Myriad International Limited v Aegis Charters Limited
[2024] NZHC 3466
•20 November 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-2567
[2024] NZHC 3466
UNDER the Companies Act 1993 ss 287 and 289 IN THE MATTER OF
an application for the liquidation of a company
BETWEEN
MYRIAD INTERNATIONAL LIMITED
Plaintiff/Applicant
AND
AEGIS CHARTERS LIMITED
Defendant/Respondent
Hearing: On the papers Appearances:
Oscar Ward for the Applicant
Judgment:
20 November 2024
JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
[Application for the appointment of an interim liquidator]
This judgment was delivered by me on 20 November 2024 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar
Solicitors:
Urlich Milne Lawyers Limited, Epsom, Auckland, for the Plaintiff/Applicant
Copy for:
Khov Jones Limited, North Harbour, Auckland
MYRIAD INTERNATIONAL LIMITED v AEGIS CHARTERS LIMITED [2024] NZHC 3466 [20 November 2024]
Introduction
[1] The plaintiff, Myriad International Ltd, is applying to put the defendant company, Aegis Charters Ltd, into liquidation. The statement of claim for putting the defendant into liquidation was filed by the plaintiff on 17 October 2024.
[2] On 12 November 2024 the plaintiff has applied by interlocutory application without notice for the appointment of an interim liquidator of the defendant pursuant to s 246 of the Companies Act 1993.
Background and material facts
[3] The defendant purchased a vessel, Kiwa II (MNZ 130170), (the vessel) on 11 April 2023. The vessel is a 60 foot motor vessel which can host up to 55 charter guests for charters in the Waitemata Harbour and the Hauraki Gulf.
[4] The purchase price was $340,000 and a deposit of $60,000 was paid on settlement. The balance of the purchase price, $280,000, was funded by a loan from the plaintiff company to the defendant. A term loan agreement on an ADLS form was entered into on 15 November 2023 (the term loan agreement) the relevant terms of which were:
(a)a loan amount of $280,000;
(b)minimum monthly repayments of $3,642.14 comprising of principal and interest at the lower interest rate;
(c)Duncan Leonard Hill, a director of the defendant (Mr Hill), signed the term loan agreement as guarantor;
(d)security under the term loan agreement was the vessel itself.
(e)the plaintiff was to maintain an insurance policy on the vessel and the defendant was responsible for payments relating to the insurance;
(f)the defendant was to maintain the berthage of the vessel at Z Pier berth 40, Westhaven Marina, under a sublease arrangement, and the defendant was responsible for payments for berthage when due and payable;
(g)the defendant agreed to be bound by and comply with the Westhaven Marina’s rental agreement and not do anything which might jeopardise the berthage of the vessel;
(h)the defendant undertook at all times to adhere to the vessel’s Maritime Transport Operator Plan and its maintenance plan and meet all conditions under the Maritime Transport Operator’s certificate.
[5] The defendant defaulted in making monthly payments under the term loan agreement and also defaulted in paying berthage and insurance payments. On 23 September 2024 the plaintiff’s solicitors served the defendant with a statutory demand seeking repayment of the balance of the monies owing under the term loan agreement, totalling $280,813.71 made up of $261,585.37 being the balance of monies owing under the loan, and $19,228.34 being insurance premiums and berthage costs owing.
[6] The statutory demand was served on 24 September 2024 and was not complied with, resulting in the plaintiff applying to put the defendant into liquidation based on the unremedied statutory demand.
Legal Principles
[7]Section 246(1) of the Companies Act provides:
246 Interim liquidator
(1)If an application has been made to the court for an order that a company be put into liquidation, the court may, if it is satisfied that it is necessary or expedient for the purpose of maintaining the value of
assets owned or managed by the company, appoint a named person, or an Official Assignee for a named district, as interim liquidator.
(2)Subject to subsection (3), an interim liquidator has the rights and powers of a liquidator to the extent necessary or desirable to maintain the value of assets owned or managed by the company.
(3)The court may limit the rights and powers of an interim liquidator in such manner as it thinks fit.
(4)The appointment of an interim liquidator takes effect on the date on which, and at the time at which, the order appointing that interim liquidator is made.
(5)The court must record in the order appointing the interim liquidator the date on which, and the time at which, the order was made.
(6)If any question arises as to whether on the date on which an interim liquidator was appointed an act was done or a transaction was entered into or effected before or after the time at which the interim liquidator was appointed, that act or transaction is, in the absence of proof to the contrary, deemed to have been done or entered into or effected, as the case may be, after that time.
[8] Rule 31.23 of the High Court Rules 2016 provides that an application to appoint an interim liquidator may be made by anyone who is entitled to apply for the appointment of a liquidator under s 241(2)(c) of the Companies Act. This includes a creditor of the company.
[9] To appoint an interim liquidator, there must first be an application for an order that the company be put into liquidated; that application must be likely to succeed; and the other circumstances of the case must justify the appointment of an interim liquidator.1 This latter requirement has been described as establishing a “relatively low threshold”.2
[10] In determining whether an interim liquidator should be appointed, the Court will ask whether the company’s assets are in jeopardy, whether the status quo should be maintained and whether the interests of creditors are safeguarded.3 But this is not an exhaustive list of factors — it is only a “useful litmus test”.4 The controlling
1 Eden Crescent Ltd (in liq) v First City Trust No 2 Ltd (2006) 3 NZCCLR 456 (HC) at [26]; and
Landbank Ltd v NZ Catering Supplies Ltd (2006) 3 NZCCLR 936 (HC) at [4].
