Apostolakis v Cafe Italiano Wellington Limited HC Wellington CIV-2011-485-583

[2011] NZHC 392

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2011-485-583

BETWEEN  GEORGE APOSTOLAKIS Plaintiff

ANDCAFE ITALIANO WELLINGTON LIMITED

Defendant

Judgment:      1 April 2011 at 3:00 PM

REASONS FOR DECISION OF ASSOCIATE JUDGE D.I. GENDALL

These Reasons for Decision were delivered by Associate Judge Gendall on 1 April

2011 at 3.00 pm under r 11.5 of the High Court Rules.

Solicitors:           Collins & May, Solicitors, PO Box 30614, Lower Hutt

Introduction

G APOSTOLAKIS V CAFE ITALIANO WELLINGTON LIMITED HC WN CIV-2011-485-583 1 April 2011

[1]      On 29 March 2011 the plaintiff filed in this Court a statement of claim to put the defendant company into liquidation together with a without notice interlocutory application for appointment of an interim liquidator.

[2]      The interlocutory application was referred to me and after consideration at

10.40 am on on 30 March 2011 I made an order appointing Murray George Allott as interim liquidator of the defendant company, made certain orders as suggested limiting and restricting the powers of the interim liquidator and reserved costs.   I indicated that my detailed reasons for that decision would follow.   I now set out those reasons.

[3]      The without notice application to appoint the interim liquidator was made pursuant to s 246 Companies Act 1993. This states relevantly:

246.      Interim Liquidator

(1)       If an application has been made to the Court for an order that a company be put into liquidation, the Court may, if it is satisfied that it is necessary or expedient for the purpose of maintaining the value of assets owned or managed by the company, appoint a named person, or an Official Assignee for a named district, as interim liquidator.

(2)       Subject to sub-section 3 of this section, an interim liquidator has the rights and powers of a liquidator to the extent necessary or desirable to maintain the value of assets owned or managed by the company.

(3)       The Court may limit the rights and powers of an interim liquidator in such manner as it thinks fit.

[4]      This  application  is  supported  by  a  detailed  affidavit  of  the  plaintiff,  Mr George Apostolakis sworn 28 March 2011.  In addition, a statement of claim to place the defendant into liquidation was filed on 29 March 2011.

Counsels’ Arguments and My Decision

[5]      In considering s 246 Companies Act 1993, Brookers Company & Securities Law at para CA246.02 sets out the pre-conditions to appointment of an interim liquidator in the following way:

CA246.02          Pre-conditions to Appointment of Interim Liquidator

There are three main pre-conditions to the liquidator’s appointment:

(a)       A liquidation application must have been filed in the Court disclosing good grounds for putting the company into liquidation.  An interim liquidator is unlikely to be appointed unless there is a good prima facie case for liquidation.  If a company is not in fact put into liquidation, it follows that the Court has no power to appoint an interim liquidator and any existing appointment will come to an end ....

(b)       The Court must be satisfied that there is the need for urgency.  Normally, ex parte applications for the appointment of an interim liquidator will not be successful unless special circumstances can be demonstrated.  An undertaking as to damages will be required in such cases ....

(c)       The circumstances must not only be urgent – they must also justify the appointment of an interim liquidator:

CA246.04

[6]      As Brookers Company and Securities Law goes on to note at para 246.04, the circumstances justifying appointment of an interim liquidator were considered by the High Court in Robert Bryce & Co Ltd v Chicken & Food Distributors Limited [1990]

5 NZCLC 66,648.   There, the Court stated that in determining whether there is a need for interim control of the company in question, the following factors need to be considered:

(a)       Whether the company’s assets are in jeopardy;

(b)       Whether the status quo should be maintained; and

(c)       Whether the interests of creditors are safeguarded.

An important aspect with respect to these factors is the need to maintain the value of the assets owned or managed by the company.

[7]      Turning  to  the  three  pre-conditions  for  the  appointment  of  an  interim liquidator noted at para [5] above, in the present case an application has been filed by the plaintiff to have the defendant company placed into liquidation in terms of s 241

Companies Act 1993.  This relies upon the just and equitable ground for placing a company into liquidation in terms of s 241(4)(d) Companies Act 1993 and refers to an irreparable breakdown in the relationship between the plaintiff and Mr Massimo Giurioli (“Mr Guirioli”) who are co-directors and their interests are co-shareholders of the defendant.   This breakdown in their relationship is said to have occurred

between March 2010 and March 2011 and is such, and the evidence before me confirms that both parties accept, that they cannot continue to operate the defendant company and that it should be placed into liquidation.

[8]      On this basis, and considering the material presently before the Court, I am satisfied that there is a good prima facie case here for liquidation of the defendant.

