Property Ventures Limited (in receivership and liquidation) v Gibbston Downs Wines Limited
[2014] NZHC 510
•18 March 2014
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2013-409-000170 [2014] NZHC 510
UNDER The Companies Act 1993 BETWEEN
PROPERTY VENTURES LIMITED (in receivership and liquidation)
Plaintiff
AND
GIBBSTON DOWNS WINES LIMITED Defendant
Hearing: (By telephone) 18 March 2014 Appearances:
K P Sullivan for Plaintiff
K W Clay for DefendantJudgment:
18 March 2014
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
as to appointment of an interim liquidator
[1] The plaintiff ’s substantive application for an order that the defendant be put
into liquidation is for hearing tomorrow, the defendant having filed a defence.
[2] A telephone conference was convened for today because the defendant had yet to comply with directions in relation to evidence for the hearing.
[3] Because of developments over the last 24 hours, Mr Sullivan at the conference urged the Court to make an order of liquidation now. I ruled that the appropriate time for the making of any substantive order is tomorrow when the case is called for hearing.
[4] Mr Sullivan alternatively submitted that this is an appropriate case for the appointment today of an interim liquidator pursuant to s 246 Companies Act 1993.
Mr Clay for the defendant opposed the appointment of an interim liquidator. I heard
PROPERTY VENTURES LIMITED (in receivership and liquidation) v GIBBSTON DOWNS WINES LIMITED [2014] NZHC 510 [18 March 2014]
initial submissions and then reconvened for further submissions later in the day to provide counsel with a little further time to consider the issues.
[5] Because of the urgency of the situation, I issue a brief judgment only.
The defendant company
[6] The defendant incurred debts of $1,520,123.03 to the plaintiff through inter- entity advances. The plaintiff (subsequently placed in receivership and liquidation) issued a statutory demand for the debt in June 2012. The defendant unsuccessfully made application for an order setting aside the statutory demand. The defendant thereby incurred further debts by way of judgments for costs.
[7] The defendant unsuccessfully appealed to the Court of Appeal and subsequently unsuccessfully applied for leave to appeal to the Supreme Court. The defendant raised as its primary issue the entitlement of the liquidator to initiate proceedings.
[8] By reason of the judgment of the Supreme Court released yesterday, the defendant’s challenges to the validity of the plaintiff’s actions in this proceeding are at an end.1
[9] Furthermore, as the Supreme Court noted in its judgment the defendant is clearly insolvent with an estimated deficiency of approximately $2,800,000.
[10] Against this background, Mr Clay advised at the start of the conference hearing this morning that his instructions were to no longer oppose an order for liquidation. The defendant still wishes to be heard through Mr Clay on the
identification of the liquidator or liquidators to be appointed.
1 Gibbston Downs Wines Ltd v Property Ventures Ltd (in receivership and in liquidation) [2014] NZSC 21.
Discussion - the jurisdiction to appoint an interim liquidator
[11] Section 246 Companies Act provides the jurisdiction in relation to the appointment of an interim liquidator. Relevantly, s 246(1) 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.
[12] The jurisdiction is reinforced by r 31.23 High Court Rules which provides –
31.23 Power to appoint interim liquidator
(1) When a proceeding for putting a company into liquidation has been commenced under rule 31.3, the plaintiff and any person entitled to apply to the court for the appointment of a liquidator under section 241(2)(c) of the Companies Act 1993 may apply to the court for the appointment of an interim liquidator.
(2) If the court is satisfied, upon proof by affidavit, that there is sufficient ground for the appointment of an interim liquidator, it may make the appointment, and may limit the rights and powers of the interim liquidator in any manner it thinks just.
Discussion - the basis of the plaintiff ’s application for appointment of an interim liquidator
[13] Mr Sullivan has filed the required certificate as to the defendant’s debt remaining due and owing to the plaintiff. That, combined with the clear insolvency of the defendant and the defendant’s decision to no longer defend the application for liquidation, makes it almost inevitable that an order will be made putting the defendant into liquidation.
[14] The defendant had a vineyard operation at Gibbston.
