100 Investments Limited v Walker
[2020] NZHC 1947
•7 August 2020
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2020-485-009
[2020] NZHC 1947
UNDER section 284 of the Companies Act 1993 IN THE MATTER
of the liquidation of Property Ventures Ltd (in liquidation)
BETWEEN
100 INVESTMENTS LIMITED
First Applicant
RFD FINANCE LIMITED
Second ApplicantAND
ROBERT BRUCE WALKER
Respondent
Hearing: 25 June 2020 Appearances:
J Moss for applicants
C Sawyer for respondent
Judgment:
7 August 2020
Reissued:
12 August 2020
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
Introduction
[1] Property Ventures Ltd (in liquidation) (PVL) was incorporated on 3 November 1997. It was a property development concern. Over the years, it accumulated a large number of subsidiaries.1
1 In this judgment I propose to refer to PVL and its subsidiaries as the PVL group of companies. In doing so, I do not use the phrase in the technical sense as it is used in sub-pt 2 of pt 11 of the Companies Act 1993 dealing with financial reporting. It is merely a convenient way of describing the collection of entities involved.
100 INVESTMENTS LIMITED v WALKER [2020] NZHC 1947 [7 August 2020]
[2] On 27 July 2010 this Court made orders winding up PVL and several other companies in the group and appointing the respondent as liquidator.2
[3] A decade on, there is no sign that the liquidation of the PVL group of companies is nearing an end. There has been a remarkable level of acrimony between Mr Walker and PVL’s former Managing Director, Mr David Henderson, and the liquidation has given rise to a prodigious amount of litigation. This is just the most recent example.
[4] As seems to happen in litigation arising from this liquidation, what on its face is a straightforward application has become more complicated than it needs to be. In this judgment, I propose to deal only with the dispositive issues. I make no apology for ignoring extraneous matters.
[5] By originating application pursuant to pt 19 of the High Court Rules 2016, the applicants, 100 Investments Ltd (100 IL) and RFD Finance Ltd (RFD), seek two substantive orders:
(a)an order under s 256(1)(a)(ii) of the Companies Act 1993 entitling them to inspect accounts and records; and
(b)an order under s 284(1)(c) and (d) that these accounts and records be audited.
[6]As I see it the following issues arise:
(a)whether the applicants should be granted leave to pursue their application under pt 19 of the High Court Rules;
(b)if so whether they can establish that they are creditors of PVL, which is a threshold issue under both provisions;
2 Initially the respondent was the sole liquidator. For a period there was a second liquidator, Mr John Scutter. But since Mr Scutter’s retirement from the role on 22 March 2018, the respondent has again been the sole liquidator.
(c)if so whether they can make out an entitlement to the orders sought under the two provisions.
Leave to proceed by originating application
[7] Most proceedings must be commenced by notice of proceeding and statement of claim. Part 19 of the High Court Rules offers an alternative process. It provides for the commencement of proceedings by originating application.
[8] The pt 19 procedure is available in respect of applications under certain specific statutory provisions set out in r 19.2. Whilst these include certain applications under the Companies Act, they do not include applications under ss 256 or 284.
[9] However, r 19.5 confers on the Court a discretion to permit proceedings not caught by r 19.2 to be commenced under pt 19.
[10] Part 19 is intended to provide an efficient (and therefore inexpensive) alternative for putting an issue before the Court, when neither the Court nor the parties will be assisted by pleadings, interlocutory steps such as discovery, and viva voce evidence. The fundamental purpose of pleadings is to define the issue or issues for determination. The types of proceedings singled out in r 19.2 for commencement by originating application are ones in which the issue or issues for determination are predetermined by the statutes under which such applications are made. In such circumstances, no useful purpose will be served by the parties restating the issue in pleadings.
[11] Against this background, it appears to me that the primary indicator as to whether any proceeding is suitable for commencement under pt 19 is whether the issue or issues which the applicant wishes the Court to consider is or are predetermined or obvious under the relevant statute or other rule of law, or whether the issues need to be defined by an exchange of pleadings (statement of claim and statement of defence) so that the Court can identify exactly what it is being asked to address, and whether there are likely to be significant factual controversies.
[12] Sections 256 and 284 both appear amongst a series of sections in the Companies Act dealing with the “Duties, rights, and powers of liquidators” and “Qualifications and supervision of liquidators.”
