Arena Alceon NZ Credit Partners, LLC v Grant
[2025] NZHC 1360
•28 May 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-2214
[2025] NZHC 1360
IN THE MATTER of Ormiston Rise Limited (in receivership and liquidation) AND
IN THE MATTER
of Ormiston Rise Development Limited (in receivership and liquidation)
BETWEEN
ARENA ALCEON NZ CREDIT PARTNERS, LLC
Plaintiff
AND
DAMIEN MITCHELL GRANT
First Defendant
ADAM STEVENSON BOTTERILL
Second Defendant
Hearing: 24-28 March 2025 Appearances:
D J Chisholm KC, J C Caird and S Hawksworth for Plaintiff R J Hollyman KC, A J Peat, M Ropati and C Browne for Defendants
Judgment:
28 May 2025
JUDGMENT OF ASSOCIATE JUDGE LESTER
This judgment was delivered by me on 28 May 2025 at 12.30 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
………………………………………..
ARENA ALCEON NZ CREDIT PARTNERS, LLC v GRANT [2025] NZHC 1360 [28 May 2025]
TABLE OF CONTENTS
Introduction [1]
Background [6]
The individuals concerned [13]
The central issue — the requirement that administrators/liquidatorsbe impartial [18]
The Code [26]
The objective observer [44]
The status of the Code [50]
The statutory framework for challenging the position of a liquidators’
leave under s 284 of the Act [59]
The process by which ORL was placed into administration [67] Mr Grant’s knowledge prior to his appointment as administrator [80] Mr Grant’s evidence [117]
Mr Grant’s action post appointment as administrator [121] The acceptance of creditors of ORDL in the administration of ORL [143] Mr Gilchrist’s position on obtaining votes [152]
Compliance with pt 15A of the Act by Mr Grant [154]
Section 239AK of the Act [156]
Section 239AP of the Act [165]Section 239APA of the Act [174]
Section 239C of the Act [185]Section 239AF of the Act [188]
Section 239AN of the Act [190]
Sections 239AU and 239ACZA of the Act [193]
Section 239ABA of the Act [202]
Section 239O of the Act [211]
The process by which Mr Botterill is appointed joint liquidator [219]
Section 283 of the Act [219]
What then does this mean for Mr Grant’s purported resignation and appointment of Mr Botterill as joint liquidator? [230]
The absence of a separate DIRRI by Mr Botterill [238]
Should the liquidators be removed? [246]Arena’s delay in bringing this challenge [251]
Other relevant considerations [255]
Litigation funding [271]
Use of inhouse solicitors [273]Remuneration [279]
Costs[285]
Introduction
[1] Arena Alceon NZ Credit Partners, LLC (Arena) seeks an order removing Mr Damien Grant and Mr Adam Botterill (the liquidators) as liquidators of Ormiston Rise Limited (ORL) and its subsidiary, Ormiston Rise Development Limited (ORDL). Arena seeks a range of further orders including declarations that Mr Grant breached sections of pt 15A of the Companies Act 1993 (the Act) when he was administrator of ORL, and asks that the Court review remuneration claimed by Messrs Grant and Botterill.
[2] Arena says that Mr Grant’s actions, both up to his appointment as voluntary administrator of ORL and while he was administrator and liquidator, show a failure to act independently and impartially, such that he should be removed as liquidator. While Mr Botterill was not an administrator, Arena says his actions during that time and following his purported appointment as joint liquidator on 20 June 2022 mean that he must also be seen as lacking impartiality and independence. It is these allegations that are at the heart of Arena’s application. Mr Chisholm KC, counsel for Arena, submits the evidence discloses an actual lack of impartiality and independence as opposed to merely the appearance of such. Mr Chisholm submits what amounts to actual bias is not spelt or cured by the appointment of independent counsel, as ultimately it is the liquidators who make decisions in respect of the proceeding. In any event, if there was the appearance of bias, Mr Chisholm submits that Arena could not have confidence the liquidators’ decisions will be reached impartially.
[3] Other allegations are made by Arena including a lack of competence on the part of Messrs Grant and Botterill, albeit Mr Hollyman KC, counsel for the liquidators, submits such has not been squarely raised in the pleadings.
[4] The remuneration claimed by Mr Grant while he was administrator, and by Messrs Grant and Botterill as liquidators, is challenged in part because of what Mr Chisholm submits was work that was either not carried out competently or unnecessary in the context of the administration and liquidation.
[5] It will be necessary to identify the statutory basis relied on for the application to remove the liquidators, the standard to be met by Arena, the factors relied on by Arena as justifying removal, and whether they have been made out.
Background
[6] ORL was incorporated on 8 July 2019 with the intention that it would carry out a residential property development of land at Murpheys Road, “Flat Bush”, Auckland. The development was a large one involving the creation of approximately 727 lots. ORDL was later incorporated, as its name suggests, to carry out the development. The intention was that ORDL would contract with suppliers to the project.
[7] On 18 February 2020, ORDL, ORL and Arena entered into a funding arrangement for the project. As described by the Court of Appeal: “In essence, this was a substantial financing arrangement entered into to enable ORL to purchase and develop the land.”1 In addition to committing funding, Arena was a minority shareholder of ORL, holding 19.5 per cent of its shares.
[8] ORL’s obligations to Arena were guaranteed by ORDL. Arena had the benefit of a General Security Agreement (GSA) over all assets of ORL and a registered mortgage over the land at Flat Bush. The securities were held by Quaestor, as security trustee for Arena.
[9] On 28 April 2021, Arena made demand on ORL following an event of default. In the hearing before me, it was not disputed an event of default had occurred. However, the liquidators question Arena’s motives for making the demand on ORL and for placing ORL in receivership upon the default not being remedied. Quaestor appointed receivers to ORL on 7 May 2021. By this stage, the construction of the development was well under way.
[10] The receivers say they undertook work to preserve the development works already commenced and continued some of the earthworks, civil engineering and design works to preserve value. Further funding in that regard was provided by Arena.
1 Grant v Arena Alceon NZ Credit Partners, LLC [2024] NZCA 366 at [4].
[11] In August 2021, Arena/Quaestor advised that the total level of the debt was just under $180,000,000. The receivers conducted a sale process for the land and the development by way of public tender and they accepted an offer on 19 August 2021 from an entity related to Arena for approximately $198,000,000. That sale settled on 13 September 2021. The sum of $178,000,000 was then paid to Arena together with a payment to a second mortgagee which left no funds available to be returned to ORL.
[12] On 25 August 2021, Mr Grant was appointed administrator of ORL by way of Board resolution. The first creditors’ meeting was held by postal vote on 6 September 2021, at which Mr Grant was confirmed as administrator. ORL was put into liquidation with Mr Grant appointed liquidator at the watershed meeting on 29 September 2021, held via Zoom. In December 2021, ORDL was placed into liquidation by order of this Court, with Mr Grant again appointed liquidator. Arena takes issue with the process by which Mr Botterill was appointed joint liquidator of ORL and ORDL in June 2022, saying his appointment was invalid.
The individuals concerned
[13] Mr Todd Strathdee was essentially Arena’s representative in Australasia. Mr Strathdee was a director of ORL from 20 February 2020 until 22 August 2021 when he was removed as director, along with another, by ORL as 70.5 per cent shareholder.
[14] Mr Clinton Webber was an original director of ORL and was director again from 22 August 2021 to 24 September 2021 in place of Mr Strathdee. He is director and ultimate shareholder of Foundation Developments Limited (Foundation), the
70.5 per cent shareholder in ORL, which removed the directors in place on 22 August 2021. Mr Webber is also a director and shareholder of Platform Homes Limited (Platform) (called now Millenium Capital Limited) which was a construction contractor to ORDL on the Ormiston development.
[15] Jason Dobbie was a director of ORL between 22 August 2021 and 24 September 2021. He was also a director of Platform and aligned with Mr Webber.
[16] Mr Brent Gilchrist is the current and only director of ORL. He was one of the three directors appointed by Foundation on 22 August 2021 and again, aligned with Mr Webber. Mr Gilchrist worked for companies associated with Mr Webber and he described himself as Project Manager and/or Chief Operating Officer of Platform, Mr Gilchrist described himself as the “…. conduit between Mr Grant and Mr Webber and Mr Dobbie …”.
[17]Mr Jim Kehoe is an employee of Quaestor.
The central issue — the requirement that administrators/liquidators be impartial
[18] It is well-established that the principal requirement for appointment as a liquidator is independence. Liquidators are required to be independent and be seen to be independent.2 The Court has a duty, in the wider public interest, to ensure that the interests of persons concerned in the winding up are best served by the appointment.3
[19] Hansen J in Jacobsen Creative Surfaces Ltd v Smiths City Ltd said, in relation to the jurisdiction to replace liquidators under s 235(c) of the Companies Act 1955, that the first factor to be considered in the exercise of the discretion was independence. His Honour said: “[T]here must be on the part of the liquidator the ability to make informed and unbiased decisions in the interests of all groups.”4
[20]In Re Trafalgar Supply Co Ltd (in liq), Wylie J said:5
I take the view that where there is a body of suspicion, whether in the end justified or not, but with some factual foundation on which suspicion may be built, then it is undesirable that a liquidator should be appointed. There will be left in the minds of creditors a sense of dissatisfaction that an appointee of the Court may not have been totally impartial in the performance of his duties. I have endeavoured to express those views in a recent decision of my own, Re Halford Ornowski and Associates Ltd (15/2/91, Wylie J, HC Auckland M666/90) this year where the circumstances were rather different, but where nevertheless the anxiety on my part to ensure that total independence and impartiality were seen to be exercised was a prime consideration.
2 Paul Heath and Michael Whale (eds) Heath and Whale on Insolvency (online ed, Lexis Nexis) at [20.15].
3 Re Anthony Stevens Holdings Ltd (in liq) HC Auckland CL3/87, 5 April 1989.
4 Jacobsen Creative Surfaces Ltd v Smiths City Ltd [1994] 1 NZLR 128 (HC) at 6.
5 Re Trafalgar Supply Co Ltd (in liq) [1991] MCLR 293 at 296.
[21] There must be a factual foundation for the suspicion that the liquidator cannot carry out their duties and show the requisite objectivity and independence. Asher J in WHK (NZ) Ltd v Retail Media Ltd (in rec and liq), said: “That objectivity and independence is important where [the liquidators] will have, as here, the role of a watchdog over the activities of the receiver.”6
[22] In Hyndman v Newson, Associate Judge Osborne adopted the following submissions of counsel as describing the source and character of the requirements of a liquidator’s impartiality:7
A liquidator is a creature of statute [whose] primary duty is to take possession of and realise the company’s assets or the proceeds of the realisation of the assets, and distribute them to the company’s creditors in accordance with the legislation and to distribute any surplus assets or the proceeds according to the legislation. It is the liquidator’s duty to carry out these tasks in a reasonable and efficient manner.
