Sanson and Anor v Ebert Construction Ltd
| Jurisdiction | New Zealand |
| Judge | Judge J P Doogue |
| Judgment Date | 06 October 2015 |
| Neutral Citation | [2015] NZHC 2402 |
| Docket Number | CIV-2014-404-2977 |
| Court | High Court |
| Date | 06 October 2015 |
[2015] NZHC 2402
CIV-2014-404-2977
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
Application by a liquidator under s292 Companies Act 1993 (CA) (insolvent transactions voidable) — company had entered into a direct agreement in relation to the funding of a development contract — under agreement the lender would directly advance funds to the respondent on the instruction of the company — there were a series of transactions (including monetary transfers and the transfer of property to reduce indebtedness) to the respondent totalling $1.6 million — the monetary transactions had been made in the four days before being placed into liquidation — the transactions had occurred six and a half years previously — whether the payments made by the lender were “transactions” made by the company or whether they were the result of the lender meeting obligations under the direct agreement to the respondent — whether the arrangement amounted to a guarantee — whether the arrangements contravened the assets deprivation rule — whether the respondent had received preferential payments — whether the proceedings were time barred under the Limitation Act 1950.
M J Tingey and N Moffatt for Applicants
A Van Ammers and R J Gordon for Respondents
JUDGMENT OF ASSOCIATE Judge J P Doogue
The applicant liquidators seek to set aside $1,603,891.90 in transactions between Takapuna Procurement Ltd (In Liquidation) (“TPL”) and Ebert Construction Ltd (“Ebert”) pursuant to ss 292 and 295 of the Companies Act 1993.
The transactions comprise (together, the Transactions):
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a) a payment of $499,226.50 to Ebert on 18 November 2008;
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b) the transfer of apartment B401 and accessory unit AU40 (certificate of title 341326 (North Auckland registry)) (the Property) to Ebert on 20 November 2008 for reduction in indebtedness of TPL in the sum of $540,000; and
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c) a payment of $564,665.40 to Ebert on 21 November 2008.
It is uncontroversial that the two monetary payments in (a) and (c) occurred in the four days before TPL was placed into liquidation on 21 November 2008. There is contention between the parties as to whether transaction (b) occurred at that time or at an earlier point. This will have to be resolved in the course of this judgment.
The claim which Ebert makes is for the balance of amounts which it was owed for the construction of an apartment complex, the Shoalhaven Apartments, located in Takapuna on the North Shore of Auckland (Shoalhaven Apartments).
The Court appointed liquidators to TPL on the application of the Commissioner of Inland Revenue (the Commissioner). The Commissioner alleged that TPL was insolvent and that it had failed to pay $2,272,575.80 in GST payments to the IRD.
It is not in dispute that TPL could not pay the debt owed to the Commissioner or the $17,496,821.61 that it owed to another creditor, Strategic Nominees Ltd (Strategic).
The claim which the liquidators make is that because TPL had failed to make a preferential payment to the IRD of over $3,000,000, Ebert would never have received any of the $1,603,891.90 in liquidation.
In October 2005, TPL entered into a construction contract with Ebert to construct the Shoalhaven Apartments (the Construction Contract). The contract was for a lump sum of $32,497,188 (plus GST) (the Construction Sum).
The funding of TPL obtained for the development of the Shoalhaven Apartments came from two lenders, BOS International (Australia) Limited (BOSI) and Strategic (the Financiers). BOSI was the senior lender of the two and its lending arrangements with TPL are those that have some bearing on the present application.
The funding provided by BOSI was under a Senior Facility Agreement (Construction) (the Senior Facility) that BOSI and TPL entered into on 3 November 2005.
The Senior Facility provided for a cash advances facility with a limit of $36,500,000 (the Facility). The Facility was divided into tranches. Tranche A had a maximum limit of $36,000,000 and was to be used to assist in the development of stage 1 and stage 2 of the Shoalhaven Apartments. Tranche B had a maximum limit of $500,000 and was to be used to pay GST due and payable in respect of the Shoalhaven Apartments.
Subsequently, Tranche B was increased to $800,000, taking the overall facility to $36,800,000, under a Deed of Amendment of the Senior Facility.
