Capper v Riverside Pride Limited
[2022] NZHC 2186
•1 September 2022
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE
CIV-2022-463-45
[2022] NZHC 2186
UNDER the Companies Act 1993 IN THE MATTER OF
an application for the appointment of interim liquidators
BETWEEN
TANIA MICHELE MYRUP CAPPER
Applicant
AND
RIVERSIDE PRIDE LIMITED
First Respondent
STEVEN PETER DALLINGER
Second Respondent
On the papers: 24 August 2022 Appearances:
Wayne Hofer for the Applicant
No appearance for the Respondents
Judgment:
1 September 2022
JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
This judgment was delivered by me on 1 September 2022 at 12:30 pm
pursuant to Rule 11.5 of the High Court Rules
………………………….
Registrar/Deputy Registrar
Solicitors:
Tompkins Wake (W D Hofer), Hamilton, for the Applicant
CAPPER v RIVERSIDE PRIDE LIMITED [2022] NZHC 2186 [1 September 2022]
Introduction
[1] Ms Tania Capper seeks interim liquidators be appointed to Riverside Pride Ltd (RPL).
Background
[2] Ms Capper and Mr Steven Dallinger began a romantic relationship in 2001. They were dairy farmers and started out sharemilking. In 2004, they incorporated RPL as a dairy farming company. Ms Capper and Mr Dallinger are co-directors of the company, and each have a 50 per cent shareholding in it.
[3] The relationship between Ms Capper and Mr Dallinger ended acrimoniously on 4 January 2020. Ms Capper has a protection order against Mr Dallinger, which was issued on 21 September 2021.
[4] Despite the separation, Ms Capper and Mr Dallinger continued to run the business together. But matters began to sour when negotiations between the two about separating relationship property broke down. The couple’s relationship property comprises the shares in RPL.
[5] Ms Capper says that Mr Dallinger has taken steps without her knowledge that have benefited himself personally, but that have been to RPL’s detriment and to the detriment of its share value. Those steps include selling RPL equipment at undervalue, the attempted subdivision of RPL farmland, and the diversion of funds from the RPL bank account into a separate bank account.
[6] Ms Capper has managed to prevent Mr Dallinger’s attempted subdivision and diversion of funds, but she says Mr Dallinger has not paid back funds used for non- RPL purposes, including funds used to finance his legal battles with Ms Capper. She says further that the relationship between her and Mr Dallinger has irretrievably broken down to the extent that RPL is unable to be run. The only realistic option is liquidation of the company, which Ms Capper applied for on 2 June 2022.
[7] Mr Dallinger has filed an appearance under protest to jurisdiction in respect of the liquidation petition, saying the Family Court is better placed to resolve the dispute. Ms Capper says the appearance under protest is a tactical move, designed to consolidate Mr Dallinger’s effective sole control of RPL as he continues to take steps to enrich himself at the company’s expense.
[8] Ms Capper now applies for the appointment of interim liquidators to RPL to protect the company’s assets against Mr Dallinger’s actions.
[9]There are other proceedings currently on foot between the parties:
(a)On 13 April 2022, Mr Dallinger filed an application to divide relationship property. Ms Capper opposes the application, saying the main relationship property asset to be divided is RPL, and the Family Court cannot make orders directing RPL to do anything.
(b)On 5 May 2022, Ms Capper filed an application to strike out parts of Mr Dallinger’s affidavit filed in support of his relationship property application. The strike out application has been resolved by consent.
(c)On 2 June 2022, Mr Dallinger filed an application for an interim mandatory injunction. He sought the removal of he and Ms Capper from their authorisations over RPL bank accounts, leaving the authorisation solely to Macmillan Accountants — accountants he appointed. He also sought exclusive authorisation to make RPL’s day- to-day farming decisions. Ms Capper has opposed the application, saying Macmillan Accountants is closely associated with Mr Dallinger and has failed to prevent his illegitimate spending of RPL funds to date. The parties are presently in resolution negotiations to resolve the injunction application.
(d)On 21 July 2022, Mr Dallinger applied for leave to publish the Family Court proceedings and proceedings relating to a lease dispute. The publication application has been resolved by consent.
(e)RPL is also a party to separate civil proceedings related to land leased by it.