[15] It is common ground between counsel for the purposes of this application that a company known as FTG Trustees Ltd (or similar) claims rights of security over
some assets of the defendant, and the defendant may have plant or similar assets over which a secured creditor might take realisation steps.
[16] I have carefully put the common ground between counsel on that basis as for the urgent purposes of the hearing Mr Sullivan had referred in a memorandum to some factual propositions which are not in evidence. Mr Clay took objection particularly to an assertion that FTG, a company operated for the benefit of David Henderson (who before his bankruptcy controlled the numerous companies associated with Property Ventures), was going to uplift all of the assets of the defendant pursuant to a security interest. I have disregarded those various allegations as they are not in evidence.
[17] My judgment has proceeded in terms of factual background on the matters of record relating to this proceeding and on the two areas of common ground to which I have referred above.
[18] Mr Clay correctly referred me to the requirement under r 31.23 (2) High Court Rules (above at [12]) that the Court be satisfied that there are sufficient grounds for the appointment of an interim liquidator upon proof by affidavit (emphasis added). I dispense with the requirement for the filing of an affidavit the only purpose of which would have been to establish matters of record in this proceeding and the two matters which were common ground between counsel.
[19] The plaintiff’s statutory demand was issued in June 2012. The evidence filed in relation to the statutory demand is that the debt had been owing at least from
2008. The pursuit of the debt was triggered by the placing of the plaintiff into liquidation.
[20] The defendant has availed itself of all procedures available to challenge the statutory demand and then this liquidation proceeding. That has included the application to set aside the statutory demand, the subsequent appeal to the Court of Appeal, and the subsequent application for leave to appeal to the Supreme Court. In
this proceeding itself a defence was filed which relied upon the issues being pursued in the appeals.
[21] The directors of the defendant, Ian Hyndman, and David Henderson, with whom both the plaintiff and the defendant companies were previously associated, have provided the evidence for the defendant at stages of this proceeding. It must be taken that as director of the defendant Mr Hyndman controls both the company and the steps the defendant has taken to date to resist an order of liquidation. Mr Hyndman has not filed any undertaking or evidence as to how he will deal with any assets of the company in the period before any liquidation order is made. The Court has no assurance in that regard. Equally the Court has no assurance as to any due diligence Mr Hyndman would conduct in relation to any steps taken by another party in purported exercise of security rights over the defendant’s assets.
[22] There are different circumstances in this case than would usually exist when the appointment of an interim liquidator is sought.
[23] In this case there is an almost certain outcome that liquidation will occur. The grounds of defence to the plaintiff’s claim as creditor have been explored and rejected through previous judgments, culminating in the Supreme Court judgment of
17 March 2014.
Discussion – the considerations of principles applicable
[24] The first underlying consideration in relation to an interim liquidation application is whether there is a likelihood that the liquidation application itself will succeed or, put another way, whether the plaintiff has a good prima facie case for liquidation. That consideration is clearly satisfied in this case.
[25] Section 246(1) then defines the threshold requirement in terms of “necessity”
and “expediency” –
… The Court may, if it is satisfied that it is necessary or expedient for the purpose of maintaining the value of assets … appoint a named person … as interim liquidator.
[26] The threshold of “expediency”, being a broader concept than that of
“necessity”, will often be the one on which a successful application is made.
[27] I respectfully adopt the observations of Chisholm J in Carter Holt Harvey Ltd v Timbalok New Zealand Ltd2 when His Honour observed –
In its usual sense that word ‘expedient’ means ‘fitting, suitable, desirable or convenient’ thereby conveying a relatively low threshold. It is sufficient if I can be satisfied that it is expedient for an interim liquidator to be appointed for the purpose of maintaining the value of the defendant’s assets.
[28] There is authority – see Elders Pastoral Holdings Ltd v NZ Ostriches Ltd3 - for the proposition that the Court should adopt a cautious approach in deciding whether the Court is satisfied that the statutory criteria has been met, given that appointment of an interim liquidator effects a major irruption into the company’s business and, to a large degree, amounts to a pre-judgment on the winding up application itself. Rather than express matters in terms of “caution”, I would view the matters which weighed on Williams J as being quite simply matters to be taken into consideration in determining whether “expediency” is established. There should not be an effective fettering of the considerations leading to the Court’s determination of “expediency”.
