Official Assignee v Grant Thornton - [2012] NZHC 2145

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2011-404-005724 [2012] NZHC 2145

BETWEEN THE OFFICIAL ASSIGNEE Applicant

ANDGRANT THORNTON Respondent

Hearing: 16 February 2012

Appearances: G Caro for applicant
K J Scott for respondent

Judgment: 23 August 2012

JUDGMENT OF ASSOCIATE JUDGE ABBOTT

This judgment was delivered by me on 23 August 2012 at 4pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:
G Caro, Ministry of Economic Development, ASB Building, 135 Albert Street, Auckland 1010
K J Scott, Buddle Findlay, PO Box 1433, Auckland 1140

THE OFFICIAL ASSIGNEE V GRANT THORNTON HC AK CIV 2011-404-005724 [23 August 2012]

[1] The applicant, the Official Assignee (the Assignee), is the liquidator of a failed finance company, Rockforte Finance Limited (in receivership and in liquidation) (Rockforte). Rockforte issued debt securities to the public via a prospectus. It ceased taking public funds in 2009, was placed into receivership in May 2010, and into liquidation in February 2011.

[2] The respondent, Grant Thornton, audited Rockforte’s accounts for a two and

a half year period ending 30 September 2008.

[3] As part of his duties, the Assignee wishes to investigate issues concerning related party loans, poor security for loans, poor documentation of loans, the accuracy of a registered prospectus, and the accuracy of the books and records of Rockforte generally.

[4] In furtherance of that investigation, he requested information from Grant Thornton, pursuant to s 261(2) of the Companies Act 1993 (the Act). Grant Thornton resisted production of documents that were not Rockforte’s property, contending that s 261 does not require it to produce documents generally.

[5] Although the Assignee does not accept Grant Thornton’s interpretation of s

261, and contends that it is entitled to an order compelling production under that section, he has applied for an order for production under s 266(2)(b) of the Act.

[6] Grant Thornton does not dispute that it was the auditor of Rockforte in the two and a half year period already mentioned, and hence is an entity to which ss 261 and 266 of the Act apply. It says that it does not wish to be obstructive and will comply with obligations under the Act. However, it says that it did not provide documents following the s 261 request because, on the proper interpretation of that section, there was no obligation on it to do so. It opposes the application under s 266 on the grounds that it would be oppressive to require it to produce the documents being sought (having regard to the volume of documents and the cost of producing them), and because the Assignee has not provided an adequate explanation for requiring the documents.

The Court’s power under s 266

[7] Expressed very broadly, a liquidator’s task is to take possession of, and realise, all assets of the company, and to investigate all means of recovery with a view to maximising the return to the company’s creditors and contributories. The liquidator is given two powerful tools to…

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 Official Assignee v Grant Thornton

Details

AGLC: Official Assignee v Grant Thornton [2012] NZHC 2145
Case: [2012] NZHC 2145
Decision Date: 23 August 2012

CaseChat Overview and Summary

The Official Assignee, as liquidator of the failed finance company Rockforte Finance Limited, sought an order under s 266(2)(b) of the Companies Act 1993 to compel the respondent, Grant Thornton, to produce various books, records, and documents in its possession relating to Rockforte’s business, accounts, and affairs. Grant Thornton resisted production of documents not belonging to Rockforte, contending that s 261 of the Act does not require it to produce documents generally. The Assignee contended that he was entitled to an order compelling production under s 261 but had applied for an order for production under s 266 to avoid any uncertainty as to the scope of the Court’s power to order production of documents. The Court’s power under s 266 is discretionary and must be exercised after balancing the need to enable the liquidator to obtain information to investigate the affairs of the company with a need to maintain fairness in proceedings. The Assignee must satisfy the Court that there is a proper case, after balancing all relevant factors. The Assignee was seeking the documents in good faith, as part of an investigation that he was bound to undertake to establish whether there was any action he could pursue for the benefit of Rockforte’s creditors. The Assignee had put sufficient evidence before the Court to allow it to balance the competing interests: the Assignee’s reasonable requirements to carry out his duties as against the burden placed on Grant Thornton. The breadth of the orders will cause Grant Thornton inconvenience, but that, of itself, did not make the order unreasonable. Mutual cooperation would make the task more manageable and less disruptive. The public interest in investigating the circumstances that led to Rockforte’s collapse on this occasion must trump Grant Thornton’s interests in privacy and confidentiality.

The Assignee’s application was granted. Leave was reserved to seek further directions if any issues arose in relation to the implementation of the order. There was no order as to costs.

Orders