[13] Section 256 imposes a duty upon liquidators to keep accounts and records of a liquidation, and allows those to be inspected as of right by any liquidation committee, or, if the Court so orders, shareholders and creditors. Section 284 confers powers on the Court, inter alia to order the auditing of accounts and records.
[14] Neither section attempts to identify the criteria which the Court must apply in determining applications pursuant to them. The Court has a discretion. This of course must be exercised on a principled basis having regard to the Court’s responsibilities in relation to the supervision of liquidations.
[15] Obviously, in order for the Court to determine applications such as those made in the present case, it will be necessary for the applicant and the respondent to file and serve affidavit evidence as to the factual circumstances, but, above and beyond that, it does not appear to me to be likely to be of any assistance to the Court for the parties to file and serve pleadings which would do little more than identify the provisions pursuant to which any application is made and the grounds on which any application is made, which can be done in an originating application and notice of opposition. Nor does it appear to me that it would assist the resolution of these applications for the parties to move through the interlocutory processes associated with an ordinary proceeding or for there to be viva voce evidence.
[16] In short the applications made by 100 IL and RFD in this case appear to be of a sort which, in the interests of efficiency, can and should be dealt with under pt 19.
[17] To an extent, that conclusion is supported by the respondent’s formal submissions. Ms Sawyer begins her submissions thus:
This application is not appropriate to the originating application procedure and the applicants should not have leave …
[18] Having said that, Ms Sawyer moves — seemingly without any particular difficulty — directly to the substantive issues of whether the applicants are creditors
of PVL, and whether they can make out a proper basis for their claims under ss 256 and 284, and does not return to the procedural issue, suggesting that the issues for determination are self-evident.
[19] In my judgement, the applications in this case are properly brought pursuant to pt 19.
[20]The applicants will have leave to do so.
The threshold issue – are 100 IL and RFD creditors of PVL?
[21] In the case of both ss 256 and 284, creditors of the company in liquidation may only apply with the Court’s leave. 100 IL and RFD both claim to be creditors of PVL. Mr Walker does not accept that they are.
[22] On behalf of 100 IL and RFD, Mr Moss began his submissions on this issue by referring to s 240 of the Companies Act which defines the term creditor, for the purposes of pt 16 (dealing with liquidations) as:
a person who, in a liquidation, would be entitled to claim in accordance with s 303 that a debt is owing to that person by the company (in liquidation) …
[23] He then referred to s 303 of the Act which provides that admissible claims include:
… a debt or liability, present or future, certain or contingent, whether it is an ascertained debt or a liability for damages, may be admitted as a claim against a company in liquidation.
[24] The applicants claim to be creditors with debts that fall within s 303 as assignees of lenders’ rights and obligation under loans and related securities. The evidence on which they rely in doing so is an affidavit sworn by Mr Rodney Hide who is the Managing Director of 100 IL and authorised by RFD to swear an affidavit on its behalf.
100 Investments Ltd
[25] Mr Hide deposes that on 24 November 2006 a company by the name of Propertyfinance Ltd as lender entered into an agreement with a PVL group company by the name of Lichfield Ventures Ltd (Lichfield) as borrower pursuant to which Propertyfinance advanced to Lichfield the sum of $2,662,500 (the Lichfield loan). Pursuant to an earlier all obligations guarantee dated 30 March 2005, PVL guaranteed Lichfield’s obligations to Propertyfinance in terms that extended to the 24 November 2006 loan.
[26] On 27 January 2016 Propertyfinace assigned its interests in the transaction to 100 IL, with the result, it is said, that 100 IL is now entitled to pursue a claim against PVL pursuant to that company’s guarantee, and is therefore a creditor of the company as that term is defined.
RFD Finance Ltd
[27] Mr Hide says that on 11 September 2006 a company by the name of Equitable Life Insurance Company Ltd as lender entered into an agreement with a PVL group company by the name of Castle Street Ventures Ltd (Castle) as borrower, pursuant to which Equitable Life Insurance Company advanced to Castle the sum of $8.5 million (the Castle loan). The same day, PVL guaranteed Castle’s obligations under the agreement.
[28] He says that on 19 September 2006 Equitable Life Insurance Company as lender entered into an agreement with a PVL group company by the name of Tay Ventures Ltd (Tay) as borrower, pursuant to which Equitable Life Insurance Company advanced to Tay the sum of $19,801,085.45 (the Tay loan). The same day, PVL guaranteed Tay’s obligations under the agreement.
