Mason v McKay - [2021] NZHC 1766

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-1265

[2021] NZHC 1766

BETWEEN
DAVID HAMILTON MASON

Plaintiff

AND

ANDREW MCKAY and REES LOGAN

First Defendants

WESTPAC BANKING CORPORATION
Second Defendant

LEONARD MAGINNESS and JARED WAIATA BOOTH

Third Defendants

VINLINK MARLBOROUGH LIMITED

Fourth Defendant

Hearing: 13 July 2021

Appearances:

B O’Callahan and A Cherkashina for Plaintiff No appearance for Defendants (not yet served)

Judgment:

13 July 2021

Reasons:

14 July 2021

REASONS FOR JUDGMENT OF LANG J

[on oral without notice application for interim injunction]

This judgment was delivered by me on 14 July 2021 at 9 am, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date……………

MASON v MCKAY and LOGAN [2021] NZHC 1766 [13 July 2021]

Introduction

[1] The plaintiff, Mr David Mason, is a director and shareholder of Sacred Hill Marlborough Vineyards Limited (SHMVL) and Sacred Hill Vineyards Limited (SHVL). Those companies are involved in the production and sale of wine both domestically and overseas.

[2] The first defendants, Messrs Andrew McKay and Rees Logan (the receivers), were appointed as receivers of both companies on 6 May 2021 by the second defendant, the Westpac Banking Corporation (Westpac).

[3] Both companies are also in voluntary administration under Part 15A of the Companies Act 1993. The third defendants, Messrs Leonard Maginness and Jared Booth, are the companies’ administrators.

[4] The receivers have entered into an agreement to sell the companies’ business and stock to the fourth defendant, Vinlink Marlborough Limited (Vinlink), for the sum of approximately $41 million. That contract is conditional on the expiry of notices that Westpac served on the companies under s 119 of the Property Law Act 2007 (the PLA notices). These required the companies to remedy outstanding defaults under various loan facilities and general security agreements by repaying Westpac the sum of approximately $53 million no later than 13 July 2021. If the companies failed to do so the contract with Vinlink would become unconditional.

[5] Mr Mason believes the sale to Vinlink is for a sum that is considerably less than the market value of the companies’ assets. He also wishes the companies to have an opportunity to redeem Westpac’s securities by repaying Westpac in full before the end of July 2021. They will lose that opportunity if the agreement for sale of their assets is permitted to become unconditional.

[6] At 4.15 pm on 13 July 2021 I commenced hearing an oral application on Mr Mason’s behalf for orders designed to prevent the agreement for the sale and purchase becoming unconditional. At 4.55 pm I made an order requiring the receivers to grant the companies an extension of time to remedy the defaults until midnight on 15 July 2021. With the benefit of hindsight the order should probably have been

directed to Westpac, either in addition to or rather than, the receivers. I therefore vary the order to include Westpac within its ambit. I now give my reasons for making…

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.

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Details

Case: [2021] NZHC 1766
Decision Date: 13 July 2021

CaseChat Overview and Summary

In the case of Mason v McKay [2021] NZHC 1766, the plaintiff, David Mason, sought an interim injunction to prevent the sale of assets of Sacred Hill Marlborough Vineyards Limited and Sacred Hill Vineyards Limited to Vinlink Marlborough Limited from becoming unconditional. The companies were under receivership managed by the first defendants, Andrew McKay and Rees Logan, and the Westpac Banking Corporation had appointed the receivers. The companies were also in voluntary administration. Mr Mason, a director and shareholder of the companies, believed that the sale price was significantly less than the market value of the companies' assets. The court had to decide if it had jurisdiction to intervene in the receivership and if the balance of convenience favoured granting interim injunctive relief.

The court found that there was a serious issue to be tried regarding the sale price and that the balance of convenience favoured granting interim injunctive relief. The court considered that the sale price might be undervalued, and the receivers might have been able to obtain a higher sale price if they had included an assignment of the contract with Mach Flynt. The court also noted that Vinlink had always known it would need to wait until the PLA notices had expired before the agreement with the receivers would become unconditional. Westpac would be in a better position if it could be repaid in full rather than have the sale to Vinlink proceed with the resulting inevitable shortfall. The consequences for Mr Mason if relief was not granted would be significant, as he would have no prospect of regaining control of the companies.

Accordingly, the court made an order requiring the receivers (and now Westpac) to grant the companies a short extension of time within which to comply with the PLA notices. This would enable Mr Mason to persuade Westpac that the companies have a realistic prospect of repaying the debt in full. The matter was listed for mention on Thursday 15 July 2021 at 10 am to determine whether the orders would be extended further.

Orders