The liquidator owes a duty to all of the creditors, shareholders and members of the company.
As was said in Gooch’s case:
In truth, it is of the utmost importance that the liquidator should, as the officer of the court, maintain an even and impartial hand between all of the individuals whose interests are involved in the winding up. He should have no leaning for or against any individual whatever … It is for the Judge to see that he does his duty in this respect.
A liquidator is entitled to and often does accept financial assistance or information from a creditor, however it is incumbent on the liquidator that he or she does not place in jeopardy his independence in the discharge of his or her duties. The duty of independence goes further than actual and in substance independence, because a liquidator must at all times be manifestly seen as independent and impartial.
In regard to the perception of independence, the test has been said to be:
[w]hether it would be perceived by a reasonable observer that the liquidators have manifested tendency to favour certain interests at the expense of others;
and,
[that] for those who have a particular perception, that perception is the reality.
(footnotes omitted)
6 WHK (NZ) Ltd v Retail Media Ltd (in rec and liq) HC Auckland CIV-2009-404-3157, 16 July 2009 at [25].
7 Hyndman v Newson [2014] NZHC 2513 at [31].
[23] Associate Judge Osborne also noted the observation of Allan J in Mason v Lewis, where his Honour identified the duties of independence and impartiality are owed to the Court, creditors and shareholders alike: “The liquidators certainly owe a duty to shareholders and creditors and also to the Court to act impartially and independently.”8
[24] Associate Judge Osborne adopted the observations of Street J in Re Allebart Pty Ltd (in liq), as adopted by Allan J in Mason:9
It is indispensable that in point of substance the liquidator’s independence should be preserved; and it is undesirable that a liquidator should permit a situation to develop in which it might appear that he has yielded up in any degree whatever his exclusive independent control in the decision-making processes and administration of a winding up.
[25] Emphasising the importance of impartiality are the requirements of the RITANZ Code of Professional Conduct (the Code). Mr Grant, as an insolvency practitioner registered with RITANZ, is obliged to comply with the Code. Before becoming a licensed insolvency practitioner, Mr Botterill was also a member of RITANZ and so he was also obliged to comply with the Code, albeit there are some provisions that apply to insolvency practitioners and not to members. I will address the status of the Code in more detail below.
The Code
[26] The Code sets out what are called Fundamental Principles. The first of those, “Principal 1”, are integrity, objectivity, impartiality and professional behaviour. The Code uses a three level hierarchy of wording to describe and explain its requirements;
(i) mandatory requirements are referred to as must; (ii)recommended behaviours as
should; and (iii) permissive statements are may.
8 At [32], citing Mason v Lewis HC Auckland CIV-2010-404-8, 21 December 2010 at [27], per Allan J.
9 At [32], citing Re Allebart Pty Ltd (in liq) [1971] 1 NSWLR (NSWSC) 24 at 28.
[27] Independence of appearance and independence of mind are all defined terms in the Code:
Independence Independence of mind and Independence of appearance. Independence of appearance The avoidance of facts and circumstances that are so significant that a reasonable and informed third party would be likely to conclude, weighing all the specific facts and circumstances that a Practitioner or Firm’s integrity, objectivity or professional scepticism has been compromised. Independence of mind The state of mind that permits the expression of a conclusion without being affected by influences that compromise professional judgment, thereby allowing a Practitioner to act
with integrity and exercise objectivity and professional scepticism.
[28] Under Part B of the Code, which is headed “The Fundamental Principles” — “Principle 1” and “Principle 2” are as follows:
Principle 1 In addition to the obligation to comply with the law, Members must exhibit the highest levels of integrity, objectivity and impartiality in all aspects of Appointments and practice management, and must act professionally. Principle 2 When accepting or retaining an Appointment the Practitioner must at all times during the
Appointment be, and be seen to be, Independent.
[29]Under the heading “Impartiality” in the Code, it is said that:
When exercising their judgment, Members must be impartial by taking care to ensure that they:
· are not influenced by personal feelings, prejudice or difficult relationships with individual stakeholders;
· are making decisions based on the known facts and applicable law;
· have no direct personal interest; and
· except to the extent the law may permit them to do so, are not favouring one person or side more than another when applying the law.
Before exercising their judgment, Members should take reasonable steps to ascertain the necessary facts to ensure that a sound judgment can be made in accordance with reasonable standards of commercial practice.
[30]In respect of “Principle 2: Independence”, the Code provides:
When accepting or retaining an Appointment the Practitioner must at all times be, and be seen to be, Independent.
Independence is critical because of the nature of the role of the Practitioner.
Stakeholders need to have confidence in the Practitioner’s conduct and decision making. They need to be able to regard the Practitioner as fair, unbiased and not acting from self interest or other inappropriate influences when exercising his or her professional and commercial judgment.
A Practitioner must not accept an Appointment if the Practitioner will not be independent, and must not form a view as to whether to accept an Appointment without considering all relevant facts in relation to the Appointment.
[31] The Code records that this section does not apply to Receivers who are appointed by a secured creditor and have a contractual relationship with their appointor.
[32]The Code goes on to describe the test for independence as being:
A Practitioner must be independent of mind and independent in appearance - they must act and conduct the Appointment without being affected by influences that compromise professional judgment, integrity, objectivity and professional scepticism.
A Practitioner must not accept an Appointment, if the Practitioner has a Conflict of Interest or is aware that a Conflict of Interest may arise or for other reasons they might not be Independent.
[33] The Code records that the test is not whether the Practitioner considers there is the appearance of a lack of independence, as the test is objective. It acknowledges that:10
Contact between the Practitioner and the Insolvent, directors, creditors or advisors to them before the acceptance of the Appointment does not in itself create a threat to Independence. What is important is the nature of the contact and of the relationship between the Practitioner and the various stakeholders.
10 Restructuring Insolvency and Turnaround Association of New Zealand Inc, Code of Professional Conduct (1 July 2018) ( at [2.1.1].
[34]The Code confirms that:11
The mere possibility of a conflict is not a bar to accepting or continuing an Appointment. The Practitioner must be proactive in anticipating, identifying and uncovering the circumstances that may give rise to a Conflict of Interest, and not to simply address the issue when the conflict arises.
[35] The above requirement is reinforced by a requirement that: “Practitioners must actively seek to identify any risks to Independence before accepting an Appointment.”12
[36] The Code requires the completion of a Declaration of Independence, Relevant Relationships and Indemnities (DIRRI) “at the earliest practical opportunity” by way of a declaration to creditors. The components of a DIRRI are defined as:
(i)a Declaration of Independence;
(ii)a Declaration of Relationships, including the circumstances of Appointment; relevant relationships with the Insolvent and known Associates of the Insolvent; and prior professional services with the Insolvent or known Associates of the Insolvent;
(iii)a Declaration that there are no other relationships to declare; and
(iv)a Declaration of Indemnities and Upfront payments.13
[37] The Declaration of Independence requires the Practitioner to declare that they have:
· … undertaken a proper assessment of risks to Independence in accordance with the law, Code and applicable professional standards;
· … determined that the assessment identified no real or potential risks to Independence; or
11 Restructuring Insolvency and Turnaround Association of New Zealand Inc, above n 10, at [2.1.2].
12 Restructuring Insolvency and Turnaround Association of New Zealand Inc, above n 10, at [2.3].
13 “Indemnity” is defined in the Code as “Any arrangement, either directly or indirectly, to make a payment to the Practitioner for the purposes of meeting remuneration or Disbursements of the Practitioner, but does not include indemnifies under legislation.” “Upfront payment” is defined as “Any payment to a practitioner prior to the Appointment for the purposes of meeting future Remuneration or anticipated Disbursements of the Practitioner.”
· … evaluated the significance of any real or potential risk to Independence and taken such action as is necessary to preserve the Practitioner’s Independence; and
· in all cases, is not otherwise aware of any impediments to taking the Appointment.
[38] Paragraph 2.4.3 of the Code is relevant to when the appointment of Mr Botterill as co-liquidator took place. It provides:
Except in exceptional circumstances which must be documented on the file and disclosed to creditors, where two or more Practitioners have been appointed to an Insolvent, each Practitioner must sign the Declaration as it is a declaration made by each Practitioner in its own individual capacity.
[39] Declarations must be provided with the first communication to creditors — an obligation Arena says was not followed here.
[40]A replacement Practitioner must also provide a DIRRI.
[41] Accordingly, as mentioned at [32], the test of independence is objective. The appearance that a liquidator lacks independence or lacks impartiality will bar the liquidator from office, but such must be based on more than mere suspicion. A liquidator must not permit a situation to develop where it might appear they have become less than independent or impartial.
[42] The above requirements from the Code are reflected in the statutory requirements for disclosure of interest of the administrator of a company in s 239APA of the Act, which is set out at [175] below.
[43] Accordingly, as noted at [18]-[25], independence and impartiality are the principal requirements for a liquidator.
The objective observer
[44] It is clear that not only must a liquidator be independent and impartial, they must also maintain that appearance. By what standard is that appearance to be assessed? Is the relevant principle whether the fair minded reasonable observer would
perceive a lack of independence or impartiality, or might perceive as lack of independence or impartiality?14
[45] In Australian Securities and Investments Commission v Franklin, it was said the correct test was whether a reasonable fair-minded observer might reasonably apprehend that the liquidators might not discharge their duties of independence and impartiality.15
[46] In Mason v Lewis, Allan J said that the character of the duty owed by a liquidator to act impartially and independently was usefully summarised in the Australian Authority of Re Allebart Pty Ltd (in liq), in a passage that included:16
… it is undesirable that a liquidator should permit a situation to develop in which it might appear that he has yielded up in any degree whatever his exclusive independent control in the decision making processes and administration of a winding up.
(emphasis added)
Paragraphs [44]-[45] support that the threshold is might rather than would.
[47] Duffy J in McVeigh v Decmil Australia Pty Ltd, suggested with reference to ASIC v Franklin, that how the rules regarding apparent bias may be applied to a liquidator/receiver in New Zealand may not be the same as in Australia.17
[48] I note the Code’s definition of independence of ‘appearance’ refers to whether an “informed third party would be likely to conclude” that impartiality had been compromised.
[49] Ultimately, I do not need to determine whether the test in question imports a standard of “might” or “would” as I am satisfied for the reasons that I now develop that an informed third party would reasonably conclude that it appeared Messrs Grant
14 Amanda Carruthers “Eyes on independence and referrals: in the matter of Walton Construction” (2014) 30(8) BLB 178 at 178.
