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Jones v Williams

Jones v Williams

Case [2024] NZHC 891 24 April 2024

Administrator

Deed of Company Arrangement

Corporate Law & Governance

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV2023-404-001826

[2024] NZHC 891

UNDER
Part 19 High Court Rules 2016 and

ss 239AM and 239ADO of the Companies Act 1993

BETWEEN

RICHARD WARWICK JONES and KAREN FRANCES MATTHEWS

Applicants

AND

BRYAN EDWARD WILLIAMS

Respondent

Cont’d

Hearing: 27 September 2023

Appearances:

B Gustafson and K Kommu for Applicants in 2049 proceeding J A McMillan and I Hawkins for Applicants in 1926 proceeding and for Interested Parties in 2049 proceeding

J Marcetic and L J H Norton for Administrator

Judgment:

24 April 2024

Post-hearing submissions:

18 October 2023

JUDGMENT OF ANDERSON J

This judgment was delivered by me on 24 April 2024 at 3.00 pm pursuant to r 11.5 of the High Court Rules 2016.

.…………………………..
Registrar/Deputy Registrar

Solicitors:McFadden McMeeken Phillips, Nelson Chapman Tripp, Auckland
Dentons, Auckland

JONES v WILLIAMS [2024] NZHC 891 [24 April 2024]

CIV-2023-404-002049

UNDERPart 19 High Court Rules 2016, Part 15A Companies Act 1993

IN THE MATTER of an application for orders declaring
invalid or terminated a Deed of Company Administration

BETWEENMICHAEL ANDREW LOOKMAN and 187 BRIDGE TRUSTEES 53 LIMITED
as Trustees of the LOOKMAN FAMILY TRUST
Applicants

AND BRYAN EDWARD WILLIAMS
Respondent

TABLE OF CONTENTS

The applications[1]

Issues[8]

Part 15A[11]

Factual context [20]

Background to the applications[20]

Status of intellectual property[34]

The Administrator’s report under s 239AU of the Act[39]

The DOCA[49]

Dynamics[52]

Lookman Trustees’ application under s 239ACX [56]

The statutory context for creditor claims for voting purposes
within pt 15A[62]
Voting status of parties to shareholder agreements and

convertible loans [69]

Lookman Trustees’ position[69]
Administrator’s position[72]
Jones/Matthews’ evidence[75]
Have any of the investor claimants “received their shares” —
who are shareholders?[79]
What was required for the investor agreements to be valid
contracts?[85]
Effect of illegality[91]
Status of valid share purchase agreements[95]
Application of the above analysis to the shareholder and
convertible loan agreements[98]
Did any of the convertible loan agreements convert?[105]
Obligation to seek directions?[110]
Summary[114]

Interest on creditor claims[116]

Does treatment of interest invalidate the DOCA?[123]

Status of Mollywop claim[126]

Was there an undisclosed voting arrangement in breach of s 239AX?[133]

Conclusions on Lookman Trustees’ application under s 239ACX[146]

Lookman Trustees’ application under s 239ADD [150]

Section 239ADD(2)(a) – information breach?[155]

Section 239ADD(2)(c) – can the deed be given effect without injustice? [175]
Section 239ADD(2)(d) – is the DOCA oppressive or unfairly
prejudicial or unfairly discriminative to one or more of the creditors? [182] Section 239ADD(2)(e) – administrator bias and misconduct?[198] Overall discretion under s 239ADD[202]

Jones/Matthews’ application under s 239AM [203]

Summary[205]

The applications

[1] Design Electronics Ltd (DEL) was placed in voluntary administration under pt 15A of the Companies Act 1993 (Act) on 25 July 2023 by its liquidator after a resolution of creditors passed supporting that step. Mr Bryan Williams was appointed administrator. DEL’s sole director is Mr Warwick Jones. The Companies Office Register shows that Mr Jones and his wife, Ms Karen Matthews each hold 50 per cent of the company.

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 Jones v Williams

Details

AGLC: Jones v Williams [2024] NZHC 891
Case: [2024] NZHC 891
Decision Date: 24 April 2024

CaseChat Overview and Summary

In the case of Jones v Williams, the High Court of New Zealand considered various applications related to the validity and termination of a Deed of Company Arrangement (DOCA) executed for Design Electronics Ltd (DEL), an insolvent company. The key parties involved were the Lookman Trustees, Mr Bryan Williams (the Administrator), and Mr Richard Warwick Jones and Ms Karen Frances Matthews (Jones/Matthews). The Lookman Trustees sought orders to declare the DOCA void or to terminate it, arguing that the vote to approve the DOCA was flawed due to improper voting by non-creditors and the inclusion of interest on claims. They also raised concerns about undisclosed voting arrangements and the overall fairness of the DOCA. Jones/Matthews sought to have their related creditor votes counted.

The court found that the DOCA was not void under s 239ACX of the Companies Act 1993, as the issues raised by the Lookman Trustees did not substantively affect the validity of the DOCA. The court disagreed with the Lookman Trustees' contention that certain investors were shareholders rather than creditors and concluded that the Administrator was correct in estimating their claims for voting purposes. The court also dismissed the application to terminate the DOCA under s 239ADD, finding that the DOCA was not oppressive, unfairly prejudicial, or unfairly discriminatory to any creditors. The court rejected claims of Administrator bias and misconduct, and concluded that even if the DOCA had some flaws, it should not be terminated. Consequently, Jones/Matthews' application to have their votes counted became moot. The court ordered that if the parties could not agree on costs, submissions would be made accordingly.

Orders