Go to Collection Limited - [2022] NZHC 3471

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2022-409-000590

[2022] NZHC 3471

UNDER Part 15A and Part 19 of the Companies Act 1993

IN THE MATTER

of GO TO COLLECTION LIMITED

(Administrators Appointed)

AND

of an application by MALCOLM GRANT HOLLIS and JOHN HOWARD ROSS FISK

as Administrators of GO TO COLLECTION LIMITED

Hearing: On the papers

Counsel:

K M Paterson and M A Powell for Applicants

Judgment:

16 December 2022

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 16 December 2022 at 11.00 am pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

RE GO TO COLLECTION LIMITED [2022] NZHC 3471 [16 December 2022]

Introduction

[1] Go to Collection Ltd was placed into voluntary administration on 24 November 2022. The applicants, Malcolm Hollis and John Fisk (the administrators) were appointed joint and several administrators. They now apply on a without notice basis for orders:

(a)under section 239AT(3) of the Companies Act 1993 (the Act), extending the period by which the administrators must convene the watershed meeting for the company from 22 December 2022 to 31 January 2023; and

(b)under section 239Y(4) of the Act, extending the period within which notice of the termination of a contract of employment is required to be given from 22 December 2022 until 31 January 2023, with wages and salary to be treated as a cost of the administration.

Background

[2] The company operated restaurants around the country. It employed approximately 85 employees across these restaurants. The administrators have since ceased operations at three venues, and one had ceased trading prior to the administration.

[3] The company has significant secured and unsecured debts but the administrators’ current view is that the best possible outcome will be to sell the company's business(es) as this is likely to achieve a better outcome for creditors than an immediate liquidation. To this end, the administrators have continued to allow the company to trade at several venues.

[4] The administrators expect that the company will be able to continue to pay its employees and trade creditors for the period to 31 January 2023, and that the financial position of the company will not change significantly over the period. Rent in respect of the premises that are still operating is up to date.

[5] The administrators have called for offers for the purchase of the assets of the company, which are principally the restaurant businesses. Offers have been received and are being assessed.

[6] There is a requirement in s 239AT of the Act that the administrators convene a watershed meeting. Under s 239AV of the Act the watershed meeting must be held within five working days following the “convening period” for the company. In this case, the convening period is from 24 November 2022 to 22 December 2022.

[7] The administrators say that while they have endeavoured to progress the administration as quickly as possible, and still hope to have the watershed meeting…

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.

Continue reading Go to Collection Limited

Details

AGLC: Go to Collection Limited [2022] NZHC 3471
Case: [2022] NZHC 3471
Decision Date: 16 December 2022

CaseChat Overview and Summary

The administrators of Go to Collection Ltd, Malcolm Grant Hollis and John Howard Ross Fisk, applied to the High Court of New Zealand for an extension of the convening period for a watershed meeting and an extension of the period within which notice of the termination of a contract of employment is required to be given. The company had been placed into voluntary administration on 24 November 2022 and the administrators sought an extension of the convening period from 22 December 2022 to 31 January 2023. They also sought an extension of the period within which notice for the termination of the company’s employment contracts is required to be given from 22 December 2022 until 31 January 2023.

The court considered the legal issues of whether to grant an extension of time for the administrators to convene a watershed meeting and an extension of the period within which notice of termination of a contract of employment is required to be given. The court considered the objects of voluntary administration, the provisions of the Companies Act 1993, and previous cases on the matter.

The court found that it was appropriate to grant an extension of time for the administrators to convene a watershed meeting for several reasons. The extension sought was short, being a period of one month. The administrators had formed the view that the option that would provide the best return to creditors was for the businesses of the company to be sold as going concerns where possible. They had only recently received offers for purchase and needed more time to consider them. The holiday period would make it difficult to progress the administration with creditors, as at least some creditors (or their advisors) were likely to be unavailable over the holiday period. The alternative to a sale or Deed of Company Arrangement was likely to be liquidation and the administrators considered that would involve a worse outcome for creditors. The extension was likely to be in the best interests of the creditors as a whole, because it maximised the chances of the businesses being sold as a going concern.

The court also found it appropriate to grant an extension of the period within which notice of termination is to be given under s 239Y(3) of the Act. The extension sought was for the same period as the convening period (pursuant to s 239AT of the Act): that is, until 31 January 2023. The same considerations applied to this further application for an extension, and the court was satisfied it was appropriate to make the orders sought.

The court made orders in terms of the draft orders filed. The convening period was extended under s 239AT(3) of the Act to an end date of 31 January 2023 instead of 22 December 2022. The period of time in which the applicants were required to give notice of termination of a contract of employment under s 239Y(3) of the Act was extended under s 239Y(4) of the Act to an end date of 31 January 2023, instead of 22 December 2022, with any wages or salary that accrue under such contracts being an expense of the administration under sch 7, cl 1(1)(b) of the Act. The applicants’ reasonable costs of this application would be paid out of the assets of the company. Leave was reserved to apply further.

Orders