15 Australian Securities and Investments Commission v Franklin [2014] FCAFC 85, (2014) 223 FCR 204 at [81].
16 Mason v Lewis, above n 8, at [27], citing Re Albert Pty Ltd (in liq), above n 9, at [28].
17 McVeigh v Decmil Australia Pty Ltd [2021] NZHC 2929.
and Botterill were not independent or impartial in relation to their actions and conduct in the administration and liquidation of ORL.
The status of the Code
[50] Mr Chisholm submitted that there was a statutory obligation on insolvency practitioners to adhere to the Code through the Insolvency Practitioners Regulation Act 2019 (IPRA) and the associated licensing system. Insolvency practitioners must be licensed.18 Licences are issued by the New Zealand Institute of Chartered Accountants (NZICA). Section 22 of the IPRA entitles the Registrar of Companies to prescribe by notice, minimum standards and conditions for licensing.
Such a notice is secondary legislation.19
[51] The Registrar has published the IPRA (Prescribed Minimum Standards, Conditions, and Requirements for Ongoing Competence, for Licensed Insolvency Practitioners) Notice 2020 which requires that every licence issued to a practitioner is subject to a number of conditions, including an obligation on the person seeking a licence to comply with the accredited Body’s rules.
[52] In order to be granted a licence under the IPRA, a person must be a member of an accredited body or a recognised body. RITANZ is a recognised Body under the IPRA. If a person is a member of RITANZ, they must enter into a written arrangement with NZICA that includes a binding agreement on the person to be subject to the rules of NZICA. The rules of NZICA that relate to the Code of Conduct of Ethics that governs the professional conduct of its members is also secondary legislation.20
[53] NZICA’s Code of Conduct of Ethics requires members to comply with “Technical and Professional Standards”, which are defined as:
The Standards issued by the New Zealand Institute of Chartered Accountants, the External Reporting Board, the New Zealand Auditing and Assurance Standards Board, the New Zealand Accounting Standards Boards and any other Standards or authoritative guidance applicable to the task or engagement.
18 Insolvency Practitioners Regulation Act 2019, s 8(1) [IPRA].
19 IPRA, s 22(4).
20 IPRA, s 36(1)(g).
Arena submits that this includes the Code.
[54] Mr Hollyman submits that the Code is not a free-standing source of legal obligations. He notes the Code is said to expressly not bind the Court and insofar as the Code offers assistance to the Court, he submits it is a “… guide or touchstone for the idealised conduct of an insolvency practitioner”.
[55] In respect of Principles 1 and 2 of the Code that deal with impartiality and independence, Mr Hollyman submits these Principles do not change the standard to be met by an insolvency practitioner as the law already imposes stringent requirements in respect of those matters. At least to that extent, I do not need to determine the legal status of the Code given Mr Hollyman’s acceptance that Principles 1 and 2 reflect the obligations of an administrator/liquidator in any event.
[56] It would appear the authors of the Code do not view the Code as having the effect of secondary legislation. RITANZ accepts the Code is not binding on the Courts. Paragraph 1.4 of the Code records:
… the Code remains subject to the views of the Court, which may decide not to accept or follow particular requirements or guidance in the Code. If this happens, the Code will be amended to properly reflect the law.
[57] RITANZ anticipates the Code will be used by the Courts to assist in enforcing acceptable insolvency and restructuring practice and proper professional standards.
[58] The short point is, whatever its status, it does not sit well for an insolvency practitioner bound by the Code to seek to excuse non-compliance on the grounds that the Code did not have legal force. Given Mr Hollyman’s submission that Principles 1 and 2, set out at [28]-[30] above, in effect “go without saying” and RITANZ’s view that the Code may assist the Court in enforcing acceptable standards, I adopt that approach.
The statutory framework for challenging the position of a liquidators’ leave under s 284 of the Act
[59] The application to remove Messrs Grant and Botterill as liquidators is brought under ss 283, 284 and 286 of the Act, and the inherent jurisdiction of the Court.
[60]Arena requires leave to seek orders under s 284 of the Act.
[61] The power to remove a liquidator falls within the power to “give directions in relation to any matter arising in connection with the liquidation under s 284(1)(a).”21 Under s 286 of the Act, orders may be made to enforce a liquidator’s duties. Under s 286(3)(c), there is a statutory power to remove the liquidator from office — but first, the liquidator must have been given notice of their failure to comply with at least five days of continuing failure following that notice, before an application may be brought22.
[62]The Court’s inherent jurisdiction to remove a liquidator remains.23
[63] I approach the present application under s 284 of the Act. Leave is required and an application for leave has been made. Leave operates as a gatekeeper to ensure only appropriate applications proceed. The key issue in determining leave is whether there is a credible factual basis for the proposed substantive application and a reasonable likelihood that the Court will grant some or all of the relief sought.24
[64] This is not a case where there is an application to set aside or disturb a decision of a liquidator where an applicant must show that the decision is tainted by fraud, lack of good faith or unreasonableness. ‘Unreasonableness’ means acting in a way no reasonable liquidator could have acted. Serious and obvious lapses in judgement must be shown before the Court will interfere with a liquidator’s decision.25
[65] As already outlined, where the challenge to a liquidator’s position is based on a lack of independence or an allegation that they lack impartiality, the test is whether there is evidence upon which a reasonable person could conclude that the liquidator lacks impartiality or independence. Given the view expressed at [48], Arena is granted leave under s 284 of the Act to seek the removal of Messrs Grant and Botterill as liquidators.
21 Commissioner of Inland Revenue v Living Space Properties Ltd (in rec and in liq) [2020] NZHC 1434, [2021] 2 NZLR 252 at [177].
22 Companies Act 1993, s 286(2).
23 Commissioner of Inland Revenue v Living Space, above n 21, at [190].
24 Trinity Foundation (Services No. 1) Ltd v Downie (2006) 3 NZCCLR 401 (CA) at [23] and [31].
25 Jindal v Liquidation Management Ltd [2024] NZHC 2969 at [38].
[66] I now turn to the matters that Arena raises in support of its argument that a reasonably informed objective observer would conclude Messrs Grant and Botterill were not independent and lacked impartiality.
The process by which ORL was placed into administration
[67] Messrs Webber, Dobbie and Gilchrist were all appointed directors of ORL on 22 August 2021 by Foundation. By this time, ORL and ORDL had been in receivership from 7 and 8 May 2021 respectively.
[68] The relationship between Arena and Mr Webber deteriorated significantly from early in 2021. Mr Strathdee, in his evidence, described what he considered to be inappropriate commercial conduct by Mr Webber in respect of a third party, which Mr Strathdee was concerned would reflect on Arena’s reputation. The Government-funded, Kiwi-Build project (through Kāinga Ora), was associated with the Flat Bush development, which Mr Strathdee said made him sensitive to such reputational issues.
[69] I need not detail the circumstances giving rise to those concerns, but they resulted in a meeting attended by Mr Strathdee and Mr Webber at the offices of Simpson Grierson in early May 2021, where Mr Webber was presented with what Mr Strathdee characterised as a commercial option to exit the development or face receivership. Mr Webber did not accept the commercial alternative, and receivership followed. Again, while it is not disputed an event of default had occurred entitling Arena to appoint a receiver, ORL claims the receivership was for an improper purpose
— being to force the interests associated with Mr Webber (those of the 70.5 per cent shareholder) (the Webber interests) out of the project, so that Arena could take the benefit of the development for itself via its related entity which ultimately purchased the development.
[70] Accordingly, there are two very different views of the motives for the receivership.
[71] Arena does not dispute that it sought to distance itself from Mr Webber. It says with an event of default having occurred, it had legitimate reasons for protecting its
reputation and when a commercial solution could not be reached, it exercised its rights. Mr Gilchrist, who worked closely with Mr Webber, saw Arena’s actions as it seeking to cut Foundation, and therefore Mr Webber, out of the profit of the development, and move that profit into an entity Arena owned through the sale by the receivers.
[72] On 28 October 2021, Mr Grant commenced proceedings aimed at terminating receivership. At the risk of over simplification, that application was based on the proposition that Arena was no longer a creditor.
[73] The receivers in turn made an application on 23 December 2021, seeking directions as to the proper level of ORL and ORDL’s debt. The receivers proceeding was the catalyst for Mr Grant’s October proceeding being stayed in February 2022.
[74]Arena commenced the current proceeding in September 2023.
[75] On 28 March 2024, the liquidators commenced proceedings against Arena and the receivers, alleging Arena appointed receivers for an improper purpose.
[76]A direction was made that this proceeding be heard first.
[77] It is the competing view of the events leading to receivership that drives the present application. Arena says Mr Grant bought into Mr Webber’s version of events from an early stage, and therefore did not approach his duties as administrator or liquidator in an independent and impartial way.
[78] The issues raised by Arena about the competence of Messrs Grant and Botterill, although to some extent at a technical level, are said to point to or be consistent with the pre-conceived view held by Mr Grant that Arena/the receivers had acted inappropriately. I approach such claims on that basis, rather than as an independent ground of removal.26
26 The statement of claim pleads the defendants had to act with “professional competence” in managing conflicts of interest and breached various sections of Part 15A of the Act, but there is not an express pleading of incompetence as a standalone ground of removal.
[79] Messrs Grant and Botterill strongly deny they have failed to act impartially or independently or otherwise in breach of their duties as liquidators. They maintain that as liquidators one of their duties is to test the actions of receivers and confirm the amounts recovered by secured creditors.
Mr Grant’s knowledge prior to his appointment as administrator
[80] ORL was a land-owning company. As a non-trading single asset company, it had very few creditors. Shortly after the first creditors’ meeting on 6 September 2021, the sale of ORL’s only asset settled on 13 September 2021. Pre-administration was no attempt by ORL or by Mr Grant as administrator to prevent the sale settling.
[81] An initial discussion took place between Messrs Webber, Dobbie, Gilchrist and Grant prior to receivership. Mr Webber was aggrieved at Arena’s attitude towards him, and the effect that had on Arena’s decision-making in respect of the event of default that had occurred. Mr Grant claimed in evidence that he did not recall the issues Mr Webber was facing at that time which were being discussed at the meeting, but did recall that insolvency was discussed. Mr Grant accepts it is possible that what was subsequently described as the war between shareholders — Arena and Foundation
— was discussed. Given the significant events facing Mr Webber and ORL at that time, and given there was no other catalyst for the meeting suggested, it was highly likely that Mr Webber’s concerns were discussed.
[82] It was not possible for the Webber interests to have ORL put into voluntary liquidation, as Foundation only held 70.5 per cent of the share in ORL. The third shareholder, who held 10 per cent, was not prepared to co-operate in voluntary liquidation.
[83] A lengthy meeting took place between Messrs Gilchrist and Grant on 19 August 2021. At that stage, Messrs Gilchrist, Dobbie and Webber were not directors of ORL. Their appointment was on 22 August 2021.
