BAY METAL FABRICATORS LIMITED (IN LIQUIDATION) v STEENSON [2016] NZHC 1634 [19 July 2016]

BAY METAL FABRICATORS LIMITED (IN LIQUIDATION) v STEENSON [2016] NZHC 1634 [19 July 2016]

Company was insolvent from at least 31 March 2008; defendants took personal drawings and received salary without statutory authorisation or adequate explanation; repayments to shareholders within the look-back period were voidable; director breached ss 131, 135 and 136 by continuing to trade while insolvent and incurring obligations the company could not meet; liquidators were entitled to recover specified sums under s 161, to set aside voidable transactions under ss 292/294, and to obtain compensation under s 301; orders for repayment and contribution were granted against the defendants accordingly.

Citation
[2016] NZHC 1634
Parties
First Plaintiff: Bay Metal Fabricators Limited (In Liquidation); Second Plaintiff: Vivien Judith Madsen-Ries and David Levin as Liquidators of Bay Metal Fabricators Limited (In Liquidation); First Defendant: Graham Douglas Steenson; Second Defendant: Carol Grace Steenson
Court
High Court
Jurisdiction
New Zealand
Judgment Date
19 July 2016
Procedural Posture
Liquidation Proceedings Under the Companies Act 1993 / Formal Proof Hearing and Judgment (judgment Delivered 19 July 2016)
Outcome
Judgment for plaintiffs (liquidators) against Mr and Mrs Steenson on multiple causes of action
Legal Topics
Voidable Transactions, Preference, Director Remuneration, Reckless Trading, S 301 Compensation, Duty to Creditors, S 161 Salary Recovery, S 292 and S 294 Notices
Company Law Insolvency Law Directors' Duties Voidable Transactions Preference Director Remuneration Reckless Trading S 301 Compensation +3 more

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Parties

Bay Metal Fabricators Limited (In Liquidation)

First Plaintiff

Vivien Judith Madsen-Ries and David Levin as Liquidators of Bay Metal Fabricators Limited (In Liquidation)

Second Plaintiff

Graham Douglas Steenson

First Defendant

Carol Grace Steenson

Second Defendant

Procedural Posture

Liquidation Proceedings Under the Companies Act 1993 / Formal Proof Hearing and Judgment (judgment Delivered 19 July 2016)

Legal Issues

  1. 1 Whether drawings on shareholder current account were repayable and/or voidable preference
  2. 2 Whether repayments to shareholders within two years of liquidation were voidable under s 292/s 294
  3. 3 Whether director's salary payments were authorised and recoverable under s 161(5)

Ratio Decidendi

Company was insolvent from at least 31 March 2008; defendants took personal drawings and received salary without statutory authorisation or adequate explanation; repayments to shareholders within the look-back period were voidable; director breached ss 131, 135 and 136 by continuing to trade while insolvent and incurring obligations the company could not meet; liquidators were entitled to recover specified sums under s 161, to set aside voidable transactions under ss 292/294, and to obtain compensation under s 301; orders for repayment and contribution were granted against the defendants accordingly.

Court Disposition

Judgment for plaintiffs (liquidators) against Mr and Mrs Steenson on multiple causes of action

Orders

  • Mr and Mrs Steenson pay the Company the sum of $35,640 in respect of the first cause of action together with interest from the date of demand (6 October 2014)
  • Mr Steenson pay the Company $119,390 in respect of the second cause of action together with interest from the date of liquidation