicant claims he has an entitlement to payments due under his Employment Agreement with Meadowlane Limited which was terminated without notice. He says he was not subsequently employed by a related company International Entertainment (Aust) Pty Limited and nor did he receive any payment in lieu of notice under his Employment Agreement. He says he did not consent to being made redundant and/or to any purported transfer of employment. He claims he is entitled to prove as a creditor as set out in the proof of debt he lodged.

[4] At the forefront of the respondents position in opposition to this matter proceeding as a Part 19 application, is their claim that standard discovery ought to be directed and which would be denied to them if the Part 19 process was engaged.

[5] For the respondents Mr Norling submits the applicant is seeking to shortcut the ordinary process and thereby denying the respondents the opportunity to utilise the normal pre-trial processes.

Decision

[6] It is clear the originating application procedure can be appropriate in the context of applications concerning liquidations even where the actions of a liquidator are in contention. Issues concerning voidable transactions are an example of this. Recourse to the originating application procedure can be appropriate even where an adversarial position is adopted and where liquidators decisions are easily able to be

questioned without recourse to the standard track process where the usual additional costs of such a process can be avoided.

[7] Mr Hucker submits and the Court agrees that wherever practically possible then the Court’s supervision of liquidations and/or challenges to liquidator’s decisions ought to be the subject of a simplified process; where those issues can be determined at the least cost to creditors.

[8] Section 19.4 allows applications for directions to be brought by a receiver and/or a liquidator as of right utilising the originating application procedure. Whether a debt ought to be accepted and/or rejected can and is regularly determined by way of applications for directions.

[9] Mr Hucker submits and the Court agrees the procedure ought to be available to creditors.

[10] The challenge to a liquidators decision concerning a Proof of Debt is governed by Regulations 15 and 16 of the Companies Act 1993 and the Liquidation Regulations Act 1994. Regulation 15(2) treats the application as being an appeal from a decision of the liquidator. When assessing whether a proof of debt should be rejected the Court considers the reasons the liquidator has given. Section 284 of the Companies Act enables the Court to supervise a liquidator and the decisions of that person.

[11] As a general proposition this Court considers the Part 19 process to be generally appropriate for the purpose of reviewing a decision to refuse a proof of debt. That does not mean to say it must always be appropriate for that purpose but usually it should be. Particularly when as here the applicant’s claim is relatively modest.

[12] It does not appear to the Court that any prejudice to the liquidators has been identified by the prospective engagement of the originating application process – save for recourse, in the normal manner, to prescriptive discovery obligations.

[13] In this case the Court’s enquiry will be about the liquidators’ reasons for acting as they did; and about the knowledge and information available to them to justify their reasons. It does not appear on this view of the matter that standard discovery be required. The focus of this enquiry appears to be about whether the applicant received entitlements from another source that were otherwise entitlements that the company in liquidation is obliged to meet.

[14] The issues do not appear to be complex and to the Court it seems these can be properly examined by reference to the Part 19 procedure.

Judgment

[15] The Court grants leave for the proceeding to be commenced by way of originating application pursuant to Part 19 of the High Court Rules.

Associate Judge Christiansen