BRADBURY V VANCE CA CA719/2008

BRADBURY V VANCE CA CA719/2008 29 June 2009IN THE COURT OF APPEAL OF NEW ZEALAND CA719/2008 [2009] NZCA 277BETWEEN GAYNOR NOREEN BRADBURY Appellant AND DAVID STUART VANCE Respondent Hearing: 18 June 2009 Court: Glazebrook, Potter and Keane JJ Counsel: R C Laurenson for Appellant J R Sumner and C L Potter for Respondent Judgment: 29 June 2009 at 3.30 pmJUDGMENT OF THE COURT A The appeal is dismissed. B Costs are awarded to the respondent for a standard appeal on a Band A basis plus usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Keane J) [1] On 31 October 2008, David Vance, the liquidator of Touchtec Equipment Marketing Limited (Touchtec), obtained summary judgment against Gaynor Bradbury for $40,000 under s 298 of the Companies Act 1993 (the Act).[2] Mrs Bradbury, it was uncontested, received from Touchtec two $20,000 payments, the first on 16 November 2004 and the second on 23 December 2004, at the behest of her son, Scott Anderson. Mr Anderson holds half the shares in Touchtec and was, until September 2004, a director of Touchtec, and at the time of the advances still retained control of Touchtec. It was also uncontested that these payments were made within three years of Touchtec going into liquidation on 31 August 2006. [3] The primary defence Mrs Bradbury then advanced, which Associate Judge Gendall rejected as untenable on the evidence, was that she did not receive the two payments from Touchtec. She contended that she received them from her son, or some entity other than Touchtec, on his instruction. On this appeal, she contends, the Associate Judge, in rejecting her defence, went against the weight of the evidence. [4] Mrs Bradbury's second line of defence was that the payments to her resulted from the sale of shares, that she had purchased on her son's advice, in a company in which her son also had an interest, Akamai Technologies New Zealand Limited (Akamai). That contention, the Associate Judge held, was unsupported by any evidence. On this appeal that finding is uncontested.Central issue[5] It appears accepted on this appeal that the Associate Judge expressed accurately the effect of s 298(2)(b) of the Act, which captures company transactions entered into within three years of liquidation with directors, or persons in control, or relatives, and others closely related, where the consideration is either inadequate or excessive. So far as the provision applies, it says this:Where, within the specified period, the company has disposed of property to – (b) A relative of a person, who, at the time of the disposition had control of the company;the liquidator may recover from the relative any amount by which the value of the property at the time of the disposition exceeded the value of any consideration received by the company.[6] Instead, on this appeal Mr Laurenson, counsel for Mrs Bradbury, contends that the Associate Judge wrongly gave summary judgment on the basis that, as it was put in Jowada Holdings v Cullen Investments Ltd CA 248/02, 5 June 2003, at [28], on the evidence Mrs Bradbury plainly lacked a tenable defence. The Associate Judge is said to have failed to take into account relevant evidence. [7] On the hearing of the application there was no issue, Mr Laurenson says, that between 1997 – 2003 Mrs Bradbury had made advances to her son, to be invested in his companies, one of which was Touchtec, totalling some $375,000. It was accepted equally that Touchtec was under no liability to make the two payments to Mrs Bradbury and only did so at the behest of Mr Anderson. The natural inference has to be, Mr Laurenson contends, that Touchtec did so to discharge a liability to Mr Anderson. The two payments Touchtec made had ceased to be its property. Those Mrs Bradbury received were the property of her son. To obtain summary judgment the liquidator had to, but could not, exclude that possibility. [8] Mr Sumner, for the liquidator, contends the Judge was right to conclude that s 298(2)(b) of the Act so plainly applied that summary judgment was inevitable. Touchtec was under no liability to make the payments to Mrs Bradbury. It owed her nothing and she gave it nothing in response. The payments were made at the behest of Mr Anderson. There is nothing to suggest that Touchtec owed him the money it paid to his mother. The only inference open has to be that taken by the Associate Judge. Mr Anderson misused his control of Touchtec. Mrs Bradbury received payments to which neither he nor she was entitled.Effect of evidence[9] If anything emerges from the evidence it is, as Mr Laurenson said himself in his submission, that Mr Anderson, now a bankrupt, conducted business through a variety of companies, all now in liquidation, as if they were extensions of