It
was an abuse of court procedure for Grant Thornton, as receivers of a
Christchurch property company, to try and liquidate a Vero insurance subsidiary
over a disputed insurance payout, the
Court of Appeal ruled.
Grant Thornton was appointed receivers of
92 Lichfield Street Ltd in 2010. Property
developer David Henderson previously controlled the company. Receivers insured the Christchurch Lichfield
St building for $13 million with Vero subsidiary AAI Ltd. Three mortagagees were recorded as having an
interest in the insurance policy. The
court was told lenders associated with David Henderson bought out at a later
date the second and third mortgagees: Dominion Finance and Hanover Finance.
The building was badly damaged in the
Christchurch earthquakes. Negotiations
between the receivers and Vero took some time.
Grant Thornton agreed to Vero’s June 2013 offer of $6.5 million plus
claim costs to date together with some $203,000 for costs incurred to protect
the damaged building. The receivers
amended a seven page discharge form sent by Vero, deleting the need for
approval from secured creditors (which now included interests associated with
David Henderson) and signed only as receivers.
The court was told Vero refused to pay, saying agreement was required
from all secured creditors as well. Vero
said it faced the risk of paying the receivers in full and then facing separate
claims from the mortgagees who were noted on the policy. Through 92 Lichfield Street Ltd, the
receivers applied to have Vero’s subsidiary wound up by the High Court on the
grounds that there was an undisputed debt due of $6.5 million and the insurer
refused to pay. The High Court ordered
immediate payment, failing that AAI Ltd was to be wound up.
The Court of Appeal said there was a
substantial dispute as to whether the money was immmediately payable and it was
an abuse of process to take winding up proceedings to force payment. The court was told Vero was forced to pay
$6.5 million into court because the receivers were not willing to delay
liquidation proceedings while the High Court decision in their favour was
appealed.
The Court of Appeal ruled the receivers
knew final settlement also required agreement from all secured creditors noted
on the policy. When seeking extensions
of time to consider the June 2013 offer, the receivers said discussions with mortgagees
needed more time. Vero told the receivers
they could pass on details of the $6.5 million settlement offer to Mr Henderson
and to any other interested parties.
AAI
Ltd v. 92 Lichfield St – Court of Appeal (19.11.15)
16.009