Coffee108 Limited (in liquidation)
[2025] NZHC 2255
•11 August 2025
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2025-470-101
[2025] NZHC 2255
UNDER Section 284 of the Companies Act 1993 and the inherent jurisdiction of the High Court IN THE MATTER OF
An application for directions relating to the liquidation of Coffee108 Limited
(in liquidation)
RE
BENJAMIN FRANCIS and GARRY CECIL
WHIMP as liquidators of Coffee 108 Limited (in liquidation)
Applicants
Hearing: On the papers Counsel:
C J H Fraser for the Applicants
Judgment:
11 August 2025
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 11 August 2025 at 3 pm.
Pursuant to Rule 11.5 of the High Court Rules.
…………………..
Registrar/Deputy Registrar
Solicitors:
Morrison Partners, Auckland
FRANCIS and WHIMP [2025] NZHC 2255 [11 August 2025]
Introduction
[1] Benjamin Francis and Garry Whimp (the liquidators) were purportedly appointed as the liquidators of Coffee108 Ltd (the company) on 10 March 2025, by special resolution of the shareholders of the company.
[2] The liquidators have discovered an issue with the validity of their appointment. They seek directions from the Court regarding their appointment and the steps that they have taken in the liquidation since their appointment.
Background
[3] The company has two shareholders who are both directors, Colleen Heath and Michael Leonard-Smith. In November 2024, Ms Heath commenced a proceeding in this Court alleging shareholder oppression under s 174 of the Companies Act 1993 (the Act), including an application for an order putting the company into liquidation under s 241 of the Act (the liquidation proceeding).
[4] In the liquidation proceeding, Ms Heath nominated the liquidators as appropriate liquidators should the court make the orders sought. On 5 February 2025, the liquidators consented to their appointment by the Court.
[5] Ms Heath and Mr Leonard-Smith subsequently agreed to settle the liquidation proceeding. They agreed to the liquidation of the company. They signed a special resolution of shareholders of the company, dated 10 March 2025, appointing the liquidators. The liquidation proceeding was discontinued by consent on 21 March 2025.
[6] The liquidators were not notified of their appointment until 25 March 2025. Since then, the liquidators have substantially progressed the liquidation, including:
(a)closing the company’s business and realising the company’s assets;
(b)identifying potential creditors and processing creditors’ claims; and
(c)filing statutory reports.
[7] The Commissioner of Inland Revenue (the Commissioner) has a preferential creditor’s claim of $272,049.37, which exceeds the amount available for distribution to creditors. No other creditors will receive a distribution.
The issues
[8] Section 241 of the Act provides that a liquidator may be appointed by special resolution of shareholders. Section 241AA provides:
241AA Restriction on appointment of liquidator by shareholders or board after application for court appointment served on company
(1)This section applies if an application for the appointment of a liquidator under section 241(2)(c) has been filed and served on the company.
(2)A liquidator may be appointed under section 241(2)(a) or (b) only if—
(a)the liquidator is appointed within 10 working days after the application is served on the company; or
(b)if the application is made under section 241(2)(c)(iv), the creditor who filed the application consents to the appointment under section 241(2)(a) or (b).
(3)This section ceases to apply from the time that the court disposes of the application.
[9] In the present case, an application for the appointment of a liquidator under s 241(2)(c) had been filed and served on the company in November 2024. The shareholders’ resolution was passed more than 10 working days after the liquidation proceeding had been served on the company, so the requirement in s 241AA(2)(a) was not met. Section 241AA(2)(b) does not apply.
[10] Section 241AA(3) is of no assistance to the liquidators. The proceeding was not discontinued until 21 March 2025, after the purported appointment of the liquidators, which was prima facie invalid.
[11]The issues are:
(a)Whether the appointment of the liquidators can be validated?
(b)What other relief is available to rectify the invalid appointment?