Interlocutory application without notice for appointment of interim liquidator
[10] Ms Capper seeks orders appointing Mr Steven Khov and Mr Kieran Jones as interim liquidators of RPL, and such other orders the Court deems appropriate.1
[11]The grounds on which the orders are sought are:2
(a)it is necessary and/or expedient for the purpose of maintaining the value of assets owned or managed by RPL to appoint an interim liquidator to RPL:
(i)There is a valid winding up application underway: Ms Capper has, together with the current application to appoint an interim liquidator, made an application to put RPL into liquidation on 3 June 2022.
(ii)The winding up application will in all probability succeed:
(A) The affairs of RPL have been conducted in a manner that is unfairly discriminatory and unfairly prejudicial to the plaintiff in the plaintiff’s capacity as a shareholder of RPL due to:
i.The relationship between Ms Capper and Mr Dallinger has irretrievably broken down, resulting in the inability to communicate about the affairs of RPL;
ii.Mr Dallinger has acted, and continues to act, in a manner in which he has benefited himself ahead of the company in breach of his director’s duties.
(iii)There is a real need for urgency, and a clear need for interim control to be exercised over RPL, and the circumstances justify the appointment of an interim liquidator:
(A) The assets are in jeopardy — Mr Dallinger has continuously acted in breach of his director’s duties by conducting the affairs of the company in a manner that benefits of himself to the detriment of RPL, including by:
i.Selling equipment owned by RPL to a related company at an undervalue (paragraphs [21] – [28] of the Statement of Claim;
1 Interlocutory application without notice for appointment of interim liquidator at 22 August 2022 at [1].
2 At [2].
ii.Attempting to sub-divide land owned by RPL without the knowledge or consent of Ms Capper (paragraphs
[29] – [35] of the Statement of Claim); and
iii.Diverting the Fonterra milk payments away from from RPL’s bank account (paragraphs [36] – [45] of the Statement of Claim).
iv.Diverting the AFFCO livestock payments away from RPL’s bank account into accounts over which RPL has no control.
(B) The status quo should be maintained — RPL owns dairy cattle that are milked, whose milk is supplied to Fonterra, in return for payment. Status quo is required to preserve the well-being of the cattle and continue to milk the cattle to generate income for RPL.
(C) The interests of the creditors are safeguarded — For the reasons set out above, Mr Dallinger is acting in a manner detrimental to the company and its creditors.
[12]The application is made without notice on the following grounds:3
(a)The urgency of the situation is such that requiring Ms Capper to proceed on notice would cause undue delay or prejudice to RPL and Ms Capper; and
(b)For the reasons set out above, the interests of justice require the application to be determined without serving notice of the application.
Affidavit of Tania Capper dated 3 June 2022
[13] Ms Capper has made an affidavit in support of her application to appoint liquidators to RPL. She deposes that she and Mr Dallinger were in a romantic relationship that ended acrimoniously. She says the two of them are not on speaking terms and that RPL’s shares and assets are the only relationship property they have. Ms Capper deposes that Mr Dallinger has had effective control of RPL since the relationship ended, and that he has recently taken a number of actions calculated to extract value from the company to his benefit.4
[14] Ms Capper says that in April 2022 she requested Mr Dallinger agree to the voluntary appointment of liquidators. He refused. She says she is now constantly
3 At [4].
4 Verifying affidavit of Tania Michele Myrup Capper in support of application to appoint liquidators to Riverside Pride Limited dated 3 June 2022 at [5].
worried about what Mr Dallinger will do next to destroy the value of RPL and her shareholding. She says she has no option but to apply to appoint liquidators so that Mr Dallinger will take no further actions in respect of the company.5
[15] Turning to address background matters, Ms Capper deposes she and Mr Dallinger incorporated RPL on 30 April 2004. Since that time, the two have been co-directors and each 50 per cent shareholders of the company. In June 2015, RPL purchased around 71 hectares of farmland. To afford the purchase, RPL entered into a loan agreement with Rabobank, which was guaranteed by the Paramount Holdings Trust (the Trust), a family trust settled by Ms Capper’s parents. It was required to sell part of the farmland in July 2020 to clear a portion of its debt to Rabobank. Ms Capper said this sale reduced the RPL farm to 36 hectares and reduced the overall farmable land to just less than 160 hectares.6
[16] Ms Capper deposes that her relationship with Mr Dallinger was characterised by physical and psychological violence. She says she finally left the relationship after an incident in late 2019, after Mr Dallinger pushed her to the ground and stomped on her head. He was convicted of that offence on or around 1 November 2019. Ms Capper says she moved out of the home the following January, but she and Mr Dallinger continued to run the business together.7
[17] Ms Capper says she and Mr Dallinger have, since mid-2020, been attempting to settle the division of their relationship property. She says their inability to agree has led to Mr Dallinger making life on the farm particularly difficult — sometimes failing to complete tasks, leaving things dirty or sending Ms Capper nasty text messages. As a result, she has been the beneficiary of a protection order against Mr Dallinger since 21 September 2021.8
[18] Ms Capper deposes that since the relationship separation, Mr Dallinger has treated RPL as if it were his own company, and the company assets as if he owned them personally. He has been making unilateral decisions in running the company,