In addition to the Senior Facility, TPL entered into a direct agreement with Ebert, BOSI and Strategic on 3 November 2005 (Direct Agreement). The Direct Agreement provided that:
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a) the Deed was to record agreements reached between TPL, Ebert, BOSI and Strategic about the Construction Contract (recital C);
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b) BOSI agreed to pay direct to Ebert the amount payable by TPL to Ebert under the Construction Contract to the extent approved by an approved quantity surveyor (cl 4.2(d));
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c) TPL irrevocably authorised BOSI to make an advance pursuant to the Senior Facility for the purpose of payments to Ebert being made (cl 4.6(a)(i));
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d) all parties expressly acknowledged that TPL remained primarily liable for all its obligations under the Construction Contract (cl 4.5);
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e) notwithstanding anything in the Deed or any act or omission by BOSI or Strategic, TPL remained liable to perform all its obligations assumed pursuant to each relevant document, including the Construction Contract (cl 9.1); and
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f) the terms of the Direct Agreement takes precedence over the terms of the Construction Contract but, except to the extent expressly modified by the Direct Agreement, the Construction Contract remained in full force and effect (cl 17).
Reference will be required to other aspects of the Direct Agreement in due course.
The construction of the Shoalhaven Apartments reached practical completion under the Construction Contract on or about 23 April 2008.
At the beginning of November 2008, Ebert and TPL agreed that the amount owed by TPL to Ebert under the Construction Contract was $1,603,891.90, broken down as follows:
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a) $3,856.66 under payment schedule 34;
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b) $647,370.44 under payment schedule 35;
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c) $388,000 under extension of time claim 2;
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d) $194,695.31 under payment schedule 36; and
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e) $369,970.09 under payment schedule 37.
Payment of the amounts which were agreed to be paid thereafter took place by way of the two cash payments and the transfer of the apartment which are referred to above.
The mechanics by which the payment in regard to the apartment were that Ebert took a nomination from Nidus Properties Ltd (Nidus), under the Nidus Agreement pursuant to which Nidus' rights as purchaser passed to Ebert. Notification of this nomination was made to TPL by Nidus' solicitors on 5 November 2008.
The applicants assert that, at the time when the agreement for transfer of the apartment was entered into, it was sixteen days before the call of the IRD's liquidation application on 21 November 2008 which Ebert, by its then CEO, Mr Martin, was aware of. 1
It would in fact seem that around about this time, the respondent was having some concerns about the liquidity of TPL. On 17 November 2008, Mr Martin, the CEO of Ebert, sent an email to Mr Peter Brown of Strategic in which he stated as follows:
However, with TPL's forthcoming receivership, I am concerned about the risk of TPL's receiver clawing back any or all money put in escrow.
I interpolate that it is more likely than not that the reference to a receivership should be read as referring to the impending liquidation application which the Commissioner had instigated.
The agreement between TPL and Ebert under which it was proposed and agreed that the respondent would acquire the apartment was recorded in a letter, dated 5 November 2008, sent to TPL by Mr Martin. The agreement referred to in the letter also provided that TPL would make payment of claim 35. Of that claim, Ebert would authorise TPL to pay $152,000 otherwise due and owing to Ebert into the Carter Atmore Law trust account to effect settlement of the Nidus Agreement. Due to this, Ebert would only directly receive $495,370.44 in funds towards payment of claim 35. The remaining $388,000 due under the Nidus Agreement was to be paid through writing off the $388,000 that was due to Ebert under extension of time claim 2.
On the same date, TPL and Ebert entered into a Settlement Agreement under which they recorded arrangements in relation to settling the final account for completion of works at Shoalhaven. BOSI was not a party to this agreement. The agreement recorded that a deed would be prepared for termination of the Direct Agreement and “satisfactory security of payment of outstanding payments to [Ebert]”.
On 6 November 2008, Ebert issued a statement of account for payment claims 34 and 35 and extension of time claim 2. The statement reflected the arrangement described above and showed a cash balance owing by TPL in respect of those claims of $499,227.24.
On 13 November 2008, TPL issued drawdown notices on BOSI for the sum of $578,868 under Tranche A of the Senior Facility and $72,358.50 from Tranche B of the Senior Facility. The amounts under Tranche A were described as being $426,868 for Ebert and $152,000 to be paid to the Carter Atmore Law trust account. The amounts under Tranche B were described as being for Ebert.
On 18 November 2008, BOSI advanced the sum of $606,879.13 under Tranche A of the Facility and $75,859.89 under Tranche B of the Facility. Out of these sums, BOSI remitted $499,226.50 to Ebert and...
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Sanson and Anor v Ebert Construction Limited
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