Levin and Jordan as Liquidators of B & J ITI Contracting Ltd ((in Liquidation)) v ITI & Syddall Enterprises Ltd

JurisdictionNew Zealand
CourtHigh Court
Judgment Date01 Sep 2011
Neutral Citation[2011] NZHC 1050
Docket NumberCIV 2011-404-405

[2011] NZHC 1050


CIV 2011-404-405

Under the Companies Act 1993

In The Matter of the liquidation of B & J Iti Contracting Limited

Henry David Levin and Barry Phillip Jordan as Liquidators of B & J Iti Contracting Limited (In Liquidation)
ITI & Syddall Enterprises Limited

CC Mansell for applicants

GE Sharrock, CB Hirschfeld and SC Potter for respondent on 4 July 2011

SC Potter for respondent on 29 August 2011

[on application that transaction be set aside and for recovery]

This judgment was delivered by me on 1 September 2011 at 4pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar


The application

The applicants seek orders in reliance on ss 292, 294, 295 and 296 of the Companies Act 1993:

  • (a) Setting aside payments totalling $62,406.37 made by B & J Iti Contracting Ltd (in liquidation) to Iti & Syddall Enterprises Ltd and referred to in the liquidators' notice to set aside a voidable transaction dated 2 February 2009; and

  • (b) Requiring the respondent to pay $62,406.37 to B & J Iti Contracting Ltd.


The liquidators' notice, which is not contained in the bundle of documents prepared by counsel for this hearing, was produced by counsel's memorandum dated 7 July 2011 and filed in this proceeding. The notice had apparently been filed on 2 February 2009 and given the number CIV 2006-404-6745.


The operative parts of the liquidators' notice provide:

Take notice that-

  • 1. Henry David Levin, liquidator of B & J Iti Contracting Limited (In Liquidation) (“the Company”) hereby seeks to set aside payments made by the Company totalling $62,406.37 in reduction of the debt for goods and services supplied by Iti & Sydall Enterprises Limited.

  • Details of Voidable Transactions

    2. The Company was put into liquidation by the appointment of a liquidator on 12 April 2007 by the High Court at Auckland. The matter number for the original proceeding was CIV-2006-404-6745. The application for appointment of a liquidator was filed on 1 November 2006.

  • 3. The property or value that the Liquidator wishes to recover is $62,406.37 made up of the transactions set out in Appendix A.

  • 4. In giving this notice, the liquidator relies on the following grounds:

    • (a) The liquidators have reviewed the Company's MYOB supplier card transaction listing and have considered the running account balance. Within the specified period the peak of the Company's debt to Iti & Sydall Enterprises Limited was $64,137.87; and Iti & Sydall Enterprises Limited were owed $1,731.50 at the date of liquidation. The Liquidators believe that Iti & Sydall Enterprises Limited have received a voidable preference of $62,406.37.

    • (b) The Transactions were insolvent transactions in terms of section 292 of the Companies Act 1993 (“the Act”).

    • (c) The Transactions were within the specified period as defined by section 292(5) of the Act as the period of two years before the date on which the application for liquidation was made to the High Court.

    • (d) The Transactions have enabled Iti & Sydall Enterprises Limited to receive more towards the satisfaction of a debt than it would otherwise have received or have been likely to have received in the company's liquidation.

History of this application

I shall refer to B & J Iti Contracting Ltd as the company. This matter has had an unfortunate history since the filing by the liquidators of a notice to set aside transactions pursuant to s 294 of the Companies Act 1993 on 2 February 2009. The respondent, by its solicitors, sent a letter, which was accepted by the liquidator as a notice objecting to the liquidators' notice pursuant to s 294(3) of the Companies Act 1993. It was not until 1 February 2011 that the liquidators filed their application to set aside transactions and for recovery of the moneys covered by those transactions.


The application was then subject to directions made by this Court on 23 March and 6 and 20 May 2011. The direction made on 23 March 2011 allocated a one-day fixture for 4 July 2011. The respondent was in serious breach of those directions. I issued a minute on 29 June 2011, two clear working days before the fixture. After setting out the background in the minute, I ordered as follows:

    The file discloses no submissions in opposition and copies of all authorities from the respondent. They are now in default in that requirement. This must be attended to forthwith. 5. I have considered the document which is entitled Notice of opposition to originating application for order that transaction be set aside and for recovery dated 31 March 2011. The document, as a notice of opposition, does not comply with r 7.24 in that it: a. Does not state which of the orders sought in the application are opposed; b. Does not state the specific grounds of opposition to the orders sought; c. Does not refer to any particular enactment or principle of law or judicial decision on which the respondent relies.

