Auckland Council v Sybeem Holdings Limited

[2012] NZHC 1719

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-2761 [2012] NZHC 1719

BETWEEN  AUCKLAND COUNCIL Plaintiff

ANDSYBEEM HOLDINGS LIMITED Defendant

Hearing:         13 July 2012

Appearances: Mr Mulligan for plaintiff

Mr Griffin for defendant

Judgment:      13 July 2012

ORAL JUDGMENT OF ASSOCIATE JUDGE DOOGUE

Counsel:

Buddle Findlay, P O Box 1433, Auckland – [email protected]

Mr R Griffin, Barrister, Southern Cross Chambers – [email protected]

AUCKLAND COUNCIL V SYBEEM HOLDINGS LIMITED HC AK CIV-2012-404-2761 [13 July 2012]

[1]      This proceeding is a defended liquidation proceeding however, on the 12th of July 2012 the company resolved to liquidate and that a Mr Bryan Williams should be appointed liquidator of the company.

[1]      The defendant in addition to filing a statement of defence filed an application for stay of the proceedings and for restraint of publication of the advertisement.

[2]      Mr Griffin for the company acknowledged that on the face of it the passing of the special resolution by the sole shareholder of the defendant company contravened s 241(AA) of the Companies Act 1993 which provides so far as relevant:

[241AA         Restriction on appointment of liquidator by shareholders or   board after application filed for Court appointment

(1)       This  section  applies  if  an  application  has  been  filed  for  the appointment of a liquidator of a company by the Court under section

241(2)(c).

(2)      A liquidator of the company may only be appointed under section

241(2)(a) or (b) if the liquidator is appointed within 10 working days after service on the company of the application.

(3)       If  a  liquidator  is  appointed  under  section  241(2)(a)  or  (b),  the creditor who filed the application referred to in subsection (1) may apply to the Court under section 283(4) for the review of his or her appointment as if the words “successor to a liquidator” in section

283(4) read “liquidator”.

(4)       Subsection (2) does not  apply once the application has been finally disposed of.]

[3]      Today,  Mr  Griffin  said  that  because  the  defendant  had  filed  the  stay application it was not caught by the provisions of s 241AA(2).   He said that was because once an application for stay is filed time within which the company can pass a special resolution is extended indefinitely.  Mr Mulligan for the plaintiff did not accept that submission.  He said that the purpose of s 241AA is to prevent companies from frustrating the liquidation process.  There is no policy reason, he argued, for the interpretation that Mr Griffin put forward.

[4]      I agree with the plaintiff that no grounds are discernible that would justify the Court interpreting the section the way that Mr Griffin submits.   No authority has been referred to which might throw light on this question either.

[5]      Mr Griffin then submitted with reference to the authority in Re JRS Garage Limited  [1961] NZLR 632 that a Court will take into account opposition to a proposed liquidation from other creditors.

[6]      The considerations that were referred to in that case apply where a plaintiff having  advertised  the  liquidation  proceedings  finds  that  creditors  arrive  at  the hearing having given notice of intention to appear and/or statements of defence opposing the making of a liquidation order because that is not in the best interests of, usually, the creditors as a whole.  That situation is quite a different one from what applies here.  I understand that the creditor’s views to which Mr Griffin is making reference  is  a  reference  to  the  fact  that  the  sole  shareholder  of  the  defendant company, Mr Guttenbeil, opposes a Court ordered liquidation and the appointment of a different liquidator from the one that was specified in the special resolution of the company past 12 July 2012.  That is quite a different circumstance from that to which the considerations referred to in Re JRS Garage Limited at application.

[7]      I recognise though that the company which Mr Griffen represents may have a view  concerning  who  should  be  the  appropriate  liquidator  of  the  company. Mr Mulligan for the plaintiff has submitted that a Mr Chris McCullough of PKF is available.  Mr McCullough has not filed a consent to act.

[8]      The only concern of the Court is to ensure that a suitably neutral liquidator who will comply with the law is appointed.   The exact identity of the liquidator beyond that is not a matter of interest to the Court.  Of the two possible liquidators my  preference  leans  towards  Mr  McCullough  if  only  for  the  reason  that  he apparently has had no prior contact with the shareholder of the defendant company. That is not to say that I am suggesting that Mr Williams would not comply with the law if he was appointed liquidator.   It is just that I know nothing about him.   Of course I know nothing about Mr McCullough but it would be a condition of his

appointment that a consent to act with the usual declaration be furnished to the

Court.

[9]      Two remaining matters need to be mentioned.  First, the company says that it has a cross-claim against the plaintiff.  It expects that it will be able to enforce that cross-claim to obtain an order for costs in the District Court on certain injunction proceedings involving both the present parties which is likely to be in the sum of

$18,000.   Mr Mulligan has noted for the plaintiff that that is a matter that the liquidator will have to properly deal with in due course.   I do not think I can say anything further about any potential costs order in the District Court, whether there should  be some  netting  arrangement  or otherwise  between  the  plaintiff  and  the defendant.  The position will not be straightforward and it will not be of assistance for me to embark upon a further discussion of it here today.  The second point is that Mr Sven Guttenbeil a director of the company wanted to address me today but I have observed to those in the Court that he has not standing to do so.  That is the rule that is conventionally and almost invariably applied except in very special circumstances and I know of no reason why I should depart from it on this occasion.

[10]     There will be an order placing the company into liquidation.   The order is timed at 1.04 p.m.  The order is to lie in Court until the liquidator who I am going to appoint, Mr C McCullough has filed a consent to act which the Court has reviewed in order to ascertain that he is a proper person to be appointed as liquidator.

[11]     The plaintiff will have costs on a 2B basis together with disbursements to be fixed by the Registrar.

[12]     After I had delivered my reasons above Mr Griffin asked me to note in my judgment that his submission concerning the freezing of time under s 241AA had an additional aspect to it.   He said that his submission should more accurately be recorded as being that where an application for stay is made time under s 241AA is suspended until such time as the stay application has been deferred and disposed of. Having considered the submission put in that form I am unable to agree that it makes any difference to the outcome and does not affect the decision that I have made.

Postscript

[2]      Since  I  gave  my  reasons  in  Court  a  consent  to  act  has  been  filed  by Christopher Carey McCullough and Steven Mark Lawrence.  Mr McCullough was of course the liquidator that I anticipated would be appointed.   Mr Lawrence is an additional liquidator who I did not mention previously.  Given that both liquidators have given a consent to act I can see no reason why both should not be appointed. As well I approve the liquidation rates claimed in the consent to act which the liquidators have filed dated 13 July 2012, on the usual basis, though, that an application to approve overall remuneration will be necessary at the conclusion of

the liquidation.

J.P. Doogue

Associate Judge