Alchemy Beverage Co Ltd v We Love Group Ltd
[2021] NZHC 3428
•14 December 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-000244
[2021] NZHC 3428
BETWEEN ALCHEMY BEVERAGE COMPANY LIMITED
PlaintiffAND
WE LOVE GROUP LIMITED
Defendant
CIV-2021-404-002314 UNDER
Companies Act 1993, s 250
IN THE MATTER OF
An application under s 250 for an order that the liquidation of WE LOVE GROUP
LIMITED (IN LIQUIDATION) be
terminated and other ordersKIERAN JONES and STEVEN KHOV as
liquidators of WE LOVE GROUP LIMITED (IN LIQUIDATION)
Plaintiffs / Applicants
Hearing: On the papers Counsel:
J R F Cochrane and S M Chow for Plaintiffs / Applicants
Judgment:
14 December 2021
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by Associate Judge Andrew on 14 December 2021 at 11.00 am
pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar
Date………………………….
ALCHEMY BEVERAGE CO LTD v WE LOVE GROUP LTD [2021] NZHC 3428 [14 December 2021]
Introduction
[1] The liquidators of We Love Group Ltd (in liquidation) (WLG), Mr Kieran Jones and Mr Steven Khov, apply to terminate the liquidation under s 250 of the Companies Act 1993. They contend it would be just and equitable to do so.
[2]The liquidators also apply without notice for:
(a)A direction under r 18.7 of the High Court Rules 2016 (the Rules) that the statement of claim need not be served on any parties; and
(b)Orders under ss 276, 278 and 284 of the Companies Act approving their remuneration and expenses ($41,929 plus GST and disbursements of
$26,412 plus GST).
[3] The liquidators make the application on the basis WLG’s creditors have all had their debts satisfied and are no longer creditors, or have entered into arrangements with the company and/or third parties, such that their interests are protected in respect of future dealings with the company if the liquidation were terminated. The liquidators also rely on the creditors’ consent to the relief sought in the statement of claim for the termination of the liquidation.
Background facts
[4] The liquidators are licensed insolvency practitioners who were appointed joint and several liquidators on 30 March 2021 on application by Alchemy Beverage Co Ltd (Alchemy) to liquidate WLG.
[5] WLG was incorporated on 16 May 2017 and, at the date of liquidation, had one director, Chenxi Gu.
[6] From incorporation, WLG has had one shareholder, being a company named We Love Holdings Ltd, company number 6271143 (WLH). WLH is also understood to be controlled by Mr Gu, the director of the company.
[7] WLG traded as a business, manufacturing and selling bottled and pre-mixed alcohol products. WLG’s primary product is called “Luxerose” cocktails. These products are mostly exported direct to China, with a small percentage sold to local retailers in New Zealand.
[8] At the date of liquidation, WLG was trading from premises in Rosedale, Auckland. The premises is an office and warehouse where three full-time and one part-time staff are employed to manufacture and distribute the Luxerose cocktails.
[9] For reasons set out in Mr Khov’s substantial affidavit filed in support of the application, the liquidation was unexpected. WLG Company failed to comply with a statutory demand. The liquidators understand that WLG ignored the subsequent liquidation proceedings on the basis of a misunderstanding that it had already disputed the outstanding invoice issue by Alchemy.
[10] The liquidators advise that WLG has entered into arrangements with all its creditors who have filed claims in the liquidation and/or that it holds sufficient funds for those claims to be satisfied in full.
[11] Mr Gu has injected funds into WLG to enable it to pay, with the exception of three parties (the Supporting Creditors), all outstanding creditor claims and costs relating to the liquidation.
[12]The Supporting Creditors:
(a)Consent to the termination of WLG’s liquidation; and
(b)Support this proceeding and related without notice application for directions as to service.
[13] The Supporting Creditors have reached an agreement with WLH regarding payment of their costs in relation to the liquidation and this proceeding.
