ML Trustees 2711 Limited v Khov

[2015] NZHC 276

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2014-404-3374 [2015] NZHC 276

UNDER	the Companies Act 1993
IN HE MATTER OF	EASY GROUP LIMITED (IN LIQUIDATION)
BETWEEN	ML TRUSTEES 2711 LIMITED Applicant
AND	STEVEN KHOV and DAMIEN GRANT Respondents

Hearing:	25 February 2015
Counsel:	K T Glover for ML Trustees 2711 Limited B J Norling for Messrs Khov and Grant
Judgment:	25 February 2015

JUDGMENT OF HEATH J

This judgment was delivered by me on 25 February 2014 at 3.30pm pursuant to Rule

11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:
Metro Law, Auckland
Waterstone Insolvency, Auckland
Counsel:

K T Glover, Auckland

ML TRUSTEES 2711 LIMITED v KHOV and GRANT [2015] NZHC 276 [25 February 2015]

Introduction

[1]      Easy Group Ltd was purportedly put into liquidation by a special resolution of its shareholders on 16 January 2014, by the appointment of Messrs Khov and Grant as liquidators.1   The special resolution had been signed by Mr Laurence Pope (who owned one share in the company), ostensibly on his own behalf and as a trustee of the Osarus Trust.  The trustees of that Trust, Mr Pope and ML Trustees 2711 Ltd (ML Trustees), owned the remaining 99 shares.

[2]      ML Trustees disputed Mr Pope’s authority to bind the Trust in executing the special resolution.   It applied to this Court for an order declaring the resolution invalid.   Somewhat inconsistently, a declaration was also sought that the office of liquidator was vacant and appointment of another named person as liquidator.2

[3]      In an affidavit sworn in support of the application, the sole director of ML Trustees, Mr Hemphill, did not dispute that the circumstances justified a special resolution putting Easy Group Ltd into liquidation.   His concern was with the appointment of Messrs Khov and Grant.  Mr Hemphill said that his objections were based on their reputation in the commercial community; particularly the way in which Messrs Khov and Grant were perceived to carry out duties as liquidators.

[4]      An application for security for costs was made by Messrs Khov and Grant. That was set down for hearing on 2 March 2015.   Timetabling directions for that application were made by Venning J, on 22 January 2015.  There was no compliance with those directions.  For that reason, the proceeding was listed before me in the Duty Judge List today.

The substantive application

[5]      In a joint memorandum filed yesterday, Mr Glover, for ML Trustees and

Mr Norling,  for  Messrs  Khov  and  Grant,  indicated  that  ML Trustees  was  now satisfied that Easy Group Ltd had validly been put into liquidation and did not wish

1      Companies Act 1993, s 241(2)(a).

2      Liquidation is commenced by the appointment of liquidators: s 241(1) of the Companies Act

1993. An invalid appointment would invalidate the liquidation.

to pursue its substantive application.   As a result, the application for security for costs was rendered redundant.

[6]      Nevertheless, having had their appointment put in issue in this Court, Messrs Khov and Grant wish to obtain an order confirming the validity of their appointment, in anticipation of other steps they wish to take in the liquidation.  They are fearful that such steps could be compromised, if their status were subsequently challenged successfully by some other party.

[7]      I indicated to counsel that I was not prepared to make a confirmation order without a proper application and argument.  The validity of the appointment of the purported liquidators goes to whether the company is, in fact, in liquidation.3

[8]      I advised counsel that I would consider the procedural ramifications of what was proposed and give directions this afternoon.

[9]      I have come to the view that it would be preferable for a separate proceeding to be commenced by Messrs Khov and Grant, in which a declaration of valid appointment is sought.   That procedure was followed in Rodewald v Aqua- Agriculture Farms Ltd,4  in which the appointed liquidator sought judicial confirmation of his appointment when an issue arose over the failure to state the time of the appointment of the liquidator in a special resolution.5

[10]     So  far  as  the  present  proceeding  is  concerned,  I  make  the  following directions:

(a)       On the basis of ML Trustee’s indication that intends to withdraw the substantive application, that application is dismissed.

(b)      In  consequence,  the  application  for  security  for  costs  brought  by

Messrs Khov and Grant is dismissed.

3      For example, see Rodewald v Aqua-Agriculture Farms Ltd [2002] 3 NZLR 501 (CA) at paras

[15] and [27]–[30].

4      Rodewald v Aqua-Agriculture Farms Ltd [2002] 3 NZLR 501 (CA).

5      See s 241A(1)(a) of the Companies Act 1993.

(c)       No order as to costs.

[11]     I record that the parties have agreed that costs lie where they fall on the basis that ML Trustee will support the validity of the liquidators’ appointment on the proposed application for a confirming declaration which will be made separately. Mr Glover confirmed that position in open Court today.

[12]     The hearing scheduled for 2 March 2015 is vacated and appearances are excused. This proceeding should now be regarded as at an end.

The liquidators’ proposed application

[13]     I give the following directions to the liquidators in relation to their proposed application for a declaration confirming their appointment:

(a)      An originating application and affidavits in support shall be filed and served by 5pm on 27 February 2015.

(b)On or before 4 March 2015, an application for directions as to service shall be filed.

(c)      It will be for Mr Norling, in conjunction with Messrs Khov and Grant, to determine the names of the persons who should be served.   As presently advised, I would expect the list to include all secured creditors, and all proved creditors, whether preferential or ordinary. In addition, ML Trustee and Mr Pope should be served, as shareholders.    I  would  also  expect  the  Official Assignee  and  the Registrar of Companies to be served.

(d)      The   application   for   directions   shall   address   mode   of   service.

Depending upon the way in which the liquidators have been communicating with those involved in the liquidation it may be that could be done by way of ordinary post or email.

[14]     When filing the new proceeding, Mr Norling should draw the Registrar’s attention to this judgment and to the directions I have made.  I consider that it would be appropriate for the application for directions as to service to be referred to an Associate Judge in the first instance.   There is also jurisdiction for an Associate

Judge to deal with a substantive application of this type.6

P R Heath J

Delivered at 3.30pm on 25 February 2015

6      Jurisdiction exists under s 26I(2)(e) of the Judicature Act 1908, by reference to Part 16 of the

Companies Act 1993. See also, Companies Act 1993, s 284(1)(g).