Warren Metals Ltd v Grant and Khov Hc Ak

JurisdictionNew Zealand
CourtHigh Court
JudgeAsher J
Judgment Date20 February 2013
Neutral Citation[2013] NZHC 263
Docket NumberCIV-2012-404-005190
Date20 February 2013

[2013] NZHC 263

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-005190

BETWEEN

Under Section 72 of the District Courts Act 1947

In The Matter of an appeal of a decision of the Auckland District Court

Warren Metals Limited
Appellant
and
Damien Grant and Steven Khov
Respondents
Counsel:

SS Khan and JE Riddle for Appellant

RM Dillon for Respondents

Appeal against District Court (“DC”) finding that it had no jurisdiction to determine personal claims brought against liquidators — DC said the liquidators were acting in their capacity as liquidators and could not be sued in DC as High Court had exclusive jurisdiction — liquidators cut up a metal press belonging to appellant and sold it for scrap — appellant had also paid in advance for scrap which had been loaded into appellant's containers and liquidators refused to allow it to leave the premises until appellant paid again — appellant alleged it had claims in conversion in respect of metal press and in agency/sale of goods in respect of scrap metal in containers — whether claims in the DC were barred by s248 Companies Act 1993 (“CA”) (effect of commencement of liquidation) or s284 CA (court supervision of liquidation).

The issues were: whether the DC was barred from determining personal claims against liquidators by s248 CA or s284 CA; whether the liquidators had made a decision about an asset of the company; and whether the company had a possessory right in the press so that it was property of the company and covered by s248(1)(c)(ii).

Held: In a liquidation the assets of the company were not vested in the liquidator although under s248(1)(a) CA, the liquidator had the custody and control of the company's assets. The liquidator had no better title to the assets than the company itself. Once a company was put into liquidation, the rights of unsecured creditors were limited in proving their claims. To continue a claim against the company required leave.

The section took away the functions and duties of the directors which were assumed by the liquidator as the company's agents. It did not give the company or its liquidator any extra rights or different rights in relation to property owned by third parties. A liquidator could be liable for any torts or breaches of contract committed in the course of the liquidation. Although it was true that a decision regarding an asset of the company could only be challenged in the HC, Warren Metals did not accept that the metal press was an asset of the company. Further it was not saying that the company had done anything unlawful in relation to the metal press — it said that the liquidators had done so.

The company and its liquidators had no possessory right at the time the metal press was cut up. Warren Metals claimed that the press was always its asset and that the company had no right to retain it or use it. Therefore, it said, the liquidators committed a tort when it was cut up. Section 248 CA was not designed to protect liquidators from unlawful actions by them against the property of third parties, whether or not they considered themselves to be acting in their capacity as liquidators at the time. If they chose to commit an unlawful act against the property of a third party they could be personally liable. Section 248 CA did not pose an impenetrable jurisdictional bar. Further, s248(1)(c)(ii) CA applied to the exercise of enforcement of rights or remedies, not the commencement or continuation of legal proceedings, to which s248(1)(c)(i) applied.

Section 284 CA did not say that any claims against the liquidators, who were officers of the HC, must be dealt with by the HC. The section had no direct relevance to a claim by a third party in relation to property that had been unlawfully interfered with by persons who happened to be liquidators. It was not the function of s284 to take away claims that were otherwise arguable against persons who committed alleged wrongs in their capacity as liquidators. It was open to any third party to sue liquidators personally, although the third party had to overcome the hurdle of proving that the liquidators made themselves personally liable. The Court would determine such a proceeding on orthodox common law principles.

The claim could be brought against the liquidators by Warren Metals as the owner of the chattel that had been allegedly unlawfully converted by them. The essence of conversion was dealing with Warren Metals' chattel in a manner that was inconsistent with its property rights, wilfully and without lawful jurisdiction. The fact that the liquidators claimed to have been acting in their capacity as liquidators did not take away the DC's jurisdiction to hear that claim. Sections 248 and 284 CA were irrelevant. The decision to strike out the claim in relation to the metal press was incorrect.