[14] WLG’s largest creditor is Beijing Weiheng International Trading Ltd (BWIT). Its general manager has sworn and filed an affidavit in support of the liquidators’
application for termination. Mr Xi deposes that the parties have reached compromise in respect of BWIT’s debt. Accordingly, BWIT intends to withdraw its current claim and will not be submitting any other claims against WLG.
[15] Mr Yueming Zheng, the trustee of the Ah Ling Family Trust – the landlord of the premises leased by WLG – has also sworn and filed an affidavit in support of the application. Mr Zheng advises that in respect of any unpaid rent accrued by WLG both prior to and during the liquidation, the Ah Ling Family Trust and WLG have reached a compromise. Accordingly, the Ah Ling Family Trust will not be submitting any claims against WLG and intends to make arrangements with it outside of the liquidation process.
[16] Mr Gu also supports the application. In his affidavit, sworn 1 October 2021, he confirms his support for the termination and notes WLH is meeting the liquidators’ fees and legal costs. Mr Xi notes that because the shareholder is paying the ongoing costs of the liquidation, the costs of the current proceeding, it does not want to see the liquidation or the proceeding take any longer than is necessary.
Service of the statement of claim
[17]Rule 7.23 of the Rules relevantly provides:
Application without notice
(1) A person who wants to make an application to the court and have the application determined without any other party having been served (in these rules referred to as an application without notice) must use form G 32.
(2)An application without notice may be made only –
(a)on 1 or more of the following grounds:
(i)that requiring the applicant to proceed on notice would cause undue delay or prejudice to the applicant:
(ii)that the application affects only the applicant:
(iii)that the application relates to a routine matter:
(iv)that an enactment expressly permits the application to be made without serving notice of the application:
(v)that the interests of justice require the application to be determined without serving notice of the application; and
(b)if the applicant has made all reasonable inquiries and taken all reasonable steps to ensure that the application and supporting documents contain all material that is relevant to the application, including any defence that might be relied on by any other party and any facts that would support the position of any other party.
(3) An applicant who makes an application without notice must, if the application is of a kind that is likely to be contested if it were made on notice, file a memorandum with the application that sets out –
(a)the background to the proceeding (including the material facts that relate to the proceeding); and
(b)the grounds on which each order is sought; and
(c)an explanation of the grounds on which each order is sought without notice; and
(d)all information known to the applicant that is relevant to the application, including any known grounds of opposition or defence that any other party might rely on, or any facts that would support opposition to the application or defence of the proceeding by any other party.
…
[18] For the reasons advanced by the liquidators, noted above, I am satisfied that the requirements of r 7.23(a)(i) and (b) are met. I also note that while the application is not of a kind that is likely to be contested if it were made on notice, counsel has certified that the application complies with the Rules.
[19] I find that it would be unduly prejudicial to require the application to be brought on notice. It would increase cost and will delay the liquidators, WLG and WLH as shareholder in relation to the termination proceedings. All known interested parties support termination. Progressing on notice to these parties, particularly WLG’s major creditor, BWIT, which is based overseas, would only increase costs for the shareholder, WLH, because it is paying for the application as a cost of the liquidators, and would likely delay the orders that WLH seeks.
[20] It is clear that the applicants have made all reasonable enquiries and taken all reasonable steps to ensure that the application and supporting documents contain all material that is relevant to the application, including any defence that might be relied
upon by any other party and any other facts that would support the position of any other party, as provided in r 7.23(b).
[21] Accordingly, pursuant to r 18.7 of the Rules I direct that the statement of claim need not be served on any party.
The termination application
[22] Under s 250(1) of the Companies Act the Court may, if it is just and equitable to do so, make an order terminating the liquidation of a company.
[23] In the ordinary run of cases, the Court will only exercise its discretion to order termination of the liquidation if:1
(a)All the creditors have been paid in full or satisfactory provision has been made for them to be paid or they have consented;
(b)The liquidators’ costs have been paid or secured; and
(c)The shareholders have consented or would be in no worse position than if the liquidation had proceeded to its conclusion.