5 At [6]–[9].
6 At [13]–[22].
7 At [23]–[29].
8 At [30]–[38].
many of which have been to RPL’s detriment and her detriment as a shareholder. She cites examples including Mr Dallinger allowing the quality of RPL’s cows’ body conditions to decline, his cancelling her and her husband’s wages, and him attempting to give himself a pay rise.9
[19] Ms Capper expresses specific concerns about Mr Dallinger’s actions on RPL’s assets. She says that over the period from October 2020 to April 2022, Mr Dallinger sold RPL’s equipment at undervalue to his own company, Dallinger Holdings Ltd (DHL), tried to subdivide some of RPL’s land and diverted funds paid to RPL by Fonterra to another bank account. She deposes further that, having investigated various accounts belonging to, or associated with, RPL, she has discovered a number of alarming transactions. She says there are many transactions where it is difficult to see how they could be for RPL’s benefit. Those transactions include purchases at Ōpōtiki Tyre Services for a tractor not owned by RPL, Harvey Norman, Bunnings, and Hunting & Fishing. And, Ms Capper deposes, she has bank receipts showing Mr Dallinger has been taking funds out of a joint bank account set up to receive rental payments from tenants of a farmhouse on the RPL farm.10
[20] Concluding on the RPL assets issue, Ms Capper reiterates that Mr Dallinger is operating RPL without her oversight or consent and is taking actions designed to benefit himself to the corresponding detriment of the company and her as 50 per cent shareholder. She says he has not transferred back to RPL the equipment he caused RPL to sell at undervalue; he continues to use RPL funds for non-RPL purposes; he has tried to subdivide RPL land behind her back; and he has refused to transfer the diverted Fonterra milk payments back to RPL. She says that she is extremely concerned that if Mr Dallinger is allowed to continue to exercise control over RPL, the value of the company will soon be completely eroded. RPL’s assets are in jeopardy and Mr Dallinger cannot continue in control of the company.11
[21] Ms Capper deposes that it is obvious there has been a complete breakdown in the relationship between her and Mr Dallinger. She says she believes the affairs of the
9 At [39]–[45].
10 At [46]–[71].
11 At [74]–[77].
company will continue to be conducted in a manner that excludes her from the business of the company and that is unfair to her as a 50 per cent shareholder. She deposes she does not have enough information about the company’s financial affairs to know for sure whether it is solvent. Based on available information, however, she says she is concerned the company is on a negative trajectory and may soon be balance sheet insolvent. At the very least, she says, Mr Dallinger’s actions are causing a diminution in the company’s value.12
[22] Ms Capper says she seeks an order appointing liquidators to RPL on the basis she is an unfairly prejudiced shareholder, or that it is just and equitable to put the company into liquidation.13
Affidavit of Tania Capper dated 22 August 2022
[23] Ms Capper has also made an affidavit in support of her application for the appointment of interim liquidators. She deposes that since she detailed her concerns regarding Mr Dallinger’s use of RPL’s assets in her earlier affidavit, Mr Dallinger has continued to act in a manner that jeopardises RPL’s assets without her knowledge or consent. She reiterates Mr Dallinger has sold RPL equipment to DHL at undervalue.
She says that DHL has not paid the full amount invoiced for that equipment.14
[24] Ms Capper deposes that Mr Dallinger has been diverting Fonterra milk payments that RPL receives into a DHL bank account over which she has no control or access. She says Mr Dallinger has refused to account for, or repay, those diverted funds — some of which he has applied to his personal legal expenses. She says further that between 21 January 2022 and 11 August 2022, Mr Dallinger diverted livestock payments RPL receives from AFFCO into accounts over which she has no control or access. She says that although Mr Dallinger has since changed the bank account for AFFCO receipts back to the correct RPL account, she believes he is simply trying to cover his tracks. She says the total sum of funds diverted from RPL in respect of the livestock payments is $12,286.49.15
12 At [95]–[105].
13 At [106].
14 Affidavit of Tania Michele Myrup Capper in support of without notice interlocutory application for appointment of interim liquidator dated 22 August 2022 at [16]–[18].
