Application by Jackson (Forestlands) - [2018] NZHC 2447

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-1849 [2018] NZHC 2447

UNDER
Part 19 of the High Court Rules and sections

280 and 286 of the Companies Act 1993

IN THE MATTER OF

an application concerning FORESTLANDS N.Z. LIMITED

IN THE MATTER OF

an application by NEALE JACKSON and

GRANT ROBERT GRAHAM Applicants

Hearing: 31 August 2018

Appearances:

D T Broadmore and HCMS Snell for the Applicants
C Matsis for Leaders Real Estate (1987) Limited (Creditor)

Judgment:

1 September 2018

Reasons:

18 September 2018

REASONS JUDGMENT OF MUIR J

This judgment was delivered by me on Tuesday 18 September 2018 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:………………………….

Counsel/Solicitors:
Buddle Findlay, Auckland
Gault Mitchell Law, Wellington

Re an application by Jackson and Graham (Forestlands) Reasons [2018] NZHC 2447 [1 September 2018]

Introduction

[1] On 31 August 2018 I heard argument from the applicants, Neale Jackson and

Grant Graham, who filed applications:

(a)seeking leave to commence proceedings by way of originating application; and

(b) permitting them to act as liquidators of Forestlands N.Z. Limited

(FNZ).

[2] In my results judgment of 3 September 2018, I granted both applications.

[3] My reasons now follow.

Background

[4] The applicants are partners in the Auckland office of KordaMentha (a specialist corporate advisory and “turnaround” firm). They seek leave to be appointed as liquidators of FNZ under ss 280 and 286(4) of the Companies Act 1993 (the Act). Their application is necessary because;

(a)KordaMentha has been engaged on two prior occasions to provide professional services to FNZ’s sole director, Mr Kearns;

(b) KordaMentha has a continuing business relationship with ANZ Bank

(which has a first ranking security interest registered against FNZ); and

(c)the applicants anticipate being appointed as liquidators of several other “Forestland entities” which are likely to be in a creditor relationship to FNZ.

[5] There are 18 such entities, being Forestlands (No’s 2-12 and 14-20) Limited respectively. I will likewise refer to them as the Forestland entities. The Financial Markets Authority (FMA) has applied to the Nelson High Court for Messrs Graham and Jackson to be appointed as liquidators to these companies; and on 22 August 2018,

a like application under s 280 and 286(4) was made in respect of such proposed appointments.

[6] These entities were incorporated between 1999 and 2011 to own and develop forests on various lands. The sole director of each of these companies is likewise
Mr Kearns.

[7] Each Forestland entity issued a prospectus for forestry shares which generally entitled subscribers to receive a proportionate share of dividends declared on the harvest of each forest and any surplus assets on a winding up arising from the sale of the underlying land.

[8] FNZ was involved in the marketing and promotion of the forestry shares for each Forestlands entity.

[9] Following the issuing of the prospectus for each entity, members of the public subscribed for shares in them and the entities…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Application by Jackson (Forestlands)

Details

AGLC: Application by Jackson (Forestlands) [2018] NZHC 2447
Case: [2018] NZHC 2447
Decision Date: 1 September 2018

CaseChat Overview and Summary

In the High Court of New Zealand, Auckland Registry, Neale Jackson and Grant Graham sought leave to commence proceedings by way of originating application and permission to act as liquidators of Forestlands N.Z. Limited (FNZ). The applicants, partners at KordaMentha, a corporate advisory firm, argued that their prior professional services to FNZ’s director, business relationship with a secured creditor, and anticipated role as liquidators of related entities warranted their appointment despite potential disqualifications under the Companies Act 1993. The court considered whether the applicants' independence and ability to act professionally could be compromised and weighed the benefits of their prior involvement against the potential risks.

The court held that the applicants' prior engagements with FNZ’s director did not disqualify them as long as they acted with integrity and independence. The court also found that their business relationship with a secured creditor, ANZ Bank, did not preclude their appointment, as there was no indication of a conflict of interest in this context. The court further noted that the applicants' prior knowledge of the companies could provide efficiency benefits. The court granted the applications on a without notice basis, recognizing creditors' rights to challenge the appointment later. The court ordered that the applicants could claim reasonable costs of the application if appointed as liquidators.

Orders