Gower - [2020] NZHC 1605

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2020-409-000106

[2020] NZHC 1605

UNDER section 32 of the Receiverships Act 1993 and Part 19 of the High Court Rules

IN THE MATTER OF

the receiverships of Cone Enterprises (New Zealand) Limited (in receivership and in

liquidation) and Shake Shed & Co NZ

Limited (in receivership) and Shake Shed & Co Holding Limited (in receivership)

AND

IN THE MATTER OF

an application pursuant to s 32 of the Receiverships Act 1993

BETWEEN

COLIN ANTHONY LATHAM GOWER and ANDREW JAMES GRACE

Applicants

Hearing: 6 July 2020

Counsel:

C R Vinnell for the Applicants

Judgment:

7 July 2020

JUDGMENT OF DOOGUE J

Introduction

[1] The applicants, Colin Gower and Andrew Grace, were appointed as receivers and managers of Cone Enterprises (New Zealand) Ltd (in receivership and in liquidation), Shake Shed & Co NZ Ltd (in receivership) and Shake Shed & Co Holding Ltd (in receivership) on 12 February 2020.

GOWER AND GRACE [2020] NZHC 1605 [7 July 2020]

[2] Since 3 March 2020, the applicants have been excused from liability for rent or any other payments becoming due under the companies’ various leases at numerous sites throughout New Zealand.

[3] They seek a further extension of the order made by Mander J on 5 June 2020 excusing them from liability for rent and any other payments becoming due under leases of the premises and the properties listed at [18(b)] of his judgment.1

Background

[4] The background to this matter to date is recorded in [1]-[4] and [7]-[14] (inclusive) of Mander J’s judgment of 5 June 2020, and need not be repeated.

Grounds on which the order is sought

[5] The three companies in receivership are lessees of various retail premises and through informal intercompany arrangements or licences to occupy contained in various franchise agreements, they have rights to occupy those premises as franchisees of food outlets styled as “Shake Shed”.

[6] Mr Gower has deposed in his affidavit dated 1 July 2020 that as a result of the country moving to COVID-19 alert level 4 from 25 March 2020 and remaining at level 3 until 13 May 2020, there has been a major impact on the franchise stores, the leased premises, and the applicants’ ability to deal with the issues arising from the receiverships. Their situation has become worse and less certain as a result. Because there has been no trading during these periods, neither the franchisees nor the applicants have access to funds with which to pay rent.

[7] It is not known whether the majority of the leases contain rent abatement clauses. One lease that has been reviewed does not contain such a clause. Counsel has advised that many of the premises are in shopping malls and it is very common practice amongst mall owners not to have rent abatement clauses for their tenants. The applicants have not been able to obtain assurances in respect of any of the 21 premises that rent…

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 Gower

Details

AGLC: Gower [2020] NZHC 1605
Case: [2020] NZHC 1605
Decision Date: 7 July 2020

CaseChat Overview and Summary

The applicants, Colin Gower and Andrew Grace, were appointed receivers and managers of three companies in receivership on 12 February 2020. The companies were lessees of various retail premises in New Zealand and had rights to occupy those premises as franchisees of food outlets styled as “Shake Shed”. The applicants sought an extension of an order excusing them from liability for rent and any other payments becoming due under leases of the premises. The background to the matter and the reasons for the application were outlined in an earlier judgment by Mander J, and need not be repeated. The applicants sought a further extension of the order made by Mander J on 5 June 2020, excusing them from liability for rent and any other payments becoming due under leases of the premises and the properties listed at [18(b)] of his judgment.

The court was required to decide whether the applicants should be excused from liability for rent and any other payments becoming due under leases of the premises for the period between 30 June and 31 July 2020. The court considered the impact of COVID-19 on the franchise stores, the leased premises, and the applicants’ ability to deal with the issues arising from the receiverships. The applicants had been excused from liability for rent or any other payments becoming due under the companies’ various leases at numerous sites throughout New Zealand since 3 March 2020. The applicants sought a further grace period of 20 working days in respect of all leased premises to negotiate a transaction with a purchaser who would assume all of the Cone Enterprises and Shake Shed franchisor rights. The court considered the interests of the landlords and the potential benefits of selling the franchise businesses as a going concern.

The court was satisfied that orders should be made on the terms sought. The court was satisfied that the only way stakeholders were likely to receive any benefit from the receivership was if the franchise businesses could be sold as a going concern, and it was therefore in the creditors’ interests for that to be facilitated if possible. The court was also satisfied that the majority of the landlords were unlikely to be materially affected by excusing the applicants from their obligations. The court granted dispensation from the requirement of service of the application and supporting affidavits to be in accordance with the High Court Rules 2016. The court was satisfied that there was sufficient nexus between the recipients of the emails and the landlords such that the application would be brought to the attention of the landlords by that medium.

The court made the following orders: (a) Service of this application and supporting affidavits is satisfied by email to the addresses listed in counsel’s memorandum of 6 July 2020. (b) The applicants are excused from liability for rent and any other payments becoming due under leases of the premises at various locations for the period between 30 June and 31 July 2020.

Orders