15 At [19]–[28].
[25] Ms Capper deposes that Rabobank, the bank that financed RPL’s purchase of its farm, recently sent a letter to her and Steven as directors of RPL. That letter expressed concerns regarding the ongoing dispute between the parties and the status of RPL’s assets. She says that she shares Rabobank’s concerns about RPL’s ability to meet its loan repayments, given that Mr Dallinger has continued to act in a manner that benefits himself ahead of RPL. She deposes she is concerned that Mr Dallinger’s actions in dealing with RPL’s assets will continue to significantly diminish the value of RPL. She says she has no way of knowing what other RPL assets Mr Dallinger has dispersed or is planning to disperse without her knowledge.16
[26] Concluding, Ms Capper reiterates she seeks an order appointing an interim liquidator on the basis that it is necessary and/or expedient for the purpose of maintaining the value of RPL’s assets, and that she makes the application without notice to Mr Dallinger.17
Affidavit of Katie Findley dated 23 August 2022
[27] Ms Katie Findley, legal assistant at Tompkins Wake (the firm acting for Ms Capper in these proceedings), has also made an affidavit in support of Ms Capper’s application. She deposes that on 22 August 2022, a solicitor at the firm received an email from Mr Dallinger requesting that Ms Capper authorise certain holiday pay payments to be made by RPL.18
[28] In an accompanying memorandum, counsel for Ms Capper say the authorisation request “raises a number of red flags”. Counsel say the workers are not employees but instead contractors — no holiday pay has been paid to anyone since the RPL was incorporated in 2004. In any event, the requests cannot be unlawfully acted upon as s 28A of the Holidays Act 2003 provides that no more than one week of annual holidays can be paid out within any entitlement year. As well, that Mr Dallinger and two other employees have chosen now to request a significant sum be paid out of RPL is inherently suspicious. In counsel’s submission, it illustrates that Mr Dallinger is
16 At [29]–[32].
17 At [33].
18 Affidavit of Katie Aleisha Findley in support of interlocutory application without notice for appointment of interim liquidator dated 23 August 2022 at [1]–[3].
desperately trying to reduce the assets of RPL for his own benefit and is a further example of why it is crucial that RPL be put into the control of interim liquidators.19
Ms Capper’s submissions
[29] Mr Wayne Hofer, for Ms Capper, submits that the three main pre-conditions to justify appointing an interim liquidator are met: there is a valid winding-up application before the Court; that application will in all probability succeed; and the circumstances are not just urgent but also justify the appointment of an interim liquidator.20
[30] Of the first pre-condition, Mr Hofer says Ms Capper has applied to appoint liquidators to RPL. Of the second pre-condition, he submits the relationship between Ms Capper and Mr Dallinger has irretrievably broken down. The two only communicate through their lawyers; Ms Capper benefits from a protection order against Mr Dallinger; and Mr Dallinger has made an injunction application seeking to take control of RPL out of the directors’ hands. As well, Mr Dallinger has acted in breach of his director’s duties by taking steps to benefit himself, prejudicing RPL is so doing. And, given the Companies Act 1993 gives the High Court exclusive jurisdiction to determine liquidation proceedings, Mr Dallinger’s appearance under protest to jurisdiction and subsequent application to dismiss are unlikely to succeed.21
[31] Of the third pre-condition, Mr Hofer submits there are a number of reasons why the circumstances are not only urgent, but also justify appointment of an interim liquidator. First, the company’s assets would be jeopardised if Mr Dallinger continued to exercise control over the company. Secondly, the status quo should be maintained in order to preserve the wellbeing of RPL’s cows and RPL’s income streams. Thirdly, having RPL in the control of an interim liquidator would best safeguard the interests of creditors. It would prevent further illegitimate dissipation or diminution of the value of RPL’s assets.22
