MADSEN-RIES V BURROWES HC AK CIV-2012-404-005120

MADSEN-RIES V BURROWES HC AK CIV-2012-404-005120

The payment of $400,000 was an insolvent transaction made within the restricted period and voidable under the Companies Act 1993; respondents failed to establish the s 296(3) defence because a reasonable director in the respondent's position would have suspected insolvency and taken enquiries; the excess $94,254.91 over the recorded shareholders' credit was an advance repayable on demand; delay and asserted impecuniosity did not justify ordering less than full repayment; therefore the transaction was set aside and repayment ordered.

Citation
openlaw-cf5492be_1dd6_4ed2_b5f4_40050210e082.pdf
Parties
First Applicant (liquidator): Vivien Judith Madsen-Ries; First Applicant (liquidator): Henry David Levin; Second Applicant: Elbur Developments Limited (In Liquidation); Respondent: Craig Burrowes; Respondent: Sandra Kaye Burrowes
Court
High Court
Jurisdiction
New Zealand
Judgment Date
19 February 2013
Procedural Posture
Companies Act 1993: Voidable/insolvent Transaction in Liquidation / High Court Judgment (application to Set Aside Transaction)
Outcome
Application granted; voidable transaction set aside; repayment ordered
Legal Topics
Voidable Transactions, Insolvent Transaction, Director Duties, Repayment Orders, Defences for Good Faith Recipients
Companies Law Insolvency Law Voidable Transactions Insolvent Transaction Director Duties Repayment Orders Defences for Good Faith Recipients

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Parties

Vivien Judith Madsen-Ries

First Applicant (liquidator)

Henry David Levin

First Applicant (liquidator)

Elbur Developments Limited (In Liquidation)

Second Applicant

Craig Burrowes

Respondent

Sandra Kaye Burrowes

Respondent

Procedural Posture

Companies Act 1993: Voidable/insolvent Transaction in Liquidation / High Court Judgment (application to Set Aside Transaction)

Legal Issues

  1. 1 Whether the $400,000 payment was an insolvent transaction voidable under s 292 and s 294 Companies Act 1993
  2. 2 Whether the liquidators could set the transaction aside and obtain repayment under s 295
  3. 3 Whether respondents could rely on the s 296(3) good faith defence to avoid repayment

Ratio Decidendi

The payment of $400,000 was an insolvent transaction made within the restricted period and voidable under the Companies Act 1993; respondents failed to establish the s 296(3) defence because a reasonable director in the respondent's position would have suspected insolvency and taken enquiries; the excess $94,254.91 over the recorded shareholders' credit was an advance repayable on demand; delay and asserted impecuniosity did not justify ordering less than full repayment; therefore the transaction was set aside and repayment ordered.

Court Disposition

Application granted; voidable transaction set aside; repayment ordered

Orders

  • Payment of $400,000 made on 12 July 2007 set aside as a voidable transaction under s 294(5) Companies Act 1993
  • Respondents Craig Burrowes and Sandra Kaye Burrowes to repay $400,000 to the company (liquidators)