[29] Equitable Life Insurance company then assigned the Tay and Castle loans to Equitable Holdings Ltd, the trustee company. On 14 February 2014 Equitable Holdings assigned to RFD its interests in the debts owed to the company by Castle and Tay under those loans.
[30] PVL’s internal financial records show that as at the date of the company’s liquidation:
(a)Approximately $2.5 million was outstanding under the Lichfield loan;
(b)Approximately $13.6 million was outstanding under the Castle loan; and
(c)Approximately $6.1 million was outstanding under the Tay loan.
[31] The documentation to which Mr Hide refers in his affidavit evidence appears to support this description of events. Ms Sawyer did not contend otherwise.
[32] Prima facie then, it would appear that by assignment both 100 IL and RFD are creditors of PVL with standing to apply for the orders they seek.
[33] As already said, the claim by 100 IL and RFD to be creditors of PVL is challenged by Mr Walker.
[34] In his notice of opposition Mr Walker did not provide any detail as to the basis for this challenge. Under the heading “No standing in the applicants to make this application”, he asserts that 100 IL and RFD are not creditors. He recognises that their claim to be creditors is founded on the assignment to them of the rights and obligations of the lenders to Litchfield, Castle and Tay including guarantees of the three loans provided by PVL. However, in relation to these claims, all he says is that “the applicants have not established that the assignments were valid or that they could give rise to any claim”. That does not take matters very far.
[35] Nor did Mr Walker take matters very much further in his short (effectively two page) affidavit in support of his opposition. Here is the sum total of Mr Walker’s evidence on the point:
6.… I do not believe there can be any substance in the Applicants’ claims to be creditors.
7.I have sought further information in respect of the assignment discussed at paragraph 5 of the affidavit of Rodney Phillip Hide, which information invalidates the claim that has been assigned.
8.This assignment referred to at paragraph 6 of the affidavit of Rodney Phillip Hide is the same one referred to at paragraph [32](c) of the judgment of Venning J of today’s date at [2020] NZHC 165. As his Honour says there, the relevant loan contained a “no assignment” clause, which would make any such assignment to the Applicant as claimed invalid.
[36] Immediately prior to the hearing of this matter on 25 June 2020, a second affidavit sworn by Mr Walker in support of his opposition was filed and served. The late filing and service of this affidavit gave the applicants’ advisers virtually no time to consider it. The late filing and service of such an affidavit is plainly objectionable, and I would have excluded it had Mr Moss pressed an objection to it. However, he did not do so, and I therefore allowed the affidavit in.
[37] In any event, I found this further affidavit evidence of little assistance. In it Mr Walker makes a series of somewhat intemperate assertions on factual and legal matters. To the extent that this evidence goes to the issue of the status of 100 IL and RFD as creditors (or not), I will address it in dealing with the submissions made on Mr Walker’s behalf by Ms Sawyer.
[38] In her submissions relating to the status of 100 IL and RFD as creditors, Ms Sawyer covered a considerable amount of ground. In doing so, she went well beyond the grounds identified in the notice of opposition and the evidence before the Court.
[39] Ms Sawyer levelled criticism at the way in which the PVL group of companies operated. She emphasised the apparent fluidity of rights and obligations within the group and the way in which these were assigned or otherwise transferred between PVL itself and other companies. On this basis, she submitted that those responsible for the governance of the group prior to liquidation could arrange for any contractual rights and obligations such as those under loans and guarantees to be moved at a whim. These are my words rather than hers, but she described something like a game of musical chairs within the group so that where such rights and obligations landed at the time of the liquidation was, not so much a matter of dumb luck, as something that the
then directors and managers could manipulate. On this basis, she invited the Court to be sceptical of the apparently neat position presented by 100 IL and RFD in Mr Hide’s affidavit evidence.
[40] Ms Sawyer’s description of the way in which the PVL group of companies was governed and managed is not without foundation. However, whatever criticism might be made of this, the fact of the matter is that 100 IL and RFD are able to point to the clear documentary evidence that they are the successors in title to financiers who lent substantial sums to the three subsidiaries which indebtedness was guaranteed by PVL. Those transactions have not been the subject of specific challenge by Mr Walker as the liquidator and have not been overturned by the Court. Prima facie then, the Court must recognise their legitimacy and 100 IL and RFL’s status as creditors in the sums claimed by them and referred to in the relevant management accounts.
[41] On the basis of Mr Walker’s evidence quoted above, Ms Sawyer also advanced an argument to the effect that the rights and obligations of the lenders under the three loans were not capable of assignment.
