Ipsofactoj.com: International Cases [2001] Part 3 Case 13 [NZCA]


COURT OF APPEAL, NEW ZEALAND

Coram

Waikato Freight &

Storage (1988) Ltd

- vs -

Meltzer

TIPPING J

McGECHAN J

SALMON J

5 MARCH 2001


Judgment

Tipping J

INTRODUCTION

  1. This appeal from Master Kennedy-Grant concerns the concept of "the ordinary course of business" as it affects transactions which may be voidable under s 292 of the Companies Act 1993. The appellant, Waikato Freight and Storage (1988) Ltd ("Waikato"), failed in its application in the High Court to have declared not voidable two payments made to it by Excel Freight Limited (Excel) of which the respondent, Mr. Meltzer, is the liquidator. These payments were made about 2 and 3 months prior to Excel being placed in liquidation. Waikato appeals from the Master's decision on the basis that he was wrong to hold it had not satisfied the onus of showing that both payments were made by Excel in the ordinary course of business.

    BACKGROUND CIRCUMSTANCES

  2. As its name implies, Waikato is a company engaged in carrying freight for its customers. Excel was a freight forwarder. It used Waikato's services between late October 1996 and mid April 1997. At that time it terminated its relationship with Waikato on the basis that it was "looking to cut costs" and had therefore engaged another carrier. During the course of the relationship between the parties, Waikato rendered the following accounts to Excel for services rendered as follows:

    October 1996

    $ 2582.50

    November 1996

    $ 9603.42

    December 1996

    $13797.62

    January 1997

    $ 7883.73

    February 1997

    $11766.30

    March 1997

    $11210.39

    April 1997

    $ 7216.84

  3. Excel made four payments to Waikato which, together, cleared all its indebtedness. Their amounts and dates were:

    31 January 1997

    $12146.65

    6 March 1997

    $10424.91

    28 May 1997

    $19261.35

    25 June 1997

    $21623.50

    We note that the totals of these sums ($64060.80 and $63456.41) do not coincide. The figures are those appearing in the Master's judgment as amended in two respects by counsel. Fortunately the lack of an exact match is of no relevance to the disposition of the case.

  4. None of the four payments can be reconciled with any particular invoice or combination of invoices or balance outstanding. It is only the last two payments totalling $40884.85 which the liquidator of Excel now contends are voidable. There was earlier a suggestion that the second payment, i.e. that made on 6 March 1997 was also voidable but the liquidator did not pursue that contention in the High Court.

  5. Excel was placed in liquidation on 25 August 1997. Thus the May and June payments were made during the restricted period of six months as defined in s 292(6) of the Act. It is common ground that Excel was, at the time of both payments, unable to pay its debts and that the payments enabled Waikato to receive more than it would have received in the liquidation. Hence, Waikato had the onus of establishing that the payments were made in the ordinary course of business in terms of s 292, the material part of which states:

    292

    Transactions Having Preferential Effect

    (1)

    In this section, transaction, in relation to a company, means—

    (a)  

    A conveyance or transfer of property by the company:

    (b)

    The giving of a security or charge over the property of the company:

    (c)

    The incurring of an obligation by the company:

    (d)

    The acceptance by the company of execution under a judicial proceeding:

    (e)

    The payment of money by the company, including the payment of money under a judgment or order of a court.

    (2)

    A transaction by a company is voidable on the application of the liquidator if the transaction—

    (a)

    Was made—

    (i)

    At a time when the company was unable to pay its due debts; and

    (ii)

    Within the specified period; and

    (b)

    Enabled another person to receive more towards satisfaction of a debt than the person would otherwise have received or be likely to have received in the liquidation—

    unless the transaction took place in the ordinary course of business.

    (3)

    Unless the contrary is proved, for the purposes of subsection (2) of this section, a transaction that took place within the restricted period is presumed to have been made —

    (a)

    At a time when the company was unable to pay its debts; and

    (b)

    Otherwise than in the ordinary course of business.

