Fielden Farms Limited (in receivership)

[2023] NZHC 982

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2023-409-163

[2023] NZHC 982

IN THE MATTER

of an application pursuant to s 32 of the Receiverships Act 1993

BETWEEN

COLIN ANTHONY LATHAM GOWER and DIANA CLARE MATCHETT

Applicants

IN THE MATTER

of the receivership of

Fielden Farms Limited (in receivership), Mark Fielden Ofsoske and Judith Ann Ofsoske as partners of the Mark Fielden Ofsoske and Judith Ann Ofsoske Partnership (in receivership) and The MF Ofsoske

Family Trust and the JA Ofsoske Family Trust Partnership (in receivership)

Hearing:	On the papers
Judgment:	28 April 2023

JUDGMENT OF HARLAND J

Introduction

[1]                 The applicants are the receivers of Fielden Farms Ltd (in rec) (FFL), the Mark Fielden Ofsoske and Judith Ann Ofsoske Partnership (Partnership), the MF Ofsoske Family Trust and the JA Ofsoske Family Trust Partnership (Trust Partnership). They were appointed as receivers and managers of all of the entities comprising the Ofsoske Group on 18 April 2023.

[2]                 The applicants have filed an interlocutory application without notice for permission to commence proceedings by originating application for various orders

RE FIELDEN FARMS LTD (IN REC) [2023] NZHC 982 [28 April 2023]

they contend are required to be made as a matter of urgency that have arisen during the receivership. Specifically, the orders sought are:

(a)        Granting permission to commence these proceedings by way of an originating application without notice.

(b)       Dispensing with service of this application and supporting affidavit prior to the order being made.

(c)        Extending the timeframe within which the receivers must give notice of termination of an employment contract for wages and/or salary to the employees of Fielden Farms Ltd (in rec) (FFL), Mark Fielden Ofsoske and Judith Ann Ofsoske as partners of the Mark Fielden Ofsoske and Judith Ann Ofsoske Partnership (in rec) (Partnership) and the MF Ofsoske Family trust and the JA Ofsoske Family Trust Partnership (in rec) (Trust Partnership) until 7 June 2023 or such further period as the Court directs.

(d)       Excusing the receivers from liability for rent and any other payments becoming due under any leases held by FFL, the Partnership and/or the Trust Partnership until 7 June 2023 or such further period as the Court directs.

[3]The grounds upon which each order is sought are as follows:

(a)        It is in the interests of justice that these proceedings be commenced by the filing of an originating application without notice to ensure they are dealt with urgently.

(b)       The applicants were appointed receivers and managers of FFL, the Partnership and the Trust Partnership on 18 April 2023.

(c)        FFL appears to employ dairy workers who work on dairy farms owned by Partnership and the Trust Partnership (farms). It is not certain but appears possible that the Partnership and Trust Partnership may also be parties to employment contracts.

(d)       The details of all relevant employment agreements are not yet known.

(e)        It appears that some employees may be migrant workers with visas. The terms of their visas is not yet known.

(f)         It is in the best interest of the employees and the receivers that the extension is granted to allow:

(i)the receivers to obtain copies of all relevant employment contracts and visas;

(ii)to take advice on any immigration/visa issues that arise in respect of any of the employees; and

(iii)to allow the employees certainty and continuity of the employment relationships, and for the farms to continue to operate without interruption.

(g)       The receivers have not yet met with Mark Ofsoske, the director of FFL and any of the partners. Mark Ofsoske is out of the country.

(h)       The details of any leases held by FFL, the Partnership and/or the Trust Partnership are not yet known, despite the receivers’ best initial efforts to obtain such information. It is expected that this information will become clearer as the receivers discuss matters with Mark Ofsoske.

(i)          The 14 day period afforded by s 32 of the Receiverships Act 1993 (Act) ends on 2 May 2023. The receivers will not be in a position, within this window of opportunity, to sell any of the assets in receivership.

[4]                 The application relies on rules 7.46, 19.1, 19.5, 19.7 and 19.11 of the High Court Rules (HCR) and ss 32(3), (4) and (7) of the Act.

[5]                 The application is made without notice. The necessary certification as required by r 7.46 of the HCR has been signed by the solicitor for the applicants.

[6]                 In support of the application, I have also received an affidavit of Colin Anthony Latham Gower dated 21 April 2023 and a memorandum from counsel for the applicants dated 21 April 2023.

Discussion

[7]                 The Ofsoske Group conducts a farming business in and around the Coromandel Peninsula. The company is used to hold farm assets, being property and livestock. As part of the farming operations, the receivers believe that there are at least seven known employees that are employed by the company on a wage/salary basis.

[8]                 The application has been filed in the High Court Registry in Christchurch/Ōtautahi because it is the registry nearest the office of the receivers.

Urgency

[9]                 The application is made on a without notice basis pursuant to r 7.43 of the HCR on the following grounds:

(a)        requiring the applicants to proceed on notice would cause undue delay or prejudice to them;

(b)       the application relates to an urgent matter;

(c)        the interests of justice require the application to be determined without serving notice of the application;

(d)       the employees affected by the granting of an extension will not be prejudiced because the orders sought are for the benefit of the employees and the company. Where this is the case, the Court has recognised notification of the application as “pointless”; and

(e)        the employees will further not suffer any prejudice if service is dispensed with because they will get a copy of the order, will have the right to challenge any extension and the company will continue paying the employees in accordance with timesheets and invoices submitted and approved by the reporting personnel. The Court has recognised this as an appropriate circumstance for a without notice application.

