Fisk v Ross Asset Management Limited (in receivership)

[2012] NZHC 3459

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2012-485-2591 [2012] NZHC 3459

UNDER  Part 16 of the Companies Act 1993

BETWEEN  JOHN HOWARD ROSS FISK AND DAVID JOHN BRIDGMAN AS RECEIVERS OF EACH OF THE DEFENDANT COMPANIES

First Plaintiffs

ANDJOHN HOWARD ROSS FISK AND DAVID JOHN BRIDGMAN AS RECEIVERS OF AND ON BEHALF OF DAVID ROBERT GILMOUR ROSS Second Plaintiffs

ANDROSS ASSET MANAGEMENT LIMITED (IN RECEIVERSHIP)

First Defendant

ANDBEVIS MARKS CORPORATION LIMITED (IN RECEIVERSHIP) Second Defendant

ANDMERCURY ASSET MANAGEMENT LIMITED (IN RECEIVERSHIP)

Third Defendant

ANDMCINTOSH ASSET MANAGEMENT LIMITED (IN RECEIVERSHIP)

Fourth Defendant

Hearing:         17 December 2012 (Heard at Wellington)

Counsel:         M.G. Colson - Counsel for Plaintiffs

H. Rennie QC & R. Johnson - Counsel for Financial Markets
Authority (FMA)
M. Lennard - Counsel for B.W. Tichbon (Creditor investor) in support
G. Turkington - Counsel for D.R.G. Ross and defendant companies

Judgment:      17 December 2012

ORAL JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

Solicitors:           Bell Gully, Solicitors, PO Box 1291, Wellington 6140

Tripe Matthews Feist, Solicitors, PO Box 5003, Wellington

Financial Markets Authority, Level 2, 1 Grey Street, Wellington

JHR FISK AND DJ BRIDGMAN AS RECEIVERS OF EACH OF THE DEFENDANT COMPANIES V ROSS ASSET MANAGEMENT LIMITED (IN RECEIVERSHIP)& ORS HC WN CIV-2012-485-2591 [17 December

2012]

[1]      Before the Court are a series of applications concerning the above defendant companies.

[2]      The first of those is an application by the plaintiffs to place the defendant companies into liquidation.

Liquidation Applications

[3]      The plaintiffs bring those applications as receivers of each of the defendant companies and also as receivers of and on behalf of David Robert Gilmore Ross (Mr Ross), who I understand is a shareholder of the individual companies.  I am satisfied, as a result, that the plaintiffs therefore have jurisdiction to bring this application pursuant to s 241 Companies Act 1993.

[4]      The general grounds advanced in support of the various applications are first, that the companies in question are unable to pay their debts in terms of s 287

Companies Act 1993, in that pursuant to s 287(c) there has been a receiver appointed with respect to the assets of the individual companies.  It is true that the receivers in each case have been appointed by this Court pursuant to application made by the Financial  Markets Authority (the  FMA),  but  notwithstanding  this  by  analogy it seems to me that certainly the companies in question on all the material which has been placed before the Court are quite unable to pay their debts as due.  Secondly, as I understand it, the plaintiffs rely upon the just and equitable ground contained in s

241(4)(d) Companies Act 1993.

[5]      In  this  case,  the  evidence  before  the  Court  principally  provided  in  a  3

December 2012 affidavit of the first-named plaintiff, John Howard Ross Fisk (Mr Fisk), is to the effect that the group of companies concerned have liabilities owing to various investors of something exceeding $450 million and the only assets of the cmpanies which the appointed receivers had been able to locate to date total some

$11.5 million.

[6]      Mr  Fisk  in  this  affidavit  in  addition  to  highlighting  this  overwhelming shortfall  in  each  of  the  companies,  goes  on  to  add  that  since  the  date  of  the

appointment of the plaintiffs as receivers, little by way of additional assets has been identified.

[7]      Mr Fisk also confirms that, as far as the receivers are able to ascertain, there has been extensive co-mingling of funds within the group of companies and in effect they have run a scheme for investors which could only be described as a ponzi scheme, at least in recent times particularly.

[8]      Before me today, Mr Turkington appeared as counsel for the defendant companies and indicated that his instructions from the companies were simply to abide the decision of the Court.  Certainly no opposition to the present liquidation applications has been filed by any party.

[9]      In addition, Mr Rennie QC appeared before me today as counsel for the FMA and noted that its position is one of support for the liquidation application before the Court.

[10]     Finally, Mr Lennard appeared before me today for Bruce William Tichbon

(Mr Tichbon) one of the investors and creditors of the defendant companies.