[29] As it happens, any concern arising from the fact that there may in some cases be a “pre-judgment” disappears in this case – as indicated above, the recent developments indicate that liquidation of the defendant is almost inevitable.
[30] I turn then to the Court’s broader considerations when deciding whether expediency has been established. I adopt the matters which Eichelbaum CJ identified as considerations in Robert Bryce & Co Ltd v Chicken & Food
Distributors Ltd4. Factors to be considered are:
2 Carter Holt Harvey Ltd v Timbalok New Zealand Ltd (1997) 11 PRNZ 435 at 438
3 Elders Pastoral Holdings Ltd v NZ Ostriches Ltd HC Rotorua M2/99; M3/99, M4/99 8 February
1999, per Williams J.
4 Robert Bryce & Co Ltd v Chicken & Food Distributors Ltd (1990) 5 NZCLC 66,648 at 66,649, adopting In Re Jeans West (Distribution) Pty Ltd Supreme Court of Western Australia, 139/90, 9
April 1990.
a. Whether the company assets are in jeopardy;
b. Whether the status quo should be maintained;
c. Whether the interests of creditors are safeguarded.
[31] I adopt also the observations of Heath J in Yue Ming Shen v An Ying International Financial Ltd,5 in which His Honour observed that the Robert Bryce factors are a framework for analysis and are not an exhaustive list of relevant considerations.
Application of the statutory test
[32] I am satisfied that it is expedient that an interim liquidator be appointed.
[33] After two years of litigation aimed at having the defendant put into liquidation, the creditors are on the point of obtaining an order of liquidation.
[34] The Court has no evidentiary grounds for concluding that he or they who currently have governance of the defendant will actively defend the assets of the defendant on behalf of the plaintiff and other creditors pending liquidation. The existence of a creditor which might take steps towards realisation of the defendant’s assets is a legitimate concern for unsecured creditors of the defendant. Their interests will be at risk if an independent mind is not engaged to consider the rights that any secured creditor may be claiming and if necessary to challenge and respond to any claim. In short, the appointment or an interim liquidator is likely to promote
preservation of the status quo.
5 Yue Ming Shen v An Ying International Financial Ltd HC Auckland CIV-2006-404-3088, 28 July
2006 at [15].
Who should be interim liquidator?
[35] Through counsel the plaintiff proposed the appointment of John Marshall Scutter who in June 2013 was appointed to join Mr Walker as liquidator of the plaintiff.
[36] In the event there was to be an interim liquidator appointed, Mr Clay opposed the appointment of Mr Scutter. The defendant (by which I take it Mr Hyndman) apparently questions Mr Scutter’s independence, a matter I cannot resolve as there was insufficient time for any evidence to be filed in relation to the suitability of the interim liquidator.
[37] Mr Clay indicated that the appointment of the Official Assignee would not be opposed. During an adjournment Mr Sullivan was able to establish that the office of the Official Assignee at Christchurch would have only limited capacity to take any steps between appointment as interim liquidator and any final order of liquidation.
[38] Mr Sullivan helpfully suggested as a compromise the appointment of Kevin Desmond Newson, who has provided a consent to act. In his consent documents Mr Newson confirms that he knows of no bar under s 280 Companies Act which would disqualify him from acting as liquidator.
[39] In these circumstances I conclude that it is appropriate to appoint Mr Newson as interim liquidator.
Order
[40] I order –
a. I appoint Kevin Desmond Newson as interim liquidator of Gibbston
Downs Wines Limited.
b.Mr Newson shall have the rights and powers of an liquidator to the extent identified in s 246(2) Companies Act 1993.
c. Without detracting from the rights and powers referred to at [41]b. above, Mr Newson shall have the power to obtain documents and information set out in s 261 Companies Act 1993.
d.I reserve the costs of the application for appointment of an interim liquidator and this order.
e. The appointment of Mr Newson as interim liquidator takes effect at
2.45pm today, 18 March 2014.
Associate Judge Osborne
Solicitors:
DLA Phillips Fox (Counsel KP Sullivan) Canterbury Legal Services (Counsel KW Clay)
1
0