Platform Homes Limited v Grant
[2021] NZHC 3492
•16 December 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-002005
[2021] NZHC 3492
UNDER Companies Act 1993, s 239AM and Part 19 of the High Court Rules IN THE MATTER OF
The administration of ORMISTON RISE LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION)
BETWEEN
PLATFORM HOMES LIMITED, CSL MANAGEMENT LIMITED and PATHWAY REALTY LIMITED
Applicants
AND
DAMIEN MITCHELL GRANT
Respondent
Hearing: 15 November 2021
Further submissions: 23 November 2021 (from Applicants)
Counsel:
D L Bennington for Applicant A S Botterill for Respondent
Judgment:
16 December 2021
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by Associate Judge Andrew on 16 December 2021 at 1.00 pm
pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar Date…………………………
PLATFORM HOMES LTD v GRANT [2021] NZHC 3492 [16 December 2021]
Introduction
[1]Ormiston Rise Ltd (ORL)1 is in receivership and liquidation.
[2] On 25 August 2021, ORL was placed into voluntary administration pursuant to s 239I of the Companies Act 1993. Mr Damien Grant, the respondent, of Waterstone Insolvency, was appointed the voluntary administrator.
[3] The applicants, Platform Homes Ltd, CSL Management Ltd and Pathway Realty Ltd,2 are unsecured creditors of ORL. The applicants’ directors were previously directors of ORL and their directorships only ceased shortly before the watershed meeting.
[4] On 29 September 2021, Mr Grant convened a watershed meeting. The outcome of the meeting were resolutions that ORL be placed in liquidation; that Mr Grant be confirmed as liquidator; and that the administration of the company should end.
[5] Mr Grant disregarded the applicants’ votes at the meeting on the grounds that they were related creditors under s 239AM of the Companies Act. The applicants now apply for orders pursuant under that section that their votes be counted and not disregarded as related creditors’ votes.
[6] Mr Grant does not oppose the application and indicates he will abide the Court’s decision.
[7] The issue before me is whether I should decline to determine the application on the basis that the alleged matter at issue is moot; or whether there is a live, tangible and concrete dispute which the Court can properly determine.3
1 ORL.
2 I refer to the applicants respectively as Platform Homes; CSL; and Pathway Realty.
3 In my minute of 15 November 2021, issued following the hearing on 12 November 2021, I directed the applicant to file submissions addressing the issue of whether there is a live and tangible dispute which the Court could properly determine. I have since received a memorandum from the applicants dated 23 November 2021 addressing that issue.
Background facts
[8] On 7 May 2021, Quastor Advisors Ltd LLC appointed Neal Jackson and Grant Graham of Calibre Partners as joint and several receivers of ORL under a general security deed.
[9]The current shareholders of ORL are Foundation Developments Ltd, as to a
70.5 per cent share; Alcon NZ Credit Partners SPV, LLC (Arena), as to a 19.5 per cent share; and Urban Resort Investments Ltd as to a 10 per cent share.
[10] It is relevant to note several key figures in ORL’s ownership and board structure:
(a)Brent Gilchrist, the current director of ORL. He was appointed on 22 August 2021.
(b)Jason Dobbie, a director of ORL between 22 August 2021 and 24 September 2021. He is presently a director of the applicant companies.
(c)Clint Webber, also a former director of ORL over two periods: first, between 8 July 2019 and 29 March 2021; and again, between 22 August 2021 and 24 September 2021. He is currently a director of the applicant companies, as well as the sole shareholder of CSL and the sole shareholder of NZ Build Group Ltd, the parent company of Platform Homes and Pathway Realty.
[11] On 25 August 2021, ORL’s board resolved to place the company into voluntary administration4 and to appoint Mr Grant voluntary administrator.
[12] On 24 September 2021, the administrator gave notice to ORL’s creditors of a watershed meeting on 29 September 2021 via Zoom, not via postal ballot.
[13]The notice advised that the resolutions to be considered were:
4 Pursuant to s 239I of the Companies Act.
(a)that the company be placed into liquidation (resolution 1);
(b)that Mr Grant as incumbent administrator be confirmed as liquidator of the company (resolution 1(a));
(c)that Richard Macey and Grant Sanson be confirmed as joint and several liquidators of the company in place of the administrator (resolution 1(b)); and
(d)that the administration of the company should end (resolution 2).
[14] On 24 September 2021, Mr Dobbie and Mr Webber, as the directors of the applicants, voted in favour (via postal vote) of resolutions 1 and 1(a); and against resolution 2 on the basis ORL was insolvent.
[15] On 29 September 2021, Mr Botterill, senior in-house counsel for Waterstone Insolvency, advised Mr Dobbie and Mr Webber that the administrator considered that the applicants were still related to ORL despite recent changes to the board and a note from Mr Gilchrist.