2 Carter Holt Harvey v Timbalok New Zealand Ltd (1998) 11 PRNZ 435 (HC) at 438.
3 Robert Bryce & Co Ltd v Chicken & Food Distributors Ltd (1990) 5 NZCLC 66,648.
4 Shen v An Ying International Financial Ltd HC Auckland CIV-2006-404-3088, 28 July 2006 at [15].
principle is that interim liquidators will be appointed if thought necessary to protect private interests of creditors or where the public interest requires an appointment.5
[11] In Best Invest NZ Company Ltd (in interim liq) v Japan Business Consulting Company Ltd,6 Associate Judge Bell made the following observations regarding the appointment of interim liquidators.
[11] The appointment of interim liquidators is a drastic remedy. Once interim liquidators are appointed, it is almost inevitable that a liquidation order will be made. Applications to appoint interim liquidators must therefore be considered with care and should not be made lightly. In most applications, the plaintiff normally has a straightforward case on the substantive merits. In the typical case the plaintiff is indisputably a creditor and there are clear signs of insolvency. In such cases the court’s main inquiry is whether the appointment of interim liquidators is necessary or expedient for the purpose of maintaining the value of assets owned or managed by the company. A sound case on the substantive merits is a prerequisite for any application to appoint interim liquidators. That is required to avoid any miscarriage of justice in appointing interim liquidators. If the substantive proceeding should ultimately fail, damage to the business caused by the appointment of interim liquidators may be irreparable.
Grounds for the application
[12] The grounds set out in the application for appointment of an interim liquidator are:
(a)it is necessary or expedient for the purpose of maintaining the value of the assets owned or managed by the defendant;
(b)there is a valid application to put the defendant company into liquidation and a likelihood that the application would succeed; and
(c)there is a need for interim control of the defendant company pending an order putting the defendant into liquidation;
(d)the principal asset of the defendant is a maritime vessel which is at serious risk of damage;
5 At [13].
6 Best Invest NZ Company Ltd (in interim liq) v Japan Business Consulting Company Ltd
[2019] NZHC 1037.
(e)there is a serious risk to public safety if the defendant is allowed to continue operating charters on the vessel.
[13] Mr Ward, for the plaintiff, refers to the affidavit of Mr Phillip Andrew Jones sworn in support of the application, which asserts the following concerns as justifying the appointment of an interim liquidator:
(a)The fact that Mr Hill is suspected of taking illicit substances and has refused to undertake a drug test. This may have serious implications for the insurance policy for the vessel which is managed by the plaintiff;
(b)the incidents of Mr Hill operating charters and failing to comply with operating procedures for the vessel (including minimum crew requirements and crew training requirements). This is putting public safety at risk;
(c)the defendant’s failure to comply with the vessel’s maintenance, the overdue hull inspection and anode replacement, which, if not addressed, could risk rapid degradation of the vessel’s structure and value.
[14] Steven Khov and Kieran Jones have consented to be appointed interim liquidators of the defendant by consent dated 8 November 2024.
Result
[15] I am satisfied that the prerequisite for appointment of an interim liquidator that there is a valid application to put the defendant into liquidation that is likely to succeed is satisfied and the plaintiff is clearly a creditor of the defendant. The question is whether the appointment of interim liquidators is necessary or expedient for the purpose of maintaining the value of assets owned by the defendant.
[16] Having regard to the comments of Associate Judge Bell in the Best Invest NZ Company Ltd decision7 as to the drastic nature of appointment of an interim liquidator as a remedy, I am of the view that the application should be declined as there is insufficient evidence of the necessity or expediency for the purposes of maintaining the value of the vessel by the defendant. The reasons for this view are:
(a)There is no evidence of illicit drug-taking by Mr Hill. There is hearsay evidence from comments made by others at the relevant berthage. While Mr Hill has refused to undertake a drug test, this does not automatically lead to the inference that he is taking illicit drugs;
(b)while there is some evidence of Mr Hill not operating charters in accordance with the vessel’s operating procedures as set out at paragraphs 21 and 22 of Mr Jones’ affidavit, it is scant, and in my view is insufficient to conclude that the vessel is necessarily being operated contrary to operating procedures;
(c)as to the vessel’s annual out of water hull inspection and anode replacement, given this was due in August 2024 and therefore already at least two months has passed since the vessel’s inspection was due, there is not sufficient evidence that there will be a risk of serious damage to the vessel from this cause before 13 December 2024 as a result of this inspection not being carried out;
(d)there is insufficient evidence of risk to public safety for the Court to be satisfied that there is serious risk before 13 December 2024.
Orders
[17]I make the following orders:
(a)The plaintiff’s application to appoint an interim liquidator under s 246 of the Companies Act 1993 is dismissed;
7 Above note 6 at [11].
(b)costs are reserved as these are better dealt with as part of the liquidation application.
…………………………….. Associate Judge Taylor
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