Drikolor New Zealand Limited

[2019] NZHC 2650

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-2183

[2019] NZHC 2650

UNDER

Part 19 of the High Court Rules and sections 239F, 239ACD, 280 and 286 of the Companies Act 1993

IN THE MATTER OF

An application pursuant to sections 239F, 239ACD, 280 and 286 of the Companies Act 1993 for an order that N Jackson and NG Burrett not be disqualified from appointment as administrators, deed administrators or

liquidators of Drikolor New Zealand Limited

AND IN THE MATTER OF

DRIKOLOR NEW ZEALAND LIMITED

IN THE MATTER

OF AN APPLICATION

N JACKSON and N G BURRETT

On the papers:	at Auckland
Judgment:	17 October 2019

JUDGMENT OF POWELL J

This judgment was delivered by me on 17 October 2019 at 2.30 pm pursuant to R 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors:          Kensington Swan, Auckland

Drikolor New Zealand Limited [Originating application Without Notice] [2019] NZHC [2650] [17 October 2019]

[1]                Neale Jackson and Natalie Burrett, chartered accountants and accredited insolvency practitioners from KordaMentha, have applied by way of originating application for leave to be appointed as joint and several administrators of Drikolor New Zealand Limited (“Drikolor”).

[2]                The application is necessary because s 280(1)(cb) of the Companies Act 1993 precludes their appointment of administers if they or their firm has “had a continuing business relationship … [with] … any of [Drikolor’s] secured creditors”, subject to an order pursuant to s 286(4) of the Act which gives the Court jurisdiction to enable appointment notwithstanding the provisions of s 280.

[3]                In this case both Mr Jackson and Ms Burrett  are caught by the provisions of  s 280 and have, in the course of their professional work, carried out work for the ASB Bank which is one of the creditors of Drikolor.

Legal principles

[4]                As Mr McMillan on behalf of Mr Jackson and Ms Burrett has noted, the key principles for an application pursuant to s 286(4) are summarised in Re Tubbs:1

(a)It is appropriate to make an application under section 280 of the Act as an originating application under Part 19 of the High Court Rules;

(b)An important issue is whether there is a risk that the proposed administrators' independence and ability to carry out their task professionally and effectively might be compromised in the particular circumstances;

(c)without notice applications will be permitted where the interests of justice require urgency and the creditors' interests can fairly be protected in other ways, having regard also to the undue delay or prejudice to applicants as potential administrators;

(d)where an order is made on a without notice basis, the Court might appropriately direct the order and application be served on any creditors and the Court might properly reserve leave to creditors to apply to vary or set aside the orders made within a specified period;

(e)the solicitor-client costs of the proposed administrators in respect of the application are usually ordered to be an expense in the administrators.

1      Re Tubbs [2014] NZHC 385 at 11.

Discussion

[5]                Having reviewed the application, the affidavit of Mr Jackson filed in support, and submissions of counsel, I am satisfied the application should be granted. In particular, while Mr Jackson and Ms Burrett have provided professional services to ASB, it is clear there is no actual conflict, as not only have Mr Jackson and Ms Burrettt not provided any professional services to Drikolor previously, the services provided to ASB did not relate to Drikolor. In this regard the comments by this Court in Re Jackson (another application by Mr Jackson) are pertinent:2

I accept that KordaMentha (like many other large accountancy and insolvency practices) will routinely act on the instruction of New Zealand banks. Absent particular disqualifying circumstances (of which there are none on the information currently available to the Court), I do not consider that such associations will typically preclude orders under ss 280 and 286(4).

[6]                Likewise, I accept it is appropriate that this application is made and determined on a without notice basis, noting there is some urgency as a result of the current financial position of Drikolor and steps pending by both the Companies Office and its landlord. In addition, the draft orders proposed by Mr Jackson and Ms Burrett protect the position of the creditors to challenge the appointment within a relatively short time after they have been served should there be any genuine issue arising. I also conclude it is sensible to approve in advance the ability for Mr Jackson and Ms Burrett to be appointed as deed administrators and/or liquidators without the need for further application to the Court, given that identical considerations apply and making provision in this manner prevents unnecessary expense in the future.

Decision

[7]For the reasons set out above I make the following orders:

(a)the application be permitted to be made by way of an originating application;

(b)notwithstanding section 280(1)(cb) of the Companies Act 1993 (Act), Neale Jackson and Natalie Gytha Burrett of KordaMentha

2      Re Jackson [2018] NZHC 2447 at [35].

(Proposed Administrators) may be appointed as joint and several administrators of Drikolor New Zealand Limited (Drikolor);

(c)notwithstanding section 280(1)(cb) of the Act, the Proposed Administrators may be appointed as joint and several deed administrators or liquidators of Drikolor, if appointed as such at a watershed meeting of creditors in the voluntary administration of Drikolor;

(d)in the event that the Proposed Administrators are appointed as administrators of Drikolor, then:

(i)this application is adjourned to the Duty Judge list to be called at 10 am on 14 November 2019;

(ii)a copy of this application and orders of the Court be served on all known creditors of Drikolor notified of the first meeting of creditors in Drikolor's voluntary administration pursuant to s 239A0(1 )(a) of the Act, at the same time and in the same manner as notice under  s 239A0 is given by the administrators to those creditors, with a copy of this application and the Court's orders also to be posted on KordaMentha's website;

(iii)the    administrators'    notice     to     creditors     under s 239A0(1)(a) of the Act shall include advice to creditors of the next mention date of this application, and advice that, if they wish to challenge the interim orders made, they are entitled to do so by filing and serving a notice of opposition within 10 working days of service of the Court's orders to set aside the Proposed Administrators' appointment as administrators of Drikolor; and;

(iv)the creditors of Drikolor shall have leave to apply to the Court within 10 working days of service of the Court's

orders to set aside the Proposed Administrators' appointment as administrators of Drikolor; and

(v)the Proposed Administrators' solicitor-client costs and disbursements of this application are to be an expense incurred by the Proposed Administrators in carrying out their duties as administrators of Drikolor.

Powell J