[16]Mr Botterill also advised the applicants that:
(a)their votes would be recorded but disregarded for the purposes of the results on 29 September 2021; and
(b)they were entitled to apply to the Court to admit their votes.
[17]The watershed meeting minutes record:
(a)there was a quorum for the meeting;
(b)the following creditors were deemed related, and as such their votes would be recorded but disregarded:
(i)CSL;
(ii)Pathway;
(iii)Platform Homes; and
(iv)Arena.
(c)Accordingly, the outcomes of the votes were (recording but disregarding those companies’ votes):
(i)Resolution 1 was passed, and ORL was placed into liquidation. There were eight votes in favour, but four counted.
(ii)Resolution 1(a) was passed, and Mr Grant was confirmed as the liquidator of ORL. There were seven votes in favour of confirming Mr Grant as the liquidator, with four of those votes counted. Arena voted against resolution 1(a) but its vote was recorded and disregarded.
(iii)Resolution 1(b) was not passed. It received only one vote in favour from Arena, which was, again, recorded but disregarded. The seven other creditors voted against the resolution, but only four were counted.
(iv)There is no evidence on the outcome of resolution 2.
Relevant legal principles
[18]Section 239AM of the Companies Act provides:
Related creditor’s vote disregarded unless court orders otherwise
(1)The administrator must disregard a related creditor’s vote on a resolution at the creditors’ meeting unless the court orders otherwise.
(2)A related creditor may apply to the court for an order that its vote be taken into account.
(2A) A related creditor that intends to apply for an order must,–
(a)before a vote is taken on the resolution, give notice in writing to the administrator that the creditor –
(i)is a related creditor; and
(ii)intends to apply to the court for an order that its vote be taken into account; and
(b)within 10 working days of the creditors’ meeting, make an application to the court.
(2B) The court may order that a related creditor’s vote be taken into account only if satisfied that ordering that the applicant’s vote (or the applicants’ votes) be taken into account –
(a)is not contrary to the interests of the creditors, or a class of creditors, as a whole; and
(b)will not prejudice, and is not reasonably likely to prejudice, the interests of the creditors who voted against the resolution or for it, as the case may be, to an extent that is unreasonable having regard to –
(i)the benefits accruing to the applicant (or the applicants), or to some or all of the related creditors, from the resolution or from the failure to pass the resolution; and
(ii)the nature of the relationship between the applicant (or the applicants) and the company, or between the related creditors and the company; and
(iii)any other relevant matter.
(3)In this section and sections 239AMA to 239AMC, –
related creditor means a creditor who is a related entity of the company in administration
related entity means, in relation to the company in administration,–
…
(d) a director or shareholder; or
…
(g) a related company; or
…
(k) a company one of whose directors is also a director of the company in administration; or
…
Doctrine of mootness
[19] The Supreme Court of Canada in Borowski v Canada (Attorney General), held:5
The doctrine of mootness is an aspect of a general policy or practice that a court may decline to decide a case which raises merely a hypothetical or abstract question. The general principle applies where the decision of the court will not have the effect of resolving some controversy which affects or may affect the rights of the parties. If the decision of the court will have no practical effect on such rights, the court will decline to decide the case. This essential ingredient must be present not only when the action or proceeding is commenced but at the time when the court is called upon to reach a decision. Accordingly if, subsequent to the initiation of the action or proceeding, events occur which affect the relationship of the parties so that no present live controversy exists which affects the rights of the parties, the case is said to be moot. The general policy or practice is enforced in moot cases unless the court exercises its discretion to depart from its policy or practice.
[20] The Court referred to the two-step analysis which is adopted in determining whether the question before the Court is a moot one:6
… First, it is necessary to determine whether the required tangible and concrete dispute has disappeared and the issues have become academic. Second, if the response to the first question is affirmative, it is necessary to decide if the court should exercise its discretion to hear the case. The cases do not always make it clear whether the term "moot" applies to cases that do not present a concrete controversy or whether the term applies only to such of those cases as the court declines to hear. In the interest of clarity, I consider that a case is moot if it fails to meet the “live controversy” test. A court may nonetheless elect to address a moot issue if the circumstances warrant.
[21]In Gordon-Smith v R the New Zealand Supreme Court held:7
[16] … In general, appellate courts do not decide appeals where the decision will have no practical effect on the rights of the parties before the Court, in relation to what has been at issue between them in lower courts. This is so even where the issue has become abstract only after leave to appeal has been given. But in circumstances warranting an exception to that policy, provided the court has jurisdiction, it may exercise its discretion and hear an appeal on a moot question.
