Bartletts Creek Vineyard Limited Partnership v Maginness
[2021] NZHC 2295
•2 September 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-1060
[2021] NZHC 2295
UNDER Section 239AT and 239ADO of the Companies Act 1993 and Part 19 of the High Court Rules 2016 IN THE MATTER
of SACRED HILL MARLBOROUGH VINEYARDS LIMITED (IN RECEIVERSHIP & ADMINISTRATORS APPOINTED)
BETWEEN
BARTLETTS CREEK VINEYARD LIMITED PARTNERSHIP
Applicant
AND
TONY LEONARD MAGINNESS and
JARED WAIATA BOOTH (as administrators of SACRED HILL MARLBOROUGH VINEYARDS LIMITED)
Respondents
Hearing: 21 July 2021 (further submissions 26 July 2021) Appearances:
B D Gustafson for the applicant
E C Gellert and R A Morris for the respondents S C D A Gollin for Westpac New Zealand
Judgment:
2 September 2021
JUDGMENT OF HARLAND J
This judgment was delivered by me on 2 September 2021 at 1:00 pm Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar Date:………………………..
Counsel/Solicitors:
E C Gellert and B A Morris, Lowndes Jordan, Auckland B D Gustafson, Forty Eight Shortland, Auckland
R E Kettelwell, Sharp Tudhope Lawyers, Tauranga
S C D A Gollin, Minter Ellison Rudd Watts, Auckland
BARTLETTS CREEK VINEYARD LTD PARTNERSHIP v MAGINNESS and BOOTH (as administrators of SACRED HILL MARLBOROUGH VINEYARDS LTD) [2021] NZHC 2295 [2 September 2021]
Introduction
[1] On 18 June 2021, upon application by the administrators of Sacred Hill Marlborough Vineyards Ltd (the company), the Court made an order on a without notice basis extending the period within which the administrators could convene a watershed meeting by 29 days pursuant to s 239AT(3) of the Companies Act 1993 (the Act).
[2] As is usual, the order reserved leave to any creditor of the company to apply on notice to vary or set aside the orders that had been made. Bartletts Creek Vineyard Ltd Partnership (Bartletts Creek), one of the company’s 11 landlords, applied to the Court to set aside the order, terminate the administration of the company and grant it leave under s 239ABE of the Act to bring a possession order application under the Property Law Act 2007.
[3] Bartletts Creek’s application was granted a priority hearing because the receivers had entered into an agreement to sell the company’s business, including the company’s interest in the Bartletts Creek lease, to a third party, Vinlink Marlborough Limited (Vinlink). The priority hearing was set down before me to deal solely with the part of the application seeking to set aside the Court’s order referred to above.
[4] The day before the hearing, the receivers of Sacred Hill settled the sale of the company’s business as a going concern.
[5] At the outset of the hearing, counsel for Bartletts Creek indicated that it no longer sought to set aside the order, but it still wished to challenge the fact that the application by the administrators had been made without notice. Given that Bartletts Creek no longer sought to pursue its relief, the focus of the hearing shifted to whether the Court could entertain this argument. It was agreed that the resolution of this issue was not one that required the Court’s urgent attention.
[6]The issues to be determined are therefore:
(a)Can Bartletts Creek challenge the making of the Court’s order given that it no longer seeks to set it aside?
(b)If it can, was the order properly advanced by the administrators on a without notice basis?
Can Bartletts Creek challenge the making of the Court’s order on a without notice basis given it does not pursue its application to set it aside?
[7] This question arises because as Bartletts Creek does not pursue its application, the relief it sought and the basis for its challenge has arguably been extinguished. I was concerned that to allow the challenge would be akin to a review of or appeal from the order. However Mr Gustafson submitted that he was not challenging the decision of the Judge, who he accepted had made the orders on the basis of the information before him; rather he submitted that the applicants should not have brought the application on a without basis notice in the first place.
[8]I sought further submissions on the point.