[84] Mr Grant was approached by Mr Webber in August 2021. An example of Mr Grant’s lack of care in his evidence is that he says at the time of that approach, Mr Webber was a director of ORL. That was not the case as Mr Webber did not
become a director until 22 August 2021. When taxed with this issue, Mr Grant said the meeting was reasonably late in the piece and that Mr Webber may or may not have been a director — that he could not be certain.
[85] What is clear is that there was a separate meeting on 19 August 2021 where Mr Grant met with Mr Gilchrist. Recall that Mr Gilchrist was spokesperson for Mr Webber. This meeting lasted for about an hour and a half and was in a coffee shop in Ponsonby, Auckland.
[86] It is clear that the discussion on 19 August 2021 related to the Webber interests concerns about the receivership and the sale process. At this stage, the Arena debt was understood to be in the region of $137,000,000. It was not until after the commencement of the voluntary administration that it was learnt that between receivership on 7 May 2021 and the voluntary administration in late August 2021 that the debt had grown to $179,895,000, which was disclosed in an email sent by Mr Kehoe to Mr Botterill on 31 August 2021.
[87] At the 19 August 2021 meeting with Mr Gilchrist, Mr Grant says Mr Gilchrist outlined that the dispute between Mr Webber and Mr Strathdee of Arena was accelerating. Mr Gilchrist described Mr Strathdee on behalf of Arena as being out of control. Mr Webber’s views were also discussed at that meeting.
[88] Following the 19 August 2021 meeting, Mr Grant wrote to Mr Webber in a letter dated 23 August 2021. Preparation of that letter appears to have crossed with the appointment of Messrs Gilchrist, Dobbie and Webber as directors of ORL, as the 23 August 2021 letter refers to the previous directors as being in office. The letter outlined potential insolvency options for ORL and ORDL. Mr Grant noted the need for a 75 per cent vote of shareholders to place ORL into liquidation, whereas for a voluntarily administration, a simple Board majority would be required. By 23 August 2021, the decision had already been made to replace ORL’s Board in order to place the company into voluntary administration as the existing directors were replaced on 22 August 2021. Mr Grant noted in his letter that a voluntary administration requires two statutory meetings and that: “At the first meeting creditors can propose new administrators and vote down the appointed administrator.”
[89]Mr Grant discussed the advantages of liquidation in his letter:
Given the facts as I understand them, the greatest utility of an insolvency in this case is to use the statutory powers of a liquidator to compel information from directors, creditors and receivers as to the conduct of these companies and receivership. My recommendation would be to explore appointing
liquidators instead of administrators.
[90] The “facts” as Mr Grant identified them would have been provided to him by Mr Gilchrist at the lengthy meeting on 19 August 2021 and perhaps, to a lesser extent, the pre-receivership meeting.
[91]The letter concluded with a recommendation and advice as follows:
30.For the reasons outlined above, liquidation is the preferred option to deal with the shareholder[s’] desired outcome in this situation. This removes the complexities of having to deal with multiple meetings and allows the liquidator to move quickly to enforce their rights without being distracted by the statutory obligations of an Administration.
(emphasis added)
[92] I referred earlier to Mr Grant’s belief that it is possible that the existence of a state of war between shareholders was discussed at the pre-receivership meeting. What Mr Grant said was:
I do recall conversations about, as you say, the war between the parties but those conversations were much — my recollection of those conversations were much later [than the pre-receivership meeting].
[93] Mr Chisholm asked Mr Grant: “You mean prior to your appointment as Administrator?”
[94]Mr Grant answered: “Yes, yes”.
[95] I find the shareholders’ “desired outcome” referred to by Mr Grant, noted at [90] was that which was of the Webber interests, being those of the 70.5 per cent shareholder, Foundation. So much follows from the context in which Mr Grant gave advice on how to achieve the “shareholders’ desired outcome” — the only shareholder he had discussions with was, by extension, Foundation. Mr Gilchrist, in his evidence, confirmed that the purpose of appointing Mr Grant as administrator was that it was
a reaction to Arena’s decision to appoint receivers and in order to “retain some element of control of the outcome”. Mr Grant acknowledges that he was aware pre-appointment, there was a state of war between the shareholders. Mr Grant ultimately met with one warring faction and gave advice in his 23 August 2021 letter as to how the Webber interests could achieve their desired outcome.
[96] The day prior to Mr Grant being appointed administrator, he sent an email to Mr Gilchrist stating as follows:
After discussing this internally, we think I should take this, rather than delegate it to Greg. I usually let Greg take the files, as he is less likely to frighten the horses, but after talking about it with Adam, we think the horses need to be frightened.
[97] Mr Grant accepted under cross-examination that the “horses to be frightened” were Arena/receivers. I accept Mr Chisholm’s submission that this would not be seen as the comment of an impartial, independent insolvency practitioner. Mr Chisholm’s submission was that this was not a typical case of an insolvency practitioner being approached by the directors of an insolvent company seeking advice. This is because Mr Grant’s 23 August 2021 letter would convey to an objective observer that Mr Grant had been approached by one faction of a shareholder dispute to advance their interests against another shareholder who was also a secured creditor.
[98] I find that the intention of Mr Gilchrist’s and the Webber interests in engaging with Mr Grant was to have ORL placed into liquidation. This was so that Mr Grant could take steps in relation to the Arena receivership. Mr Grant was aware of this, and he and Mr Botterill worked towards achieving liquidation.
[99] Mr Hollyman, in his opening submissions, stated that Arena takes issue with “a handful of procedural steps in the month Mr Grant was administrator of ORL” — that, however, belies the substance of what was being discussed. At that this stage, the Webber and Arena interests were at war.
[100] Voluntary administration triggered the need for the initial creditors’ meeting under s 239AN of the Act. However, as ORL was a non-trading company, it was recognised that it had few creditors in its own right. On 27 August 2021, Mr Dobbie
sent an email to Messrs Gilchrist, Webber, Grant and Botterill recording: “All consultants, contractors and creditors were engaged used [ORDL] so that means there are very few creditors who had the ability to invoice ORL.”
[101] However, for the voluntary administration to be an effective means of achieving liquidation and, in particular, having Mr Grant appointed liquidator, it was necessary for Mr Grant to be confirmed as administrator at the first creditors’ meeting, required by s 239AN of the Act. Mr Gilchrist set about trying to obtain votes.
[102] Mr Gilchrist obtained four creditors’ claims from suppliers which had contracted with Platform. It seems that Mr Gilchrist approached these creditors on the basis that they had nothing to lose in making a claim in ORL, as Mr Gilchrist assured them that doing so would not prejudice their rights against Platform.
[103] The evidence is that Mr Gilchrist completed at least some creditor’s forms on behalf of the creditors he approached and he had them signed by those creditors.
[104] Mr Grant, it seems at least in respect of Silverdale Stairs Ltd, accepted its claim for voting purposes at the first meeting without scrutinising at all whether it was a creditor or not. In evidence, Mr Grant, having accepted that he did not assess the claim said:
In my defence I would point out that there was no vote, in effect, there was no challenge, I did not turn my mind to the issue of Silverdale Stairs. I accepted the votes as they were on the face of them, nothing turned on the outcome.
[105] Whether Mr Grant remained in office as administrator turned on the outcome of the first creditors’ meeting. Messrs Grant and Botterill were aware Mr Gilchrist had been courting creditors to lodge votes in Mr Grant’s favour.
[106] For the reasons I give below, I find that both in respect of the first creditors’ meeting and the watershed meeting that Mr Grant had no reasonable basis for accepting the four creditors procured by Mr Gilchrist as creditors of ORL.
[107] Pursuant to s 239C of the Act, a creditor includes a secured creditor.27 Accordingly, Arena was a creditor for the purposes of the voluntary administration, but it was not treated as such. That appears in part to have been a result of a misunderstanding by Mr Botterill rather than a deliberate attempt to exclude Arena but, nonetheless, Arena was in other respects not treated in the same manner as other creditors.
[108] Arena points to a number of irregularities in respect of the voluntary administration. It will be necessary to consider these in detail but some appear to be down to a failure to take proper care to understand the relevant provisions of the Act applying to voluntary administrations.
[109] The voluntary administration lasted from 25 August 2021 to 29 September 2021 when ORL was placed into liquidation at the watershed meeting.
[110] Section 239AE sets out what an administrator must do as soon as practical after the administration begins:
239AE Administrator must investigate company’s affairs and consider possible courses of action
As soon as practicable after the administration of a company begins, the administrator must—
(a)investigate the company’s business, property, affairs, and financial circumstances; and
(b)form an opinion about each of the following matters:
(i)whether it would be in the creditors’ interests for the company to execute a deed of company arrangement:
(ii)whether it would be in the creditors’ interests for the administration to end:
(iii)whether it would be in the creditors’ interests for a liquidator to be appointed.
[111] Ultimately, Mr Grant claimed that his research into this single asset company (whose asset had been sold by the receiver and had at the highest, eight to ten creditors), incurred costs over the approximately 25 working days of the voluntary
27 Companies Act 1993, s 239C, definition of “creditor”, para (b).
administration of $180,000 including GST. That sum includes $35,399 plus GST for “creditors” and $117,035 plus GST for “investigation”.
[112] Mr Chisholm, while submitting these costs were excessive, submitted the work went well beyond the requirements of s 239AE of the Act given the nature of the company’s affairs, and indicated Mr Grant had started work as if he had already determined to bring a claim against Arena/receivers.
[113] In short, Arena says Mr Grant was, in practical terms, acting for the Webber interests in achieving liquidation. Arena says that Mr Grant so while lacking impartiality and independence with a view to advance the Webber interests against Arena.
[114] Mr Grant says that what occurred was no more than the usual pre-appointment discussions between shareholders/directors and an insolvency practitioner, and that any non-compliance with the Act or the Code was inadvertent or caused no prejudice. Mr Grant says it certainly did not indicate a lack of impartiality or independence, nor represent incompetence.
[115] Messrs Strathdee, Gilchrist, Grant and Botterill were each cross-examined on their affidavit evidence, as were the experts called by the parties.
[116] I now turn to the key events in more detail, touched on in the above broad description, to set out my findings in respect of each of the events and circumstances relied on.
Mr Grant’s evidence
[117] Mr Grant was not a careful witness. On a number of important issues, he had poor recall — in particular, in respect of meetings. I had the impression that when faced with difficult questions Mr Grant’s first resort was to say he could not recall and then offer possible answers. The only concessions Mr Grant made was when he was faced with an unanswerable proposition. But short of being left with no option but to accept his non-compliance, he tended to fall back on an inability to recall.