The deficiencies in the respondent's case continued until 5pm on Friday, 1 July 2011. When the matter was called before me on 4 July 2011, I allowed counsel to take further instructions because, obviously, the position was unsatisfactory. The respondent sought a further adjournment and indicated a desire to file further affidavit evidence. On probing further as to the nature of the affidavit evidence, it appeared to be restricted to the application of s 296 to the case. Counsel for the applicants, with some reluctance, obtained instructions to proceed. I can understand the difficult position that the applicants were placed in, particularly when they considered the economics of the matter.


The hearing proceeded on the basis that the application would be examined as to the application of ss 292 and 294 of the Companies Act 1993 and, if that did not determine the matter, further time would be allowed to consider matters pertaining particularly to s 296 of the Companies Act 1993. Unfortunately, it became evident as the hearing proceeded that the evidence before me was unsatisfactory and that I did not feel confident that a proper determination of the issues restricted to those raised by ss 292 and 294 of the Companies Act 1993 could be achieved. Accordingly, further fixture time was allocated and directions made to ensure that the file was in proper shape for the conclusion of this application. It is important that I add that one of the previous major points raised in opposition was that B & J Iti Contracting Ltd was holding moneys on trust for the respondent that were ultimately paid to the respondent. Counsel advised that that position was no longer pursued. It is not covered in the notice of opposition that was then filed. Although the affidavits that appear on the file deal with this issue, it will not be further dealt with in my analysis.


My minute drew attention to a further matter. Accordingly I set out that portion of the minute:

10. Because of the timing of the transaction, the analysis which the court is required to undertake involves the provisions of s 292 and following of the Companies Act 1993 prior to the amendment which was substituted from 1 November 2007 by s 27(1) of the Companies Amendment Act 2006. Accordingly, the specific issues that are now required to be determined by the court are:

  • (a) Whether some 63 payments and covering a sum in total of $62,406.37 and which were made within the restricted period as defined in s 292(6) of the Companies Act 1993 were made in the ordinary course of business of B & J Iti Contracting Ltd;

  • (b) Whether Iti & Syddall Enterprises Ltd knew that the intent or purpose of the payments were in respect of matters referred to in s 292(4)(a), (b) and (c); and

  • (c) Whether the respondent received the payments in good faith and has altered its position in the reasonably held belief that the payments were validly made and would not be set aside and that it is inequitable to order recovery, or recovery in full.


My minute then noted that further time had to be allowed for the filing and service of further affidavits in support, opposition and reply and appropriate directions covering that were the made.


On reviewing the file I discovered that the liquidators' notice, required by s 294 of the Companies Act 1993, was not on the court file. I issued a minute requiring production of the complete notice with its appendix. Counsel, by memorandum, then filed the notice.


When I analysed the notice that had been provided I became concerned as to whether it complied with s 294(2)(c) of the Companies Act 1993. Section 294(2)(c) provides that the liquidators' notice must “specify the transaction or charge to be set aside”.


I issued a minute which relayed my concerns to counsel. The operative parts of this are now set out:

    I raise for counsel to consider whether there has been a compliance with s 294(2)(c) of the Companies Act 1993. 4. Subject to checking and working back from 8 December 2006 to 1 May 2006, the column in Appendix “A” which appears to signify payments made by B & J Iti Contracting Ltd to the respondent total $123,709. I have extracted that from the column with “Debit” at its head. If the counting I have taken is correct, that would indicate that a number of the entries in the column that I have made reference to are not the subject of challenge. That, in turn, would indicate that there has not been an appropriate specification of the transactions that are challenged by the liquidators.

The response to my minute came principally via one of the liquidators, Mr Levin's, affidavit of 15 July 2011. Mr Levin's response is contained in paragraphs 18–22 of that affidavit, which I now set out:

    I note that the Court questioned the contents of the notice to set aside the transactions. 19. On 2...

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