[9] Under r 7.46 of the High Court Rules 2016, a judge must determine whether a without notice application satisfies one of the grounds outlined in r 7.46(3). If so satisfied, the judge can make the order sought, make any order he or she thinks just in the circumstances or dismiss the application.1 If the judge determines that the application cannot be properly dealt with without notice, he or she can give directions as to service and adjourn the determination of it until after service has been affected or dismiss the application if it has no prospect of success.2
[10] Rule 7.46 is contained within pt 7, sub-pt 2 of the High Court Rules entitled “[i]nterlocutory applications and interlocutory orders”. The basis for this application is pt 19 of the High Court Rules. Rule 19.10 imports rr 7.23 and 7.46 into proceedings commenced by way of originating application with all necessary modifications.
[11] Although not the case here, ordinarily parties before the Court are seeking to set aside, vary or rescind substantive orders made without notice rather than solely objecting to the procedure undertaken, or there is also an underling substantive proceeding before the Court. In this proceeding, as no interlocutory application was
1 High Court Rules 2016, r 7.46(4).
2 Rule 7.46(5).
made by the administrators, the relief sought and granted was substantive, subject only to the leave order and the affected parties’ appeal rights.
[12] Both counsel were unable to find any case directly on point where the without notice application was for substantive, not interim relief (i.e. an originating application). However, I was referred to Green Way Ltd v Mutual Construction Ltd3 and Haven v Lombard.4 Both cases concerned without notice interlocutory applications in the context of substantive proceedings and both were cases where the Court was prepared to rescind or discharge the without notice interlocutory order because of failures to comply with the rules in respect of such applications.
[13] In Green Way Ltd v Mutual Construction Ltd Campbell J rescinded injunctive relief granted on a without notice basis because the application did not include the matters required to certified by Form G32 of the High Court Rules 2016.5 The application had not identified the grounds upon which it was made without notice and neither had it included certification of full and frank disclosure. Although there was no formal application, the Court appears to have treated the matter as an interlocutory application in a substantive proceeding to rescind the order under r 7.23. The topic of jurisdiction was not dealt with by the Court, probably because it is well understood that interlocutory injunctive relief is subject to reconsideration by the High Court with the jurisdiction outlined in r 7.49.
[14] In Haven v Lombard, the Court discharged a without notice order because not all correspondence on a subject relevant to the order sought was before the Court.6 This meant that full disclosure had not been made as required by r 7.23.
[15]It is worth setting out the actual order made in this case by the Judge:
ATER READING the Applicants' without notice originating application for orders extending the convening period for the watershed meeting of Sacred Hill Marlborough Vineyards Limited (in receivership and administrators appointed) (the Company) dated 18 June 2021, the affidavit of Jared Waiata
3 Green Way Ltd v Mutual Construction Ltd [2021] NZHC 1704.
4 Haven v Lombard [2017] NZHC 1336.
5 Green Way Ltd v Mutual Construction Ltd, above n 3, at [47] and [83].
6 Haven v Lombard, above n 4, at [23]–[25].
Booth sworn 18 June 2021, and the memorandum of counsel for the Applicants dated 18 June 2021, THIS COURT ORDERS:
1.The Applicants are granted leave to commence these proceedings without notice;
2.The convening period for the watershed meeting in relation to the voluntary administration of the Company be extended by, 29 working days from 21 June 2021 until 30 July 2021 pursuant to section 239AT(3) of the Companies Act 1993 (the Act).
3.Advice of the orders shall be served on all creditors of the Company by:
3.1Sending the orders to creditors by email (where an address has been provided to the Company) or by post to the postal address that has been provided to the Company (if an email address has not been provided to the Company); and
3.2Posting a copy of the orders on Baker Tilly Staples Rodway's website.
4.Leave is reserved for any creditor of the Company to apply on notice to vary or set aside these orders; and
5.Leave is reserved to the Applicants to apply further in respect of any modifications or ancillary issues arising out of the orders made.
[16] In this case, the leave order granted by the Court was to “vary or set aside these orders”, and the orders granted encompassed the without notice order. For this reason, I agree with Ms Gellert that the High Court has jurisdiction to consider whether the without notice order was appropriate and whether it ought to have been made on a without notice basis. If leave had not been granted to reconsider all the orders made, arguably the High Court would not have jurisdiction and Bartletts Creek would have needed to deal with any issues it had by way of appeal.