[11]     Mr Tichbon’s notice of appearance in support of the present application was late.  Pursuant to r 31.20 High Court Rules I granted leave to Mr Lennard to appear however, and for Mr Tichbon’s appearance in support and supporting affidavit to be accepted and  read.   And  Mr Tichbon  also  supported  the liquidation  application before the Court.

[12]     For the reasons outlined above, I have no doubt here that the companies in question which are before the Court are quite unable to pay their debts and it is appropriate for orders for liquidation to be made in each case.  Orders are to follow.

Liquidators to be Appointed

[13]     The  second  issue  before  the  Court  today  relates  to  the  identity  of  the liquidators to be appointed in the order which is about to follow.

[14]     The present application seeks the appointment of Mr Fisk and David John Bridgman (Mr Bridgman) as liquidators of each of the four defendant companies. As I have already noted they were appointed by this Court as receivers of the various companies some weeks ago.

[15]     As a result, a second application has been placed before the Court pursuant to ss 280 and 286 of the Companies Act 1993 regarding the appointment of Mr Fisk and Mr Bridgman as liquidators.

[16]     Before me today, Mr Rennie QC for FMA raised no issue concerning the appointment of Mr Fisk and Mr Bridgman as liquidators of these companies. Mr Lennard however for Mr Tichbon did raise certain issues.

[17]     Those  issues  were  raised  it  seems  rather  late  in  the  piece.    Indeed,  Mr

Tichbon’s appearance in support and supporting affidavit were dated only today, 17

December 2012.

[18]     As I understand Mr Tichbon’s concern it is first, that there may be some conflict of interest which arises in this matter if Mr Fisk and Mr Bridgman are appointed liquidators.   It is somewhat unclear to me, however, just what shape or form that conflict of interest might potentially take.

[19]     Essentially, as I understand it Mr Tichbon suggests that if Mr Fisk and Mr Bridgman are appointed liquidators, then the group of investors in these companies which is substantial should have the opportunity of considering concerns that he Mr Tichbon has raised which as I understand it have been voiced by Auckland advisers Mr Tichbon has consulted, McDonald-Vague regarding the liquidation of these companies.

[20]     It goes without saying that if indeed the shortfall between amounts invested and the final asset position of these companies is as substantial as it would appear at present, all investors have a major and pressing concern that liquidation proceeds promptly, and in an efficient and cost competitive manner.

[21]     Notwithstanding this, the Court today faces the inevitable position which is that it must decide on the appointment of liquidators to these companies.

[22]     In  my  view,  it  is  appropriate  that  Mr  Fisk  and  Mr  Bridgman  the  prior receivers who no doubt have significant knowledge already of these companies and their complex affairs, are appointed. An order to this effect is to follow.

[23]     As  I  understand  his  major  concern,  however,  Mr  Tichbon  seeks  some additional directions from this Court to allow the various investors of the companies to have an early opportunity to review that appointment and consider whether application might be made to appoint alternative liquidators to all of some of the defendant companies  That possibility remains.  Here, on the limited material I have had an opportunity to consider in the application before me this morning, I do not see any special reasons why one particular creditor, in this case Mr Tichbon, should have a greater opportunity to have his voiced concern adopted by the Court.  As I understand the position, there has already been reasonably widespread website dissemination of material in this case to various members of the investor group. That obviously could continue in the future and Mr Tichbon in particular would have the opportunity to share his concerns with fellow investors.

[24]     Notwithstanding this, I appreciate that these matters have with some haste been sprung upon all parties and the Court this morning.   I am therefore going to reserve leave in the orders I am about to make for any party including Mr Tichbon to approach the Court on 48 hours notice for any additional or alternative directions which  may  be  required  in  this  proceeding.    That,  as  I  see  it,  would  give  an opportunity for additional concerns to be considered in a more measured way at some time in the future if indeed they do arise.

Section 280 Companies Act 1993

[25]     Before the Court also were two further applications.   The first, as I have noted above, was the Application Without Notice for orders under sections 280 and

286 of the Companies Act 1993 brought by Mr Fisk and Mr Bridgman.

[26]     In my view the orders sought in that application are appropriate.  Orders are now made pursuant to paras [1], [2], [3] and [4] of that application.

Investor Confidentiality Issue

[27]     The final application was one made orally on behalf of the plaintiffs pursuant to s 255(4) Companies Act 1993.

[28]     This section provides that the Court may on the application of a liquidator exempt the liquidator from compliance with certain provisions outlined in s 255 or modify the application of those provisions.