himself.He introduced money to the companies, and moved money between them, as if it were his and not theirs. He did so without any regard to the requirements of the law. [10] As is also evident, Mr Anderson did not scruple to obtain money from his mother. He obtained from her a very considerable sum. We have no reason to doubt that it may have been as much as $375,000. But as to where it went, there is nothing in the evidence to say. The only record is an acknowledgement of debt Mr Anderson gave Mrs Bradbury on 5 February 2001 in respect of two advances totalling $110,000 and the acknowledgement is as instructive for what it does not say as for what it does say. [11] Mr Anderson acknowledged that these advances had been applied to the business operations of three companies. He did not specify what sums went to which companies. He claimed that the advances could, even would, be repaid early on the restructuring of a fourth company and the sale of a property, then under conditional offer. He executed the acknowledgement in his personal capacity, and as a director of the three companies. He committed the companies and himself twice over, both directly and as guarantors. He held out that they would give Mrs Bradbury first debentures as security. [12] Evidently, Mrs Bradbury was never repaid those advances. Nor did she ever obtain anything from the companies directly on which she could rely upon independently of the acknowledgement. Furthermore, on the evidence, Mr Anderson was engaged in at least two other companies, the fourth company referred to in the acknowledgement, and Akamai; and there is nothing to say where the $265,000, which constituted the bulk of Mrs Bradbury's advances, went. [13] The cruel irony is that, as the Associate Judge found, the only transactions involving Mrs Bradbury, of which there is any record, are the two payments for which the liquidator of Touchtec now has summary judgment against her; and, as the Associate Judge concluded, they are not to her advantage. Quite the contrary. Those records, such as they are – summary entries in the trust account of Touchtec's solicitor, Peter Brinsley, and some email traffic before and after – do not begin to support Mrs Bradbury's principal defence.[14] The first payment, on 16 November 2004, was made by Mr Brinsley out of the trust account he held for Touchtec. The payment was derived from a sum of $278,888.90 received that day described as 'from Touchtec bridging funds to Globe.Net'. Globe.Net was Touchtec's former name and so the payment was to Touchtec. But where it came from and on what basis is not stated. Nor is that to be found anywhere else in the evidence. Nor is there anything to say why Mrs Bradbury was entitled to some part of those funds either directly or indirectly. [15] The second payment, on 23 December 2004, again from Mr Brinsley's trust account for Touchtec, came from a $300,000 payment into the account on 25 November 2004 and described as 'from Touchtec'. In an email to Mr Anderson, dated 20 November 2006, Mr Brinsley said that he receipted this sum to Touchtec as 'funds for advances' and as to this sum he did have three instructions from Mr Anderson, the last of which, on 23 December 2004, authorised the payment made to Mrs Bradbury that day. [16] This series of instructions made clear that some of the payments authorised by Mr Anderson were to meet liabilities of his. He did not say that in regard to the payment to his mother. That is unlikely to matter. The balance remaining, Mr Anderson said, was to be held on deposit 'for a rainy day'. But what still remains completely unclear is where the funds came from, on what basis, and why Touchtec was to pay them out.Conclusions[17] On the face of the evidence, there is nothing to support the possibility that Mr Anderson had some right to the funds, if not personally then as a result of a liability owed him by Touchtec. Absent that, and any independent liability on Touchtec's part to Mrs Bradbury, as to which there is no suggestion, the only inference open is that Mr Anderson misused his control of Touchtec to have it pay out to his mother, in preference to Touchtec's creditors, a sum to which neither he nor she was entitled.[18] Like the Associate Judge, we have every sympathy for Mrs Bradbury. We can only agree with him, however, that Mr Vance as liquidator of Touchtec was obliged, on behalf of the creditors generally, to pursue the two payments made to Mrs Bradbury; and that the grant of summary judgment made was irresistible.Result and costs[19] The appeal is dismissed. [20] Costs are awarded to the respondent for a standard appeal on a Band A basis plus usual disbursements.Solicitors: The Law Connection, Raumati for Appellant Ford Sumner, Wellington for Respondent