[17] I am satisfied that given the wording of the orders made by the Court on 18 June 2021, there is jurisdiction for this Court to reconsider whether the application to extend the convening period was properly advanced by the administrators on a without notice basis.
Was the order properly advanced by the administrators on a without notice basis?
[18] At this point, it is necessary to set out the background to the application to provide context for the information that was provided to the Court to support the application for the order sought to extend the convening period.
Background
[19] Sacred Hill’s business based in Marlborough involved the growing and procuring of grapes and the operation of a substantial winery. It sold grape and wine products both domestically and internationally.
[20] The sites upon which Sacred Hill grew the grapes necessary to produce its products were leased. There were 11 different leases, one of which involved Bartletts Creek as the lessor. These leases were material to Sacred Hill’s business.
[21] The Sacred Hill and Bartletts Creek lease was entered into on 12 January 2017, with a final expiry date in 2051. The vineyard which is the subject of the lease is relatively large by New Zealand standards, comprising some 94.8 hectares.
[22] The lease contains a clause (cl 11.2.2) which provides that if a receiver is appointed for Sacred Hills, it is lawful for Bartletts Creek to re-enter and repossess the vineyard, thereby terminating the lease. The lease also includes a set of provisions (cl 10) outlining various rights and duties that apply when the lessee seeks to assign the lease.
[23] On 11 May 2021, Westpac New Zealand Ltd (Westpac) appointed Rees Logan and Andrew McKay as the joint and several receivers and managers of Sacred Hill. Following their appointment, the receivers continued to trade the company with the intention of selling it as a going concern.
[24] Through its discussion with others, Bartletts Creek became aware that the receivers were negotiating the assignment of the company’s rights under its lease and the other lessors’ leases to Vinlink Marlborough Ltd (Vinlink). Given this development, Bartletts Creek wished to consider the option of purchasing its lease
from the receivers, so that it would be able to choose who would tenant the property for the remainder of the lease. I infer from the material provided to me that approaches to this effect were made to the receivers by Bartletts Creek, but Bartletts Creek formed the view that these approaches were being ignored.
[25] Bartletts Creek considered there had been a breach of cl 11.2.2 of the lease because receivers had been appointed. On 14 May 2021, it gave notice under s 246 of the Property Law Act 2007 (“the PLA notice”) that it would cancel the lease if the breach was not remedied by 21 May 2021.
[26] On 18 May 2021, the solicitors for the receivers wrote to the solicitors for Bartletts Creek requesting that Bartletts Creek take no action to cancel the lease under the PLA notice. The letter set out that payments under the lease were being made, there were no rental arrears or breaches of any other covenants under the lease, and the receivers had commenced a sale process and intended to assign the lease to a “serious bidder”, who had the ability to take over all the obligations under the lease. The letter indicated that the sale was being progressed urgently and expressed the opinion that cancellation of the lease was disproportionate to the breach alleged. The letter then went on to say that if Bartletts Creek did not confirm it would take no action under the lease by 5pm the following day (19 May), the receivers would apply to the Court for relief under s 253(1)(c) of the Property Law Act 2007 (the PLA).
[27] On 19 May 2021, the solicitors for Bartletts Creek provided more information about the alleged breaches of the lease by Sacred Hill, but agreed to take no further action before 22 May “at the earliest”. Further discussion was invited and information about the prospective purchasers requested, including the ability of the shareholders to provide security or a guarantee.
[28] On 20 May 2021, the solicitors for the receivers replied, referring to the imminence of the sale at which point they could provide an update to all landlords, which might assist with the details Bartletts Creek had requested. An agreement was sought to a seven day “no action” by both parties.
[29] On the afternoon of 21 May 2021, the solicitors for the receivers wrote to the solicitors for Bartletts Creek challenging their view that Bartletts Creek was entitled to cancel the lease. The letter indicated that if Bartletts Creek wanted to do so, it would need to apply to the Court for an order for possession of the land under s 244(1)(a) of the PLA. The solicitors for the receivers also advised that such an application would be opposed, and that they would seek relief against Bartletts Creek for cancellation.