    (4)

    For the purposes of this section, in determining whether a transaction took place in the ordinary course of business, no account is to be taken of any intent or purpose on the part of a company —

    (a)

    To enable another person to receive more towards satisfaction of a debt than the person would otherwise receive or be likely to receive in the liquidation; or

    (b)

    To reduce or cancel the liability, whether in whole or in part, of another person in respect of a debt incurred by the company; or

    (c)

    To contribute towards the satisfaction of the liability, whether in whole or in part, of another person in respect of a debt incurred by the company —

    unless that other person knew that that was the intent or purpose of the company.

    MASTER'S JUDGMENT

  6. The Master referred to the decision of the Privy Council in Countrywide Banking Corp Ltd v Dean [1998] 1 NZLR 385 and made the following citation from the judgment of Their Lordships delivered by Gault J at 394:

    .... the test is essentially one of fact ....

    .... the transaction must be examined in the actual setting in which it took place. That defines the circumstances in which it is to be determined whether it was in the ordinary course of business. The determination then is to be made objectively by reference to the standard of what amounts to the ordinary course of business. As was said by Fisher J in the Modern Terrazzo Ltd case, the transaction must be such that it would be viewed by an objective observer as having taken place in the ordinary course of business ....

    The section .... requires examination of the actual transaction in its factual setting (excluding the intent or purpose of the company save as required by subs (4)).

  7. After referring to a submission made by counsel for the liquidator, the Master stated that he was approaching his decision on the basis that whether a challenged payment has been made in the ordinary course of business is to be determined:

    (a)

    By exercising the judgment of an objective observer;

    (b)

    With regard to the activities of the particular company; and

    (c)

    In reliance on those facts which were or ought to have been known to both the creditor and the company (subject only to the requirement of actual knowledge where the fact in question is intent or purpose on the part of the company — see s 292(4) of the Act).

  8. When turning to the facts, the Master indicated that he was disregarding certain facts on the basis that they were known only to Excel or that there was no sufficient evidence that they should have been known to Waikato. The facts so disregarded were that Excel was insolvent from at least 31 March 1996; that Excel's aged trial balances for the period 31 March 1996 (sic) showed creditors whose accounts were more than 90 days overdue; that certain cheques listed in the liquidator's affidavit had been dishonoured, and that Excel had received various letters which the Master described as "dunning" letters, as also referred to in the liquidator's affidavit.

  9. The Master then indicated that in addition to the facts set out as the beginning of this judgment, he regarded the following further facts as relevant to his decision. Excel had made no payments to Waikato in either November or December 1996. After the January payment of $12146.65 Excel's outstanding debt to Waikato was made up as follows:

    Current

    $ 7,883.73

    1 month (i.e. Dec 96 billings)

    $13,797.62

    2 months

          $ 39.27

    Total

    $21,720.62

  10. After the March payment of $10424.91 Excel's debt to Waikato was made up as follows:

    Current

    $11,210.39

    1 month (i.e. Feb 97 billings)

    $11,766.30

    2 months

    $ 7,883.73

    3 months and over

      $ 2,807.59

    Total

    $33,768.01

  11. Excel made no payment to Waikato in April 1997. The May and June 1997 payments cleared Excel's total indebtedness to Waikato. The evidence of Waikato's managing director, Mr. D G Taylor, was that only about 1 percent of Waikato's debtors paid on the 20th of the month following. The Master concluded that this evidence, which was not contradicted or questioned, suggested that late payment was not unusual in the freight industry. He noted that there had never been prompt payment by Excel. Furthermore, Mr. Taylor's evidence, again uncontradicted, was to the effect that it was very common in the freight industry for debtors to be unable to pay their accounts until they received payment of a large account due to them. The Master observed that this appeared to have been true of Excel in this case. This was a reference to a dishonoured cheque to be mentioned in a moment.