[118] I do not consider Mr Grant was untruthful in his evidence, but that is because he does not believe he has done anything wrong — that however, is the issue. Mr Grant’s subjective beliefs are not relevant. I find Mr Grant did not recognise the nature and extent of his dealings with the Webber interests, from which an objective observer would conclude it was likely Mr Grant lacked independence and was not impartial between the Webber interests and Arena.
[119] It is no answer to say Messrs Grant and Botterill were, as Mr Hollyman put it in his submissions, obliged by their duties to pursue substantive proceedings against Arena. Mr Grant’s background with the Webber interests is such that a reasonable observer would be likely to conclude that Mr Grant from the outset intended to pursue Arena in support of the Webber interests. Within a month of the watershed meeting, on 28 October 2021, Mr Grant commenced proceedings to terminate the receivership. The extent of the investigations carried out during the administration, which I detail below, point to Mr Grant being focused on proceedings against the receivers from the 19 August 2021 meeting. Mr Hollyman submits that Messrs Grant and Botterill’s investigations disclose that Arena placed ORL and ORDL into receivership with the intent to exclude the Webber interests and to retain the profit of the development for themselves. Such is denied, but as I indicated during the hearing, there are issues to be investigated by the liquidators of ORL. However, the issue here is the appearance of how Mr Grant and latterly Mr Botterill went about doing so.
[120] In respect of some evidence, Mr Grant accepted that his recollection of events was wrong or, that he had been confused. I find Mr Grant when examined, sought to downplay the extent to which he brought into the narrative of events being put to him by Messrs Gilchrist, Dobbie and Webber. Mr Grant’s response to it being put to him that he had sided with the Webber interests became something of a mantra, reciting that as an insolvency practitioner, he frequently had stories put to him by directors that proved not to be true, and that he treated such advice with caution. However, that assertion is not borne out by Mr Grant’s actions at the time, his contemporary descriptions of his own role and in the extent of the investigations he undertook into the actions of Arena and the receivers during the voluntary administration.
Mr Grant’s action post appointment as administrator
[121] Following Mr Grant’s appointment, he was sent an email by Mr Dobbie on 25 August 2021 at 2:49 pm which was copied to Mr Botterill. The email forwarded the executed resolution appointing Mr Grant as administrator, that concluded:
Also as discussed Simon Munday from Duncan Cotterill would be our preferred legal counsel as they have intimate knowledge of the events since they began at the end of March.
(the Duncan Cotterill legal advice email)
[122] Mr Chisholm put to Mr Grant that the above email showed he had been discussing appropriate legal counsel with Mr Dobbie which, in context, could only have meant counsel would bring a claim against Arena. Again, Mr Grant said he did not recall.
[123] It is evident to me that Mr Grant approached the voluntarily administration as if it was inevitable that he would be appointed liquidator, and essentially commenced from the outset the type of investigations necessary for a claim to be brought against Arena/the receivers.
[124] While Mr Grant said he did not recall the discussions about appointing Duncan Cotterill, he did recall that it was the directors’ view that litigation might be necessary, but he said it was not necessarily his view. Mr Chisholm, in response, referred Mr Grant to his “frighten the horses” email and put to him that with Mr Grant’s knowledge of the war between shareholders, he must have been a party to some discussions appointing lawyers at that time. Mr Grant replied by referring to what he was being told by Messrs Webber, Dobbie and Gilchrist, but did not directly respond to being a party to discussions regarding solicitors. Mr Chisholm also put to Mr Grant that the Webber interests side of events prompted Messrs Grant and Botterill to immediately start taking steps to investigate Arena and the receivers. Essentially, Mr Grant acknowledged that was correct but said: “We would have done that regardless … because that was the obvious place to start.”
[125] I find that Mr Grant’s enquiries went beyond what could reasonably have been required for the purposes of s 239AE of the Act set out at [110] above. I set out in full the amount of work said to have been undertaken by Messrs Grant and Waterstone Insolvency (Waterstone) during the voluntary administration.
Remuneration Report Ormiston Rise Limited (7590136) (Administrators appointed) – 25 August 2021 to 29 September 2021 Position Rate
(excl. GST)
Administration Creditors Investigation Total Time Cost Time Cost Time Cost Time Cost Licensed insolvency practitioner 550 per hour 2.11 1,055 14.47 7,235 84.18 42,090 100.76 50,380 Senior in-house Counsel 475 per hour 3.08 1,463 41.39 19,660 111.03 52,739 155.50 73,863 In-House Counsel 350 per hour 0.00 0 0.00 0 3.00 1,050 3.00 1,050 Law clerk / Junior in-house counsel 250 per hour 1.45 363 4.27 1,068 68.18 17,045 73.90 18,475 Insolvency Officer 350 per hour 4.95 1,733 20.06 7,021 9.11 3,189 34.12 11,942 Junior Insolvency staff 250 per hour 0.95 238 1.46 365 3.69 923 6.10 1,525 Administrative staff 100 per hour 3.50 350 0.50 50 0.00 0 4.00 400 Total 16.04 5,201 82.15 35,399 279.19 117,035 377.38 157,635
[126]The first receivers’ report referred to the amount of the secured debt being
$137,600,000. Yet by Mr Kehoe’s email to Mr Botterill of 28 August 2021, the debt had grown to $179,895,000. I can readily accept that this is something a voluntarily administrator would want to understand. Mr Grant explained he undertook significant investigation because of his statutory requirement to investigate and because of his obligation to recommend to creditors the option under s 239AE of the Act to be voted on at the watershed meeting. To do so, Mr Grant said he needed to have an understanding of ORL’s position and what its assets were.
[127] Mr Grant, when it was put to him that it was not for a volunteer administrator to be carrying out an investigation to decide whether proceedings would be issued, said whether the increase in Arena’s debt would stand up to scrutiny was a valid thing for creditors to know, that it might help the creditors make decisions and also assist the administrator in giving the creditors options. Mr Grant said that given the size of the increase in indebtedness, it was appropriate for him to spend considerably more time investigating what went on.
[128] However, this explanation cannot be reconciled with what was in fact contained in the administrator’s report to creditors. Mr Grant’s report for the watershed meeting, said:
As ORL was the land holding entity, it has minimal trade/development related creditors. The administrator has commenced comprehensive investigations into the affairs of the company, is determining its financial position at this stage it is unlikely there will be any distribution to creditors.
…
At this stage it is unlikely there will be funds available to the unsecured creditors. The sale of the Property by the receivers has not resulted in any distribution to the administrator of ORL. This will be a matter that requires significant investigation by a liquidator in their supervisory capacity as to the conduct of receivers.
…
The administrator/liquidator intends to fully investigate the background of these related parties and whether the secured creditors have acted appropriately in relation to the sale and purchase of the Property with reference to any statutory duties.
[129] The extent of work carried out by Mr Grant ignores the reality that as ORL was a single asset company, was not trading, and its only asset had been sold — liquidation was realistically the only option.
[130] There is no evidence that any form of report for the benefit of creditors was produced by Mr Grant as to whether the actions of Arena or the receivers would stand up to scrutiny. If Mr Grant’s explanation for the work and hours claimed as represented by the table at [125] was accurate, I would have expected a report or memorandum to have been prepared for creditors setting out some of the information gathered from that work and preliminary observations.
[131] The fact is in fact, voluntary administration was only a means of achieving liquidation. Mr Grant knew this, hence his comment in his 23 August 2022 letter to Mr Webber that liquidation was the best means of achieving the shareholders’ objectives. It was those objectives that Mr Grant was working to advance. The extensive work apparently carried out, coupled with what is recorded as Mr Grant’s discussion about legal counsel, is really only consistent with investigating Arena’s action at the request of the Webber interests with a view to ORL bringing proceedings against Arena.
[132] Consistent with that conclusion is that Arena was not treated the same as other creditors in the voluntary administration. Other creditors were sent, together with
notice of the first meeting, voting forms and proof of debt forms, whereas Arena was told it needed to request the forms. Arena did not receive its notification until a few days after the other creditors. There was not a convincing explanation for this but it seems it was linked to Mr Botterill’s mistake that because Arena was a secured creditor, it was only entitled to participate in the administration to the extent that it had unsecured debts. Arena was not sent the 8 September 2021 email with the outcome of the first creditors’ meeting.
[133] Mr Grant’s position on Arena’s ability as secured creditor to participate in the administration issue is unsatisfactory. It was Mr Grant’s obligation to determine whether a creditor was entitled to participate in the voluntary administration. Mr Grant was aware that s 239C of the Act provides that a secured creditor is a creditor for the purposes of a voluntary administration. It seems that Mr Grant left determining whether Arena was entitled to participate in the administration to Mr Botterill. However, in his evidence, Mr Grant said he determined which creditors’ claims should be accepted.
[134] Mr Grant also left it to Mr Botterill to work closely with Messrs Dobbie and Gilchrist in respect of the collection of votes. I accept, as Mr Chisholm put it, the tenor of Mr Botterill’s communications with Mr Dobbie and Mr Gilchrist was as if they were clients rather than directors of a company in administration — that is how that correspondence would appear to an objective observer.
[135] On the day Mr Grant was appointed administrator, the Webber interests communicated with Messrs Grant and Botterill, providing material to be investigated relevant to Arena and the receivers. Mr Botterill, on that day, provided a copy of a letter that he had sent to the receivers on the afternoon of Mr Grant’s appointment. He did so in the manner, as I have said, as if the directors were his clients. The tone and tenor of the email communications, particularly shortly after Mr Grant was appointed administrator, was of shifting to an investigation into the actions of Arena and the receivers.
[136] In the evening that Mr Grant was appointed administrator, Mr Dobbie sent to Messrs Botterill and Grant, a Dropbox file apparently containing a significant number
of documents which, from context, concerned Arena. The email referred to Messrs Gilchrist, Webber and Dobbie putting together a list of items that it would be good to investigate, including “some questionable actions” by the receivers. Mr Botterill replied later that evening, acknowledging receipt and saying he would work through the documents and provide Messrs Gilchrist, Webber and Dobbie with a copy of a letter he had sent to the receivers that afternoon.
[137] On 27 August 2021, Mr Botterill wrote to the directors and copied in Mr Grant, referring to the resolutions to be addressed at the first creditors’ meeting, saying: “We need to quickly get an idea of who the entitled creditors are and how they will vote”. Mr Chisholm characterised this as Mr Botterill acting in concert with the directors to ensure Mr Grant remained as administrator, asking rhetorically, why else there was a need to know? Mr Chisholm characterised the tone of the email correspondence between Mr Botterill and the directors at this time as inconsistent with the administrator adopting an impartial position.