[9]      As to the second requirement that the situation here demands urgency, the plaintiff in his affidavit refers to several matters:

(a)      Both parties appear to acknowledge that the defendant company is clearly insolvent and it is continuing to trade only on a cash basis.  Its bankers have apparently “locked up the company’s bank accounts” and critically, all office records including cheque books, computers and all financial records have now been removed from the company’s premises it is said by Mr Guirioli.

(b)According to the plaintiff, there are substantial irregularities in the financial accounts of the defendant company and large amounts of money, stock, plant and equipment have been shifted from the company’s premises it is alleged by or at the direction of Mr Guirioli, and cannot now be located.

[10]     Accordingly, the plaintiff’s contention is that there is a serious risk here that assets of the defendant company have been and will in future be dissipated and/or transferred to unrelated entities (presumably controlled by Mr Guirioli and others) and not applied in satisfaction of the defendant’s creditors, thus putting them out of reach of those creditors.  In this regard, Mr Guirioli does appear to own and control a number of other companies including Serio Imports Limited (which claims to be a substantial creditor of the defendant), Cafe Italiano Majoribanks Limited, Cafe Italiano Molesworth Limited and Topolino Limited, some of which it is suggested have had major items of the defendant’s plant transferred to them.

[11]     The plaintiff contends that it is only recently that it has come to his attention that  Mr  Guirioli  has  previous  criminal  convictions  for  using  a  document  for pecuniary  advantage  involving  an  alleged  misappropriation  of  gaming  machine funds at a Ten-Pin bowling complex in Porirua in 1992.   Given this, and other matters he says he has recently discovered, the plaintiff contends that any further delays in this matter may result in both financial records of the defendant not being able to be recovered and assets of the company and their value secured, and an interim liquidator therefore needs to be appointed immediately.

[12]     From correspondence between the lawyers acting for the plaintiff and for Mr Guirioli which is before the Court, it is clear that for some time both Mr Apostolakis and Mr Guirioli have agreed that the defendant must be placed into liquidation. There seems to be some suggestion however that Mr Guirioli has delayed agreed steps in signing a Shareholder’s Resolution to achieve this - hence the present application to the Court by the plaintiff.

[13]     In the present case all parties seem to accept that the defendant company is insolvent and that a liquidation is inevitable. There is, in the series of letters between the lawyers which I have mentioned above, copies of which are attached to the plaintiff’s affidavit before the Court, various claims and counter-claims regarding missing  and  removed  assets  of  the  defendant,  discrepancies  with  its  financial accounts and concerns over missing financial records.  As I see it, maintaining the value and existence of the assets of the defendant company is a real concern.

[14]     I am satisfied therefore that it is important here for the status quo to be maintained so far as the defendant is concerned and that there is a real need for urgency which under the circumstances here would justify the appointment of an interim liquidator.

[15]     Williams J in Elders Pastoral v New Zealand Ostriches Limited (High Court Rotorua, 8  February 1999, M2/99) did  note  that the appointment of an interim liquidator  “trenches  across  directors’ powers,  effects  a  major  irruption  into  the company’s  business,  and  to  a  large  degree  amounts  to  a  pre-judgment  on  the winding-up application itself.”  Notwithstanding these comments, and given that all

parties here, in spite of their acrimonious dispute, do appear to accept that the company is insolvent and must be placed into liquidation, I am satisfied that it is expedient for an interim liquidator to be appointed, that the circumstances in this case are urgent and that they justify such an order being made.   In Carter Holt Harvey v Timberloch New Zealand Limited (1997) 11PRNZ435, the Court indicated that the word “expedient” in s 246 Companies Act 1993 suggested that a relatively low threshold was required.  As I see it, that threshold has been met in the present case.

[16]     In reaching this conclusion, I need to say that I am satisfied that any third parties  would  not  be  unduly prejudiced  here  by the  appointment  of  an  interim liquidator given the evidence before the Court which I have noted above.

Conclusion

[17]     In summary, I am satisfied the order sought for appointment of an interim liquidator is justified in the present case.  It is necessary, in my view, for an interim liquidator to take charge of and locate the company’s financial and other records, to exercise some control over maintaining the value of its assets, to control any transfer or disposition of those assets and to protect the position of the general creditors of the defendant.

[18]     An appropriate consent to act as interim liquidator has been provided by Mr Murray George Allott. As I understand it, given that the present application has been made without notice, an appropriate undertaking as to damages has been filed on behalf of the plaintiff.

[19]     The plaintiff ’s application therefore succeeds.   The orders I have noted at para [2] above made on 30 March 2011 are confirmed.   Those orders were timed at

10.40 am on 30 March 2011.

‘Associate Judge D.I. Gendall’