  12. The Master noted that there was no suggestion that during the course of the relationship between the parties Waikato had departed from its usual debt recovery procedures; nor were those procedures in any way out of the ordinary. Although not specifically noted by the Master, counsel confirmed that there had been no communication between the parties after the cessation of their relationship, not even when the cheque about to be mentioned was dishonoured with the answer "present again". The Master further concluded that it was not unreasonable for Waikato to require prompt payment of the monies outstanding when Excel brought the business relationship to an end on the basis that it was looking to cut costs and was therefore engaging another carrier.

  13. Finally, in his recital of what he saw as the relevant facts, the Master noted that Excel's cheque for the May payment of $19261.35 was dishonoured on initial presentation. It was, however, met when presented again two days later. We interpolate here that the dishonour was accompanied by the answer "present again" rather than by some other less encouraging answer, such as "insufficient funds". In respect of the dishonour of this cheque, the Master noted that such events were not infrequent in the freight business, happening every two months or so, usually because the drawer of the cheque had written it out expecting to receive a payment to cover it, and there was some delay in actually getting the covering payment. The Master expressed the view that all the features of the case favoured a finding that the challenged payments were made in the ordinary course of business, save for three matters, namely: the pattern of payments; the fact that the challenged payments were made after the business relationship had been terminated because the company wished to cut costs; and the dishonour of the cheque for the first of the disputed payments on its initial presentation.

  14. The Master then proceeded to discuss each of these three matters and came to the now challenged conclusion that in combination they meant that Waikato had failed to establish that the payments were made in the ordinary course of business. We will defer examining the Master's discussion of the three points and counsel's competing submissions on them until after we have considered certain legal matters. Counsel indicated that there was no dispute between them on the law but it is still desirable, indeed necessary, to consider certain aspects of the concept of ordinary course of business as used in the voidable preference provisions of the Act.

    LEGISLATIVE PURPOSE

  15. One of the important points made by Their Lordships in Countrywide was the need to approach the proper meaning and scope of the concept of the ordinary course of business in relation to the particular statutory context in which the concept appears. The meaning of the same or similar phrases in other contexts is not likely to be particularly helpful. The present context is of course that of avoiding transactions, here payments, which give the recipient a preference over other creditors of a company which is now in liquidation and was at the date of payment unable to pay its due debts.

  16. In 1993 New Zealand company law underwent a fundamental shift of emphasis in this area. The focus moved from intent to effect. Under the earlier law the focus was on whether the dominant intention of the insolvent company was to prefer the creditor concerned. Under the new law the initial focus is on whether the transaction has a preferential effect.

  17. But Parliament did not consider it appropriate to make payments having a preferential effect absolutely voidable. The recipient creditor was given two ways of avoiding that consequence; one as of right, and the other discretionary. If a payment is voidable under s 292(2) the creditor may, as of right, prevent recovery if able to show that it was made in the ordinary course of business. Even if the payment is otherwise voidable, the creditor can seek the exercise of the Court's discretion under s 296(3) to deny recovery, in whole or in part, if able to show receipt in good faith, alteration of position with a qualifying belief, and that it would be inequitable to order recovery or recovery in full.

  18. It is thus evident that Parliament thought it would be unduly harsh to make a transaction voidable simply as a result of its preferential effect. What is more, Parliament considered that the competing interests would not be properly balanced by allowing the creditor simply to seek the exercise of the Court's discretion in terms of s 296(3). An additional protection was given to creditors who had received a payment which was preferential in effect. The creditor can keep the payment if able to show, the onus being on it, that the payment was made by the debtor company in the ordinary course of business. Parliament thereby intended a commercially unremarkable payment to stand, even if having preferential effect. It must have been Parliament's view that otherwise the ordinary processes of commerce would be unduly undermined.

