R Lits Group Limited v SFund Limited
[2024] NZHC 3730
•9 December 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-003137
[2024] NZHC 3730
UNDER the Companies Act 1993 IN THE MATTER OF
the liquidation of R LITS GROUP LIMITED and its subsidiaries
BETWEEN
RLITS CONTRACTING LIMITED
(in liquidation and receivership) Plaintiff
AND
R LITS GROUP LIMITED
First Defendant
SFUND LIMITED
Second Defendant
…continued over
Hearing: 6 December 2024 Counsel:
G Neil / W Webster for the Plaintiff
Raymond Bishop, director, for the First to Fifth Defendants
Date of Judgment:
9 December 2024
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 9 December 2024 at 4.00 pm Pursuant to r 11.5 of the High Court Rules.
…………………..
Registrar/Deputy Registrar
Solicitors/Counsel:
Meredith Connell, Auckland
RLITS CONTRACTING LTD (in liquidation and receivership) v R LITS GROUP LIMITED [2024] NZHC 3730 [9 December 2024]
AND RLITS REAL ESTATE LIMITED
Third Defendant
BF7 PROPERTY #1 LIMITED
Fourth Defendant
BF7 LOG TRANSPORT LIMITED
Fifth Defendant
Introduction
[1] The first defendant, R Lits Group Ltd (R Lits Group) is the parent company of the plaintiff, RLits Contracting Ltd (in liquidation and receivership) (RLits Contracting) and the second to fifth defendants (referred to as, respectively, SFund, RLits Real Estate, BF7 Property and BF7 Log Transport). The plaintiff and the defendants are collectively referred to as “the group of companies”.
[2] RLits Contracting was put into liquidation by this Court on 7 October 2024. The Official Assignee was appointed liquidator (the liquidator). The liquidator commenced this proceeding on 5 December 2024, seeking orders that the defendants be put into liquidation.
[3] The statement of claim pleads, inter alia, that R Lits Group and SFund are insolvent because they are unable to pay debts due to RLits Contracting.
[4] In respect of R Lits Group and SFund, the liquidator applies without notice for orders putting the companies into liquidation immediately:
(a)without allowing RLits Group and SFund an opportunity to file a defence; and
(b)without the usual requirement to advertise the proceeding.
[5] If R Lits Group and SFund are put into liquidation then the liquidator intends to pass a resolution by R Lits Group as shareholder of RLits Real Estate, BF7 Property and BF7 Log Transport, putting those companies into voluntary liquidation.
[6] The liquidator relies on a memorandum of the sole director of R Lits Group and SFund, Raymond Bishop, dated 4 December 2024 and filed in this proceeding. In the memorandum, Raymond Bishop confirms that:
(a)he has received copies of the statement of claim, the without notice application seeking an immediate liquidation order and the affidavit of Anthony Pullan in support of the liquidator’s applications;
(b)he has read the documents, and he admits all of the facts pleaded in the statement of claim;
(c)he understands that the Court has been asked to immediately liquidate R Lits Group and SFund and to appoint the Official Assignee as their liquidator, the intention being that the liquidator then pass a shareholder resolution to put RLits Real Estate, BF7 Property and BF7 Log Transport into liquidation; and
(d)R Lits Group and SFund consent to judgment being entered in accordance with the statement of claim and RLits Group and SFund being put into liquidation.
Jurisdiction
[7] Under s 241(2)(c)(iv) and (4)(a) of the Companies Act 1993 (the Act), a liquidator may be appointed by the Court on the application of a creditor if the Court is satisfied that the defendant company is unable to pay its debts.
[8] Part 31 of the High Court Rules 2016 (HCR) deals with liquidation proceedings:
(a)On the filing of a statement of claim seeking a liquidation order, the Registrar of the Court is required to appoint the time and place of the hearing of the application.1
(b)Liquidation proceedings are generally heard in open court, but the Court has a discretion to direct otherwise.2
(c)The hearing date is inserted into the notice of proceeding, and the plaintiff is required to serve the statement of claim, notice of proceeding and other supporting documents on the defendant company. Service
1 High Court Rules 2016, r 31.6(1).
2 Rule 31.2.
must be effected no less than 15 working days before the allocated hearing.3
(d)The proceeding must be advertised, at least five working days after service of the statement of claim and at least five working days before the allocated hearing date.4
(e)In special or exceptional circumstances, the Court can dispense with the requirement to advertise the proceeding,5 relying on the Court’s inherent jurisdiction and the Court’s power to control its own procedure.6 The Court must consider what effect dispensing with advertising might have on other parties.7
(f)On interlocutory application made before the allocated date of hearing of a liquidation proceeding, the Court may extend or abridge time for steps required under pt 31, or excuse non-compliance with any rule in pt 31.8
[9] RLits Contracting seeks immediate judgment relying on r 15.15 of the HCR, which provides:
15.15 Judgment on admission of facts
(1)If a party admits facts (in the party’s pleadings or otherwise), any other party to the proceeding may apply to the court for any judgment or order upon those admissions the other party may be entitled to, without waiting for the determination of any other question between the parties, and the court may give any judgment or order on the application as it thinks just.
(2)This rule is not affected by rules 15.16 and 15.17.