[22]The above passages apply equally to the decisions of first instance courts.8
5 Borowski v Canada (Attorney General) [1989] 1 SCR 342 at [15] (emphasis added).
6 At [16].
7 Gordon-Smith v R [2008] NZSC 56, [2009] 1 NZLR 271.
8 Harvey v New Zealand Association of Credit Unions [2019] NZHC 1174 at [32].
Analysis and decision
[23] Ms Bennington, for the applicants, contends the first question the Court must resolve is whether the applicants are related creditors for the purpose of s 239AM. If the Court finds that they are not related, then the administrator is required to count their votes. The applicants’ position is there is a live dispute because Mr Grant decided the applicants were related creditors even though as at the date of the watershed meeting, they did not share common directors. It is the applicants’ position that they ceased being related creditors when their common directorship ended five days prior to the watershed meeting.
[24] As is recorded in the outcomes of the meeting above, it is not disputed that the applicants supported the resolutions passed at the watershed meeting. It must follow that that the outcome of the vote would not have been different had the administrator not disregarded the applicants’ votes.
[25] It is clear from the application and submissions filed that the applicants are seeking a declaration and clarification from the Court as to whether they are in fact related creditors for the purposes of the legislation. It would appear, although I have heard no submissions on this point, that the application should perhaps have been brought under s 239AMA, rather than s 239AM. The latter section presupposes that the applicants are in fact related creditors, but despite that, an order is sought from the Court that their vote be taken into account because the grounds in subsection 2B are made out. A challenge to an administrator’s decision as to the status of related creditor appears more properly to be dealt with under s 239AMA, which provides:
239AMA Creditor’s vote disregarded if administrator considers creditor is related creditor
(1) If the administrator considers that a creditor that votes on a resolution at a creditors’ meeting is a related creditor, and the creditor has not given notice under section 239AM(2A), the administrator must (unless the court orders otherwise) –
(a)disregard the creditor’s vote; and
(b)give notice in writing to the creditor stating the reasons for the administrator’s view.
(2) The court may, on the application of the creditor, order that the creditor’s vote be taken into account if satisfied that the creditor is not a related creditor.
(3) The creditor must make any application under this section to the court within 10 working days of receiving the notice.
[26]Section 239AMB then provides:
239AMB Further powers where court orders creditor’s vote be taken into account
(1) If the court orders, under section 239AM or 239AMA, that a creditor’s vote be taken into account, the court may also –
(a)order that the resolution be set aside or treated as having passed:
(b)order that a new meeting be held to consider and vote on the resolution:
(c)order that the creditor’s vote on a resolution to vary or amend the resolution be taken into account:
(d)make any other orders that the court thinks necessary.
(2) Despite any application under section 239AM or 239AMA, the outcome of the vote on the resolution is valid and effective unless the court orders otherwise.
[27] In any event, the application appears to be confined to seeking a declaration. The applicants do not seek orders under s 239AMB, for example, setting aside the resolutions or ordering that a new meeting be held to consider and vote on those resolutions.
[28] I find that there is no live, tangible controversy that remains for the Court to determine for the following reasons. First, Ms Bennington has referred to the possibility of Arena filing its own application under s 239AM, but there is no evidence to support that proposition and it appears there is no point in doing so given the majority vote in favour of the resolutions passed.
[29] Second, it has not been suggested any declaration from the Court will affect the rights of the applicants as creditors or that there is any real prospect of any further meetings at which the rights of the applicants to vote might be at issue. Likewise, there is no suggestion that the watershed meeting should be reconvened and the
resolutions voted upon again; nor do the applicants dispute the resolutions that were passed. Therefore, I fail to see that the clarification the applicants seek would have any real utility or practical impact on the applicants’ rights. There is simply no probative evidence before the Court to suggest otherwise.
[30] Third, in their affidavits filed in support of the application, the applicants raise issues about the sale of ORL’s property by the receivers. This is a matter that Mr Grant is said to be investigating as part of his liquidation enquiry. There is no suggestion that the applicants’ status, as related creditors or otherwise, has any bearing on Mr Grant’s investigations or that clarifying the issue is necessary to facilitate those investigations.
[31] Fourth, I note that the question of timing – namely, the period of five days referenced above at [22] between the applicants’ directors ceasing to be directors of ORL – would likely be a critical factor in any determination of whether the applicants are related creditors. However, this very fact-specific question is not suitable for determination in an otherwise moot case.
[32] Finally, there are no special reasons why, absent a live controversy, I should determine the application. The applicants advance no such grounds.
[33]For all these reasons, I decline to determine the application.
Result
[34] I dismiss the application for orders pursuant to s 239AM(1) and (2) of the Companies Act 1993. That is without prejudice to the applicants filing a fresh application in the event a live controversy arises in the future.
Associate Judge P J Andrew
0
2
0