  19. As the Privy Council noted, the proper approach to the phrase "ordinary course of business" is an objective one but against the actual setting in which the payment or other transaction took place. The difficulties which seem to have emerged are not so much with the phrase itself. Rather they relate to the standpoint from which the Court identifies the "actual setting". To show that a payment or other transaction took place in the ordinary course of business, the recipient creditor has to show that there was nothing abnormal — nothing out of the ordinary — about the payment or transaction in the commercial context in which it took place. As the Privy Council said, there are difficulties in trying to paraphrase statutory tests, or capture them in different words. Hence Their Lordships did not adopt any particular formulation, and it would be inappropriate to seek further to elaborate the phrase itself. But it has become necessary to consider further the proper ambit of the "actual setting" in which the transaction in question took place.

    THE "ACTUAL SETTING" ISSUE

  20. The relevant passage in the Countrywide judgment at 394 is:

    Plainly the transaction must be examined in the actual setting in which it took place. That defines the circumstances in which it is to be determined whether it was in the ordinary course of business. The determination then is to be made objectively by reference to the standard of what amounts to the ordinary course of business. As was said by Fisher J in the Modern Terrazzo Ltd case, the transaction must be such that it would be viewed by an objective observer as having taken place in the ordinary course of business. While there is to be reference to business practices in the commercial world in general, the focus must still be the ordinary operational activities of businesses as going concerns, not responses to abnormal financial difficulties.

  21. A little later, also at 394, Their Lordships spoke again of the exercise being undertaken objectively by reference to the standard of the ordinary course of business. At 395 they observed:

    It may be that transactions undertaken in the past will, because of changed circumstances, no longer be considered as in the ordinary course of business.

  22. In saying this, Their Lordships did not mean that a payment once made can change its character by reason of changed circumstances in the future. A payment which was made in the ordinary course of business at the time of its making cannot cease to have that character because of a change of circumstances in the future. The point is that a similar payment made in changed circumstances may not bear the same character. We note in passing that, again at 395, the Privy Council said that payment of accrued indebtedness, as here, may be in the ordinary course of business.

  23. The fundamental issue to be considered is how much the "objective observer" is to be taken as knowing about the circumstances in which the payment was made. Differences have arisen in the High Court as to whether that observer is to be taken as looking at the matter on the basis of the creditor's perception of the transaction, the debtor company's perception or some amalgam of the two. As will be seen, none of these approaches exactly captures the correct position.

  24. In his summary at 182 of the Modern Terrazzo case [1988] 1 NZLR 160, Fisher J observed in his point (f):

    As the ordinariness of a course of business can not be viewed exclusively from the viewpoint of the creditor or relevant class of creditor, it could not be sufficient that creditors of that class customarily enter into transactions of that type. Of equal importance is whether the business would also have appeared ordinary if objectively viewed by someone standing in the shoes of the subject company.

    That formulation tends to suggest an amalgamated approach, albeit the expression "standing in the shoes of the subject company" has the difficulty that it may appear to ascribe to the objective observer more knowledge of the company's affairs and circumstances than would be apparent on a wholly objective assessment.

  25. There have been two decisions of this Court on this topic since the judgment of the Privy Council in Countrywide. The first is Vague v Fajner (1998) 8 NZCLC 261, 790. The Court (Richardson P, Heron and Doogue JJ), per Richardson P, indicated that it saw no difference in substance between the approach of the Privy Council and that of Rich J in Downs Distributing Co Pty Ltd v Associated Blue Star Stores Pty Ltd (in liq) (1948) 76 CLR 463 which the Privy Council cited in Countrywide at 393. Rich J had spoken of the "everyday usual or normal character of the transaction", and the "undistinguished common flow of business done". He had also emphasised that the phrase "ordinary course of business" was speaking of the course of business in general and, when applied to a particular transaction or payment, was referring to something which was unremarkable ("calling for no remark") and arose out of "no special or particular situation".

  26. The second case is Meltzer v A-G CA216/98, judgment 3 May 1999 per Doogue J for a Court comprising Henry J, Gallen J and himself. There is nothing of assistance in relation to the present point in that judgment which was essentially concerned only with how the facts of the case should be viewed in the light of the Countrywide judgment.

