Moore v Tasman Dairy Producers Limited (in liquidation)

[2013] NZHC 563

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-404-916 [2013] NZHC 563

BETWEEN  CHRISTOPHER HAMISH MOORE Applicant

ANDTASMAN DAIRY PRODUCERS LIMITED (IN LIQUIDATION) AND KIWI YOGHURT COMPANY LIMITED (IN LIQUIDATION)

Respondents

Hearing:         18 March 2013

Counsel:         S G Moore for Applicant

D M Hughes for Respondents

Judgment:      21 March 2013

JUDGMENT OF KEANE J

This judgment was delivered by  on  21 March 2013 at 12pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar

Date:

Solicitors:

Haigh Lyon, Auckland

Kensington Swan, Auckland

CHRISTOPHER HAMISH MOORE V TASMAN DAIRY PRODUCERS LIMITED (IN LIQUIDATION) AND KIWI YOGHURT COMPANY LIMITED (IN LIQUIDATION) HC AK CIV 2013-404-916 [21 March 2013]

[1]      In 2008 Kiwi and Tasman were incorporated to manufacture and distribute Piako yoghurt. Tasman manufactured bulk yoghurt, which Kiwi purchased and flavoured and packaged. Kiwi held the trade mark.

[2]      In  mid 2012 Tasman obtained a loan from KOneWOne, on the basis that KOneWOne might convert the loan into shares in both Tasman and Kiwi. WHK Accountants, Auckland were engaged to review both companies and, in a report dated 12 October 2012, concluded that both were effectively insolvent.

[3]      On 29 October 2012 the shareholders and directors of the two companies decided to assign the trade mark and related intellectual property rights to Hauraki Dairy Limited, which was incorporated by KOneWone the following day. Hauraki's sole director is Christopher Moore. On 13 February 2013, as a result of shareholder resolutions, Tasman and Kiwi went into liquidation.

[4]      Hauraki  now intends to trade under the Piako name and to engage a former Tasman shareholder and director, Shaun Jacka, as a sales representative. There is the prospect  that  a  Tasman  shareholder,  Grant  Mathewson,  or  his  nominee,  may purchase Hauraki shares.

[5]      Neither Mr Jacka, nor Mr Mathewson, is to have any part in controlling Hauraki. But Mr Moore is concerned that unless they have the permission of this Court, even the limited parts they are to play may expose him to personal liability for Hauraki's debts.

Phoenix company regime

[6]      Hauraki has been incorporated within five years of the date of liquidation of the two failed companies, Tasman and Kiwi. It has not taken their names. But it does intend to trade, as they did, as Piako and is to be deemed, therefore, a phoenix

company.[1]

[1] Companies Act 1993, s 386B(1), (2).

[7]      The result is that no director of Tasman or Kiwi may be a director of Hauraki or play any part in its promotion, formation or management without the permission of this Court, subject to three exceptions which do not apply.[2] That may not apply to Mr Mathewson, who appears only to have been a Tasman shareholder. It does apply to Mr Jacka, who was both a director and a shareholder.

[2] Section 386A(1).

[8]      Mr Moore's concern that, if Hauraki engages  Mr Jacka especially, he as Hauraki's sole director might become liable for its debts, may well be academic. Mr Moore could only become liable if, in managing Hauraki, he acts or is willing to act on the instructions of Mr Jacka, knowing that Mr Jacka is contravening the Phoenix

company rule.[3]  That appears to be unlikely, but I will assume that there is that

possibility.

[3] Section 386C(1).

[9]      The  issue  then  is  whether,  if  Mr  Jacka  especially plays  any part  in  the promotion, formation or management of Hauraki, that could offend the purposes of the Phoenix company regime in one or both of two ways. Might Mr Jacka, or Mr Mathewson, have been privy to selling to Hauraki the Piako trade mark, and related intellectual property, at an undervalue? Might the Tasman and Kiwi creditors extend credit to Hauraki without knowing that Mr Jacka and Mathewson may have been involved in its formation and management?

[10]     These  two  risks  must  always  be  assessed  on  a  case  by  case  basis.  As

McKenzie J said in Groves v TSSN Ltd (in liq):[4]

If the business of a failing company can be sold at market value that will generally be in the interests of creditors. It is not unusual, in the sale of a business, for the purchaser to be granted the right to use the business name, as part of the goodwill of the business which is being purchased. Sometimes, too, the involvement of key personnel may contribute to the value of the business, which a purchaser will wish to retain.

[4] Groves v TSSN Ltd (in liq) [2012] 1 NZLR 111 at [31].

[11]     The purpose of the phoenix company regime, as McKenzie J then said, is to ensure that where those risks are not insuperable, 'such arrangements ... be entered

into, under appropriate supervision and controls'; and in this case, I am satisfied, that is all that is called for.

Conclusions

[12]     First, Mr Moore was not a director, nor was he involved in the management, promotion or formation of Tasman and Kiwi. He only became involved when they approached him and his partner for finance, and the loan they obtained came not from him but from KOneWone. He will retain control of Hauraki and will not be subject to the control of either Mr Jacka or Mr Mathewson.

[13]     Second, Hauraki, though it will trade under the Piako brand and have the benefit of the trade mark and related intellectual property, obtained both on the face of it at market value. Tasman's and Kiwi's liquidators have assessed how those assets were valued and are satisfied the values are likely to have been fair, more especially as the first ranking charge holder, the ANZ Bank, did not consent but did not oppose the sale.

[14]    Third, Mr Moore has advised Tasman's and Kiwi's creditors, and its own suppliers, that Hauraki is a completely separate entity. The liquidators have gone further. They have given the creditors Mr Moore's application and the affidavits, without the exhibits, but made clear that creditors could also have the exhibits. Two creditors, whose debts come to some 12 per cent of the total creditor pool, have asked  for  the  exhibits.  Neither  they  nor  the  remaining  creditors  advised  the liquidators by 13 March 2013, as they were asked to do, that they opposed this application.

[15]     I make the order applied for permitting Mr Jacka and Mr Mathewson to be concerned with and to take part in the promotion, formation and management of

Hauraki. No issue arises as to costs.

P.J. Keane J