[42] Having regard to the terms of his notice of opposition, I have reservations as to whether that issue — that is to say the issue of the lawfulness of the assignments — is properly before the Court, but, as Mr Moss for 100 IL and RFD engaged on the point, I will deal with it.
[43] In relation to the Lichfield loan, as Mr Moss submitted, Mr Walker’s assertion in relation to the assignment of the Propertyfinance loan to 100 IL on 27 January 2016 that he had “sought further information in respect to the assignment … which information I believe invalidates the claim that has been assigned” is not evidence at all.
[44] To the extent that Mr Walker is saying that the assignments of the rights and obligations under the loans to Castle and Tay were precluded by non-assignment clauses in the loan documentation, the loan documentation for Castle indicates that it precludes an assignment to anyone other than the trustee. As already said, the first assignment by Equitable Life Insurance Company was to the trustee (Equitable
Holdings). The trustee was under no similar restraint. A cursory reading of the loan documentation for Tay indicates that this contained no prohibition on assignment.
[45] Finally, Ms Sawyer submitted on behalf of Mr Walker that this application was frivolous and vexatious, and that the Court should not entertain it. In fairness to Ms Sawyer, the background to that submission relates less to the particular circumstances of this case as to the acrimonious nature of this liquidation to which I have already referred. As an illustration one need only refer to Thomas J’s recent decision in Henderson v Walker3 in which her Honour concluded that Mr Walker had misused information relating to Mr Henderson which came into his possession in his capacity as the liquidator of PVL and subsidiaries. That decision extends to some 90 pages and describes the disputes between the parties there in a way that is unnecessary to replicate here. Against that background, it seems to me that Ms Sawyer’s submission can be summarised by saying that Mr Walker’s perception at least is that giving Mr Henderson through 100 IL and RFL access to any documentation is only likely to lead to more acrimony and litigation.
[46] Such an outcome is by no means beyond the bounds of possibility. However, the Court must approach this application like any other on the basis of the merits. In my judgment, 100 IL and RFD are able to make out a strong claim — based largely on documentary evidence — to be creditors of PVL, and therefore entitled to pursue these applications.
The substantive applications
[47] The principles upon which the Courts approach applications under ss 256 and 284 were largely common ground as between Mr Moss for 100 IL and RFD and Ms Sawyer for Mr Walker and I summarise them below.
Section 256(1) provides as follows:
Duties in relation to accounts
(1)Subject to subsection (2), the liquidator of a company must—
3 Henderson v Walker [2019] NZHC 2184.
(a)keep accounts and records of the liquidation and permit those accounts and records, and the accounts and records in the company, to be inspected by—
(i)any liquidation committee appointed under section 314, unless the liquidator believes on reasonable grounds that inspection would be prejudicial to the liquidation; and
(ii)if the court so orders, a creditor or shareholder; and
(b)retain the accounts and records of the liquidation and of the company for not less than 1 year after completion of the liquidation.
…
[49] In Levin v Lawrence Toogood J concluded that an applicant pursuant to s 256(1)(a)(ii) was required to establish a good reason for any order sought.4 On appeal the Court of Appeal affirmed the good reason test and elaborated on it in these terms:5
(a)mere suspicion or assertion by a creditor that a liquidator has not undertaken — or is not undertaking — the liquidator’s statutory task properly is not sufficient;
(b)it is not permissible for a creditor to apply merely in order to embark on a fishing expedition — in order to sift through the accounts and records of the liquidation to see if that might turn something up.
(c)as a minimum, the applicant must put forward some persuasive, tangible or concrete reason why inspection should be granted. An example might be where the creditor, from its own dealings with the company in liquidation, has a genuine concern about a particular aspect of the company’s affairs. If the liquidator declines to investigate this area, or declined to say whether it had been investigated, we think the s 256(1)(a)(ii) threshold would be crossed.
[50]Section 284(1)(c) and (d) provide:
284 Court supervision of liquidation
(1)On the application of the liquidator, a liquidation committee, or, with the leave of the court, a creditor, shareholder, other entitled person, or director of a company in liquidation, the court may—
…
4 Levin v Lawrence [2012] NZHC 1452 at [56].
5 Levin v Lawrence [2013[ NZCA 394 at [53].
(c)order an audit of the accounts of the liquidation:
(d)order the liquidator to produce the accounts and records of the liquidation for audit and to provide the auditor with such information concerning the conduct of the liquidation as the auditor requests:
…
[51] As to the leave component of s 284, Mr Moss referred me to several authorities including the Court of Appeal’s judgment in Trinity Foundation (Services No. 1) Ltd v Downey and Anor.6
[52] In all of those cases the various courts confirmed that leave will be granted where an applicant such as a creditor can establish a seriously arguable case on the merits.7 In this case, the application by 100 IL and RFD is of course the substantive application before the Court. It is therefore unnecessary to consider the leave point as a discrete one as it will be subsumed in the substantive application.
