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 is appropriate to make an application under s 280 of the Act as an originating application under Part 19 of the High Court Rules;

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

(c)where the order is made on a without notice basis, the Court usually directs the order and application to be served on any creditors at the same time and in the same manner as the administrators’ or liquidators’ (as applicable) first report, and reserves leave to creditors to apply to vary or set aside the Court’s orders within a certain period of time after service of those orders; and

(d)the Court must have regard to the attitude of the creditors and “stand back” and take into account advantages to the company, its shareholders, creditors and other interested parties when considering

1      See for example Re Joeleen Enterprises Ltd HC New Plymouth CIV-2008-443-0485, 3 October 2008; Re Southbury Insurance Ltd (In Receivership) [2012] NZHC 1316; and Re Madagascar (No.1) 2013 Ltd [2014] NZHC 385.

the approval of the appointment of an administrator or liquidator in the exercise of the Court’s discretion under s 280.

[10]In Re Joeleen Enterprises Ltd, Associate Judge Abbott stated at [18] that:

The critical issue in considering whether the danger of conflict of interests exists due to a continuing business relationship (however that might be defined) is whether there is a risk that the applicant’s independence and ability to carry out her or his task professionally and effectively would be compromised in the particular circumstances of the case.

Without notice originating application

[11]              By reference to paragraph [9(a)] above, I am satisfied that the proceeding is appropriately commenced by way of originating application under Part 19 of the High Court Rules. I am also satisfied, on the basis of Mr Maginness’ supporting affidavit, that it is appropriate for the application to proceed on a without notice basis. The Company currently has 114 creditors, service on which would, I accept, be time consuming and onerous given the urgency of the application. Because it is my intention to reserve leave to any creditor to apply to vary or set aside my orders (in addition to the rights that creditors will have at the watershed meeting), I am also satisfied that their interests can be fairly protected despite the absence of notice.

Are the substantive orders appropriate?

[12]              The application is necessary because of the continuing business relationship previously identified. However, the applicants:

(a)have not provided professional services to the Company, its directors, shareholders or any related entity; and

(b)have not advised Rabobank in respect of the Company or its security over the company.

[13]              The applicants are known to the Court as competent and reputable practitioners for insolvency and restructuring work. They also have extensive experience in the horticultural and agricultural business sector which will, in my view, enable them to administer the proposed appointment efficiently and in the best interests of all

creditors of the Company. Both are CA ANZ accredited insolvency practitioners cognisant of the integrity, objectivity, independence, and due care and skill which discharge of their obligations requires.2

[14]              They do not consider the fact of their previous engagement by Rabobank to in any way impair the probity of the appointment, which is an assurance I am prepared to accept, subject to any further information which may become available in the context of any subsequent challenge. I also accept as a relevant consideration that Rabobank is an organisation with such a significant commercial presence in New Zealand that many other accountancy firms with the expertise to conduct the administration of the Company will similarly have continuing business relationships with the Bank which require an application under s 280 of the Act.

[15]I also note:

(a)That within the “convening period” defined in s 239AT(2) of the Act,3 administrators are required to hold a watershed meeting of creditors at which an alternative administrator, deed administrator or liquidator could be appointed; and

(b)my intended reservation of the right to apply to vary or set aside my orders.

[16]              I accordingly consider the substantive orders sought by the applicants are appropriate.

Subsidiary orders

[17]              The applicants propose that advice of the application and a copy of the Court’s orders be served on all creditors of the company by:

2      CA ANZ accredited insolvency practitioners are subject to the same standards as a CA ANZ member including the NZICA Code of Ethics and the Rules for New Zealand Insolvency Practitioners.

3      This is stipulated as 20 working days after the date on which the administrator is appointed. Paragraph [24] of Mr Maginness’ affidavit incorrectly refers to 25 working days.

(a)writing to creditors as soon as practicable after the appointment of administrators takes place, at the same time as statutory notices under ss 239AO or 243(2) of the Act are issued summoning a creditors meeting, or under s 245 of the Act dispensing with a meeting of creditors; and

(b)posting a copy of the application and orders on the Baker Tilly Staples Rodway website.

These proposals are orthodox and accepted.

[18]              They also seek orders that any notices required to be sent (pursuant to s 15A of the Act), be permitted to be sent by email where an email address has been provided or, if a creditor has not provided such an email address, by post. Again, the proposal is unobjectionable.

Further appointment as liquidators or deed administrators

[19]              At the watershed meeting to which I have referred, the applicants may potentially be appointed as liquidators or deed administrators. In that event they would require the leave of the Court before assuming such a role. I consider it appropriate that the order granting leave under s 280 of the Act for appointment as administrators also cover potential appointments as liquidators or deed administrators at such a meeting.

[20]              I note the commitment of the applicants to advise the Court if any further conflict arises in terms of s 280 of the Act between the date of their appointment and the watershed meeting.

Muir J