  27. Counsel referred us to several judgments of the High Court delivered after Countrywide was decided in the Privy Council. We have considered them all, but will mention only two, both decisions of Baragwanath J, as they appear to have the greatest relevance to the present issue. In Re Anntastic Marketing Ltd (in liq) [1999] 1 NZLR 615, Baragwanath J spoke at 617 of the fine line between:

    impairing the free flow of trade by undoing transactions that a reasonable New Zealander aware of the facts known to the trader would regard as normal, and allowing favoured creditors to make off with more than their own share of the assets of this insolvent business to which they have extended credit.

  28. After a detailed review of a number of cases, His Honour indicated at 622 that he proposed to adopt as the appropriate test:

    whether the trader [the creditor] subjectively was, or objectively ought in the particular circumstances to have been, alerted to real risk that the transaction was abnormal for reasons of financial weakness.

    (Baragwanath J's emphasis)

    That approach tends to draw attention away from the true enquiry which is whether, in its actual setting, the transaction was objectively "abnormal", to use the same word as the Judge. It also introduces the causative gloss of financial weakness. While such weakness may explain any motive or purpose there may have been on the part of the debtor company to prefer the creditor, it does not matter why, if it be so, the transaction is not in the ordinary course of business. In any case the statute puts the onus on the creditor to demonstrate that the transaction did in fact take place in the ordinary course of business. The Judge's further gloss of "real risk" is not easy to reconcile with that requirement.

  29. In the later case of Re Excel Freight Ltd (the same liquidation as here) reported at (1998) 8 NZ CLC 261, 827, Baragwanath J stated:

    I add that I considered in the course of argument as to s 292 whether, while the twofold test

    (1)

    subjectively was or

    (2)

    objectively ought

    suggested in Anntastic Marketing appeared to conform with previous High Court decisions, it could be more generous to paid creditors than the "ordinary course" test and the strict Downs formula permit. It is striking that neither in terms says anything about either (1) the creditor's knowledge or (2) knowledge of financial weakness; the sole topic is ordinariness. Apart from s 292(4), which has no application in this case, the topic of the creditor's knowledge does not arise until s 296(3)(a); which has effect after a transaction has become voidable for infringing the "ordinary course" requirement. It requires, to allow the change of position defence, that the plaintiff both received the property "in good faith" (see Laws of New Zealand Insolvency para 329) and altered his or her position in the reasonably held belief that the transfer was validly made and would not be set aside (and also that the Court considers it inequitable to order recovery or recovery in full).

    After reflection I remain of the view that "ordinary course" cannot be tested wholly objectively taking account of the actual position within the company: that is because every transaction to which the section applies is ex hypothesi by a company trading while insolvent. The test of "ordinary course" can only be that which would so appear to a reasonable person in the position of the creditor. It has been noted that the relevance of that person's knowledge is stated expressly in s 292(4); I am prepared to infer that it has implied relevance in subs (2). Nor am I minded to treat the section as directed at transactions which are or appear extraordinary in respects other than of financial weakness; there is no obvious reason to do so where the measure is directed at preferential payments by an insolvent company. But the result is the application of a similar yet quite differently expressed test in ss 292(2) and 296(3)(a). (I return to the latter at the end of the judgment). The point may serve as a footnote to the addendum expressing concern as to drafting with which Fisher J concluded his judgment in Re Modern Terrazzo Ltd (in liq); Bowden v Macdonald (1997) 8 NZCLC 261, 478 at p 261, 501: [1998] 1 NZLR 160 at p 189.

    (emphasis as in original judgment)

  30. We note that the Judge was of the view that the test of ordinary course of business could only be what "would so appear to a reasonable person in the position of the creditor". There are variations on these themes in other decisions of the High Court and, when one recalls para (f) of Fisher J's summary in Terrazzo noted earlier, it is readily apparent that the High Court judgments are by no means consistent.