[53] Turning to that, the leading cases are Re Ocean Shipping Ltd (in liq),8 Black v Selwyn Developments Ltd (in liq)9 and Drilling Fluid Equipment NZ Ltd v Registrar of Companies.10
[54] I adopt the articulation of the principle involved given by Associate Judge Gendall (as he then was) in Drilling Fluid Equipment NZ Ltd:11
The decision in Re Ocean Shipping clearly provides authority for the court to intervene in a case such as the present to use its supervisory powers vested in it by s 284 of the Companies Act. As Fisher J noted in Re Ocean Shipping, there is a very strong presumption that the creditors of a failed company are entitled to a full and thorough investigation of the financial history and status of the company, and that is especially the case where they are prepared to fund the exercise. In my view the creditors appear to have been denied that opportunity in the present case although, it may be that at the end of the day “the further investigation will prove fruitless but for my part I would be very
6 Trinity Foundation (Services No. 1) Ltd v Downey and Anor Court of Appeal 15 November 2006 at [31]. See also Birchall v Project Works Construction Ltd (in liq) (2004) 9 NZCLC 263, 547; and Official Assignee v Norris [2012] NZHC 961 at [18].
7 See Adaptable Solutions v Toon [2017] 753 at [20].
8 Re Ocean Shipping Ltd (in liq) HC Auckland M348196. 16 July 1996 per Fisher J.
9 Black v Selwyn Developments Ltd (in liq) HC Auckland CIV-2007-404-4525 20 August 2007 per Courtney J.
10 Drilling Fluid Equipment NZ Ltd v Registrar of Companies HC Wellington CIV-2008-485-1985. 17 December 2008 per Associate Judge Gendall.
11 At [10].
slow to see a creditor denied at least the opportunity: — Fisher J in Re Ocean Shipping.
The s 256 application
[55] On behalf of 100 IL and RFD Mr Moss submits that “they meet the good reason test and should be allowed to inspect the company accounts and records because:
48.1Mr Walker has received a considerable sum of money from the PWC settlement;
48.2Mr Walker and SPF provided undertakings to the Supreme Court that there would be a return to creditors from any PWC settlement funds received;
48.3Mr Walker has indicated in separate proceedings and under oath that creditors have done well from the liquidation;
48.4Despite this, the applicants have not received any funds from the liquidation nor any explanation of where the settlement funds have gone;
48.5It is of considerable concern that that Mr Walker’s solicitor indicated that there may not be sufficient funds remaining to pay anything to the creditors of PVL and that any amount has been absorbed by liquidator’s fees in the circumstances of the undertakings to the Supreme Court; and
48.6Mr Walker admitted on oath that his first priority is his own pecuniary interest rather than the interests of the creditors.
[56] It may be that the settlement of the litigation instigated by the liquidators against the directors, auditors and valuers referred to by Mr Moss in this submission resulted in a substantial recovery. However, in and of itself, that does not take the argument very far. What matters is the amount of that recovery relative to the various calls on the funds which include the costs of the liquidation and the claims of secured creditors as well as the claims of unsecured creditors. All that can really be inferred is that the successful outcome of the claims against those parties meant that the liquidator received funds which, as an officer of the Court, he is obliged to apply appropriately in the course of the liquidation. In due course the liquidator will of course be obliged in terms of s 255 of the Companies Act to report. At that stage, the Court will expect to have before it sufficient information to enable an assessment to be made to satisfy itself that the liquidator has acted lawfully and properly in discharging those responsibilities.
[57] What the litigation funder (SPF No 10. Ltd) and the liquidator said in their evidence in the course of prosecuting the claims against the directors, auditors and valuers was that the settlement would result in the flow of funds to the liquidators. Whilst unsecured creditors might fairly infer that this would increase the prospects of a return to them, I do not read into what was said anything in the nature of an assurance or undertaking that that would be the case.