[138] I do not accept Messrs Botterill and Grant’s assertion that Mr Botterill’s reference to needing to quickly know who the entitled creditors were and how they would vote was merely a matter of curiosity. Mr Grant acknowledged in cross-examination that looking back at that comment, Mr Botterill’s request was unwise. Again, the objective observer would, from the date of this correspondence, have the impression that Messrs Grant and Botterill were in the Webber interests camp. Mr Botterill wanted to know if enough votes had been secured to confirm Mr Grant’s appointment as administrator.
[139] Mr Botterill, in his email of 27 August 2021, referred to seeking information from the receivers, and said: “We are preparing an application to court to compel information to keep the heat on if need be.”
[140] In response to whether this was a comment an independent, impartial insolvency practitioner would make, Mr Grant said: “… coming back, right up to the, to the start of this thing there was an expectation on behalf of the Board that money would come out. We were put in there to help resolve that.”
[141] As at Mr Grant’s appointment on 25 August 2021, given the very modest level of creditors, and the expectation at that time that there would be tens of millions of dollars surplus available from the receivers to go to the shareholders, in a practical sense is an acknowledgement by Mr Grant that he saw his role as being to assist with obtaining money from the receivers for the shareholders.
[142] It was not until Mr Kehoe’s email of 28 August 2021 that it was learnt there would be no funds coming from the receivers.
The acceptance of creditors of ORDL in the administration of ORL
[143] As noted, Mr Dobbie advised Messrs Grant and Botterill in an email of 27 August 2021, that there were very few creditors of ORL. It seems Mr Gilchrist came up with the idea of approaching the creditors of Platform who had reservation of title clauses to ask them to put in creditors’ claims in the ORL administration on the basis it could do them no harm.
[144] I find there was no reasonable basis for the creditors’ claims of Global Supply Systems Ltd, Rollformers 2000 Ltd, PGF Ltd and Silverdale Stairs Ltd, to have been accepted by Mr Grant, either at the creditors’ meeting or at the watershed meeting. (I accept Silverdale Stairs Ltd was not accepted as a creditor for the watershed meeting).
[145] Mr Botterill, who was a senior in-house solicitor during the administration, when giving evidence could not explain the jurisdictional basis by which a creditor of Platform, whose product was supplied pursuant to a reservation of title claim (ROT) and installed in buildings on land owned by ORL, could be a creditor of ORL. There was a belated attempt by Mr Francis (who gave expert evidence on behalf of Mr Grant), to construct an explanation based on the suppliers to Platform having a claim in conversion against ORL, but plainly that was not what Mr Botterill understood at the time. Mr Francis’ belated suggestion of a claim of conversion is put in context by the fact the joint expert report agreed the ROT creditors were not creditors of ORL.
[146] In respect of the creditor, Silverdale Stairs Ltd, Mr Grant acknowledged he did not even consider whether that company was a creditor prior to the final creditors’ meeting. Mr Grant said: “I accepted the votes as they were on the face of them, nothing turned on the outcome”. That was not a reasonable position for Mr Grant to adopt. I accept that the Silverdale Stairs Ltd’s claim was rejected for the watershed meeting, but that is not the point.
[147] As to Mr Grant’s view that nothing turned on the vote at the first creditors’ meeting, Mr Strathdee’s uncontradicted evidence is that had Arena known there was arguably only one true creditor in ORL (a company called FINDEX), Arena would have acted differently, that is, it would have sought orders from the Court under s 239AMA(2) of the Act for its vote to be taken into account. Otherwise, it would at the time have sought orders to have Mr Grant removed as administrator or liquidator as the case may be.
[148] It seems Mr Grant deferred to Mr Botterill as to the status of the claims made by creditors of Platform. Mr Botterill knew the idea that suppliers to Platform could become creditors of ORL based on their ROT claims was Mr Gilchrist’s idea. Where an administrator is presented with a novel basis for a person being a creditor, a reasonable administrator will satisfy themselves that there is a reasonably arguable legal basis for that claim. That did not occur here as Mr Botterill (the in-house legal adviser) could not articulate a basis for such creditors having a claim against ORL.
[149] In respect of the creditors’ claims from PGF Ltd and Global Supply Systems Ltd, Mr Botterill received email chains between Mr Gilchrist and ROT creditors that showed these creditors were owed money by Platform, and were being encouraged to file claims in the administration of ORL. Mr Botterill was copied into those emails, which included queries to which Mr Botterill replied that he would check with Mr Grant and respond shortly.
[150] The fact the legal status of the creditors named at [149] was not considered by Mr Grant prior to the first creditors’ meeting, when coupled with the tenor of the correspondence from Messrs Dobbie and Gilchrist to Mr Botterill (containing references to creditors who would vote “our way”) gives the appearance that Mr Grant
and the Webber interests were working together to ensure that Mr Grant was confirmed as administrator at the first creditors’ meeting and beyond.
[151] Mr Dobbie, in an email to Mr Botterill and copied to Mr Grant, concluded his email with; “Also when looking for potential additional creditors do their debts need to be dated before the receivership started?” Mr Grant accepts he knew Mr Gilchrist was actively looking for votes in Mr Grant’s favour, but describes that as Mr Gilchrist’s right as he wanted to keep Mr Grant in office. However, that should have made a reasonable insolvency practitioner, if not sceptical, of at least careful to check the votes that resulted from someone in Mr Gilchrist’s position essentially “touting” for votes.
Mr Gilchrist’s position on obtaining votes
[152]Mr Gilchrist, in his first affidavit said:
Mr Grant and Mr Botterill made it clear to me that it was very important for us to be able to outvote Arena at these creditor meetings.
…
However, the difficulty in this case was … that almost all of the suppliers/creditors of the Ormiston Development were creditors of [Platform], not ORL. Following discussions with Mr Grant and Mr Botterill, it was agreed that I would approach a number of creditors of [Platform] to encourage them to lodge creditor claims in the administration of ORL and vote in favour of Mr Grant as the preferred Liquidator. The creditors were told that by submitting creditors’ claims and voting in favour of Mr Grant, they would be supporting [Platform] and would be “looked after”. Mr Grant and Mr Botterill were aware of this communication to the creditors.
This affidavit was requested from Mr Gilchrist by the solicitors acting for Arena.
[153] In a second affidavit filed by Mr Gilchrist, requested by the solicitors acting for Messrs Grant and Botterill, Mr Gilchrist backtracked on a number of the key matters contained in his first affidavit. Mr Hollyman, notwithstanding filing Mr Gilchrist’s “reply”, submitted Mr Gilchrist’s evidence should be rejected in its entirety. I was not assisted to any real extent by Mr Gilchrist’s oral evidence but the contemporary emails, as I have said, are relevant.
Compliance with pt 15A of the Act by Mr Grant
[154] Part 15A of the Act controls how a company enters voluntary administration and the obligations on the administrator. Arena alleges Mr Grant failed to comply with a number of his obligations under pt 15A of the Act. While not put this way, Mr Chisholm’s submission was to the effect that all of the areas of non-compliance worked against Arena’s interests, or disclosed a lack of competence by Mr Grant.
I now turn to each of the areas of alleged non-compliance.
Section 239AK of the Act
[156] The first meeting of creditors was held pursuant to s 239AN of the Act. Section 239AK provides:
239AK Conduct of creditors’ meetings
(1)The following clauses of Schedule 5 apply to creditors’ meetings called under this Part as if references to the liquidator were references to the administrator:
(a)subject to section 239AZ, clause 4; and
(b)clauses 6 to 11.
(2)At any meeting of creditors or class of creditors held under this Part, a resolution is adopted if a majority in number representing 75% in value of the creditors or class of creditors voting in person, or by proxy vote or by postal vote, vote in favour of the resolution.
[157] Clauses 6 to 11 of sch 5 deal with proxies, postal votes, minutes, representation of corporations, the ability of a meeting of creditors to regulate its own procedure and the effects of irregularities or defects.
[158] Mr Chisholm submitted that cl 1 of sch 5 does not apply. Clause 1 provides that a meeting of creditors may be held by:
(a)an in-person meeting;
(b)AVL; or
(c)postal ballot.
[159] Mr Chisholm’s submission was that as cl 1 of sch 5 is not included in s 239AK(1) of the Act as applying to voluntary administration, the creditors meeting
had to be in-person. Mr Chisholm submitted that conclusion is reinforced by s 239AP(1) which provides that the administrator must table at the first creditors’ meeting various materials. Mr Grant accepted that it made no sense for documents to be “tabled” at a postal meeting.
[160] Section 239AK(2) of the Act does refer to a postal vote, however, Mr Chisholm submitted while a creditor could elect to vote by postal vote if they wished, subs (2) does not expand the permitted means of holding a first creditors’ meeting. The point of the materials in s 239AP being tabled at the meeting was to permit the creditors to discuss those issues before casting their votes.
[161] Mr Chisholm’s submission is supported by Heath and Whale on Insolvency which in the last three editions, has said that creditors’ meetings are to be conducted in accordance with s 239 of the Act, not s 243 as relied on by Mr Grant.28
[162] Mr Hollyman submitted there is no statutory requirement as to how material must be distributed for the first creditors’ meeting. That may well be correct.29 However, the point is creditors must have the information for the meeting. Whether the information is sent by email prior to, or copies distributed at the meeting (that is, tabled at the meeting) is not the point. The point is that creditors should have the information at the meeting in order to be able to discuss it.
[163] I accept Mr Chisholm’s submission that the obligation under s 239AP of the Act to table material at the meeting drives the conclusion that the first creditors’ meeting must be in-person.
[164] Mr Grant held the first creditors’ meeting by postal vote, assuming such was permitted by cl 1 of sch 5 of the Act. However, it was telling that Mr Grant acknowledged in cross-examination that he did not even look at s 239AK prior to arranging the first creditors’ meeting by postal vote. I accept this meeting was during a COVID-19 lock down in Auckland, but the meeting could have been held by AVL if approved by the Court — in fact an informal creditors’ meeting was held by AVL by
28 Paul Heath and Michael Whale, above n 2, at [17.11].
29 Re Pumpkin Patch Ltd (receivership and administrators appointed) [2016] NZHC 2771 at [26], a decision concerning the form of notices of watershed meeting under s 239AU of the Act.
Mr Grant on 1 September 2021, showing there is no reason why the first creditors’ meeting should not have not been by AVL.
Section 239AP of the Act
[165] Section 239AP requires the administrator to table at the first creditors’ meeting his or her written consent, the certificate required under s 239G, an interest statement that complies with s 239APA of the Act and a notice stating that administrators are required to be licensed, and that more information about the regulation of insolvency practitioners is available from the Registrar. Non-compliance is a criminal offence.30
[166]Mr Grant, in cross-examination said, referring to s 239AP of the Act that:
… it just says “must table” and we did that but as I said previously, it occurred to me that for exactly the point you are making that that was pointless …
[167] However, Mr Grant in his affidavit sworn 21 February 2025 said: “I accept that the documents referred to above … were not tabled at the first creditors’ meeting.”