  31. In our view the judicial approach has become over-complicated and over-refined. The question is whether, at the time it was made, the relevant transaction was made in the ordinary course of business. That is a question of objective fact. General business practices are relevant to that question, as are any particular customs or practices within the field of commerce concerned. So too is the previous commercial relationship between the parties. The observer spoken of in the Privy Council is in reality the Court which must look at the circumstances, as objectively apparent at the time of the transaction. The ultimate question is whether on the evidence before the Court the transaction or payment can be said to have been made in the ordinary course of business. Was it in its objective commercial setting an ordinary or an out of the ordinary transaction for the parties to have entered into?

  32. The mental approach of the parties to the transaction, as objectively apparent, may sometimes be relevant as an aspect of the circumstances in which the ultimate factual assessment must be made. That of course is subject to s 292(4) which, in itself, demonstrates the legislative purpose to keep subjective intent to prefer on the part of a debtor company out of the arena, unless known to the creditor. It should be noted here that Parliament has made the debtor company's intent or purpose to prefer relevant only if it is actually known to the creditor. The statutory words are "unless the other person [the creditor] knew that that was the intent or purpose of the company". Parliament has thereby eschewed constructive knowledge in this context. It has not said "knew or ought to have known". That being the legislative approach to knowledge in relation to intent to prefer, it is unlikely Parliament intended constructive knowledge to be relevant to other aspects of the transaction, save in the unlikely event that such knowledge is capable of influencing whether the transaction, in its actual setting, was objectively in the ordinary course of business. Intent to prefer is irrelevant unless such intent was known to the creditor. If known, such fact must be regarded as relevant but even then, although pointing towards the payment or other transaction being outside the ordinary course of business, such does not automatically follow. This is consistent with the objective assessment which the Court must make.

  33. We will examine the circumstances of the present case on the foregoing basis. It will be recalled that the Master was of the view that all the facts which he found established with the exception of three matters, supported the view that the two payments had been made by Excel in the ordinary course of business. To those three matters we now turn.

    THE PATTERN OF PAYMENTS

  34. There were only two payments prior to the first disputed payment. There is force in Mr. Taylor's submission that it is difficult to see much of a pattern emerging from only two payments, against which the disputed payments can realistically be compared. Nor do we consider much can usefully be derived in the present case from an astute analysis of how long outstanding the monies comprised in each payment had been, either in themselves or by comparison with the composition of earlier payments. Ms Brown sought to support the Master's view that the pattern of payments after termination of the relationship showed a marked contrast with the pattern during the relationship. She suggested there was significance in the speed with which the outstanding indebtedness was discharged. In objective terms, we can see nothing out of the ordinary in a company paying off its outstanding indebtedness in two payments made about one month and two months after the relationship ended. In short, we regard Waikato's billings and debt collection procedures as being entirely conventional. So too, objectively viewed, were Excel's payments both during and after the relationship. Any other view seems to us to involve either a departure from the required objectivity or the adoption of too narrow a view of the ordinary processes of commerce in a setting such as the present.

  35. For these reasons we are unable to view this aspect of the case in the same way as the Master. We note in passing that the Master referred at one point to Excel's "unsatisfactory payment record". Leaving aside the fact that Waikato did not contend Excel's payment record was unsatisfactory, the crucial issue does not turn on an appraisal of whether a payment record is or is not "satisfactory". Neither can we accept the Master's view that Waikato should have been put on enquiry as to Excel's solvency. In any event the Master did not indicate at what point such enquiry should have occurred, nor how this concept affected whether the two payments were made in the ordinary course of business. The Master had earlier found that it was not unreasonable in the circumstances for Waikato, after the relationship was over, to seek prompt payment of the outstanding indebtedness, albeit, as will be mentioned later, Waikato did nothing specific to hasten the payments.

  36. Our impression from the evidence is that Waikato regarded the pattern of payments involved here, to the extent that there was any pattern, as par for the course. In short, we do not see anything in connection with the so-called pattern of payments which suggests that the last two were made other than in the ordinary course of business.

