Hollis v Fisher Painters (2017) Limited

[2019] NZHC 3066

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2019-409-000653

[2019] NZHC 3066

UNDER

Part 19 of the High Court Rules and Section 280 of the Companies Act 1993

IN THE MATTER

of an application under section 280 of the Companies Act 1993 for an order that Malcolm Grant Hollis and Wendy Ann Somerville not be disqualified from

appointment as liquidators of Fisher Painters (2017) Limited

BETWEEN

MALCOLM GRANT HOLLIS and WENDY ANN SOMERVILLE

Applicants

AND

FISHER PAINTERS (2017) LIMITED

Respondent

Hearing:	Determined on the Papers
Counsel:	G K Riach for Applicants
Judgment:	22 November 2019

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 22 November 2019 at 5.00 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors:

Harmans Lawyers, Christchurch

HOLLIS & SOMERVILLE (Applicants) v FISHER PAINTERS (2017) LTD [2019] NZHC 3066 [22 November 2019]

[1]    This judgment has been issued under urgency. The applicants apply for the following orders:

(a)permitting this application to be brought under Part 19 of the High Court Rules;

(b)dispensing with service of this application and supporting affidavits; and

(c)granting permission to the applicants to act as liquidators of Fisher Painters (2017) Limited (the company).

[2]The application has been supported by:

(a)a memorandum of counsel dated 21 November 2019;

(b)a joint affidavit of Bronwyn Jean Fisher and Jonathan Clement Fisher, both shareholders and directors of the company, dated 21 November 2019; and

(c)an affidavit of Malcolm Grant Hollis dated 21 November 2019.

[3]    It is appropriate that this application be brought by originating application under Part 19 of the High Court Rules. My research indicates that this has been the case with other applications of this kind and I see nothing in the circumstances of the case that requires a different approach.1

[4]    In relation to the application for an order dispensing with the service, it appears this has also been the approach in other similar cases. I accept that given the intention to put the company into liquidation immediately, there would be practical difficulties directing service on interested parties such as the company’s creditors. Taking my lead from the approach adopted by Cooke J in Somerville and Hollis,2 I propose to

1      Somerville and Hollis [Liquidators of Peter Fletcher Transport Ltd] [2019] NZHC 1189 citing Re Mountainview Developments Ltd (in liquidation) HC Auckland M1730/00, 21 November 2000; and Re Joleen Enterprises Ltd HC New Plymouth CIV-2008-443-485, 3 October 2008.

2      Above n 1.

protect the position of creditors by requiring service of this application and this ruling upon creditors following the applicants’ appointment and giving such creditors leave to apply to set aside the appointments should they wish to do so.

[5]    The substantive application is made under s 280(1)(cb) of the Companies Act 1993. That section provides:

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]    In the present case the potential disqualification arises because the applicants are partners of PricewaterhouseCoopers (PWC) and the firm has provided professional services to secured creditors of the company described in the applicants’ consent to act in the following way:

(a)ANZ Bank New Zealand Limited has a collateral security interest over all present and after-acquired property of the company. PWC provides tax and non-audit services to ANZ Bank New Zealand Ltd.

(b)R & S Trade Group Limited has a collateral security interest over specified goods of the company. PWC provide advisory services to R & S Trade Group Limited. PWC provided an IRD approved service within the previous two years that lets taxpayers pool their provisional tax payments together in an account held by a registered tax pooling intermediary, e.g. the tax pool operated by PWC called Tax Pooling Solutions, to R & S Trade Group Ltd.

1. As to the correct approach to be taken, I again take my guidance from

   Somerville and Hollis at [9] – [11] as follows:

[9]   In terms of the approach the Court should adopt when making an order permitting a person to be a liquidator notwithstanding prima facie disqualification, it is a matter of applying the text of the enactment in light of its purpose. This involves identifying why Parliament decided that such persons would be subject to the presumption that they are disqualified. It is apparent from s 280(1) that Parliament concluded that such a person could nevertheless act as liquidator if the Court so ordered. So the Court needs to ascertain whether the reasons for the prima facie disqualification are present in the particular case.

[10]   The role of liquidator is a statutory role which requires independence. That independence is important as all the creditors and other interested parties should be treated impartially by the liquidator in the exercise of the significant statutory powers and functions. Subsections (ca) and (cb) were inserted within s 280 by amendment in 2006. The provisions were reviewed during the Select Committee process, and changes were made to the wording of the proposed provisions. The Select Committee commented that “these new provisions are intended to prevent a perception that the liquidator may be partial towards either the Company’s creditors or its debtors”. A person from a firm who has had a continuing business relationship with a secured creditor could potentially be seen to favour that creditor.

[11]     I agree with the test to be applied set out by Grice J in Fisk & McMillan v Fargher Construction Limited:

[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. This was the approach taken by Associate Judge Abbott in Re Joeleen Enterprises Ltd.

[8]    I am satisfied that the court should order that the applicants be entitled to be appointed liquidators in the present case because:

(a)both applicants are very experienced and qualified to act as liquidators;

(b)the relationship between PWC and the secured creditors arises solely as a consequence of the provision of professional services by PWC and there is nothing to suggest those professional services related to the affairs of the company. The risk of a conflict of interest, or even the perception of one, is remote;

(c)the disqualifying relationships arise as a consequence of PWC’s broad practice as a leading accounting firm and I would expect the firm is well- resourced to manage any conflict of interest issues that might arise;

(d)the directors and shareholders of the company support the appointment of the applicants as liquidators of the company because of their professional expertise; and

(e)in the event that any creditor considers there is a risk of a lack of independence or concern about the applicants’ ability to carry out their tasks professionally and effectively, they will be given leave to review these orders of the court.

Result

[9]I am satisfied that it is appropriate to make the following orders:

(a)I grant permission to the applicants to commence this proceeding by way of an originating application without notice.

(b)I dispense with service of this application and supporting affidavits prior to these orders being made.

(c)I grant permission to the applicants to act as liquidators of Fisher Painters (2017) Ltd.

(d)I direct that copies of the originating application, supporting affidavits, sealed order and this judgment be served on all known creditors of the company at the same time and in the same manner as the liquidators’ notice of the first creditors’ meeting called in accordance with s 243 of the Companies Act 1993.

(e)Any creditor of the company is granted leave to apply to the court within 10 working days of such service to set aside the applicants’ appointment as liquidators.

[10]The applicants have not sought an order for costs and I therefore make no order.

O G Paulsen Associate Judge