[168] This is another example of Mr Grant’s lack of care in giving evidence. When Mr Grant’s statement in the preceding paragraphs was put to him, he said his recollection was that there were some documents that were tabled, but whether they were all the documents or not, he was not sure. When taxed with this inconsistency, Mr Grant said he was confused when he gave his earlier evidence and could not recall with certainty what the situation was. He said: “I thought the documents may have been tabled, maybe they weren’t”.
[169] The first creditors’ meeting was held on 6 September 2021. However, an email on 7 September 2021 from Mr Robinson, an insolvency officer with Waterstone, sent to Messrs Botterill and Grant records: “Please see the Legislation attached and the associated documents we will present to our creditors”. The list included documents called: consent to act, independence assessment, resolution appointing administrator, notice of administrator, and notice of result and certificate.
30 Companies Act 1993, s 239 AP(2).
[170] Mr Botterill replied, noting: “We don’t have a non-internal interests statement do we? I am not sure we want to send our internal one.”
[171] Mr Robinson replied on 8 September 2021: “I could create an external only document if you would like?”
[172] Mr Botterill replied later on 8 September 2021: “Please see this Interest Statement attached, we used this format for Mad Men”.
[173] I am satisfied that this email exchange shows that the interest statement required by s 239APA of the Act to be provided to creditors for the first creditors’ meeting, did not exist on the day of the first creditors’ meeting on 6 September 2021. I find Mr Grant did not comply with s 239AP of the Act.
Section 239APA of the Act
[174] Section 239APA of the Act requires the interest statement required by s 239AP(1)(b) to disclose:
(a)any circumstance, relationship, or other fact that creates, or could reasonably be perceived as creating, a conflict of interest for the insolvency practitioner in relation to the independence of the insolvency practitioner’s role as the administrator, including anything that would, but for a court order to the contrary, have disqualified the person—
(i)from being appointed as or acting as the administrator (see section 239F(2)); or
(ii)from being a licensed insolvency practitioner; and
[175] Mr Grant’s first interest statement for ORL (which was discussed in the email exchange on 7 and 8 September 2021 between Mr Robinson and Mr Botterill) known as a ‘DIRRI’ was sent to creditors on 8 September 2021.
[176]The declaration reads:
The following details key meetings and phone conversations pre-appointment meetings phone calls and other correspondence my firm has had:
[227] Mr Hollyman submitted this was reinforced by s 19 of the Legislation Act 2019, which he said confirms words in the singular include the plural and vice versa.
[228] However, the specific overrules the general. The specific wording of s 283(2) of the Act is inconsistent with the general provision in s 240 of the Act. Section 240(1) does not require the interpretation of the terms contained in s 240 to be followed if “the context otherwise requires”. Further, Mr Hollyman’s reliance on s 240 is not an answer to the wording of s 283(2), being inconsistent with a person being able to appoint themselves as their own successor.
[229] Both parties referred to liquidation reports for StarPlus Homes, but I do not find that comparison to be helpful. While in that example s 283 of the Act had been
used to appoint joint liquidators, approval was granted by the Court for the second liquidator to act prior to the resignation of the first liquidator, and a creditors’ meeting was held subsequent to the appointment of joint liquidators to confirm the appointment. Whether s 283 could validly be used to appoint joint successors was simply not an issue. Here, it is directly challenged and I find that s 283 does not:
(i)permit the appointment of two successors to replace a person who has resigned; and
(ii)in any event, would not permit the person resigning to be appointed as their own successor.
What then does this mean for Mr Grant’s purported resignation and appointment of Mr Botterill as joint liquidator?
[230] There was no nefarious intent in Mr Grant’s actions. There is no dispute that it is desirable, particularly in involved insolvencies, to have two liquidators. The issue for the Court is whether Mr Grant and/or Mr Botterill are in fact liquidators at this time.
[231] It is clear Mr Grant did not intend to stand down. He intended to bring on Mr Botterill as joint liquidator.
[232] By way of counterclaim, if the Court determined s 283(2) of the Act did not permit Mr Grant to resign and then appoint himself and Mr Botterill, Messrs Grant and Botterill sought that relief be granted by way of a declaration pursuant to s 284 of the Act and/or the Court’s inherent jurisdiction that Messrs Grant and Botterill are the joint liquidators of ORL and ORDL.
[233] In the alternative, a declaration is sought on the same basis that Mr Grant is the liquidator of ORL and ORDL.
[234] In a sense, the s 283 issue is something of a sideshow. Arena’s principal argument is that Messrs Grant and Botterill so lacked independence that they should
be removed as liquidators. That Mr Grant mistakenly had recourse to s 283 to appoint himself and Mr Botterill as liquidators is beside the point.
[235] Mr Chisholm makes the point that upon appointment, s 283(4) of the Act opens up a potentially wider avenue of challenge to the liquidators’ appointment than might otherwise exist. But the reality is the grounds relied on for challenging the liquidators under s 283(4) are the same for challenging the appointment of Mr Grant from the outset.
[236] While Mr Botterill was not an administrator and did not purportedly become liquidator until April 2022, he was very closely involved in all aspects of the administration and liquidation up until his formal appointment. He was legal adviser to Mr Grant and also named as the principal point of contact in the administration and liquidation and, as already covered, he liaised closely with Messrs Gilchrist and Dobbie as to the collection of creditors’ claims and he corresponded with creditors.
[237] Accordingly, I find that Mr Grant’s purported appointment of himself and Mr Botterill as joint liquidators of ORL and ORDL in April 2022 was invalid. However, given that step was a result of a misunderstanding of the effect of s 283 of the Act, I make an order that Mr Grant and Mr Botterill are the joint liquidators of ORL and ORDL. That means they are both subject to Arena’s application that they be removed as liquidators. As I have said, I do not consider this issue to be of any assistance in determining Arena’s primary application that the liquidators be removed for lack of independence.
The absence of a separate DIRRI by Mr Botterill
[238] Paragraph 2.4.3 of the Code, set out at [38] above, requires a DIRRI from each liquidator.
[239] Under s 255(2)(c)(ii)(C) of the Act, a liquidator must upon being appointed, provide an interest statement that complies with s 255A. Section 255(2)(c) provides that the interest statement must be provided within the applicable period referred to in s 255(3). Section 255(3), when referring to applicable periods, only refers to liquidators appointed under s 241, rather than under s 283.
[240] It appears a timeframe for the provision of a DIRRI of a liquidator appointed as a successor under s 283 is not provided in s 255(3) or in s 283. In those circumstances, I am satisfied the Code provides guidance as to when Mr Botterill was required to provide his DIRRI on being appointed.
[241] I find Mr Botterill did not satisfy the requirements under the Code to file a personal DIRRI. Mr Botterill’s evidence was that upon being appointed by co-signing Mr Grant’s internal statement, he did not need to complete a personal DIRRI. I do not accept that as a correct statement of Mr Botterill’s obligations under the Code.
[242] It is clear that a DIRRI is a statement of an individual’s interest. Why Mr Botterill should refuse to provide a personal DIRRI is difficult to understand. Mr Botterill claimed his refusal to do so was based on advice, but no detail of that advice is provided. Nor do I understand how such advice could conclude, in light of the plain wording of the Code, that Mr Botterill did not have to give a personal DIRRI.
[243] Arena’s solicitors wrote to Mr Botterill, calling for him to provide a personal DIRRI. They also sought an order in the statement of claim filed in this proceeding in September 2023 that both Messrs Grant and Botterill provide updated DIRRIs that comply with s 255 of the Act.
[244] Mr Botterill’s stubbornness in refusing to give a DIRRI, which is really what it amounts to, is indicative of the appearance of a lack of independence. Mr Botterill’s obligations under the Code are clear beyond any argument. The only reason he would have to refuse to provide a personal DIRRI is he did not want to be seen as accepting Arena’s assertion that he had breached his obligation in not giving one (leaving aside the more serious possibility that he had a personal interest to conceal).
[245] An independent and impartial insolvency practitioner, when told they have failed to satisfy a RITANZ requirement under the Code will remedy that default. As I have said, Mr Botterill’s refusal to do so reinforces the appearance of a lack of independence.
Should the liquidators be removed?
[246] Mr Hollyman referred to a number of authorities for the proposition that the onus on a creditor seeking to remove a liquidator is a heavy one which is not easily discharged.33
[247]Mr Hollyman relied on the Supreme Court of New South Wales’ decision of
Singtel Optus Pty Ltd v Weston, for the following propositions:34
(a)a liquidator may be removed from office if the Court is satisfied that the removal is in the best interests of the liquidation;
(b)the Court “must take care that it does not allow itself to become an instrument of those who seek merely for their own purposes to disrupt the due course of the liquidation”;
(c)that it is not enough that some decisions may be subject to criticism in the sense that one could identify things that could have been done better, or things that could have been done earlier. The question should not be approached with the benefit of hindsight.35
[248]Mr Hollyman also relied on the proposition that:36
The onus of proof will not be easy to discharge if the liquidator has become well acquainted with the business and affairs of the company, or the process of winding up has almost reached completion.
[249] Mr Chisholm in his submissions did not dispute these legal propositions, however, it is one thing to apply to remove a liquidator because of questions about their conduct, that is, whether things could have been done better or earlier, and another matter where there is the appearance of a lack of impartiality or actual impartiality.
33 Francis v Innes [2022] NZHC 3354 at [23] and [25] and the authorities cited therein.
34 Singtel Optus Pty Ltd v Weston [2012] NSWSC 674: (2012) 90 ACSR 225.
35 AMP Music Box Enterprises Ltd v Hoffman [2002] BCC 996.
36 Aboriginal & Torres Strait Island Commission v Jurnkurakurr Aboriginal Resource Centre Aboriginal Corporation (in liq) [1992] 10 ACSR 121.
[250] In the end, because of the decision I have reached in respect of Messrs Grant and Botterill’s positions, I do not at this stage need to examine the correct legal test further.
Arena’s delay in bringing this challenge
[251] Mr Hollyman emphasises that Arena waited some three and a half years before issuing this proceeding. Arena, in its solicitor’s letter of 17 June 2022 to Mr Grant, identified that Global Supply Systems, Rollformers and PGF Ltd who voted at the watershed meeting, were not creditors — albeit requested copies of their claim forms and supporting material. Mr Hollyman submits Arena foreshadowed applications to the Court in respect of its ability to vote in the watershed meeting but did not make any application. Arena did not pursue that issue further when Mr Grant declined to provide the requested information. The thrust of Mr Hollyman’s submission is that it appears Arena had concerns about the process by which Mr Grant was appointed and it raised issues with Mr Botterill’s appointment — yet did not issue this proceeding until September 2023. On 4 October 2021, Arena requested details of the admitted creditors’ claims in the watershed meeting which Mr Grant declined to provide. However, Mr Hollyman notes the creditors were disclosed in the first liquidators’ report. Mr Hollyman’s submission amounts to saying Arena is using this proceeding to shut down ORL’s claims about the conduct of the receivership.
