The applicants are the liquidators of CBL Insurance Limited (CBLI). They have identified transactions made by CBLI with CBL Insurance Europe DAC (Ireland) (Under Administration) (CBLIE) and/or agents acting on its behalf as voidable transactions under s 292 of the Companies Act (the Transactions).

[2] They make an application for directions as to service as CBLIE is resident outside of New Zealand. The grounds upon which the application is made are set out in the notice of application. It states: (a) The applicants were appointed liquidators of CBLI by order of this Court on 12 November 2018.

(b) In accordance with s 294(1) of the Companies Act, the applicants filed the notice in this Court on 26 June 2019 (the Notice).

(c) Section 294(1)(b) of the Companies Act requires the applicants to serve the Notice on CBLIE.

(d) The applicants tried to obtain CBLIEs agreement to accept service of the Notice by email to CBLIEs administrator and CBLIEs New Zealand lawyers. However, although the administrator agreed that he would accept such service, CBLIEs lawyers have advised that they are not instructed to accept service, and service on the CBLIE administrator has not been accepted.

(e) CBLIE is registered in Ireland, is not on the New Zealand Register of Overseas Companies (NZROC) kept pursuant to the Companies Act 1993 and does not have a place of business in New Zealand.

[3] The applicants also say that the Companies Act 1993 (the Act) does not provide for a method of service for the notice or the s 295 application. Rather, it says that High Court Rule 6.27(2)(j) allows for service on CBLIE out of New Zealand without leave because the claim, the notice and any s 295 application arises under the Act.

Alternatively, it says, if leave for service is required, r 6.28 allows this Court to grant leave where: (a) the claim has a real and substantial connection with New Zealand; and

(b) there is a serious issue to be tried on the merits; and

(c) New Zealand is the appropriate forum for the trial; and

(d) any other relevant circumstances support an assumption of jurisdiction.

Background

[4] The background to the application is thoroughly canvassed in the affidavit of one of the liquidators, Kare Johnstone, a chartered accountant and accredited insolvency practitioner. She says that the liquidators have identified a number of transactions made by CBLI with CBLIE as voidable transactions under s 292 of the Act. These include: (a) The Liability Settlement Agreement dated 30 January 2018 between CBLI and CBLIE, which was purportedly effective from 31 October 2017 (Liability Settlement Agreement);

(b) The Reinsurance Trust Deed dated 6 November 2017 between CBLI as Grantor, as Beneficiary and Wilmington Trust SP Services (Dublin) Limited (Reinsurance Trust Deed);

(c) Payment of 11.9 million from CBLI to CBLIE (and into the reinsurance trust account established purportedly pursuant to the Reinsurance Trust Deed) on 7 November 2018; and

(d) Further amounts, being reinsurance receivables otherwise payable to CBLI, paid into the reinsurance trust account purportedly pursuant to the Reinsurance Trust Deed and Liability Settlement Agreement, being:

A. 8,900,000.00 on 6 November 2017;

B. 8,557,795.00 on 28 December 2017;

C. 3,051,218.33 on 29 January 2018;

D. 9,400,000.00 on 20 February 2018;

E. 11,854,033 on 3 May 2018.

[5] She says the value that CBLI seeks to recover in respect of the transactions is the sum of 53,663,046.37.

[6] She confirms that contact was made with CBLIE to enquire whether legal representatives known to her would accept service. In parallel, an email was sent directly to Kieran Wallace, the administrator of CBLIE, enquiring as to whether he would accept service. The administrator advised that he would be prepared to accept service. Notice was in fact sent by way of email on 25 June 2019. Ms Johnstone was however advised that CBLIE had not yet instructed his New Zealand lawyers to accept service. It transpires that on 12 July 2019, Fee Langstone, CBLIEs New Zealand lawyers, confirmed to CBLIs lawyers, DLA Piper, that they were not instructed to accept service of the notice. As at the date of the application, no agreement had been reached regarding service.