[10] The rule applies to a liquidation proceeding unless modified or inconsistent with pt 31 of the HCR or the Act.9
3 Rule 31.12.
4 Rules 31.9 and 31.10.
5 Registrar of Companies v Marinc Ltd HC Auckland CIV-2008-404-3142, 6 June 2008 at [13].
6 Re H E Burton & Co Ltd (1982) 1 NZCLC 98,313 (HC).
7 Registrar of Companies v Marinc Ltd, above n 5, at [15].
8 High Court Rules, r 31.22.
9 Rule 31.1(3).
[11] Once facts are established by admissions, then the Court must be satisfied that the admitted facts entitle the applicant to a judgment. This requires a cause of action to be made out. The Court may then give judgment as the Court thinks just. This discretion can be applied consistently with the Court’s discretion under s 241 of the Act. Rule 15.15 of the HCR can be applied to a liquidation proceeding.
Discussion
[12] The applications by RLits Contracting are supported by an affidavit of Mr Pullan, the Auckland Regional Manager of the Insolvency and Trustee Service, a designated Official Assignee.
[13] RLits Contracting has not served a statutory demand on R Lits Group or SFund and cannot rely on a statutory presumption of insolvency.10 RLits Contracting relies on the evidence of Mr Pullan and the admissions of Raymond Bishop.
[14] As part of the liquidator’s investigation into the affairs of RLits Contracting, the liquidator’s staff interviewed Raymond Bishop and his wife, and obtained a statement from Raymond Bishop’s son, Spencer Bishop.
[15] The liquidator has established that the group of companies was effectively controlled by Raymond Bishop’s son, Roy Bishop, who was acting as a de facto director.11 From 9 May 2019 to 13 May 2022, Roy Bishop was an undischarged bankrupt and disqualified from acting as a director.12 Since 5 August 2024, Roy Bishop has been prohibited from being a director or promoter of a company, or being concerned in, or taking part, whether directly or indirectly, in the management of a company.13
[16] RLits Contracting was the trading company within the group of companies. RLits contracting did not operate a bank account in its own name. It utilised bank accounts in the names of R Lits Group and BF7 Property. The liquidator reports that
10 Under s 289 of the Companies Act 1993.
11 Companies Act, s 126.
12 Section 151(2).
13 Section 385.
the substantial trading income of RLits Contracting was deposited into these bank accounts. The liquidator has identified unexplained withdrawals which appear to be payments to Roy Bishop in his personal capacity, or for his personal benefit. The liquidator understands that Roy Bishop left New Zealand in early October 2024, and his whereabouts are presently unknown.
[17] The liquidator has established that as at the date of the liquidation of RLits Contracting:
(a)R Lits Group is indebted to RLits Contracting for $2,036,694.27; and
(b)SFund is indebted to RLits Contracting for $891,618.72.
[18] On 31 October 2024, RLits Contracting demanded payment of the debts from R Lits Group and SFund. No payment has been received. The group of companies is no longer trading. SFund is the member of the group that holds the trading assets, including vehicles, trucks, an excavator and a logging trailer. There are various security interests registered on the PPSR against those assets. The liquidator’s investigations have confirmed that R Lits Group and its subsidiaries do not hold sufficient assets to enable R Lits Group and SFund to pay their debts to RLits Contracting.
[19] I accept the evidence of Mr Pullan as establishing that R Lits Group and SFund are unable to pay their debts to RLits Contracting.
[20] The sole shareholder and director of R Lits Group, and the sole director of SFund, Raymond Bishop, consents to an order putting those companies into liquidation, and the appointment of the Official Assignee as liquidator.
[21] Raymond Bishop’s memorandum dated 4 December 2024 qualifies as admission of sufficient facts to prove the causes of action based on the insolvency of R Lits Group and SFund. The proceeding was called in open court on 6 December 2024. Raymond Bishop appeared by telephone and confirmed that he and R Lits Group and SFund consent to those companies being put into liquidation.
[22] R Lits Group and SFund support the liquidation orders, so the Court is able to safely conclude that there are no discretionary factors which might weigh against liquidation.
[23]Dispensing with advertising will have no material effect on any other parties:
(a)R Lits Group and SFund are no longer trading;
(b)the rights of secured creditors will not be affected by the liquidation;
(c)any unsecured creditors will be adequately protected through the liquidation process;
(d)there are no other identified persons with interests that need protection; and
(e)liquidation is inevitable.
[24] I am satisfied that this is a rare case where it is appropriate to make an order putting R Lits Group and SFund into liquidation immediately, without those companies having an opportunity to file a defence and without advertisement of the proceeding.
[25] The statement of claim also pleads that Roy Bishop, acting as a de facto director of R Lits Group, intentionally provided the Registrar with inaccurate information regarding the directorship of R Lits Group.
[26] Mr Pullan’s evidence is that, when Raymond Bishop was interviewed by a member of the Official Assignee’s staff, Raymond Bishop stated that he did not sign the consent and certificate of director in his name dated 29 May 2018 for his appointment as a director of R Lits Group, and he displayed little or no knowledge about the functioning of the group of companies. The liquidator alleges that Roy Bishop has forged Raymond Bishop’s signature on numerous occasions.
[27] It is not necessary to consider this additional ground for liquidation, or the Court’s jurisdiction on just and equitable grounds.
Orders
[28]The requirement for advertising of this proceeding is dispensed with.
[29] R Lits Group Limited is put into liquidation and the Official Assignee is appointed liquidator.
[30] SFund Limited is put into liquidation and the Official Assignee is appointed liquidator.
[31]These orders are timed at 4.00 pm on 9 December 2024.
[32]The plaintiff may file a memorandum as to costs.
[33] The proceeding against the third, fourth and fifth defendants is adjourned to the liquidation list on 28 February 2025 at 10.45 am.
Associate Judge Brittain
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