Warren Metal's claims in respect of the payments made for the scrap metal had nothing to do with s248 and s284 CA but were founded in the law relating to agency and the sale of goods. Warren Metals was claiming that it owned certain property and that the liquidators had acted unlawfully in respect of that property. There was no jurisdictional bar. The defence that the liquidators were acting only as agents for the company and were not personally liable, together with issues as to passing of property, could be dealt with in the DC.

If the facts relied on by Warren Metals were proven, then there was an arguable cause of action available to it based on conversion or detinue against the liquidators for refusing to provide the containers of metal worth $40,000. There might also be a claim based on quantum meruit for the unjust enrichment of the liquidators in relation to the second payment of $32,000, a payment for the metal which was at that point already owned by Warren Metals.

Sections 248 and 284 CA did not bar personal claims brought against the liquidators. The DC had jurisdiction to deal with the claims.

Appeal allowed. Order striking out proceedings set aside and order made that proceedings to be heard by DC

JUDGMENT OF Asher J

Introduction
1

On 6 August 2012, Judge DM Wilson QC struck out by oral judgment the claim of Warren Metals Ltd against Damien Grant and Steven Khov, on the basis that the District Court had no jurisdiction to hear the case. This occurred at the outset of the trial before the giving of evidence. Warren Metals Ltd appeals that decision.

2

The respondents, Messrs Grant and Khov, are liquidators. The Judge found that because they were acting as liquidators when they carried out the acts that were the subject of the claim they could not be sued in the District Court. The core issue is whether this conclusion was correct.

Lead up to the dispute
3

Briefs of evidence were exchanged prior to the trial and have been referred to extensively in the course of submissions. Accordingly, the facts that are the subject of the dispute (as yet unproven) have been set out, and I draw them largely from the brief of Warren Halloran.

4

The arrangements that led to the claim go back to 1993. The appellant Warren Metals Ltd (“Warren Metals”) was, at that point in time, trading with a William Conway and various of his companies. Mr Conway's companies still trading in 2008 are the companies that are now in liquidation.

5

The business conducted between Warren Metals and Mr Conway's companies was that of obtaining and dealing in scrap metal. William Conway and his companies would pay cash to obtain metal from the public. It would be held in their premises. They would then on-sell the metal to Warren Metals who would dispose of it largely by export. For some of the collected metal to be useable and transportable by Warren Metals, it needed to be compressed.

6

Warren Halloran is the principal of Warren Metals. In his brief, he outlines how he arranged manufacture of a light gauge metal press for Warren Metals in 1994. In April 2008, it was arranged that he would leave it with William Conway at his business premises and where it would be used to convert metal into a compressed state. At the time Warren Metals had staff processing the metal at Mr Conway's premises. It was arranged between them that the press remained the property of Warren Metals.

7

By 2008, Mr Conway was operating through a number of companies. These included 123 Metals Ltd, Cash 4 Scrap (2008) Ltd, North Island Metals Ltd, and Bairds Road Scrap Ltd. These companies operated out of premises leased by Bairds Road Scrap Ltd at 57 Tidal Road. The press was moved to that site.

8

On 23 May 2008, 123 Metals Ltd was placed into liquidation, followed by Bairds Road Scrap Ltd on 30 May 2008. It seems that Mr Conway's other companies continued to trade.

9

One company, North Island Metals Ltd, was trading in early June 2008 and was not in liquidation. However, on 5 June 2008 North Island Metals Ltd was placed into voluntary administration. On 11 June 2008, another company, Cash 4 Scrap (2008) Ltd, was placed into liquidation. The liquidators of 123 Metal Ltd, Bairds Road Scrap Ltd and Cash 4 Scrap (2008) Ltd, and the administrators of North Island Metals Ltd, were the respondents Messrs Grant and Khov.

10

In early 2008, the practice had developed that when Mr Conway was having cash flow problems, Mr Halloran would give large sums of cash to Mr Conway for the purchase of scrap. On 30 May 2008, the appellant and Mr Conway arranged for the appellant to pay $40,000 in advance for two containers of scrap metal that were to be loaded at Tidal Road over the long weekend (Queen's Birthday weekend).

$40,000 cash was paid on 1 June 2008.

11

On 6 June 2008, Warren Metals attempted to uplift two containers of preloaded metal, this being the metal that had been paid for on 1 June 2008. The respondents refused to...

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