[10]              I make my findings about urgency after outlining the factual matters that relate to it.

Employees

[11]              Under s 32(1)(b) of the Act, a receiver is personally liable for payment of wages and salary that, during the receivership, accrue under a contract of employment relating to the property in receivership and entered into before receivers’ appointment if the notice of the termination fo the contract is not lawfully given within 14 days after the date of appointment of the receivers.

[12]              Section 32(3) of the Act provides that the Court may, on application of a receiver, extend the 14 day period within which the notice of termination of a contract is required to be given in accordance with s 32(1)(b) on such terms and conditions as the Court thinks fit.

[13]              An application made by a receiver pursuant to s 32(3) of the Act must be made prior to the expiry of the 14 day period after appointment. Here, the receivers were appointed on 18 April 2023 and the 14 day period is set to expire on 2 May 2023.

[14]              I accept that the extension sought will promote continuity of the employment relationship which is likely to be in the best interest of both creditors and employees and, if the extension as sought are granted, this would allow the applicants to continue their business as usual approach.

[15]              I was referred to Re Top Retail Ltd (in rec)1 in which the Court, in the context of a receivers’ application, applied principles that had been established under Re WGL Retail Holdings Ltd.2 In Re Go To Collection Ltd (admins apptd),3 the principles in Re WGL Retail Holdings Ltd were also referred to and five additional reasons which ultimately supported the granting of an extension were outlined.

[16]I am satisfied that the following factors favour the grant of the orders sought:

(a)        the receivers require additional time in which to understand the employment contracts and make an appropriate assessment;

1      Re Top Retail Ltd (in rec) [2017] NZHC 2238.

2      Re WGL Retail Holdings Ltd [2011] NZCCLR 22.

3      Re Go To Collection Ltd (admins apptd) [2022] NZHC 3225.

(b)       the extension will promote continuity of employment relationships which is in the best interests of the company’s creditors and employees;

(c)        if an extension is not granted, the receivers will terminate the employment contracts so as to avoid personal liability;

(d)       an extension will mitigate against any employees being lost by way of refusing to sign offers of re-employment after termination occurs;

(e)        the receivers believe that advice is required in respect of immigration and/or visa issues in relation to some of the employees;

(f)         it is in the best interests of the company and its creditors that the dairy farms are sold as a going concern as this is likely to achieve the best recovery. In order to achieve this, the receivers require the employees to remain engaged with the business which termination of the employment contracts is unlikely to achieve and would cause undue stress to the relevant employees; and

(g)       the receivers’ efforts, if successful, are likely to leave the employees with a new, solvent employer.

Leases

[17]              Section 32(5) of the Act renders a receiver personally liable for rent and other payments becoming due under an agreement subsisting at the date of the receiver’s appointment relating to the use, possession or occupation by the debtor company of real or personal property charged by the debenture.

[18]              The receiver’s liability is limited to that portion of the rent or other payments which accrue in the period commencing 14 days after the date of the receiver’s appointment and ending on the date on which the receivership ends or the date on which the company ceases to use, possess or occupy the property, whichever is the earlier.4

4      Receiverships Act 1993, s 32(6).

[19]              Section 32(7) provides for the receiver to apply to the Court to limit or completely exclude his or her liability. The purpose is to avoid hardship.

[20]              In this case, the evidence outlined in Mr Gower’s affidavit refers to the applicants’ expectation that there are leases in respect of which the Ofsoske Group may be parties to, such as for run off blocks. The applicants will establish the position with respect to any such leases but require further time to establish whether any exist.

[21]              It is important to note that the purpose of s 32 of the Act is to ensure that a receiver does not obtain a benefit for the debtor company or secured creditor without paying for it. I am satisfied however that the following factors favour granting the orders sought in respect of the leases:

(a)        the applicants have not been able to meet with the director of the company, Mark Ofsoske. It is understood that Mark Ofsoske and his current wife, Beverley, are the parties with the best knowledge of all matters relating to the dairy farms owned and run by the company, the Trust Partnership and the Partnership;

(b)       the applicants have not obtained any information about any leases or relevant landlords but they expect that there are possible leases in place for things such as run off blocks for the dairy farms;

(c)        there are a number of dairy farms operating comprising large blocks of land; and

(d)       there has been insufficient time for the applicants to obtain all relevant information, make an assessment of any lease and take any appropriate steps.

Orders and directions

[22]              I am satisfied that the 14 days grace period ends on 2 May 2023 and I accept that the receivers are anxious to provide some certainty for employees to avoid anxiety and the risk of employee departures.

[23]              Having considered all of these matters, I am satisfied that it is appropriate to make the orders as sought in the interlocutory application and to make them on a without notice basis.

[24]I grant orders outlined in paras 1(a) to (d) of the application date 21 April 2023.

[25]              The orders outlined in paras (c) and (d) are to be reviewed by the Court no later than one week prior to 7 June 2023. Counsel for the applicants is to file a memorandum updating the Court no later than two working days before the next Court allocated date.

[26]              Service of this order and the underlying application will need to be effected on Mark and Judith Ofsoske. Reference is made to service on the employees of the entities in receivership however no details are provided. Counsel is to provide a memorandum no later than 5.00 pm on 2 May 2023 outlining upon whom service is likely to be required.

[27]              At this stage, I direct that this judgment be issued to counsel only. Counsel are to file a memorandum within seven days advising the Court of any reason why this judgment should not thereafter be made public.

Harland J