PETTERSON v McCONNELL DOWELL CONSTRUCTORS LTD [2018] NZHC 2379

PETTERSON v McCONNELL DOWELL CONSTRUCTORS LTD [2018] NZHC 2379

McConnell Dowell is entitled to preferential ranking under Schedule 7 cl 1(1)(e) for recoveries of $1,114,253 and for costs of $297,748.80 because it funded litigation after liquidation that resulted in recoveries for the liquidation; Mr Browne is not entitled to priority under cl 1(1)(e) because the payments/indemnities at issue were not for the benefit of the general body of creditors nor consented to by the liquidator and the recoveries during liquidation attributable to him were limited, and his non-preferential unsecured claim is not limited to $201,316.

Citation
[2018] NZHC 2379
Parties
Liquidator (applicant): David Ross Petterson; First Respondent: McConnell Dowell Constructors Ltd; Second Respondent: David Charles Browne
Court
High Court
Jurisdiction
New Zealand
Judgment Date
11 September 2018
Procedural Posture
Application for Directions Under S 284 Companies Act 1993 / High Court Judgment (directions)
Outcome
Court gave directions: upheld McConnell Dowell's promotion claims; dismissed Browne's preferential claim; left Browne's unsecured claim uncapped at more than $201,316; reserved leave for further claims and for McConnell Dowell to apply in respect of future recoveries.
Legal Topics
Preferential Claims, Schedule 7 Cl 1(1)(e), Voidable Transactions, Set Aside of Security (s 299), Secured Creditor Entitlement S 305(3)(a), Liquidator Consent to Expenditure, Priority of Claims, Indemnities for Costs, S 301 Breach of Director Duty
Companies Law Insolvency Liquidation Receivership and Security Interests Civil Procedure Preferential Claims Schedule 7 Cl 1(1)(e) Voidable Transactions +6 more

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Parties

David Ross Petterson

Liquidator (applicant)

McConnell Dowell Constructors Ltd

First Respondent

David Charles Browne

Second Respondent

Procedural Posture

Application for Directions Under S 284 Companies Act 1993 / High Court Judgment (directions)

Legal Issues

  1. 1 Whether a creditor who funds or indemnifies recoveries after liquidation is entitled to preferential ranking under Schedule 7 cl 1(1)(e)
  2. 2 Whether a creditor who was a secured creditor when payments/indemnities were made can obtain priority under cl 1(1)(e) once the security is set aside
  3. 3 Whether liquidator consent is a prerequisite to a claim under cl 1(1)(e)

Ratio Decidendi

McConnell Dowell is entitled to preferential ranking under Schedule 7 cl 1(1)(e) for recoveries of $1,114,253 and for costs of $297,748.80 because it funded litigation after liquidation that resulted in recoveries for the liquidation; Mr Browne is not entitled to priority under cl 1(1)(e) because the payments/indemnities at issue were not for the benefit of the general body of creditors nor consented to by the liquidator and the recoveries during liquidation attributable to him were limited, and his non-preferential unsecured claim is not limited to $201,316.

Court Disposition

Court gave directions: upheld McConnell Dowell's promotion claims; dismissed Browne's preferential claim; left Browne's unsecured claim uncapped at more than $201,316; reserved leave for further claims and for McConnell Dowell to apply in respect of future recoveries.

Orders

  • McConnell Dowell Constructors Ltd is a preferential creditor in the liquidation of Polyethylene Pipe Systems Ltd for $1,114,253 under Schedule 7 cl 1(1)(e)(i).
  • McConnell Dowell Constructors Ltd is a preferential creditor in the liquidation of Polyethylene Pipe Systems Ltd for $297,748.80 under Schedule 7 cl 1(1)(e)(ii).