19 Second memorandum of counsel for the applicant dated 24 August 2022 at [3]–[7].
20 Memorandum of counsel for the applicant dated 22 August 2022 at [29].
21 At [30]–[34].
22 At [35].
[32] Mr Hofer says Ms Capper’s application is brought without notice to Mr Dallinger, because the urgency of the situation and the interests of justice require such. He submits orders appointing interim liquidators are not uncommon in relationship property disputes, although he concedes there is some High Court authority seeming to suggest that appointing interim liquidators on a without notice basis is inappropriate in cases where there is a relationship property background. He submits that the authority to that effect, however, does not purport to lay down a general principle that the existence of a relationship property dispute, without more, makes proceeding on a without notice basis inappropriate. If that were to be the general principle, it would deprive meritorious claimants in relationship property disputes from urgent relief to safeguard against loss.23
[33] Mr Hofer submits that in applications to appoint interim liquidators, the courts ordinarily expect the applicant to provide an undertaking as to damages. But he says that in appropriate circumstances the Court can dispense with that requirement. He submits that in the present circumstances, the Court can exercise its discretion not to require an undertaking as to damages because the interim liquidators will be officers of the Court; Ms Capper’s application is not designed to cause loss to any party but only to prevent further loss to RPL; and the appointment of interim liquidators would benefit the company and preserve its assets — the two beneficiaries of which are Mr Dallinger and Ms Capper as shareholders.24
[34] Mr Hofer reiterates that Ms Capper seeks orders appointing interim liquidators to RPL and any other orders that the Court considers appropriate.25
Legal principles
[35]Section 246(1) of the Companies Act provides:
246 Interim liquidator
(1)If an application has been made to the court for an order that a company be put into liquidation, the court may, if it is satisfied that it is necessary or expedient for the purpose of maintaining the value of
23 At [36]–[38], discussing Baxter v Superscapes Landscape Supplies Ltd [2022] NZHC 726 and
Keet v Hidden Valley Ltd [2016] NZHC 2089.
24 At [39]–[47].
25 At [48].
assets owned or managed by the company, appoint a named person, or an Official Assignee for a named district, as interim liquidator.
(2)Subject to subsection (3), an interim liquidator has the rights and powers of a liquidator to the extent necessary or desirable to maintain the value of assets owned or managed by the company.
(3)The court may limit the rights and powers of an interim liquidator in such manner as it thinks fit.
(4)The appointment of an interim liquidator takes effect on the date on which, and at the time at which, the order appointing that interim liquidator is made.
(5)The court must record in the order appointing the interim liquidator the date on which, and the time at which, the order was made.
(6)If any question arises as to whether on the date on which an interim liquidator was appointed an act was done or a transaction was entered into or effected before or after the time at which the interim liquidator was appointed, that act or transaction is, in the absence of proof to the contrary, deemed to have been done or entered into or effected, as the case may be, after that time.
[36] Rule 31.23 of the High Court Rules 2016 provides that an application to appoint an interim liquidator may be made by anyone who is entitled to apply for the appointment of a liquidator under s 241(2)(c) of the Companies Act.
[37] To appoint an interim liquidator, there must first be an application for an order that the company be put into liquidated; that application must be likely to succeed; and the other circumstances of the case must justify the appointment of an interim liquidator.26 This latter requirement has been described as establishing a “relatively low threshold”.27
[38] In determining whether an interim liquidator should be appointed, the Court will ask whether the company’s assets are in jeopardy, whether the status quo should be maintained and whether the interests of creditors are safeguarded.28 But this is not an exhaustive list of factors — it is only a “useful litmus test”.29 The controlling
26 Eden Crescent Ltd (in liq) v First City Trust No 2 Ltd (2006) 3 NZCCLR 456 (HC) at [26]; and
Landbank Ltd v NZ Catering Supplies Ltd (2006) 3 NZCCLR 936 (HC) at [4].
27 Carter Holt Harvey v Timbalok New Zealand Ltd (1998) 11 PRNZ 435 (HC) at 438.
28 Robert Bryce & Co Ltd v Chicken & Food Distributors Ltd (1990) 5 NZCLC 66,648.
29 Shen v An Ying International Financial Ltd HC Auckland CIV-2006-404-3088, 28 July 2006 at [15].
principle is that interim liquidators will be appointed if thought necessary to protect private interests of creditors or where the public interest requires an appointment.30
Analysis
[39] The relevant principles for appointment of an interim liquidator are well summarised by the Court in Truck & Trailer Holdings Ltd v Skelly Holdings Ltd as follows:31
[7]Beyond the statutory criteria it has been recognised that there are three main preconditions to an interim liquidation:
(i)There must be a valid winding-up application under way;
(ii)The application will in all probability succeed;
(iii)The circumstances must not be merely urgent, but also justify the appointment of an interim liquidator.