[30] On 21 May 2021, Westpac resolved to place Sacred Hill into voluntary administration and Mr Booth and Mr Maginness were appointed as administrators under s 239K of the Act.7 Because of the administrators’ appointment, and the moratorium that follows as a matter of law, Bartletts Creek was not able to enter into possession of or otherwise taken action in relation to or under the lease without the administrators written consent or the permission of the Court.8
[31] On 25 May 2021, Vinlink entered into an agreement with the receivers to purchase Sacred Hill’s business conditional upon the expiry of a s 119 PLA notice that had been served on the receivers by Mr Mason, the sole director of the Sacred Hill Group.
[32] On 26 May 2021 Bartletts Creek received a letter from the administrators advising that the receivers were currently “trading while a sales process is completed to try and sell the business and/or substantially all its assets. Any expressions of interest in acquiring the business and/or its assets are to be directed to the Receivers’ office”.
[33] The letter also referred to the date for the first statutory creditors meeting scheduled to be held on 2 June 2021 and to the second statutory creditors meeting (the watershed meeting) required under ss 239AS–239ABB of the Act. The letter summarised the requirements of these sections, including that the watershed meeting must be convened within 25 working days after the date of the administrators’ appointment, being the convening period of 20 days (required under s 239AT(2)) plus the five days after the convening period (required under s 239AV). The letter did not
7 Companies Act 1993, s 238K.
8 Sections 239ABD and 239ABG.
refer to the additional provision in s 239AT(3) which states that the administrators could apply to the Court to extend the convening period before or after it has expired (s 239AT(4)).
[34] The first creditors meeting was convened by the administrators on 2 June 2021. It appears that Bartletts Creek chose not to attend the meeting. The Minutes refer to a statement from the receivers that was read to the meeting recording that the receivers had agreed to sell the business and assets of Sacred Hill to Vinlink with settlement in mid-July, the actual date of which was to be communicated in due course and the details of which were confidential at that time.
[35] On 3 June 2021, the directors of the general partner of Bartletts Creek wrote to Vinlink requesting certain information including financial information so that it could consider whether it would agree to the assignment of its lease to Vinlink. The letter asked for confirmation about whether the lease had in fact been assigned and noted the expectation that the receivers would seek consent to the assignment from Bartletts Creek. No reply was received to this letter.
[36] On 17 June, Bartletts Creek’s solicitors wrote to Vinlink confirming the receivers had advised of Vinlink’s proposed purchase of Sacred Hill, which would include the assignment of their lease. This letter essentially repeated the request for the information sought by the directors in their letter of 3 June.
[37] On 18 June 2021, the administrators applied to the Court for orders on a without notice basis to extend the convening period for the watershed meeting from 21 June until 30 July 2021, a period of 29 days. The application included (among other things), a request for an order for leave to be reserved to any creditor to apply to the Court on notice to vary or set aside the orders. The application was accompanied by an affidavit by Mr Booth, which annexed the minutes of the first creditors meeting on 2 June, Bartletts Creek’s PLA notice,9 the letter from Bartletts Creek’s solicitors of 24 May 2021, the letter from the administrators’ solicitors of 27 May 2021 and the
9 There was also another PLA notice dated 19 May 2021 issued by another lessor (Mt Royal Vineyard Investments Ltd), but this lessor took no further steps after issuing the notice.
letter of 18 June 2021 from the receivers’ solicitors outlining the details of the proposed sale and supporting the application by the administrators.
[38] On the same day (18 June 2021), Lang J made orders in terms of the application on a without notice basis. The orders were served on Bartletts Creek and others in accordance with the Judge’s directions on 21 June 2021.
[39] On 1 July 2021, Bartletts Creek made an application to the Court to set aside Lang J’s orders and the administrators filed a notice of opposition to it on 12 July 2021.
[40] On 11 July 2021, the receivers filed their first report in the Companies Office. One of the matters referred to in that report was the then conditional sale of the company as a going concern to Vinlink.
[41]On 15 July 2021, the Vinlink agreement became unconditional.
