Fiber Fresh Feeds Limited (in liquidation) - [2019] NZHC 1237

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-993

[2019] NZHC 1237

IN THE MATTER of an application under Part 19 of the High Court Rules 2016 and sections 239F, 239ACD, and 280 of the Companies Act 1993

IN THE MATTER

of FIBER FRESH FEEDS LIMITED (IN RECEIVERSHIP)

AND

of an application by TONY LEONARD MAGINNESS AND JARED WAIATA BOOTH

Applicants

Hearing: On the papers

Counsel:

M Kersey and L N Wilson for the Applicants

Judgment:

29 May 2019

Reasons:

31 May 2019

REASONS JUDGMENT OF MUIR J

Solicitors:
Russell McVeagh, Auckland.

Re an application re Fiber Fresh Feeds Limited (In Receivership) [2019] NZHC 1237 [29 May 2019]

Reasons judgment

[1] On 29 May 2019 I granted an urgent application by the applicants on the terms of a draft order provided. I indicated my reasons would follow. They do so now.

Introduction

[2] The applicants, Tony Maginness and Jared Booth, are both accountants and respectively, a director and associate director of the firm Baker Tilly Staples Rodway. They apply for orders that they may be appointed as administrators or liquidators or deed administrators of Fiber Fresh Feeds Limited (In Receivership) (the Company), notwithstanding the provisions of ss 239F(2), 239ACD(2) and 280(1)(cb) of the Companies Act 1993 (the Act).

[3] The Company is a producer of high quality animal feeds and in particular feeds for horses and calves. It is based in Reporoa and has approximately 45 employees. As at the date of the application it has 114 creditors.

[4] On 17 May 2019 Brendon Gibson and Natalie Burrett of KordaMentha were appointed by Cooperatieve Rabobank U.A. (Rabobank) as joint and several receivers and managers of the Company pursuant to a general security agreement dated 21 October 2016.

[5] The receivers have advised the applicants that either the Company or Rabobank intend to now appoint administrators. Pursuant to s 239AB of the Act, the appointment of an administrator to a company in receivership does not remove the receiver from office.

[6] It is in those circumstances that Messrs Maginness and Booth now seek to act as administrators. The application is necessary, because in the two years immediately before the commencement of the anticipated administration the applicants and their firm have had a “continuing business relationship” with the Company’s secured creditor, Rabobank.

[7] In particular, Rabobank has, within that period, appointed Mr Maginness as receiver of Pimlico Land Company Limited and Pimlico Vineyards Limited, and Mr Maginness and Mr Booth as receivers in relation to one B K Pinny. Both such receiverships have now concluded.

The law

[8] The primary legislative provision that is engaged in respect of the application is s 280 of the Act, the purpose of which is to ensure that persons who are appointed as administrators or liquidators have sufficient independence, competency and integrity to carry out those roles without causing risk to creditors and/or third parties.

[9]This Court has consistently recognised the following principles as applying:1

(a)it…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] NZHC 1237
Decision Date: 29 May 2019

CaseChat Overview and Summary

The applicants, Tony Maginness and Jared Booth, sought orders allowing them to be appointed as administrators or liquidators of Fiber Fresh Feeds Limited (In Receivership) despite their prior business relationship with the company's secured creditor, Rabobank. The applicants argued that their previous engagements with Rabobank would not impair their independence and ability to perform their duties effectively. The central legal issue was whether the applicants could be appointed as administrators or liquidators given their prior professional relationship with Rabobank, and if so, whether the appointment should proceed without notice to the creditors.

The court found that the application was appropriately commenced as an originating application under Part 19 of the High Court Rules, and it was appropriate to proceed without notice given the urgency of the application and the protection of creditors' rights through reserved leave to apply to vary or set aside the orders. The applicants' previous engagements with Rabobank, while noteworthy, did not impair their independence or competence to act as administrators. The court was satisfied with the applicants' reputations, expertise, and adherence to professional standards, which would enable them to administer the appointment efficiently and in the best interests of all creditors. The court also noted the requirement for a watershed meeting within 20 working days of the appointment, where alternative administrators, deed administrators, or liquidators could be appointed, and the court's reservation of the right to vary or set aside its orders.

The final orders granted leave for the applicants to be appointed as administrators, liquidators, or deed administrators of Fiber Fresh Feeds Limited, subject to any further information that may arise concerning their suitability. Additionally, the orders permitted the applicants to serve notice of the application and the orders on creditors and to post the application and orders on the Baker Tilly Staples Rodway website. The court also allowed for notices to be sent by email where an email address was provided, or by post if not.

Orders