[7] Ms Johnstone also avers that the Transactions were carried out at least partly in New Zealand, because: (a) one of the parties to the transaction, CBLI, is a New Zealand company;

(b) the Liability Settlement Agreement and Reinsurance Trust Deed were executed by CBLI in New Zealand; and

(c) the Transactions included payments that were made from CBLI in New Zealand to CBLIE in Ireland.

Assessment

[8] For the reasons helpfully laid out in the submissions for the applicants, I grant leave to serve CBLIE overseas.

[9] The voidable transaction provisions are set out in ss 292 to 296 of the Act. Section 294(1) sets out the procedure a liquidator must follow to set aside a voidable transaction. It provides: (1) A liquidator who wishes to set aside a transaction or charge that is voidable under section 292 or 293 must (a) file a notice with the court that meets the requirements set out in subsection (2); and

(b) serve the notice as soon as practicable on (i) the other party to the transaction or the charge holder, as the case may be; and

(ii) any other party from whom the liquidator intends to recover.

294 Procedure for setting aside transactions and charges

[10] Sections 387 to 392 of the Act contain provisions as to service which apply to service of documents on companies and overseas companies in specific circumstances. More specifically, ss 389 to 390 apply to the service of documents on overseas companies in New Zealand.

[11] The applicants submit, and I agree, that CBLIE is not a company for the purposes of that section because CBLIE is not captured as a company under the Act. Further, s 389 of the Act does not apply, as CBLIE is not on the NZROC nor does it have a place of business in New Zealand. Finally, I am prepared to proceed on this basis that s 390 of the Act does not apply, as the proposed Notice or any s 295 application is a document in legal proceedings for the purposes of that section.1

1 Citing Bond Cargo Ltd v Chilcott (1999) 13 PRNZ 629. I note that if this is wrong, and the proposed Notice is not a document in legal proceedings, the Notice could have been served under s 390(1)(d) in any event.

[12] I further agree that as the Act does not purport to provide for service outside New Zealand, any documents on overseas companies and service on overseas companies is to be in accordance with the High Court Rules.2

[13] Most relevantly, r 6.27(1) and r 6.27(2)(j) states the applicable criteria for service overseas in the present case: 6.27 When allowed without leave (1) This rule applies to a document that initiates a civil proceeding, or is a notice issued under subpart 4 of Part 4 (third, fourth and subsequent parties), which under these rules is required to be served but cannot be served in New Zealand under these rules (an originating document).

(2) An originating document may be served out of New Zealand without leave in the following cases:

2 See Metropolitan Glass and Glazing Ltd v Ship Lydia Orndorff (2000) 14 PRNZ 671 at [15]

(i) any act or omission to which the claim relates was done or occurred in New Zealand; or

(ii) any loss or damage to which the claim relates was sustained in New Zealand; or

(iii) the enactment applies expressly or by implication to an act or omission that was done or occurred outside New Zealand in circumstances alleged;

(j) When a claim arises under enactment and either

[14] In this regard, the proposed notice (while not a legal proceeding per se) initiates a civil proceeding and CBLIs claim for recovery in relation to the Transactions arises under the Act and: (a) Relates to acts of CBLI that were carried out in New Zealand, being the company entering into transactions in New Zealand and that payment of monies from New Zealand under the transactions; and/or

(b) Any loss or damage suffered by CBLI was sustained in New Zealand, and will ultimately be borne by creditors of CBLI who include persons based in New Zealand; and/or

(c) Relates to acts which occurred outside New Zealand in circumstances in which the voidable transaction provisions of the Act expressly or by implication apply to those acts because CBLI had full capacity to carry on or undertake any business or activity and to enter into any transaction within and outside New Zealand.

[15] It is unnecessary therefore for me to consider the alternative pursuant to r 6.28(5).

[16] Accordingly, there shall be an order directing service on CBLIE overseas

Question

Directors Duties - Application (ILAC)