[42] On 16 July 2021, Vinlink’s solicitors sent a letter to Bartletts Creek’s solicitors relating to the proposed settlement on 19 July, raising among other things whether Bartletts Creek was unreasonably withholding consent to the assignment of the lease. The response was that although the information provided was being assessed, consent to the assignment was not forthcoming at that stage.
[43] On 20 July 2021 (the day before the hearing before me), settlement of the Vinlink agreement occurred. The assets of Sacred Hill, including the assignment of the 11 leases, was therefore affected by virtue of s 240 of the PLA. This meant that Vinlink became Bartletts Creek’s tenant. One of counsel for the administrators’ arguments at this hearing was that Bartletts Creek’s application was unfounded because it no longer has an interest in the administration of Sacred Hill. Although that may be correct, it was not argued in any detail before me.
The law
[44] The voluntary administration regime is contained within Part 15A of the Act. The stated statutory purpose of the regime is to maximise the chances of a company or its business continuing in existence, or if that is not possible, to maximise the
chances of a better return from the company’s creditors and shareholders than would result from the company’s immediate liquidation.10
[45] As referred to above, one of the key features of the administration regime is that there is a stay on any actions against the company and its property during the period of the administration, which is called the moratorium.11 This prevents any owner or lessor from recovering property that was used or occupied by the company and from beginning or continuing proceedings against the company.12 The moratorium lasts for the duration of the voluntary administration.
[46] The administration regime has been described as providing a company with breathing space “during which the administrator can assess and investigate the company’s situation, continue to run the business if appropriate, and put together a proposal for the company’s future.”13
[47] The administrators are required to take certain steps under Part 15A once appointed, which includes convening a first meeting of creditors and then “a watershed meeting” within “the convening period” (being 20 working days after the date on which the administrators are appointed and including any period of extension).14
[48] At least five working days prior to the watershed meeting, the administrators are required to give written notice of the meeting to as many of the company’s creditors as reasonably practicable and advertise the meeting by publication in the Gazette.15 The notice must contain:16
(a)a report from the administrators about the company’s business, property, affairs and financial circumstances and any other matter material to the creditors’ decisions to be considered at the meeting; and
10 Companies Act, s 239A.
11 Section 239ABG.
12 Sections 239ABD and 239ABE.
13 Heath and Whale on Insolvency (online ed, LexisNexis) at [17.6].
14 Companies Act, s 239AT(2).
15 Sections 239AU(1) and 3(1)(a).
16 Section 239AU(3).
(b)a statement setting out the administrators’ opinion (with reasons) regarding whether it would be in the creditors’ interest for:
(i)the company to execute a deed of company arrangement (DOCA); or
(ii)the administration to end; or
(iii)the company to be placed in liquidation.
[49] At the watershed meeting, creditors can resolve to do any of the three things set out in s 239ABA, which are to be included in the statement from the administrators.17
[50] Under s 239AT(3), the administrators can apply to the Court to extend the convening period. This is what occurred here, which resulted in Lang J’s decision.
The arguments and discussion
[51] Mr Gustafson argued that the application to extend the convening period should never have been brought on a without notice basis as it did not fit into any of the five categories for doing so set out in r 7.23(2). These same grounds are outlined in r 7.46(3) regarding when the judge may determine that an application can properly be dealt with without notice.
[52]Rule 7.23(2) provides:
7.23 Application without notice
…
(2)An application without notice may be made only—
(a)on 1 or more of the following grounds:
(i)that requiring the applicant to proceed on notice would cause undue delay or prejudice to the applicant:
(ii)that the application affects only the applicant:
17 Section 239ABA.
that the application relates to a routine matter:
(iv)that an enactment expressly permits the application to be made without serving notice of the application:
(v)That the interests of justice require the application to be determined without serving notice of the application; and
(b)if the applicant has made all reasonable inquiries and taken all reasonable steps to ensure that the application and supporting documents contain all material that is relevant to the application, including any defence that might be relied on by any other party and any facts that would support the position of any other party.
[53] The without notice application does not refer to any of the grounds in r 7.23(2) specifically, although it does refer to Part 19 of the High Court Rules 2016 which incorporates this provision. The only reference to the without notice aspect of the application is at paragraph [2.13] where it says: “[i]t is in the interests of justice, and of the speedy and inexpensive determination of this proceeding, that the originating application be determined on a without notice basis.”