[8]The Court has recognised these three important factors:
(a)Whether the company assets are in jeopardy;
(b)Whether the status quo should be maintained;
(c)Whether the interests of creditors are safeguarded.
[9]These various formulations are ways of measuring whether necessity or expediency are established. They are a “litmus test”, not exhaustive.
[40] I now turn to consider whether or not Ms Capper has met the pre-conditions to the appointment of an interim liquidator.
Valid application for liquidation under way
[41]Ms Capper has filed an application to place RPL into liquidation.
Will the application in all probability succeed?
[42] Mr Hofer has submitted that the affairs of RPL have been conducted in a manner that is unfairly discriminatory and unfairly prejudicial to Ms Capper in her
30 At [13].
31 Truck & Trailer Holdings Ltd v Skelly Holdings Ltd HC Christchurch CIV-2012-409-451, 11 May 2012.
capacity as shareholder of RPL. He submits the application should succeed for the following reasons:
(a)The relationship between Ms Capper and Mr Dallinger has irretrievably broken down, resulting in the inability to communicate about the affairs of RPL as evidenced by the following:
(i)Ms Capper and Mr Dallinger do not speak to each other, and only communicate to each other’s lawyers regarding the affairs of RPL;
(ii)Ms Capper currently benefits from the protection order against Mr Dallinger, conditions of which prevent Mr Dallinger from contacting Ms Capper; and
(iii)Mr Dallinger has brought an application for an injunction, seeking to take control of RPL out of the hands of Ms Capper and Mr Dallinger.
(b)Mr Dallinger has acted and continues to act in a manner by which he has benefited himself at the expense of RPL , in breach of his director’s duties, details of which are:
(i)selling equipment owned by RPL to a related company at an under-value.
(ii)attempting to subdivide land owned by RPL without the knowledge or consent of Ms Capper;
(iii)diverting the Fonterra milk payments away from RPL’s bank accounts;
(iv)diverting the AFFCO livestock payments away from RPL’s account into accounts over which RPL has no control;
(v)endeavouring to cause RPL to pay holiday payments to its workers in circumstances where it is unclear that RPL has liability to those individuals to make the payments.
[43] In my view, the above matters set out at [42] above indicate in all probability the application for liquidation of RPL by Ms Capper will succeed.
[44] Mr Hofer in his submissions has also dealt with an appearance under protest to jurisdiction and subsequent application for dismissal which Mr Dallinger has filed in response to Ms Capper’s liquidation application. The protest to jurisdiction by Mr Dallinger asserts that matters affecting RPL should be dealt with in the Family Court as part of the relationship property proceedings, and not in the High Court.
[45] Mr Hofer submits that the application to dismiss Ms Capper’s liquidation application is unlikely to succeed because:
(a)the Companies Act confers exclusive jurisdiction on the High Court to determine liquidation proceedings;
(b)Part 31 of the High Court Rules governs the procedure for the High Court putting a company into liquidation;
(c)the Family Court has no jurisdiction to hear liquidation applications;
(d)by filing an interlocutory application to stay advertising, Mr Dallinger has taken a step in the liquidation proceeding and, in doing so, has submitted to the High Court’s jurisdiction and waived his rights to challenge the High Court’s jurisdiction;
(e)there has been no abuse of process. The liquidation of RPL is sought on the grounds that the relationship between the directors has irretrievably broken down and Mr Dallinger has acted, and continues to act, in a manner in which he has benefited himself ahead of the company in breach of his director’s duties; and
(f)while the shares of RPL are relationship property, RPL has a separate legal personality. It is not relationship property, and is subject to the Companies Act and the High Court.
[46] While only a preliminary view of the likelihood of success of Mr Dallinger’s application to dismiss the liquidation application can be formed prior to the hearing, Mr Hofer’s submissions have persuaded me that the dismissal application has a low chance of success.
Circumstances must not merely be urgent but also justify the appointment of an interim liquidator
[47]Mr Hofer submits that having regard to the important considerations set out at
[39] above, there are a number of reasons why the circumstances are not only urgent but also justify the appointment of an interim liquidator:
(a)The company’s assets are in jeopardy: RPL’s assets include dairy cattle and equipment that generate income in its farming business. Since the relationship breakdown between Ms Capper and Mr Dallinger, Mr Dallinger has acted in breach of his director’s duties by dealing with RPL’s assets in a manner that benefits himself to the detriment of RPL, without the knowledge or consent of Ms Capper. These actions are detailed at [42](b) above.