[29]     In this regard s 255(2)(c) in particular provides that liquidators are required to prepare a list of every known creditor of the company in question and to send to every known creditor, every shareholder and the Registrar for registration, a report containing a statement of the company’s affairs, proposals for conducting the liquidation, if practicable the estimated date of its completion and a notice explaining the right of  a creditor or shareholder to require the liquidator to call a meeting of creditors under s 314 of the Act.

[30]     Before me, the plaintiffs sought an order to continue to preserve an investor confidentiality arrangement which had been ordered by this Court when receivers were appointed on the application of the FMA.  As I understand the position on this aspect,  various  creditor  investors  in  these  companies  have  major  concerns  to continue this confidentiality arrangement.   I see no reason here why those earlier confidentiality orders made by this Court should not continue once the companies are in liquidation.

[31]     Accordingly, an order is now made that the appointed liquidators to these companies in terms of their duties under s 255 Companies Act 1993 are at all times to keep confidential the list of and identity of the various investor creditors of these companies.

[32]     Leave is reserved however again for any party to approach the Court further on 48 hours notice if additional directions may be sought in this regard.

Conclusion

[33]     In final conclusion of the matters before me, orders are now to be made concerning liquidation of the various defendant companies.

Ross Management Limited (in receivership)

[34]     An  order  is  now  made  placing  the  first  defendant  company,  Ross Asset

Management Limited (in receivership) into liquidation.

[35]     John Howard Ross Fisk and David John Bridgman are appointed liquidators. [36]    This order is timed at 1.01 pm today, 17 December 2012.

Bevis Marks Corporation Limited (in receivership)

[37]     A further order is made placing the second defendant company, Bevis Marks

Corporation Limited (in receivership) into liquidation.

[38]     John Howard Ross Fisk and David John Bridgman are appointed liquidators. [39]    This order is timed at 1.02 pm today, 17 December 2012.

Mercury Asset Management Limited (in receivership)

[40]     A further order is now made placing the third defendant company, Mercury

Asset Management Limited (in receivership) into liquidation.

[41]     John Howard Ross Fisk and David John Bridgman are appointed liquidators. [42]    This order is timed at 1.03 pm today, 17 December 2012.

McIntosh Asset Management Limited (in receivership)

[43]     A further order is made placing the fourth defendant company, McIntosh

Asset Management Limited (in receivership) into liquidation.

[44]     John Howard Ross Fisk and David John Bridgman are appointed liquidators. [45]    This order is timed at 1.04 pm today, 17 December 2012.

[46]     As noted at para [24] above, however, leave is reserved for any party to this proceeding (including Mr Tichbon) on 48 hours notice to approach the Court with a formal application for any additional or alternative directions which may be reasonably required.

Costs

[47]     As to costs with respect to these matters, costs are awarded to the plaintiffs on each of the applications before the Court on a category 2B basis together with disbursements as fixed by the Registrar.

[48]     So far as FMA is concerned, Mr Rennie QC indicated that no costs were justified or sought by the FMA here.  No order for costs is to be made in favour of FMA.

[49]     So far as Mr Tichbon is concerned, he filed an appearance in support of the present application.  In addition he filed a detailed affidavit in this matter, albeit at the last minute.  His concerns with respect to matters before the Court in my view are properly raised and given his support here for the liquidation application which is before the Court, I am satisfied that he is also entitled to an award of costs.

[50]     Costs  on  this  application  are also  awarded  to  Mr Tichbon as  supporting creditor  on  a  category  2B  basis  together  with  disbursements  as  fixed  by  the Registrar.

[51]     One final matter needs  to be addressed.     This is an application by the plaintiffs seeking orders fixing the rates of remuneration of the liquidators.  This is supported by an affidavit of Mr Fisk sworn 10 December 2012.

[52]     Those rates of remuneration for which the liquidators seek approval are set out at para [1](f) of the application and are in line with rates of remuneration which this Court has approved in the past.

[53]     That  said,  an  order  is  now  made  approving  the  liquidator’s  rates  of

remuneration  as  set  out  in  the  affidavit  of  John  Howard  Ross  Fisk  sworn  10

December 2012, subject to s 284 of the Companies Act 1993.

[54]     A further order is made here allowing the liquidators to exercise their powers individually pursuant to s 242 Companies Act 1993.

[55]     For the sake of clarification the orders made in the preceding two paragraphs will relate to the liquidation of each of the four defendant companies noted above.

‘Associate Judge D.I. Gendall’