[54] In addition, the application refers to Mr Booth’s affidavit in which he outlines matters relevant to the without notice aspect of the application in paragraphs [27] and [28]. In these paragraphs he says:
[27] Mr Maginness and I request that the application be determined on a without notice basis because, given the number of creditors with an interest in the application, it would be expensive and impractical for us to proceed on notice to all creditors. It would also cause unnecessary delay and prejudice, in light of the fact that the convening period currently expires this coming Monday.
[28]In addition, the interests of creditors are sufficiently protected by:
(28.1) requiring that the creditors are informed of the application and orders in the manner set out at paragraph 26.2 above; and
(28.2) allowing the creditors to apply on notice to the Court to modify or set aside the orders made.
[55] I agree with Mr Gustafson that the only grounds relevant to the administrators’ application to extend the convening period on a without notice basis would have been r 7.23(2)(i) and (v). Certainly, the aspect of undue delay and prejudice (r 7.23 (2)(i)) were covered by Mr Booth in [27] and the interests of justice ground (r 7.23 (2)(v))
was covered inferentially, albeit obliquely, in both paragraphs. The memorandum of counsel accompanying the application referred to the urgency of the application being linked to the expiry of the convening period the next day (at [3]) and the without notice aspect of it (at [33]).
Were there grounds to make the order under r 7.23(2)(a)(i)?
[56] As outlined above, this ground focuses on undue delay and prejudice to an applicant. Mr Booth’s affidavit dealt with this in relation to the number of creditors with an interest in the application, but he only refers specifically to 10 leases. The total number of creditors (approximately 143) are referred to in counsel’s memorandum.
[57] Mr Gustafson argued that r 7.23(2)(i) could not be satisfied because the administrators were aware by 8 June 2021 that the convening period would end before the sale by the receivers settled. Mr Gustafson referred to the circular sent to creditors on 8 June which referred to the Vinlink settlement occurring in mid-July, whereas the expiration of the convening period was 21 June 2021.
[58] As at 8 June, Mr Gustafson submitted, it would have been apparent to the administrators that to prevent Bartletts Creek from applying to the Court for a possession order or peaceably taking possession after the convening period expired, the administrators would need to apply for an extension to it. Mr Gustafson submitted that:
(1)if the administrators had concluded they needed to extend the convening period at this time, the circular should have advised the creditors that is what they intended to do;
(2)there is no explanation as to why the administrators delayed bringing the application to 18 June, one working day before the convening period expired, or decided that no party should be named as a respondent, even on a Pickwick basis; and
(3)because of the above, and in the absence of any explanation for the delay in bringing the application, there can be no argument that
proceeding with notice would cause undue delay or prejudice to the administrators.
[59] He therefore submitted that the grounds outlined in r 7.23 (2)(i) could not be met by the administrators. Furthermore, he submitted that the above information ought to have been before the Court.
[60] Ms Gellert’s submissions maintained the administrators’ position outlined in her memorandum in support of the without notice order. This position was also referred to in Mr Booth’s affidavit that service on all 143 creditors would have caused undue delay and prejudice and potentially jeopardised the sale of the Sacred Hill as a going concern.
[61] Although this ground appears compelling because of the number of creditors involved, it is not in fact as strong as the interests of justice ground, which I address below, and was not as well articulated in the documents presented to the Court in support of the without notice application. This is because, as Mr Gustafson rightly notes, in this electronic age service is often not difficult and an application can be made for time to be abridged if needed. Despite this observation, the administrators still had to apply for orders in relation to service in this way, so it was important for the Court to understand the extent of the task with reference to the number of creditors involved.
[62] As to whether there was prejudice to the applicant, with the benefit of hindsight it is hard to see how this aspect was made out, especially given that the documents filed did not explain the reason for the delay in filing the application until just before it was due. However, in my view, the more significant ground advanced was the interests of justice ground, which I address next.
Were there grounds to make the order under r 7.23(2)(a)(v)?
