Perpetual Trust Limited v Strategic Finance Limited (in rec) HC Wellington CIV 2010-485-1085
[2010] NZHC 1398
•27 July 2010
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2010-485-1085
UNDER the Companies Act 1993
BETWEEN PERPETUAL TRUST LIMITED Plaintiff
ANDSTRATEGIC FINANCE LIMITED (IN RECEIVERSHIP)
Defendant
Hearing: 26 July 2010
Appearances: B.A. Scott - Counsel for Plaintiff
No Appearance for the Defendant
Judgment: 27 July 2010
REASONS FOR DECISION OF ASSOCIATE JUDGE D.I. GENDALL
Solicitors: Chapman Tripp, Solicitors, PO Box 993, Wellington 6140
PERPETUAL TRUST LIMITED V STRATEGIC FINANCE LIMITED (IN RECEIVERSHIP) HC WN CIV-
2010-485-1085 27 July 2010
[1] An application by the plaintiff to place the defendant company Strategic Finance Limited (in receivership) (“the company”) into liquidation came before me yesterday, 26 July 2010.
[2] Orders were made then placing the company into liquidation, appointing
Andrew John McKay and John Joseph Cregten as liquidators and awarding Category
2B costs (and disbursements as fixed by the Registrar) to the plaintiff.
[3] In addition, an order was made approving the liquidators’ rates of remuneration in accordance with a memorandum dated 22 July 2010 of Andrew John McKay filed in this proceeding, subject to s. 284 of the Companies Act 1993. A further order was made allowing the liquidators to exercise their powers individually pursuant to s. 242 of the Companies Act 1993.
[4] Also before the Court on 26 July 2010, was a without notice interlocutory application by the proposed liquidators for directions in relation to that liquidation.
[5] Having considered that application and its supporting material and the submissions from Mr Scott, counsel for the plaintiff, I was satisfied then that this application should succeed. Orders were made on 26 July 2010 as follows:
(i)Granting leave to the proposed liquidators John Joseph Cregten and Andrew John McKay to make that interlocutory application for directions;
(ii)Exempting John Joseph Cregten and Andrew John McKay as proposed liquidators of the defendant company from compliance with their obligation to prepare and send, to every known preferential shareholder, reports on the conduct of the liquidation (including the first report and reports every six months after that);
(iii)Directing that those reports be communicated to preferential shareholders by posting them on the liquidators’ website and on the Companies Office website.
(iv)Directing John Joseph Cregten and Andrew John McKay as proposed liquidators of the defendant company to send copies of their first 6 monthly report and any subsequent 6 monthly report to any creditor or shareholder requesting a copy or to any creditor or shareholder raising any query about the conduct of the liquidation.
[6] In making these orders on the liquidators’ without notice interlocutory application I indicated that my detailed reasons would follow. I now set out those reasons.
[7] As I have noted above, the applicants, John Joseph Cregten and Andrew John McKay (“the liquidators”), were yesterday, 26 July 2010 at 10.49 am appointed the liquidators of the company. As liquidators they apply for directions.
[8] Section 255(2)(d) Companies Act 1993 requires liquidators within 20 working days of the end of each period of 6 months, following the date of commencement of the liquidation to prepare and send to every known creditor, every shareholder of the company and the Registrar a report:
(a) On the conduct of the liquidation during the preceding 6 months; and
(b)Of any further proposals which the liquidator has for completing the liquidation.
[9] Section 255(4) Companies Act 1993 allows the Court to exempt liquidators from compliance with these requirements, however, or to modify the requirements on such terms and conditions as the Court thinks fit.
[10] Turning now to the facts here, the company is a Wellington based finance company. It had a registered prospectus and issued secured debenture stock, subordinated notes and unsecured deposits to the general public. It also issued unsecured preference shares to members of the public.
[11] On 7 August 2008 the company withdrew its prospectus and suspended all repayments to its investors due apparently to concerns about its liquidity and its ability to meet ongoing payment obligations.
[12] On 2 December 2008 the company’s directors proposed a moratorium that (amongst other things) rescheduled principal payments to investors over a 5 year period. This moratorium proposal was passed by a required majority of investors at meetings held for that purpose on 22 December 2008.
[13] In January 2010 the company announced to investors that it would be unable to meet its milestone payment due on 7 January 2010 and that its total loan book asset value had fallen below 75% of the aggregate of principal monies owed to debenture holders, depositors and subordinated noteholders. Both of these matters constituted a “Review Event” under the company’s Trust Deed and, following negotiations with the company, the plaintiff Perpetual Trust Limited (which acts as trustee for the benefit of stockholders, noteholders and depositors, but not preferential shareholders) concluded that it was in the best interests of investors to appoint receivers.