(b)The status quo should be maintained: RPL operates a dairy farming business. RPL owns dairy cows that are milked, and whose milk is supplied to Fonterra in return for payment. Cows that are unable to be milked are sent to the AFFCO meat-works in return for payment. The status quo is required to preserve the wellbeing of the cows and the continuing generation of income for RPL.
(c)The interests of the creditors are safeguarded: RPL in the control of an interim liquidator rather than the control of Mr Dallinger, means that the interests of the creditors are safeguarded. Given Mr Dallinger’s actions in depleting the value of RPL and concerns expressed by
Rabobank,32 the lender to RPL, appointment of an interim liquidator will prevent any further illegitimate diminution in the value of RPL’s assets.
[48] In my view these are sufficient reasons to justify appointment of an interim liquidator.
Injunction application filed by Mr Dallinger in the Family Court
[49] Mr Dallinger has filed an application in the Family Court seeking removal of Mr Dallinger and Ms Capper from their authorisation over any bank accounts relating to RPL and leaving the authorisation solely to MacMillan Accountants Limited (MacMillan Accountants). Mr Dallinger asserts that the Family Court application will prevent Mr Dallinger taking funds out of RPL or diverting RPL funds.
[50] Mr Hofer submits that appointing MacMillan Accountants to control RPL’s bank accounts as a means of preventing Mr Dallinger further eroding the value of RPL will not be effective. He submits this is the case for the following reasons:
(a)MacMillan Accountants were appointed by Mr Dallinger and lack sufficient independence to achieve that outcome; and
(b)MacMillan Accountants has failed to prevent Mr Dallinger’s previous illegitimate spending of RPL’s funds from the date of Mr Dallinger and Ms Capper’s separation to date.
The reason submitted at paragraph (b) immediately above is unconvincing as presumably MacMillan Accountants would not be in a position to control `spending until given control of RPL’s bank accounts.
[51]He further submits the following:
32 Affidavit of Tania Michele Myrup Capper in support of without notice interlocutory application for appointment of interim liquidator dated 22 August 2022 at [29]-[30].
(a)in contrast to an interim liquidator, an accountant’s role is not to verify and differentiate between illegitimate spending and genuine RPL expenses;
(b)even if additional safeguards were implemented to assist the accountant in verifying genuine RPL expenses, the issue of insufficient independence remains; and
(c)as independently appointed officers of the Court, interim liquidators are best placed to prevent any further illegitimate diminution of RPL’s assets.
[52] I am persuaded by Mr Hofer’s submissions that the appointment of MacMillan Accountants as controller of RPL’s bank account (if Mr Dallinger’s application to achieve that was successful) will not necessarily be an effective safeguard for Ms Capper in terms of preventing Mr Dallinger from further eroding RPL’s assets.
Without notice application
[53] The application is made without notice to any other party. Mr Hofer submits the grounds and reasons for this are:
(a)the urgency of the situation is such that requiring Ms Capper to proceed on notice will cause undue delay or prejudice to RPL and Ms Capper; and
(b)the interests of justice require the application to be determined without serving notice of the application.
[54] Mr Hofer submits that notwithstanding the application is against a background of an ongoing relationship property dispute, an interim liquidator can still be appointed on a without notice application. In this respect he points to Baxter v
Superscapes Landscape Supplies Ltd,33 where a without notice application was granted for the appointment of an interim liquidator against the background of an ongoing relationship property dispute. In that case, the factual circumstances were similar to the current case, and the Court ordered that interim liquidators be appointed to the respondent company which was held by the applicant (as a 50 per cent shareholder) on the basis of her ex-partner’s (the other 50 per cent shareholder) actions, significantly reducing the respondent company’s assets.
[55] Mr Hofer in his submissions at [38] has also drawn the Court’s attention to Keet v Hidden Valley Ltd34 In that case the High Court declined an application for appointment of an interim liquidator on a without notice application. Having reviewed the decision of Clifford J and Mr Hofer’s submissions at [38], I am of the view that:
(a)Mr Hofer is correct in his submission that the decision of Keet was not intended to lay down a general principle that the existence of a larger relationship property dispute, in and of itself, makes proceeding on a without notice basis inappropriate. There were issues in that decision specific to its facts and, in particular, that the relationship property dispute had not been adequately dealt with in counsel’s memorandum or in the application generally; and
(b)the Keet decision can be distinguished on the basis suggested by Mr Hofer at [38](c) of his submissions. The relationship property dispute has been dealt with in detail in the memoranda and affidavits put before the Court and in particular, affidavits have detailed Mr Dallinger’s illegitimate diversion of RPL funds into bank accounts under his exclusive control.