[24] The starting point is whether these criteria are met, and if not, whether there are any exceptional circumstances that nonetheless warrant making the order sought.2 However, the Court is not constrained by these criteria: its power under s 250 is broad. Additional considerations include the public interest and a concern to protect the interests of the company’s present creditors and those parties who would, in future, have dealings with it if the liquidation were terminated.3
[25] I find that it is just and equitable to order that the liquidation of WLG be terminated. The factors above at [23](a)–(c) are made out and there are no other
1 Re Bell Block Lumber Ltd (in liq) (1992) 6 NZCLC 67,690, (1992) 5 PRNZ 642 at 643.
2 Bunting v Buchanan [2012] NZHC 766 at [47].
3 Foundation Securities (NZ) Ltd v Direct Labour Services Ltd (in liq) [2008] NZCCLR 1 at [21]– [22].
factors, such as the public interest, suggesting that there would be a proper basis for declining to make the order sought. My reasons are as follows:
(a)There are no parties who might be adversely affected by the termination application.
(b)WLG’s creditors:
(i)have all had their debts satisfied and are no longer creditors (one of which was the original petitioning creditor, Alchemy); and/or
(ii)consent to the relief sought in the statement of claim terminating the liquidation; and/or
(iii)have entered into arrangements with the Company and/or third parties such that their interests are protected in respect of future dealings with the Company if the liquidation were terminated; and/or
(iv)have filed affidavits in support of the termination proceeding.
(c)As noted above, Mr Gu as director of WLG and its shareholder, WLH, has filed an affidavit in support of termination and has provided undertakings which protect WLG and its creditors in respect of future dealings with WLG. I am satisfied this protects the public interest.
(d)WLH supports the termination application and will be no worse off if the liquidation is terminated than if it proceeded to its conclusion.
(e)The liquidators, as detailed in Mr Khov’s extensive affidavit, have entered into satisfactory arrangements regarding the costs and expenses with Mr Gu.
(f)I accept Mr Khov’s view, set out in his affidavit, there would be possible adverse consequences if the liquidation was not terminated, including
likely re-entry by the landlord, the Ah Ling Family Trust, fire sale of assets and inventory and recovery of debtors would be difficult and expensive. On the other hand, if WLG’s liquidation were terminated it would have a chance to continue operation and continue acquiring new business. WLH is better off in that scenario because it will be able to maintain ownership and the opportunity to further WLG’s business interests.
(g)If an order terminating the liquidation is not made, the liquidators advise that they intend to complete the liquidation and retire. If the liquidation is completed, WLH will receive no value for its shares because WLG currently has no surplus assets which the liquidators must distribute to the shareholder.4
[26] Accordingly, I grant the liquidators’ application for orders terminating the liquidation of WLG.
Application for approval of the liquidators’ remuneration
[27] In fixing a liquidator’s remuneration, the Court determines the fairness and reasonableness of what has been charged measured against the works undertaken and the results achieved.5 Fair and reasonable remuneration reflects the value of the services rendered to the creditors of the company and, if a surplus were achieved, of shareholders.6
[28] I am satisfied, having regard to the substance of the application, Mr Khov’s affidavit in support of it and the various liquidators’ reports that the application for approval of the liquidators’ remuneration should be granted. The liquidators’ work was necessary and properly performed. It was both proportionate and reasonable given the extensive investigative steps the liquidators undertook and the recovery they
4 Companies Act, s 313.
5 For a thorough review of liquidators’ remuneration, see this Court’s decision in Re Roslea Path Ltd (in liq) (also published as Flynn v McCullum) [2013] 1 NZLR 207 (HC) at [187] and the references therein.
6 Ibis.
achieved. I note that all creditors other than the supporting creditors have been paid in full.
Result
[29] I order the liquidation of We Love Group Limited is terminated pursuant to s 250 of the Companies Act.
[30]The statement of claim need not be served on any party.
[31] I approve the liquidators’ application for remuneration in the sum of $41,929 plus GST and disbursements of $26,412 plus GST.
[32]My orders are timed at 11.00 am on Tuesday, 14 December 2021.
Associate Judge P J Andrew
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