Sargison and Dalton v Green Grass Ltd

JurisdictionNew Zealand
CourtHigh Court
JudgeJudge Bell
Judgment Date06 September 2012
Neutral Citation[2012] NZHC 2304
Docket NumberCIV-2011-404-4830

[2012] NZHC 2304

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV-2011-404-4830

Under the Companies Act 1993

In the Matter of the liquidation of CLUB CROW BAR LIMITED

Between
Paul Graham Sargison and Simon Dalton
Plaintiffs
and
Green Grass Limited
Defendant
Counsel:

B Hojabri for Plaintiffs

R B Hucker and D Lang Siu for Defendant

Summary judgment application by liquidators under s298 Companies Act 1993 (insolvent transaction voidable) for recovery of payments made by insolvent company to a related company — plaintiffs had obtained summary judgment which was set aside by Woodhouse J — whether setting aside decision prevented liquidators from re-litigating the issue — whether issue estoppel applied — whether defendant had arguable defence — whether normal rule should be departed from and costs should be awarded on this application against unsuccessful party.

Held: Ordinarily, if a plaintiff obtained judgment by default on a summary judgment application regularly and a defendant later successfully applied to set aside under r12.14 High Court Rules (“HCR”) (application of summary judgment procedure), the finding that there was an arguable defence for the setting-aside application would usually result in the court also there and then deciding to dismiss the summary judgment application.

Woodhouse J had not taken that course however. While he had set aside the judgment, he had expressly held that the liquidators were still entitled to maintain their application for summary judgment. He had made it clear that his decision on the setting-aside application did not pre-determine the outcome of any further hearing of a summary judgment application.

When a court made a decision on an interlocutory application, there was an issue as to whether a finding in the course of an interlocutory application could be final for the issue estoppel rule. Usually a decision on an interlocutory application would not give rise to a cause of action estoppel. The issue turned more on the matter of issue estoppel. Woodhouse J's decision meant it was open to the liquidators to apply for summary judgment and to adduce new evidence in support of the application. That meant the decision could not have the kind of binding effect that would preclude the court from inquiring on another occasion whether Green Grass had an arguable defence to the claim. That procedural decision did not prevent the same question being raised afresh in this application for summary judgment. Woodhouse J's decision did not preclude the liquidators' application for summary judgment.

Given the studied lack of co-operation, it was understandable that the liquidators were suspicior of a defence fun by an entity associated with M and for which the office manager kept the books. Green Grass had not done itself any favours because of this lack of co-operation. It was not relevant that the documents could have been obtained elsewhere (from the bank or IRD records). There was a requirement for co-operation with the liquidators.

The liquidators' attack on the transactions pointed to by the office manager was on matters of detail rather than showing that the records could be dismissed as a whole. The fact that only parts of Green Grass' defence could be attacked showed that there were difficulties for the liquidators to conclude for summary judgment purposes, that Green Grass did not have any arguable defence to the claim as a whole. Just because some aspects of the defence case could be open to criticism did not mean that no part of the defence was sound. The materials presented by Green Grass were sufficient for summary judgment purposes to hold that there was an arguable defence.

While normally the Philpott principle would apply, this was an appropriate case in which to depart from it and award costs. While the issue estoppel point did not bind directly, the case had involved a re-argument of the question whether Green Grass had an arguable defence in circumstances where the liquidators did not present any new evidence but relied solely on their existing evidence. The liquidators ought to have appreciated that if they did not adduce any new evidence then a Judge would decide the summary judgment application in much the same way as Woodhouse J decided the setting-aside application. Judicial minds tended to work alike and, when given the same evidence and applying the same test, most times would reach the same answer. The liquidators should have foreseen that. It was predictable that they would fail.

Application for summary judgment dismissed.

ORAL JUDGMENT OF ASSOCIATE Judge Bell

1

Paul Sargison and Simon Dalton are the liquidators of Club Crow Bar Ltd which was ordered to be put into liquidation on 3 June 2011. The company was incorporated in April 2009. It operated a bar/night-club in Wyndham Street, Auckland. Megan McCabe was the sole director and shareholder of the company. She has since been adjudicated bankrupt. I am advised that, although not discharged, she is no longer in the country.

2

Green Grass Ltd is an older company that was established in January 1988. Until September 2011, Megan McCabe was the sole director and sole shareholder of Green Grass Ltd.