[58] It is true that in other proceedings Mr Walker has made the observation that the creditors have done well in the liquidation. I accept his evidence that what he meant by that was that even the secured creditors have done well to receive any return. In any event, an observation of that sort is not in my view capable of giving rise to a reasonably founded concern that the liquidator is not discharging his responsibilities as such lawfully and appropriately.
[59] I accept of course that 100 IL and RFD have not received any payment. This is explained both by the fact that their claims to be accreditors of PVL is not currently recognised by the liquidator and by the fact that it would be unusual in any liquidation for there to be an interim distribution to unsecured creditors.
[60] The indication of Mr Walker’s solicitors that there may not be any available funds for a distribution to unsecured creditors is not in my view capable of giving rise to a reasonably founded concern on the part of the unsecured creditors that the liquidator is not discharging his responsibilities lawfully and appropriately. Again, everything turns on the quantum of the funds received on the settlement relative to the claims on those funds.
[61] The suggestion that Mr Walker has admitted on oath that his first priority is his own fees is not in my view a fair one. What Mr Walker said is that the costs of the litigation — which include, but are no means limited to, his own fees — are a first call on the available funds. That statement simply reflects the priority of payments by a liquidator and to preferential creditors under sch 7 of the Companies Act.12
12 See Companies Act 1993, Sch 7(1)(a).
[62] Whilst 100 IL and RFD may well have their concerns about the way in which Mr Walker is discharging his responsibilities, the grounds put forward by them do not, in my view, meet the good reason test as described by the Court of Appeal in Levin v Lawrence. On their behalves it is said that their essential concern is that Mr Walker is not conducting the liquidation of PVL lawfully and appropriately. But the pleaded basis for their concern does not seem to me to give rise to an objectively assessed foundation for any such concern; as articulated by the Court of appeal in Levin v Lawrence, mere suspicion is not sufficient. This case contrasts with Tempest Litigation Funders Ltd v Kamal13 where the evidence pointed to the possibility of the liquidator having misconducted a creditors’ meeting and I ordered the production of documentation relating specifically to that meeting.
The s 284 application
[63] Mr Ross submits that 100 IL and RFD should have the order they seek for the auditing of the accounts and records under Mr Walker’s control because:
63.1that they have a credible factual basis that Mr Walker has not paid out creditors (or all of the creditors proportionally) from PWC settlement funds. The applicants rely on the submissions at paragraph 44 above;
63.2that if the claim is established, there is a reasonable likelihood that the Court will disturb the decision of Mr Walker because it would almost certainly find the decision unreasonable on the ground that it was a breach of Mr Walker’s duties as a liquidator to pay out unsecured creditors in equal proportions subject to preferential claims under Schedule 7;
63.3they are prepared to fund the independent audit.
[64]He continues:
64.The applicants simply seek an independent audit of the accounts of the liquidation so as to understand where the settlement proceeds were paid. If Mr Walker has nothing to hide, an audit will show that. If he does, then it is in the interests of justice that an audit exposes that because Mr Walker is an officer of the Court and acting, at all times as liquidator of PVL, under orders of the Court appointing him liquidator to PVL.
13 Tempest Litigation Funders Ltd v Kamal [2020] NZHC 827.
[65] It appears to me that of s 284, as explained in the cases and commentary, is generally applied so as to give creditors who, when the outcome of the liquidation is known, have a legitimate grievance as to the way in which it has been conducted and can demonstrate that if it had been conducted otherwise the outcome may have been more advantageous for them an opportunity to examine whether their concerns are well founded. In such circumstances, creditors are entitled to insist on a retrospective review in the form of an audit of the company’s affairs and the liquidator’s actions. The leading authorities such as Re Ocean Shipping Ltd (in liq) all involve applications after the liquidator or liquidators have filed their final reports and such information is available to the Court and interested parties.
[66] I do not see the utility in such order at this stage when the liquidation is incomplete and the liquidator has not provided a final report as to such things as the costs of the liquidation, amounts recovered and the distribution of any monies available between secured creditors, preferential creditors and unsecured creditors.
Conclusion
[67]For all of those reasons, the application is dismissed.
[68] That leaves only the question of costs. As to that, my preliminary view is that the respondent is entitled to a costs order. There may however be issues relating to the fact that, as she explains it, Ms Sawyer’s status as an employee and that may affect the appropriate costs order. I would expect counsel to be able to discuss and resolve costs. However, if they are unable to do so, they may revert by memorandum and I will deal with costs on the papers in the usual way.
Associate Judge Johnston
Solicitors:
Hucker & Associates, Auckland for applicants
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