Evergreen Modular Limited (Administrators appointed)

[2024] NZHC 1403

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-1027

[2024] NZHC 1403

UNDER

Part 19 of the High Court Rules 2016 and Sections 239Y, 239ADK and 239ADO of the Companies Act 1993

BETWEEN

EVERGREEN MODULAR LIMITED (ADMINISTRATORS APPOINTED)

BUILD PARTNERS LIMITED (ADMINISTRATORS APPOINTED)

RICHARDSON ROAD LIMITED (ADMINISTRATORS APPOINTED)

PROPERTY PARTNERS LIMITED (ADMINISTRATORS APPOINTED)

AND

an application by STEPHEN SPEERS

KEEN and MALCOLM RUSSELL MOORE

Administrators

Hearing:	On the papers
Judgment:	30 May 2024

JUDGMENT OF VENNING J

This judgment was delivered by me on 30 May 2024 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Russell McVeagh, Auckland

Re: EVERGREEN MODULAR LIMITED (ADMINISTRATORS APPOINTED) [2024] NZHC 1403 [30 May 2024]

[1]    The judgment of O’Gorman J dated 9 May 2024 refers.1 In that judgment O’Gorman J made orders exempting Stephen Keen and Malcolm Russell’s (the administrators’) liability for borrowing to fund the administration and their liability for rent and other payments, together with ancillary orders.

[2]The administrators now apply for further orders:

(a)exempting their liability for further borrowing,

(b)exempting their liability for rent to fund the administration; and

(c)dealing with ancillary matters.

[3]    I adopt the background to the matter as helpfully set out in O’Gorman J’s judgment. It is unnecessary to refer to it in this judgment.

[4]    The current application for exemption of liability for borrowing has become necessary as the administrators wish to allow Richardson Road Ltd (RRL) to borrow

$666,000 from 1769 Funding to fund an additional week of administration and continue operation of RRL while limiting the administrators’ personal liability for the borrowing to the amount of RRL’s available assets.

[5]    The administrators also seek to be exempted from personal liability for rent and other payments becoming due under a lease held by Property Partners Ltd (PPL) over the Group’s Head Office.

[6]    Finally they seek orders allowing service of the application and the orders in accordance with the notice that was previously granted in this proceeding.

[7]    There is a degree of urgency because obtaining the interim funding order is a condition to drawing the amended facility and the order must be obtained no later than 4 June 2024. The administrators are also currently exposed to personal liability under the Head Office lease, which was not addressed in their first application.

1      Re Evergreen Modular Ltd (administrators appointed) [2024] NZHC 1147.

[8]    The directors of the companies in administration have proposed to creditors a restructuring to be implemented by way of a Deed of Company Arrangement (DOCA) which is to be voted on by creditors at the watershed meetings. The watershed meetings of the companies are to be held on 5 June 2024. If the qualifying DOCA is proposed and approved at the meetings the administration companies will exit administration and control will return to the directors subject to the terms of the DOCA. The parties are currently in the process of negotiating long-term finance documents which will provide funding to support the restructuring proposal. The further order in relation to the interim funding of $666,000 is necessary as those negotiations have taken longer than anticipated.

[9]    The relevant principles  in  relation  to  the  funding  orders  are  set  out  in  ss 239ADH, 239ADO and are to be exercised in accordance with the objectives under s 239A of the Companies Act 1993.

[10]   Having regard to the matters set out in O’Gorman J’s decision and the relevant authorities referred to by counsel in the memorandum in support of this application, I accept that entry into the proposed amended facility is in the interests of RRL’s creditors and consistent with the objectives of Part 15A of the Act. Further, there is no apparent prejudice to RRL’s creditors. The creditors will be given notice once the interim funding order is granted and will be aware of it before voting on the DOCA.

[11]   In relation to the head lease order the relevant provisions are ss 239ADI and 239ADK. Again, I accept it is reasonable for the administrators to be unwilling to incur personal liability in relation to the lease, yet it remains necessary to use, possess and occupy the Head Office premises, at least for the time being. Maintaining the Head Office lease is likely to be beneficial to a restructuring of the administration companies. The landlord will not be prejudiced as it is intended rental will continue to be paid in part from the interim funding and will be maintained in accordance with the above proposal. The alternative would be termination of the lease.

[12]   I am also satisfied, given the background to the matter and the urgency, it is appropriate for the application to be made without notice and the service orders sought are appropriate.

[13]   For those reasons, orders are made in accordance with para 1(a) to (g) of the without notice application dated 30 May 2024.

Venning J