3

The liquidators of Club Crow Bar Ltd have investigated the bank accounts of the company. They found that Club Crow Bar Ltd made payments to Green Grass Ltd totalling $231,280 as set out in the statement of claim. They also say that Green Grass Ltd paid Club Crow Bar Ltd $11,550, so that net payments by Club Crow Bar Ltd to Green Grass Ltd amount to $219,730. The liquidators say that Green Grass Ltd did not provide any consideration for the net payments of $219,730. They claim under s 298(2) of the Companies Act 1993 for recovery of $219,730 on the grounds that the payments were dispositions of property in favour of another company that, at the times of the dispositions, was controlled by Megan McCabe, a director of Club Crow Bar Ltd. 1

4

There is no dispute that if the transactions were not supported by consideration, they were made within the specified period under s 298 and by reason of Megan McCabe's directorship of Green Grass Ltd, a claim can be made under s 298(2). The liquidators apply for summary judgment.

5

There are two questions:

1
    Does the judgment of Woodhouse J given on 4 May 20122 stand in the way of the liquidators obtaining summary judgment? and 2. Have the liquidators established that Green Grass Ltd does not have an arguable defence to the claim under s 298?
Does the judgment of Woodhouse J of 4 May 2012 stand in the way of the liquidators obtaining summary judgment?
6

The liquidators applied for summary judgment and obtained judgment by default, as Green Grass Ltd took no steps. Green Grass Ltd applied to set aside the default judgment. Woodhouse J heard the application under r 12.14 on 4 May 2012. He set aside the judgment. To reach that decision, he held that Green Grass Ltd had an arguable defence to the liquidators' claim.

7

Green Grass Ltd invokes issue estoppel. It says that Woodhouse J has already decided whether Green Grass Ltd can arguably maintain that it has a defence to the liquidators' claim, because that was a matter in issue before him, and it is also an issue in this application. The argument is that the finding for a setting-aside application, that Green Grass Ltd has an arguable defence, also runs when the liquidators apply for summary judgment following the setting aside.

8

Green Grass Ltd also points out that following the hearing before Woodhouse J the liquidators filed one further affidavit. That affidavit only consolidates existing evidence. There is no new evidence that was not before Woodhouse J.

9

The question here is whether the decision of Woodhouse J is final in the sense that it now prevents the liquidators relitigating the issue that was before Woodhouse J. That issue is whether Green Grass Ltd has an arguable defence to the claim for summary judgment. It is also before the court today.

10

Ordinarily, if a plaintiff has obtained judgment by default on a summary judgment application regularly and a defendant later successfully applies to set aside under r 12.14, the finding that there is an arguable defence for the setting-aside

application will usually result in the court also there and then deciding to dismiss the summary judgment application. I gave such a decision in Walter Peak Developments Ltd v Millar. 3
11

Woodhouse J did not take that course here. While he set aside the judgment, he expressly held that the liquidators were still entitled to maintain their application for summary judgment. He was at some pains to make it clear that his decision on the setting-aside application was not to pre-determine the outcome of any further hearing of a summary judgment application: 4

The matters that have been raised, including the serious issues dvanced by Ms Hojabri in her submissions, are matters that should go to a full summary judgment hearing. It is not appropriate that that hearing be conducted on this present application. And it may very well be that, following this hearing, the plaintiffs will withdraw the application for summary judgment. Having made that observation I wish to make clear that I am not expressing any concluded view in that regard…

Later he said: 5

For the avoidance of doubt, I make clear that the summary judgment has been set aside but the summary judgment application itself has not been set aside. The plaintiff is therefore free to proceed on the summary judgment application if it considers that such is appropriate and notwithstanding the tentative observations in this judgment.

12

Part of Woodhouse J's formal order was that the plaintiffs' application for summary judgment remains for hearing or other disposal. 6

13

When a court makes a decision on an interlocutory application, there is a vexed issue whether a finding in the course...

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2 cases
  • Sargison v Green Grass Limited
    • New Zealand
    • High Court
    • September 6, 2012
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  • Sargison and Dalton v Green Grass Limited
    • New Zealand
    • High Court
    • September 6, 2012
    ...HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV-2011-404-4830 [2012] NZHC 2304 UNDER the Companies Act 1993 IN THE MATTER OF the liquidation of CLUB CROW BAR LIMITED BETWEEN PAUL GRAHAM SARGISON AND SIMON DALTON Plaintiffs AND GREEN GRASS LIMITED Defendant Hearing: 6 September 2012 Counsel:......

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