McKay - [2019] NZHC 3433

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-002757

[2019] NZHC 3433

UNDER Part 29 of the High Court Rules 2016 and ss 239F and 280 of the Companies Act 1993

IN THE MATTER OF

SUNFRUIT ORCHARDS LIMITED

AND

ANDREW JOHN McKAY and ANDREW JAMES BETHELL

Applicants

Hearing: On the papers

Counsel:

J C Caird and J S Learner for Applicants

Judgment:

19 December 2019

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by Associate Judge Andrew on 19 December 2019 at 3.00 pm
pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar

Date………………………..

RE McKAY & BETHELL [2019] NZHC 3433 [19 December 2019]

Introduction

[1] This is an originating application without notice seeking orders that the applicants, Mr Andrew McKay and Mr Andrew Bethell, of BDO New Zealand Ltd (BDO), may act as joint and several administrators of Sunfruit Orchards Limited (the company), notwithstanding a possible disqualification under ss 239F and 280 of the Companies Act 1993 (the 1993 Act).

Factual background

[2] The company operates as an orchardist in the Hawkes Bay and Waikato regions. It operates across approximately 21 leased properties in both those regions. The company leases land, on which it grows and harvests fruit, predominantly apples, pears and stone fruit. It also leases premises which are used as packhouses for the fruit. The leases are with various different lessors, and each of the leases contains different terms and rental obligations.

[3] The company’s business is seasonal and is at its busiest in summer when the fruit is ripe for picking. The company employs approximately 160 employees. Those employees are currently picking stone fruit, thinning the apple crop, and the apple harvest is due to begin shortly in the new year. During the peak harvest season, the company engages the highest number of staff, with a large proportion coming from overseas to work. Most of the fruit crop is prepared for export to the northern hemisphere, although some of the product is sold domestically.

[4] In November 2018, Mr James Greenway (former BDO partner) and Mr McKay were engaged by the company at the request of the company’s banker, Westpac NZ Ltd (Westpac), as investigating accountants. Mr Bethell has been assisting Mr McKay since Mr Greenway left BDO in June 2019. The engagement was to undertake a review of the company’s financial affairs and to monitor the company’s performance.

[5] Mr McKay has deposed that the company has been under financial pressure for some time and is facing a deterioration in its financial position. Mr McKay’s assessment is that the company is, or may be, insolvent. Following a recent, unsuccessful sales process, on or about 16 December 2019, the applicants were approached by the company’s sole director, Mr John Altham, who indicated his intention to appoint the applicants as joint and several administrators of the company.

[6] Before accepting the proposed appointment as administrators, the applicants considered whether there…

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 McKay

Details

AGLC: McKay [2019] NZHC 3433
Case: [2019] NZHC 3433
Decision Date: 19 December 2019

CaseChat Overview and Summary

In the High Court of New Zealand, the applicants, Andrew John McKay and Andrew James Bethell, sought orders allowing them to act as joint and several administrators of Sunfruit Orchards Limited, despite potential disqualification under sections 239F and 280 of the Companies Act 1993. The applicants, who are partners of BDO New Zealand Ltd, were engaged by the company's banker to act as investigating accountants and to review the company's financial affairs. The applicants proposed to act as administrators due to the company's deteriorating financial position, and sought the court's consent to overcome potential disqualification based on their prior engagements with the company and its banker. The court considered whether the applicants' prior engagements would disqualify them from acting as administrators and whether their appointment would prejudice the company's creditors.

The court found that the applicants' prior engagements did not disqualify them from acting as administrators, as their in-depth knowledge of the company's affairs would enable them to perform their duties more efficiently. The court noted that the applicants' independence and ability to act professionally would not be compromised, and that a new insolvency practitioner would lack the same level of familiarity with the company's business. The court also found that there was no real conflict of interest between the applicants' prior engagements with the company and its banker, as the services provided were unrelated. The court concluded that the applicants' appointment would not prejudice the company's creditors, who had the right to replace the administrators at the first creditors' meeting.

The court granted the applicants' orders, allowing them to act as joint and several administrators of Sunfruit Orchards Limited. The court also ordered that the proceeding be commenced by way of originating application without notice, and that the court file be marked and treated as confidential until the administrators are appointed. The court reserved leave for the applicants to apply further in respect of any ancillary issues arising from the orders made.

Orders