Cannasouth Limited

[2024] NZHC 1778

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2024-419-0167

[2024] NZHC 1778

UNDER

Sections 239ACO and 239ADR of the Companies Act 1993 and Part 19 of the High Court Rules

IN THE MATTER

of CANNASOUTH LIMITED, CANNASOUTH BIOSCIENCE LIMITED, CANNASOUTH CULTIVATION

LIMITED, EQALIS GROUP NEW ZEALAND LIMITED, EQALIS PHARMACEUTICALS LIMITED, EQALIS INNOVATIONS LIMITED, RESTOREME CLINIC LIMITED,

A-SCRIPT INTERNATIONAL LIMITED, CBD ISOLATES LIMITED, EQALIS IP
LIMITED, GROW BOP LIMITED, ICE-X INTERNATIONAL LIMITED, MAHANA ISLAND THERAPIES LIMITED, MIDWEST PHARMACEUTICALS NZ

LIMITED and Q-SAFE INTERNATIONAL LIMITED
(Administrators appointed)

AND IN THE MATTER

of an application by BENJAMIN BRIAN FRANCIS and GARRY CECIL WHIMP

Applicants

Hearing:	On the papers
Counsel:	K R Lydiard and T Cooley for applicants
Date of judgment:	2 July 2024

JUDGMENT OF JAGOSE J

This judgment was delivered by me on 2 July 2024 at 3.30pm.

Pursuant to Rule 11.5 of the High Court Rules.

………………………… Registrar/Deputy Registrar

RE CANNASOUTH LTD [2024] NZHC 1778 [2 July 2024]

[1]    As duty judge, I have Cannasouth Limited’s (the company) administrators’ without notice originating application dated 25 June 2024 for orders under ss 239ACO and 239ADR of the Companies Act 1993 directing the performance or exercise of their functions and powers in particular companies’ (including the company) voluntary administration. It is supported by the administrators’ affidavit sworn 25 June 2024.

Background

[2]    Following the voluntary administration process set out in the Act, at a watershed meeting on 7 June 2024 called by the administrators to decide the future of the company, creditors voted in favour of the company executing a deed of company arrangement with its creditors providing for payments towards the creditors’ debts.

[3]    Section 239ACO(2) requires the deed to be executed within “15 working days after the watershed meeting has approved it” or such further time as the court allows on application made within that period.

[4]The company lacks a functioning board to authorise such execution.

Without notice application

[5]    Because requiring the administrators to proceed on notice would cause them undue delay, I determine the application can properly be dealt with without notice.1

Deed of company arrangement

[6]    As in administration, the administrators have control of the company’s business, property and affairs, and “may perform any function, and exercise any power, that the company or any of its officers could perform or exercise if the company were not in administration”.2

[7]In terms of execution of a deed of company arrangement, s 239ACO(3) and

(4)  provide:

1      High Court Rules 2016, r 7.46(3)(a).

2      Companies Act 1993, s 239U(d).

(3)    The company may not execute the deed unless the board of the company has, by resolution, authorised the deed to be executed by the company or on its behalf.

(4)    Subsection (3) has effect despite section 239X, but does not limit the functions and powers of the administrator of the company.

Accordingly, the administrators have power to authorise execution of the deed.3 It is appropriate that power be exercised promptly after such order.

[8]I therefore order in terms of the originating application’s subparas 11.a.–f.

—Jagose J

Counsel/Solicitors:

K R Lydiard, Barrister, Auckland Brookfields Lawyers, Auckland

3      Re LBC Holdings New Zealand Ltd [2018] NZHC 3413 at [18].