[252] Mr Chisholm strongly rejects that submission. He submitted, in effect, that Arena is quite prepared to deal with the liquidators’ proceedings on their merits, but to do so wants to know that decisions about the proceeding were being undertaken in a professional and impartial way.
[253] Mr Hollyman does not cite any authority for the proposition that delay is a defence to a challenge to a lack of independence or impartiality. Mr Hollyman did not submit Arena had waived by virtue of delay any appearance of lack of independence. Mr Chisholm submits that many of the matters relied on in this proceeding were only learnt through discovery late in the proceeding, but equally Arena must have considered when it issued this proceeding in September 2023 that it had sufficient evidence to justify that step. In that sense, Arena’s delay in bringing
this proceeding is unexplained. That Arena managed to obtain further material in support of its proceeding through discovery was happenstance and not an explanation for the delay.
[254] Delay does not excuse a lack of impartiality, but it becomes a factor to consider in the appropriate relief to order, as does the nature of Arena’s concerns about the conduct of the liquidation litigation.
Other relevant considerations
[255] Liquidation was inevitable in this case. Arena recognised this by putting up an alternative liquidator to Mr Grant at the watershed meeting.
[256] Mr Hollyman points out that any non-compliance with pt 15A of the Act was now some four years ago and suggests such breaches that may have occurred were technical, inadvertent and/or caused no prejudice.
[257] As to the conduct of the litigation, Mr Chisholm recognised the significance of senior counsel and independent solicitors having been briefed by Messrs Grant and Botterill in respect of this proceeding, but Mr Chisholm correctly recorded that nonetheless final decisions about the liquidation rest with the liquidators.
[258] As ORL was a holding company, its liquidation is straightforward as the only issues to be dealt with are those arising from the receivership. There is no suggestion there are issues relating to directors’ duties, voidable transactions or other debt recovery, as is often the case in a liquidation. In that sense, narrow interests are at stake — in crude terms — the Webber interests versus the Arena interests. Arena is well resourced, but again, its real concern is that it currently considers it is not dealing with an independent and impartial liquidator.
[259] The issues in this liquidation are now before the Court and will be resolved either through the Court process or settlement.
[260] While I am more than satisfied there is at least the appearance that Messrs Grant and Botterill were not independent or impartial, I decline to order their
removal, provided the liquidators undertake to the Court to abide by the following condition in respect of the conduct of the proceedings and all steps relating to the remainder of the liquidation.
[261] The condition is based on Mr Hollyman’s submission that it would be inappropriate to remove the liquidators when what now remains to be done in the liquidation is to complete the ongoing Court proceedings involving Arena and the receivers which are being conducted by senior counsel and independent solicitors.
[262] The condition is as follows: in respect of all litigation against Arena or the receivers, Messrs Grant and Botterill are to instruct external solicitors and retain senior counsel to conduct the proceedings. Messrs Grant and Botterill in relation to all decisions in the liquidation, including without limitation whether to attend alternative dispute resolution and settlement, are to seek the advice of senior counsel. In the event Messrs Grant and Botterill are in doubt whether to accept the advice of senior counsel, or whether they were acting consistent with that advice, they are to seek the directions of the Court in respect of that particular issue. Leave is reserved for such direction to be sought in this proceeding.
[263] The above condition recognises Arena’s position that it is not using this application to bring the proceedings against it to an end, but rather to ensure the proceedings are conducted in a reasonable and impartial way.
[264] If Messrs Grant and Botterill are not prepared to accept this condition, then I see no option other than to order their removal as liquidators, but I do not consider that to be the most desirable outcome for the liquidation, given the cost and delay removal will create. Messrs Grant and Botterill are to provide their undertaking to the Court within 10 working days or, within the same timeframe, advise if they do not accept the condition. If the condition is not accepted, a telephone conference is to be requested to address the identity of replacement liquidators.
[265] Having dealt with the primary relief sought by Arena, I now turn to the further orders sought in the statement of claim.
[266] There is a declaration that Mr Grant breached ss 239AK, 239AP, 239APA, 239C, 239AF, 239AU and 239O of the Act for the reasons given at [154] to [218] above.
[267] There is a declaration that Mr Grant failed to act reasonably in admitting the creditors’ claims for the purposes of ORL’s watershed meeting. This finding relates to the unrelated creditors and excludes the conclusion that FINDEX was a creditor.
[268] It follows there is a declaration that Mr Grant was not validly appointed liquidator of ORL at the watershed meeting, but there is an order in terms of paragraph C(a) on page 19 of the relief sought in the statement of defence and counterclaim document dated 22 October 2024.
[269] There is a declaration that Mr Botterill was not validly appointed liquidator of ORL or ORDL because s 283 of the Act was not the appropriate mechanism to achieve the appointment of joint liquidators. At [237] above, I made an order declaring that Mr Grant and Mr Botterill are the joint liquidators of ORL and ORDL.
[270] There is a declaration that Mr Grant breached his statutory obligation as administrator of ORL by failing to provide a compliant DIRRI dated 6 September 2021 for the reasons given at [183] above and that his DIRRI dated 22 September 2021 did not comply with s 239AV of the Act for the reasons given at [199]. There is a declaration that Mr Botterill breach his obligation to file a personalised DIRRI for the reasons given at [239] to [241] above.
Litigation funding
[271] Arena cannot have been surprised that ORL was receiving litigation funding given its knowledge as to the lack of assets within ORL. Mr Grant had no litigation funding when he made his application in October 2021 seeking an order that Arena was no longer a creditor — the litigation funding agreement was not entered into until 14 December 2021. It seems the funding agreement for the administration noted earlier was limited to the administration. Mr Grant obtained funding when he was the respondent in Arena’s proceedings.
[272] In its pleading, Arena seeks disclosure of the funds received in the liquidations of ORL and ORDL and the identity of any party that provided, or has previously provided, litigation funding. Mr Hollyman’s submissions advise that has been done and there is no live issue in that regard. On that basis, I do not intend to make any orders in relation to the funding issue.
Use of inhouse solicitors
[273] Arena’s statement of claim alleges that the use of in-house solicitors by Mr Grant creates a conflict of interest. In-house lawyers at Waterstone charge legal fees as if they were an external law firm. Those costs are charged to the administrator/liquidator and become costs of the administration/liquidation and are therefore paid in priority to creditors and shareholders.
[274] The statement of claim alleges this arrangement places Mr Grant in a conflict of interest, as he benefits personally from the legal fees/remuneration charged by the in-house solicitors at Waterstone, with as the profit from those services flowing to Mr Grant.
[275] In addition, the advice received by Mr Grant was, in the respects outlined in this judgment, incorrect.
[276] The use of in-house legal advisers can benefit liquidation. In a practical sense, if there are no assets to meet costs, the insolvency business carries the cost of that legal advice unless and until there is a recovery. If external solicitors were used, the firm would have to meet those costs on the usual solicitor-client basis, whereas the firm’s actual expenses in terms of its staff’s time, will be less. This makes it more likely that investigations and recovery actions will be pursued for the benefit of creditors.
[277] On the other hand, there is the opportunity for funds otherwise available to creditors to be essentially diverted to unnecessary or excessive legal services.
[278] Given the condition I have imposed in respect of the requirement to use external solicitors, I do not intend to make any further orders in respect of this issue. The costs incurred to date are dealt with below.
Remuneration
[279] The liquidators’ remuneration has been provided by an external funder related to the Webber interests. If the claim against Arena/receivers fails, then the level of funding is irrelevant to them. Arena/receivers will have the usual ability to make an application that their costs be met by the non-party funder. In that event, the level of the fees paid by the funder will not be relevant as such, as it will not impact on their interests.
[280] If the litigation against Arena/receivers is successful and results in a return of funds to ORL, then the position is different. By virtue of cl 1(1) of sch 7 of the Act, a funder has priority in the distribution of recoveries in a liquidation. Because of this, the level of fees impacts Arena as a 19.5 per cent shareholder and also the 10 per cent shareholder.
[281] I have already concluded that the level of investigation in the administration and the fees incurred were excessive given the limited role of the administrator. However, it does not follow that those fees should be refunded. It may be that work done in the administration would have been carried out in the liquidation in any event. I have found that work was accelerated into the administration essentially because, as I have said, it appears Mr Grant bought into the Webber interests’ position. However, I repeat that it may well be that the work would have been done in the course of the insolvency in any event.
[282] Accordingly, there is leave to Arena to challenge the liquidators’ fees at the conclusion of the liquidation. Leave granted to challenge the administrators’ fees also applies at the conclusion of the liquidation. I do not consider it would be an efficient use of resources for that exercise to be carried out now because, as I have said, if the liquidation proceedings do not result in a recovery, the level of fees charged by the liquidators is irrelevant to Arena. The liquidators are on notice that their record keeping in respect of their fees from this point forward must be on the basis that will permit those fees to be examined by the Court. The liquidators need to ensure that their historical records in that regard are in a form that will allow inspection in an efficient manner.
[283] Accordingly, the order of the Court is that there is leave to Arena to review the remuneration charged by the administrator and the liquidators at the conclusion of the liquidation.
[284] Messrs Grant and Botterill are ordered to provide updated DIRRIs that comply with the terms of the Act and the Code within 10 working days of this judgment and to continue to provide individual DIRRIs when the Act or the Code requires.
Costs
[285] It follows that Arena has been successful in its application. That there was not an order removing the liquidators does not alter the fact that Arena established that there is, at the very least, the appearance of a lack of impartiality and lack of independence on the part of the liquidators. Allowing the liquidators to continue, subject to the condition directed above, is to some extent a pragmatic approach, as I have said, to avoid unnecessary costs, to meet Arena’s fundamental concern about the conduct of litigation, avoid delay in the related proceedings being pursued, and driven by the narrow interests at stake.
[286] Counsel were not heard on costs. Unless costs submissions are filed within 10 working days of the date of this judgment, the order of the Court is that the liquidators are to personally pay to Arena the costs of this proceeding on a 2B basis. I certify for second and third counsel for Arena given the complexity of the case. I note both parties were represented by multiple counsel.
[287] Leave is reserved for the parties to apply further if the above orders do not address all of the issues raised.
Associate Judge Lester
Solicitors: Simpson Grierson, Auckland (for the Plaintiff) Wynn Williams, Auckland (for the Defendants)
Copy to counsel: D J Chisholm KC, Barrister, Auckland R J Hollyman KC, Barrister, Auckland A J Peat, Barrister, Auckland
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