[56] My conclusion on this point is that proceeding on a without notice basis is justified in the interests of urgency and the prospect of further erosion of RPL’s assets by Mr Dallinger. This is evidenced by his recent proposal to pay holiday pay to
33 Baxter v Superscapes Landscape Supplies Ltd, above n 23.
34 Keet v Hidden Valley Ltd, above n 23.
himself and other workers of RPL in circumstances where it is unclear that such payments are properly due and owing by RPL.
Lease proceedings
[57] At [39] of his submissions, Mr Hofer has dealt with the High Court proceedings relating to the lease of part of the land used for the farming operation by RPL from the Trust. The proceeding is brought by the Trust to terminate the lease for non-payment of rent. The trustees of the Trust are Ms Capper’s two brothers and her mother. Ms Capper is a beneficiary of the Trust but resigned as trustee on 21 September 2021.
[58] I accept Mr Hofer’s submission that Ms Capper, since her resignation as trustee, does not have control over the Trust’s affairs, and the lease proceedings which it has brought against RPL. I do not consider these are an obstacle to granting the application to appoint interim liquidators of RPL.
Undertaking as to damages
[59] At [45] to [47] of his submissions, Mr Hofer has dealt with the issue of whether an undertaking as to damages should be given by Ms Capper as a condition of any application to appoint interim liquidators to RPL. Mr Hofer submits that the Court can, in appropriate circumstances, dispense with the giving of an undertaking as to damages. He submits that one of those circumstances is that the interim liquidators are being appointed as officers of the Court, and owe duties to, and are answerable to, the Court and not to Ms Capper.
[60] Mr Hofer submits that in the circumstances of the current case, the Court should exercise its discretion and dispense with an undertaking as to damages for the following reasons:
(a)the interim liquidators will be officers of the Court;
(b)Ms Capper’s application is not designed to cause loss to any party, but to prevent further loss to RPL; and
(c)the appointment of interim liquidators to manage RPL’s assets serves to benefit the company and preserve its assets, the two beneficiaries of which are the shareholders, Mr Dallinger and Ms Capper.
[61] I accept Mr Hofer’s submissions and in my view it is appropriate to dispense with any undertaking as to damages in relation to the present application.
Consent of the liquidators
[62] Steven Khov and Kieran Jones, both licensed insolvency practitioners, have consented to be appointed jointly and severally as interim liquidators of RPL, by consent dated 16 August 2022.
Result
[63] In light of my conclusions at [43], [46], [48], [52], [56], [58], and [61] above, I am of the view that it is appropriate to appoint interim liquidators of RPL until further order of the Court.
[64] The Companies Act gives the Court power to vary the rights and powers of an interim liquidator as the circumstances may require, but otherwise an interim liquidator has the rights and powers of a liquidator to the extent necessary or desirable to maintain the value of the assets owned or managed by the company to which he or she is appointed.
Orders
[65] I order that Steven Khov and Kieran Jones are appointed jointly and severally as interim liquidators of Riverside Pride Ltd. The timing of this order for the purposes of s 246 of the Companies Act shall be the time at which this judgment is issued, being
12.30 pm on 1 September 2022.
[66] I make the following directions in relation to the power and duties of the interim liquidators:
(a)To the extent it is necessary, the interim liquidators are:
(i)to get in and preserve all the assets of RPL and to meet or continue to meet all expenses necessary to preserve the value of RPL’s assets;
(ii)to obtain the books and records of RPL from its offices and any other person.
(b)to examine on oath any person, as required under ss 265 and 266 of the Companies Act;
(c)to prepare a report for the Court within 20 working days, or such longer period as the Court may on application allow, to include the following information:
(i)a summary of the assets of RPL;
(ii)a summary of the liabilities of RPL, including estimates of contingent liabilities;
(iii)if the interim liquidators consider an order for liquidation is desirable, and if so, why;
(iv)any other information the interim liquidators consider it is necessary or desirable to put before the Court.
(d)the interim liquidators are entitled to be remunerated for their reasonable costs and expenses by reference to the time, difficulty and degree of responsibility involved in the liquidation, applying the hourly rates set out in the consent to act, dated 16 August 2022, which rates are hereby approved.
[67]Costs are reserved.
…………………………….. Associate Judge Taylor
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