[14] On 12 March 2010 receivers were appointed to the company and also to several subsidiary companies.
[15] On the same day, trading in the company’s preference shares was halted and on 7 April 2010 the New Zealand Stock Exchange at the request of the company’s receivers advised the share market that the company’s preference shares would cease to be quoted and that it would be delisted from the close of the market on 9 April
2010. NZX Regulation also advised the market, at the request of the company’s receivers, that there would be no funds available to the company’s preferential shareholders and on 12 May 2008 the company’s receivers issued their first report which noted specifically that:
“Regrettably, we consider that there are unlikely to be any amounts available for payment to unsecured creditors, including unsecured depositors and subordinated noteholders.”
[16] I turn now to the liquidation of the company yesterday. Given the appointment of the liquidators by this Court at that point, those liquidators, as I have noted, are required by s. 255(2)(d) Companies Act 1993 to send their first report to all shareholders and creditors by 26 August 2010.
[17] On the evidence before the Court, it appears that as at 12 March 2010 the company had at least 1,367 preferential shareholders.
[18] The liquidators have estimated that the direct cost of posting each 6 monthly report to those preferential shareholders is about $6,000.00 including about
$1,500.00 for postage.
[19] The liquidators have also indicated that they do not expect there will be sufficient funds for a distribution to be made to preferential shareholders in the liquidation. The company owes stockholders, noteholders and depositholders (who all rank in priority to preferential shareholders) in excess of $391 million and has assets estimated at only $240.5 million. It is likely too that, because of the complexity of the company’s affairs, it will take several years before the liquidation is completed.
[20] The liquidators are concerned that if they are required to carry out their statutory duty to the letter by sending hard copy reports to preferential shareholders (as well as to creditors), they will incur significant costs without any corresponding advantage to creditors and shareholders. Monies which are saved by granting the present application would obviously increase the dividends available to be paid to the company’s creditors.
[21] In their present application, the liquidators propose as an alternative to posting reports to preferential shareholders, that they place reports on their website ( and the Companies Office website ( On this basis, the liquidators seek an order dispensing with the formal requirement to distribute their first and subsequent reports to preferential shareholders.
[22] Given the large number of preferential shareholders here (noted above at least at 1,367) and the fact that these shareholders are highly unlikely to achieve any dividend from the company’s liquidation, the liquidators contend that the orders sought are in the best interests of the company’s creditors as a whole.
[23] On the relevant requirements outlined in the Companies Act 1993, Associate Judge RM Bell, in his decision in OPI New Zealand Limited (in liquidation) High Court, Auckland, CIV-2010-404-2537, 28 April 2010 noted at para. 7:
“(7) In the normal course of events, regular reports by liquidators to creditors form a valuable function. They provide an efficient way of informing creditors of the conduct of the liquidation.”
[24] Notwithstanding this, in the OPI New Zealand Limited case and in the earlier decision of Associate Judge Robinson in Dominion Finance Holdings Limited (in liquidation) High Court Auckland, CIV-2009-404-6606, 1 October 2009, similar applications to the present one before the Court succeeded and orders were made exempting the companies in question from their obligation to send copies of the 6 monthly reports to every known creditor and shareholder.
[25] In the present case, I accept that there are good grounds for a departure from the standard requirement for 6 monthly reporting to preferential shareholders. The direct costs alone of providing those 6 monthly reports to what is a very substantial number of preferential shareholders in my view is out of proportion to any benefit those shareholders might receive from the reports being mailed to them. Clearly, those shareholders are highly unlikely to receive any dividend from the company’s liquidation and in any event if any particular shareholder wishes to view the 6 monthly reports then these will be available by searching the liquidators’ website and the website of the Registrar of Companies.
[26] Accordingly, and given the particular nature of the present liquidation, I am satisfied it is an appropriate exercise of the Court’s discretion under s. 255(4) Companies Act 1993 to grant the present application by the liquidators and to dispense with mailing out the reports to preferential shareholders.
[27] For these reasons the orders noted at para. [5] above were made on 26 July
2010 and are confirmed.
[28] As to costs on this application, it is appropriate for an order for costs to be made in favour of the liquidators. Costs are therefore awarded on that application to the liquidators on a Category 2B basis together with disbursements as fixed by the Registrar.
‘Associate Judge D.I. Gendall’
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