Pattison

[2016] NZHC 1852

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2016-485-539 [2016] NZHC 1852

UNDER THE	Companies Act 1993
IN THE MATTER OF	an application under section 250 of the Companies Act 1993 for an order that the liquidation of Kawhatau Limited be terminated
BY	TONY WAYNE PATTISON AND MALCOLM GRANT HOLLIS Applicants

On the papers
Judgment:	17 August 2016

JUDGMENT OF ASSOCIATE JUDGE SMITH

[1]      Mr    Pattison    and    Mr    Hollis    were    appointed    liquidators    of    the Kawhatau Limited  (the  company)  on  6  April  2016  pursuant  to  a  shareholders’ resolution under s 241(2)(a) of the Companies Act 1993 (the Act).  They now apply for an order under s 250 of the Act terminating the liquidation.

[2]      The company was formed by its two shareholding groups to be the vehicle for a joint venture, which would carry out the business of owning and leasing a farm property near Taihape.   The company purchased and continues to own the farm property, which is leased.

[3]      The  shareholders  entered  into  a  joint  venture  shareholders’ agreement  in July 2009.   The term of the agreement expired in July 2015, and the agreement provided that on termination the company would  be liquidated by shareholders’

resolution appointing liquidators.

PATTISON AND HOLLIS [2016] NZHC 1852 [17 August 2016]

[4]      On the expiry of the term of the joint venture agreement on July 2015 the shareholders endeavoured to negotiate terms on which one group would buy out the other group’s shares (with the joint venture agreement, which provided for liquidation, being varied accordingly).   The company was liquidated when those negotiations did not bear fruit.

[5]     Since the liquidation there have been further discussions between the shareholding groups, and they have recently entered into an agreement for the sale of shares by one shareholding group to the other group conditional upon the liquidation of the company being terminated.

[6]      The application for termination is made by the liquidators, and consents have been filed by all shareholders.

[7]      In an affidavit filed in support of the application, Mr Hollis says that the company has four creditors.  No other person has claimed to be a creditor, and the liquidators’ inquiries have not revealed the existence of any other creditor.

[8]      Two of the four creditors are the respective shareholding groups, who have claims against the company for the credit balances owing on their respective shareholders’   current   accounts   with   the   company.      The   third   creditor   is Rabobank New  Zealand Limited,  which  holds  first  ranking  securities  over  the company’s assets.

[9]      The fourth creditor is the Inland Revenue Department.   The March 2016 balance sheet shows total tax liabilities of approximately $11,700.00.   Mr Hollis confirms that the liquidators have filed all income tax and GST returns, and made payment of the taxes showing as being payable in those returns.

[10]     The company’s financial statements for the year ended 31 March 2016 show net assets of $248,280.00.  The company’s balance sheet at 31 March 2016 shows a non-current liability to Rabobank of $759,468.00, and a current liability to Rabobank of $6,217.00.   On 16 August 2016 Rabobank provided a letter confirming that all

loan payments were up-to-date, that no notice accelerating full repayment had been issued, and that Rabobank consents to the making of the order for termination.

[11]     Mr Hollis says that the liquidators believe that the company’s obligations as lessor under the lease of the farm are up-to-date.  No claim has been made against the company by the lessee, which is a company associated with one of the two shareholding  groups.    Mr Hollis  says  that  the  liquidators’  costs  and  expenses, including in relation to the application to the Court, can be met by funds held in the liquidation.

[12]     The liquidators have filed the application under part 18 of the High Court Rules.  They seek a direction under r 18.9 directing that the statement of claim need not be served on any party.

[13]     Rule 18.9 provides:

Proceeding without service

(1)       This rule applies to a statement of claim that need not be served because of an enactment or a direction of a Judge.

(2)       The facts alleged in the statement of claim must be verified by or on behalf of the plaintiff by an affidavit (which may be appended to the statement of claim or filed separately) stating that, so far as they relate  to  matters  within  the  personal  knowledge  of  the  person making the affidavit, they are true, and, so far as they relate to matters not within that person's personal knowledge, the person believes them to be true.

(3)       Despite subclause (2), the Judge may require any fact not within the personal knowledge of the person to be proved by the affidavit of a person who has such personal knowledge.

[14]     I am satisfied that there is no party who might be affected by this application who should be served.  I accordingly direct that the statement of claim need not be served on any party.

[15]     I now address the substantive application.  Section 250 of the Act materially provides:

Court may terminate liquidation

(1)       The Court may, at any time after the appointment of a liquidator of a company, if it is satisfied that it is just and equitable to do so, make an order terminating the liquidation of the company.

(2)      An application under this section may be made by—

(a)      The liquidator; or

…

(3)       The Court may require the liquidator of the company to furnish a report to the Court with respect to any facts or matters relevant to the application.

(4)       The Court may, on making an order under subsection (1) of this section, or at any time thereafter, make such other order as it thinks fit in connection with the termination of the liquidation.

(5)       Where the Court makes an order under this section, the person who applied for the order must, within 10 working days after the order was  made,  deliver  a  copy  of  the  order  to  the  Registrar  for registration.

(6)       Where the Court makes an order under subsection (1) of this section, the company ceases to be in liquidation and the liquidator ceases to hold office with effect on and from the making of the order or such other date as may be specified in the order.

…

[16]     In most cases, the Court will only exercise its discretion to order termination of a liquidation if:

(a)       all the creditors have been paid in full or satisfactory provision has been made for them to be paid or they have consented;

(b)      the liquidator’s costs have been paid or secured;

(c)       the shareholders have given their consent or would be in no worse position than if the liquidation had proceeded to its conclusion.1

[17]     I am satisfied that the Bell Block factors are sufficiently met in this case.  The shareholders all consent to the termination order, and the liquidators’ costs can be

met from funds available in the liquidation.  Rabobank has consented to the making of a termination order, and Mr Hollis says that all tax returns have been filed and required tax payments made. In any event, as counsel’s memorandum records, the liquidators remain personally liable for unmet GST obligations arising during the period of liquidation.2

[18]     I  accordingly  make  an  order  under  s 250  of  the  Act  terminating  the liquidation of the company.  In the circumstances, there is no need for any order as to costs.

Associate Judge Smith

Solicitors:

JT Law, Wellington for the applicants