Madagascar (no 1) 2013 Ltd - [2014] NZHC 385

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2014-409-000120 [2014] NZHC 385

UNDER Part 19 of the High Court Rules and sections 239F and 280 of the Companies Act 1993

IN THE MATTER OF an application pursuant to section 239F of the Companies Act 1993 for an order that Stephen John Tubbs and Colin Anthony Latham Gower not be disqualified from appointment as administrators of MADAGASCAR (NO.1) 2013 LIMITED and MADAGASCAR (NO.2) 2013
LIMITED

EX PARTE STEPHEN JOHN TUBBS and COLIN ANTHONY LATHAM GOWER Applicants

Submissions: 5 March 2014

Appearances: G Garter for Applicants

Judgment: 6 March 2014

JUDGMENT OF ASSOCIATE JUDGE OSBORNE
as to qualification of administrators

The application

[1] Stephen Tubbs and Colin Gower apply for an order under s 239F(2) Companies Act 1993 that they may be appointed administrators of two companies. The companies are Madagascar (No 1) Limited 2013 Limited (“Madagascar (No 1)”)
and Madagascar (No 2) 2013 Limited (“Madagascar (No 2)”).

MADAGASCAR (NO.1) 2013 LTD and MADAGASCAR (NO.2) 2013 LTD EX P TUBBS [2014] NZHC 385 [6 March 2014]

[2] The sole director of Madagascar (No 1) and Madagascar (No 2) intends to resolve today to appoint Messrs Tubb and Latham as administrators of the two companies.

[3] The director prefers administration because it is likely to result in a better return for creditors as a whole than a liquidation would.

[4] In the absence of the orders sought, Messrs Tubb and Gower would be prevented from acting as administrators of the two companies by s 280(1)(ca) of the Act and arguably by s 280(1)(cb) of the Act. This is because, within two years
immediately before the administrations would commence:

BDO Christchurch Ltd and Mr Gower provided professional services to

the companies as investigating accountants; and

Messrs Tubbs and Gower may have had a “continuing business

relationship” with the companies’ bank, ANZ National Bank Ltd (ANZ).

[5] The Court has also been asked to grant leave to bring the application by way of an originating application.

The relevant law

[6] Section 280 of the Act provides:

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:

…

(ca) a person who has, or whose firm has, within the 2 years immediately before the commencement of the liquidation, provided professional services to the company, 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:

(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…

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 Madagascar (no 1) 2013 Ltd

Details

AGLC: Madagascar (no 1) 2013 Ltd [2014] NZHC 385
Case: [2014] NZHC 385
Decision Date: 6 March 2014

CaseChat Overview and Summary

In the case of Madagascar (No 1) 2013 Ltd, Stephen John Tubbs and Colin Anthony Latham Gower applied for an order that they may be appointed administrators of two companies, Madagascar (No 1) 2013 Limited and Madagascar (No 2) 2013 Limited. The director of both companies intended to resolve to appoint the applicants as administrators due to the anticipated better return for creditors through administration rather than liquidation. However, the applicants would be disqualified from acting as administrators under section 280(1)(ca) and (cb) of the Companies Act 1993, due to their prior professional services and potentially a continuing business relationship with the companies. The applicants sought an order under section 239F(2) of the Act for an exemption from disqualification.

The court considered whether the applicants' prior involvement with the companies compromised their independence and ability to carry out their role effectively. The court noted the importance of the administrators' knowledge of the company, built up through their role as investigating accountants, to assist them in carrying out the administration more quickly and efficiently. The court referred to the case of Icon Digital Entertainment Ltd v Westpac New Zealand Ltd, where the administrators were appointed despite potential disqualifications.

The court concluded that there was no risk to the applicants' independence and ability to carry out their role professionally and effectively. The prior involvement of the applicants was likely to enable the administration to take place more quickly and efficiently than otherwise. The court granted the application and ordered that Stephen John Tubbs and Colin Anthony Latham Gower may be appointed as administrators of Madagascar (No 1) 2013 Ltd and Madagascar (No 2) 2013 Ltd. The application and a copy of the order shall be served on all creditors notified of the first meeting of creditors, and leave was reserved to any creditor to apply to the Court within 10 working days of service of the order to set aside the appointment of the applicants as administrators. The applicants' reasonable solicitor/client costs of this application were ordered to be an expense incurred by the applicants in carrying out their duties as administrators.

Orders