    DISHONOUR OF CHEQUE

  37. All the Master said on this issue when expressing his conclusions was that the initial dishonour of the cheque was "a further indication of the company's inability to pay its debts as they fell due". That, however, was not the issue. The company's inability to pay its debts was acknowledged. The issue should have been to what extent the dishonour of the cheque was relevant to whether the payments in issue were made in the ordinary course of business. On the evidence the dishonour of the cheque was no indicator that when it was presented again in two days time, the payment thereby made was other than in the ordinary course of business. The reason for the initial dishonour was that covering funds were slower than expected in arriving. That, on the evidence, was a perfectly normal commercial event. There was nothing about the dishonour to suggest general insolvency or that a preference was involved in the ultimate payment. Indeed no suggestion was made that Waikato knew that either of the payments in issue had or was likely to have preferential effect. If anything the relative promptness of the two payments suggested solvency rather than insolvency. Understandably there is no suggestion in the evidence that Waikato had any concerns about Excel's solvency. The evidence was that Waikato simply re-presented the cheque and did not think it necessary to contact Excel about the dishonour. This suggests that in context it was an ordinary rather than an out of the ordinary commercial event.

    CUTTING COSTS

  38. The Master saw significance in the fact that Excel gave as its reason for terminating the relationship the fact that it was looking to cut costs. It is, with respect, drawing a long bow to suggest that when a company terminates a commercial relationship on the basis that it is going to another supplier to get a cheaper price, the first supplier (here Waikato) is put on enquiry as to the company's solvency. In any case what is the first supplier to do? All the services have been performed. Monies are outstanding. No question of further credit arises. Is the first supplier to be disqualified from the benefit of payments made to discharge the indebtedness on the basis that they were not made in the ordinary course of business?

  39. That will of course depend on the circumstances, but here Waikato applied no pressure to collect the monies outstanding nor did it change its debt collection procedures. It simply received and banked the money when it was tendered by Excel. To hold that in these circumstances, because of some passing reference by Excel to cutting costs, its discharge of the outstanding indebtedness was not in the ordinary course of business, seems to us to be placing much too high a burden on the creditor. Neither singly nor in combination do the points relied on by the Master detract from the conclusion, supported by the rest of the evidence, that the payments took place in the ordinary course of business.

  40. We have given careful consideration to Ms Brown's submissions in all areas of the case. She did her best to uphold the Master's judgment. We are, however, satisfied, in the light of Mr. Taylor's submissions, which are substantially reflected in what we have already written about the Master's reasons, that the Master erred and Waikato did show that the two payments were made in the ordinary course of business. It must be said that the Master's task was not assisted by the difficult state of the authorities.

    CONCLUSION / FORMAL ORDERS

  41. For these reasons the appeal is allowed. The orders made in the High Court are set aside. In their place there will be an order granting Waikato's application that the payments in issue be not set aside. Waikato is to have costs in the High Court on the same basis as costs were ordered against it. The respondent liquidator is to pay Waikato its costs in relation to the appeal to this Court in the sum of $5000.00 plus the reasonable travel and accommodation expenses of counsel together with disbursements as fixed by the Registrar if the parties cannot agree.


Cases

Countrywide Banking Corp Ltd v Dean [1998] 1 NZLR 385; Modern Terrazzo [1988] 1 NZLR 160; Vague v Fajner (1998) 8 NZCLC 261; Downs Distributing Co Pty Ltd v Associated Blue Star Stores Pty Ltd (in liq) (1948) 76 CLR 463; Meltzer v A-G CA216/98, judgment 3 May 1999; Re Anntastic Marketing Ltd (in liq) [1999] 1 NZLR 615; Re Excel Freight Ltd (1998) 8 NZ CLC 261

Legislations

Companies Act 1993: s. 292, s. 296(3)

Representations

D J Taylor for Appellant (instructed by Swarbrick Dixon, Hamilton).
D L Brown for Respondent (instructed by Buddle Findlay, Auckland).


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