Hollis
[2019] NZHC 1654
•16 July 2019
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2019-409-000382
[2019] NZHC 1654
BETWEEN MALCOLM GRANT HOLLIS AND WENDY ANN SOMERVILLE
Applicants
Hearing: On the papers Appearances:
B M Russell and B G Frowein for Applicants
Judgment:
16 July 2019
JUDGMENT OF DUNNINGHAM J
[1] By interlocutory application dated 8 July 2019, the applicants apply for the following orders:
(a)that this application is permitted to be made by way of an originating application and without notice;
(b)that notwithstanding s 280(1)(cb) of the Companies Act 1993 (the Act), Malcolm Grant Hollis and Wendy Ann Somerville of PricewaterhouseCoopers (Proposed Liquidators) may be appointed as joint and several liquidators of Energy Group Ltd (Energy Group) and Energy (SI) Ltd (Energy (SI));
(c)a copy of this application and orders of the Court are to be served on all known creditors of Energy Group and Energy (SI) at the same time and
HOLLIS AND SOMERVILLE [2019] NZHC 1654 [16 July 2019]
in the same manner as the liquidators’ first report under s 255 of the Act;
(d)the creditors of Energy Group and Energy (SI) shall have leave to apply to the Court within 5 working days of service to set aside the Proposed Liquidators’ appointment as liquidators of Energy Group and Energy (SI); and
(e)the Proposed Liquidators’ reasonable solicitor-client costs and disbursements of this application are to be an expense incurred by the Proposed Liquidators in carrying out their duties as liquidators of Energy Group and Energy (SI).
[2] The application is supported by a memorandum of counsel dated 8 July 2019 and an affidavit of Wendy Ann Somerville affirmed on 8 July 2019.
Should this application proceed by way of an originating application and without notice?
[3] I consider it is appropriate that this application be brought by originating application under pt 19 of the High Court Rules 2016 as has been the case with other applications of this kind.1
[4] I also accept it is appropriate for the application to proceed without notice on the creditors. Personal service of this application on the creditors of Energy Group and Energy (SI) would result in cost and delay. In any event, there is no prejudice to the creditors as they will be served with a copy of this application and the Court’s orders at the same time and will have leave to apply to the Court within five working days of service, to set aside the Proposed Liquidators’ appointment.
1 Re Blanchett HC New Plymouth CIV-2008-443-485, 3 October 2008; and Re Somerville [2019] NZHC 1189.
Application under s 280 Companies Act 1993
[5] Under s 280 of the Act certain identified persons may not be appointed to act as a liquidator of a company. In the present case, the following sections are relevant:
280 Qualifications of liquidators
(1)Unless the court orders otherwise, none of the following persons may be appointed or act as a liquidator of a company:
…
(cb) a person who has, or whose firm has, within the 2 years immediately before the commencement of the liquidation, had a continuing business relationship (other than through the provision of banking or financial services) with the company, its majority shareholder, any of its directors, or any of its secured creditors, unless, within 20 working days before the appointment of the liquidator, the board of the company resolves that the company will, on the appointment of the liquidator, be able to pay its debts and a copy of the resolution is delivered to the Registrar for registration:
[6] Section 286(4) provides that a court may order that a person may be appointed and act, or may continue to act, as liquidator, notwithstanding the provisions of s 280. That is what is sought in the present case, because a potential disqualification arises because the applicants are partners of PricewaterhouseCoopers (PWC). As Ms Somerville explains in her affidavit:
[9]We acknowledge that we may be precluded from acting as a result of section 280(1)(cb) of the Companies Act 1993 unless the Court grants the orders sought in this application. This is because PricewaterhouseCoopers may have had a “continuing business relationship” with secured creditors of Energy Group and Energy SI within the two years immediately before the liquidation would commence.
[10]The details of the relevant business relationships are as follows:
(a)Within two years immediately before the liquidation would commence, PricewaterhouseCoopers had a continuing business relationship with a secured creditor of Energy Group Limited, namely, Fleet Partners NZ Limited (Fleet Partners).
(b)Within two years immediately before the liquidation would commence, PricewaterhouseCoopers had a continuing business relationship with secured creditors of Energy (SI) Limited, namely:
(i)R & S Trade Group Limited (R & S Trade Group); and
(ii)Scottish Pacific (BFS) Pty Ltd, being a member of the same group of companies as a secured creditor of Energy (SI) Limited, namely, Scottish Pacific Business Finance Limited.
[7] In deciding whether it is appropriate to allow the applicants to be appointed as liquidators notwithstanding the prohibition in s 280(cb), I accept the test to be applied is that set out in Fisk v Fargher Construction Ltd:2
[24] It is an important safeguard that applicants who are conflicted are not appointed as liquidators without leave of the Court. The question is, whether a conflict of interest due to a continuing business relationship presents a risk that the applicants independence and ability to carry out their tasks professionally and effectively could be compromised in the particular circumstances of the case.
[8] In the present case, having regard to that test, I am satisfied that the Court should order that the applicants are able to be appointed liquidators in this case. In particular, I note:
(a)While PWC has provided tax and non-audit services to Fleet Partners, neither of the two applicants have been involved in providing these services, nor will they be involved in providing those services in the future.
(b)None of the services provided to Fleet Partners relate to Energy Group, its directors or shareholders.
(c)PWC provides advisory services to R & S Trade Group. It also provided an IRD approved service within the previous two years called Tax Pooling Services, which allows taxpayers to pool their provisional tax payments together in an account held by a registered tax pooling intermediary such as PWC, and PWC also provides non-audit services to members of the Scottish Pacific Group of Companies (a different member to the secured creditor of Energy (SI)). However, the
2 Fisk v Fargher Construction Ltd [2018] NZHC 441.
applicants themselves have not been involved in providing services to R & S Trade Group or members of the Scottish Pacific Group of Companies.
(d)None of the services provided by PWC relate to Energy (SI), its directors or shareholders and no person at PWC who is involved in the provision of services to R & S Trade Group or Scottish Pacific will be involved in the liquidation of Energy (SI).
[9] For these reasons, I am satisfied there is no risk of lack of independence by the applicants such as would compromise their ability to carry out their tasks professionally and effectively. Accordingly, for these reasons, the orders set out at [1] are made.
Solicitors:
Lane Neave, Christchurch
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