Gower - [2020] NZHC 355

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2020-409-106

[2020] NZHC 355

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 Holdings Limited (in receivership)

AND

IN THE MATTER

BETWEEN

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

COLIN ANTHONY LATHAM GOWER and ANDREW JAMES GRACE

Applicants

On the papers:

Counsel:

C R Vinnell for Applicants

Judgment:

3 March 2020

JUDGMENT OF CHURCHMAN J

Background

[1] Colin Gower and Andrew Grace (the applicants) were appointed as receivers and managers of Cone Enterprises (NZ) Limited (in receivership and in liquidation) (Cone), Shake Shed & Co. NZ Limited (in receivership) and Shake Shed & Co. Holding Limited (in receivership) (together “the companies”) on 12 February 2020.

C A L Gower and A J Grace [2020] NZHC 355 [3 March 2020]

[2] The companies are the lessee of some 27 different sites around the country (the locations). The companies operate businesses either directly or through franchisees at the locations. Franchisees occupy some 24 of the 27 locations and approximately 14 of the 24 franchisees are currently still paying rent to the landlords in respect of the locations they occupy.

The applications

[3] The applicants, by interlocutory application without notice dated 28 February 2020 seek orders:

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

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

(c)excusing the receivers from liability for rent and any other payments becoming due under leases of the premises at the various locations set out in the application.

[4] The application is supported by a memorandum of counsel dated 2 March 2020 and an affidavit from one of the applicants, Colin Gower, sworn on 28 February 2020.

[5] The affidavit of Mr Gower sets out the complicated background to this application. Cone was originally the New Zealand franchisee of “Wendy’s” Milkshake and hotdog stores. Cone is owned and controlled by Mr Chang Xi.

[6] Following a dispute with Wendy’s, Cone and its New Zealand franchisee stores were rebranded as “Shake Shed”.

[7] As a result of the rebranding, Wendy’s sued and a settlement was reached. However, the settlement was breached and on 17 December 2019, a judgment for approximately $5.5 million was obtained against Cone, Mr Chang Xi and other entities.

Receivership and liquidation

[8] Contemporaneously with the appointment of the applicants as receivers by Heartland Bank, Cone was placed into liquidation upon the application of the Inland Revenue Department.

[9] The records of Cone are inadequate with many relevant documents unable to be ascertained particularly in relation to leases. During the 14 days following their appointment, the receivers have not been able to obtain an accurate…

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 355
Case: [2020] NZHC 355
Decision Date: 3 March 2020

CaseChat Overview and Summary

The applicants in this case, Colin Anthony Latham Gower and Andrew James Grace, were appointed as receivers and managers of Cone Enterprises (NZ) Limited, Shake Shed & Co. NZ Limited, and Shake Shed & Co. Holdings Limited on 12 February 2020. These companies, which operate businesses through franchisees at various locations around New Zealand, were placed into receivership and liquidation. The applicants sought an order to commence proceedings without notice, dispense with the service of the application and supporting affidavit prior to the order being made, and excuse the receivers from liability for rent and any other payments due under the leases of the premises. The applicants argued that the proceedings needed to be dealt with urgently and that requiring them to be brought on notice would result in an injustice. They also sought to be excused from liability for rent for a period of 25 working days or such further period as the Court directed. The court found that it was appropriate to dispense with the service of the application and supporting affidavit prior to the making of the order and to commence the proceedings by way of an originating application without notice. The court also found that it was in the creditors' interests to facilitate the sale of the franchised business as a going concern, and that excusing the applicants from liability for rent for 15 working days would not materially change the situation for the majority of the landlords. The court therefore made an order granting permission to commence these proceedings by way of originating application without notice, dispensing with service of this application and supporting affidavit prior to the order being made, and excusing the receivers from liability for rent and any other payments due under the leases of the premises for a period of 15 working days from the date of the granting of this order.

Orders