[63] The arguments in respect of both grounds were intermingled, however the main argument for Mr Gustafson seemed to be that it cannot be in the interests of justice for an administrator to wait until the last minute to apply without notice for an extension
of time to the convening period knowing that this would prevent a creditor (in this case Bartletts Creek) from relying on the fact that the moratorium would end and that creditor would be able to exercise certain rights thereafter. In this case the right related to the lessor’s purported right to choose its tenant, a right that the receiver, aided by the administrators, was attempting to override by effectively extending the processes provided for under the Act by selling the business to a third party (Vinlink). It was suggested that the administrators knew Bartletts Creek would oppose an application to the Court on notice for the extension of time. Mr Gustafson submitted that “[i]t cannot be in the interests of justice that an applicant can rely on r 7.23(2)(a)(v) when it suspects that an interested party would oppose the application if served.”
[64] Mr Gustafson submitted as well that the other ground put forward by the administrators for extending the convening period was that they needed to make further inquiries about whether to propose a DOCA. He submitted that the applicant should have disclosed what they envisaged these investigations to be and any possible DOCA matters should have been fully detailed and disclosed when the application was made without notice.
[65] Ms Gellert submitted that it was appropriate for the application to proceed on a without notice basis because without extending the convening period and thereby the moratorium, the sale of the company as a going concern was likely to have been jeopardised. She highlighted the steps taken to try and resolve the issue of the Bartletts Creek lease and she noted that an application to the Court for a possession order could have been brought by Bartletts Creek earlier in any event.
[66] The sale of the company as a going concern was a key issue and was identified as such in the documents filed in support of the without notice application. The letters between the lawyers identified above in relation to Bartletts Creek’s issues were annexed to Mr Booth’s affidavit. The Judge was well able to assess this aspect against the statutory provisions, not only in relation to the making of without notice applications, but also in relation to the relevant provisions of the Companies Act and the case law concerning applications for extensions of time for the convening period which were referred to in counsel’s supporting memorandum.
[67] Although not expressed as such, the Judge’s findings about the justice of the case were set out at [4]–[7] of his decision, where he said that if the watershed meeting was held on 21 June 2021 and the creditors voted to place the company into liquidation, the value of the company’s business as a going concern would be reduced. The Judge was therefore satisfied that terminating the existing moratorium at that stage was likely to disrupt the receivers’ efforts to realise the assets of the company in the creditors’ interests.
[68] Having reviewed the documents, there is nothing I can see that would have changed the result of the assessment had the application proceeded on notice.
[69] I am persuaded that the applicant presented enough grounds to support its application to enable the Court to determine the application without notice. Despite this finding, in my view the application and supporting documents could and should have identified and more specifically addressed the grounds in r 7.23(2)(a). The reason for delay in applying to the Court for an extension to the convening period also could and should have been addressed on the facts of this case. I am less convinced that more information about the DOCA was needed, given that in this case the key point related to the sale of the business as a going concern, which as Lang J accepted was a benefit to all creditors.
[70] In the end however, Bartletts Creek’s complaint about the process relates to its situation, whereas the wider view relates to all creditors. Bartletts Creek was the only lessor who was unhappy about the proposed sale, and its position was revealed to a sufficient extent to the Court in the documents filed. Its actual rights were not infringed by the making of the order without notice as it could nonetheless have filed an application for an order for possession and advanced its position in that way. Had Bartletts Creek done this, there would however, have been an argument about whether what it contended was a breach of the lease.
Result
[71] The application by Bartletts Creek to set aside or vary the order by Lang J is dismissed. The challenge by Bartletts Creek to the administrators bringing the application without notice fails and is also dismissed.
[72] It is likely that the remaining two orders sought relating to terminating the administration and granting leave for an order for possession have been overtaken by events as well. Counsel for the applicant is to file a memorandum confirming the position within 5 working days of this judgment.
[73] The administrators of Sacred Hill Marlborough Vineyards Ltd are successful and are therefore entitled to costs. They seek increased costs, but it is my view that 2B costs are appropriate, together with disbursements as fixed by the Registrar. The parties are to confer on quantum and try to reach agreement. If agreement cannot be reached, brief memoranda may be filed by the respondents within 15 working days of this judgment and by the applicant within 20 working days.
Harland J
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