Legal principles
[12]Section 284(1)(g) of the Act relevantly provides:
284 Court supervision of liquidation
(1)On the application of the liquidator, a liquidation committee, or, with the leave of the court, a creditor, shareholder, other entitled person, or director of a company in liquidation, the court may—
…
(g)declare whether or not the liquidator was validly appointed or validly assumed custody or control of property:
…
[13] In addition, the High Court has supervisory jurisdiction over liquidators as part of its inherent jurisdiction. This jurisdiction extends to liquidators appointed other than by the Court.1
[14] There is no statutory basis to declare that an invalid appointment was valid. However, in Zhang v Kamal,2 Heath J drew a distinction between the invalidity of the appointment of a liquidator and the invalidity of a liquidation from its inception. While the appointment of a liquidator may be invalid, the liquidation may still be regarded as valid from its inception.3
[15] The strongest support for this proposition is reg 36 of the Companies Act 1993 Liquidation Regulations 1994, which provides that no defect or irregularity in the appointment of a liquidator shall invalidate any act done by him or her in good faith. In Heath J’s view, this suggests that if a liquidator is invalidly appointed he or she may, nevertheless, be regarded as having been lawfully acting in that capacity.4
1 ANZ National Bank Ltd v Sheahan and Lock [2012] NZHC 3037, [2013] 1 NZLR 674 at [137]– [139].
2 Zhang v Kamal [2017] NZHC 1943.
3 At [50] and [52].
4 At [51].
[16] The underlying rationale is that the steps taken in the liquidation are valid despite the defective appointment. Applying this reasoning, the Court has a discretion to deal with an invalid appointment of liquidators made by a special resolution of the shareholders by either: 5
(a)terminating the liquidation under s 250 of the Act; or
(b)treating the invalidity in the appointment of the liquidators as creating a vacancy in the office of liquidator, conferring on the Court a discretion under s 283(7) of the Act to appoint a liquidator.
[17] This approach was endorsed by Associate Judge Smith in Ministry of Education v Nayacakalou.6
[18] In Zhang v Kamal, Heath J discussed filling the vacancy in the office of liquidator with an alternative liquidator. There is no logical distinction between that option and making a proper appointment of the liquidators who have been invalidly appointed if that is the most expedient way forward.
Discussion
[19] There is no doubt that the purported appointment of the liquidators was invalid for non-compliance with s 241AA of the Act. The subsequent termination of the liquidation proceeding cannot rectify the defective appointment. However, the Court may exercise its discretion to keep the liquidation on foot and make a valid appointment of liquidators.
[20] In the present case, there is nothing to be gained by terminating the liquidation. The liquidation has nearly run its course. The only creditor that will receive a distribution is the Commissioner. The Commissioner has been served with this proceeding and does not oppose the orders sought.
5 At [51] and [53].
6 Ministry of Education v Nayacakalou [2020] NZHC 1874 at [27].
[21] I am satisfied that this is an appropriate case to appoint Mr Francis and Mr Whimp as the liquidators of the company, under s 283(7) of the Act, effective from the date of this judgment. Regulation 36 applies, and the defective appointment on 10 March 2025 does not invalidate any acts done by the liquidators in good faith after they were notified of their appointment on 25 March 2025. The liquidators are entitled to be remunerated in the usual way for all steps taken since 25 March 2025.
[22] The liquidators raise an issue with their potential liability for any matters in respect of the company that arose between the date of the shareholders’ resolution and the date that they received notice of the resolution, which is a period of 15 days. They seek a declaration that they are not liable for matters affecting the company or its assets which occurred prior to 25 March 2025, or any failure to complete steps required of liquidators during that period.
[23]That declaration is unnecessary:
(a)the liquidators were not validly appointed during that 15-day period, so they cannot be liable for any failure to complete statutory steps required of liquidators during that period;
(b)there is no evidence of any specific matters during that period which might give rise to potential liability, and I do not consider that it is appropriate to make a sweeping declaration that Mr Francis and Mr Whimp cannot be held liable for what may or may not have happened between 10 March and 25 March 2025 when there is no evidence of a specific issue; and
(c)should any specific issue arise in the future then it will be open to the liquidators to apply for further directions.
Orders
[24] I declare, under s 284(1)(g) of the Companies Act 1993, that the appointment of the applicants as liquidators of Coffee108 Ltd (the company) by special resolution of the shareholders of the company dated 10 March 2025 was invalid.
[25] The applicants are appointed as liquidators of the company effective from the date of this judgment.
[26] The defective appointment of the liquidators does not invalidate any act done by them in good faith prior to the date of this judgment.
[27] The liquidators are entitled to be remunerated, under s 276 of the Companies Act 1993, for all work completed by the liquidators from 25 March 2025.
[28]Leave is reserved to the applicants to apply for further directions.
Associate Judge Brittain
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