Re EncoreFX (NZ) Ltd - [2020] NZHC 674

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-000543

[2020] NZHC 674

UNDER Part 19 of the High Court Rules 2016 and section 239ADO of the Companies Act 1993

IN THE MATTER OF

ENCOREFX (NZ) LIMITED

AND

of an application by

REES GRAHAM LOGAN, ADAM PAULS NIKITINS and

STEWART ALEXANDER McCALLUM

Applicants

Hearing: [On the Papers]

Counsel:

D T Broadmore and L C Sizer for the Applicants

Judgment:

1 April 2020

JUDGMENT OF EDWARDS J

This judgment was delivered by me on 1 April 2020 at 5.00 pm pursuant to r 11.5 of the High Court Rules.

Deputy Registrar

Solicitors: Buddle Findlay, Auckland

RE ENCOREFX (NZ) LTD [2020] NZHC 674 [1 April 2020]

[1] The applicants are the administrators of EncoreFX (NZ) Ltd. They were appointed to that role on 30 March 2020 by resolution of the board of directors.

[2] The applicants seek orders modifying the default statutory requirements under the Companies Act 1993 (Act) that relate to the convening of the first creditors’ meeting. They say the current Covid-19 lockdown makes it impossible, impracticable and undesirable to comply with those statutory requirements without the orders sought.

[3] Following a telephone call with counsel for the applicants this morning, I made the orders set out in the annexure to this judgment. My reasons for doing so now follow.

EncoreFX

[4] EncoreFX is a registered financial services provider and a licensed derivatives issuer under the Financial Markets Conduct Act 2013. It is a wholesale and retail trader of foreign currency primarily used by importers and exporters to hedge foreign currency risks.

[5] EncoreFX is part of a global group, with related entities in Australia, Canada and the United States. The Australian entity was also placed into administration on 30 March 2020.

[6] One of the applicants, Mr Logan, has provided an affirmation in support of the application. He deposes to discussions with the sole director of EncoreFX as to the number of customers and creditors. Based on those discussions, Mr Logan understands that EncoreFX has approximately 110 customers, and, of those, approximately 20 to 30 unsecured creditors. There is only one secured creditor. That creditor has a security interest in a motor vehicle owned by EncoreFX.

Statutory regime

[7] Part 15A of the Companies Act 1993 (Act) governs the administration of a company. Under that Part, the applicants are required to take the following steps:

(a)Call a first creditors’ meeting to decide whether to appoint a creditors’ committee and to decide whether to replace the applicants as administrators. If it is decided to appoint a creditors’ committee, then the members must be appointed;1

(b)To give notice to EncoreFX’s creditors of the first creditors’ meeting and advertise that meeting not less than five working days before the start of the creditors’ meeting;2

(c)To hold the first creditors’ meeting within eight working days after the date of appointment (in this case 30 March 2020);3

(d)To table at the first creditors’ meeting…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re EncoreFX (NZ) Ltd

Details

AGLC: Re EncoreFX (NZ) Ltd [2020] NZHC 674
Case: [2020] NZHC 674
Decision Date: 1 April 2020

CaseChat Overview and Summary

The case of Re EncoreFX (NZ) Ltd involves an application by the administrators of EncoreFX (NZ) Ltd, who were appointed on 30 March 2020. The administrators seek orders modifying the statutory requirements for convening the first creditors’ meeting due to the current Covid-19 lockdown. They argue that the lockdown makes it impossible, impracticable, and undesirable to comply with the statutory requirements without the sought orders. The court granted the application on the papers and provided its reasoning in the judgment delivered on 1 April 2020.

The primary legal issue before the court was whether the court could make orders that deviated from the statutory requirements for convening the first creditors’ meeting under Part 15A of the Companies Act 1993. The court had to determine if the current Covid-19 lockdown justified the modification of the statutory requirements and if the proposed alternative methods of service and meeting would be consistent with the objectives of Part 15A. The court also had to consider the impact of the orders on EncoreFX’s creditors and whether the application could proceed without notice.

The court found that the application could proceed on a without notice basis, as requiring the application to proceed on notice would cause undue delay or prejudice given the Covid-19 lockdown. The court also granted leave for the affirmation to be taken remotely and filed electronically, considering the current circumstances. Regarding the method of service, the court found that allowing documents and notices to be sent by posting them on EncoreFX’s website and emailing them to creditors’ designated email addresses was a practical means of ensuring that all creditors receive notice of the meeting. The court also found that allowing the first creditors’ meeting to proceed by way of video or telephone conference and voting by electronic means was consistent with the objectives of Part 15 of the Act.

The court granted the application, making the orders sought by the administrators. The orders permitted the sending of documents and notices required under Part 15A of the Act by posting a copy on EncoreFX’s website and emailing a copy to the email address by which EncoreFX normally communicates with the creditor, or any other email address that the creditor may designate. The orders also allowed the first creditors’ meeting to proceed by way of video or telephone conference and voting to be by electronic means, such as email. The court's decision aimed to ensure that the objectives of Part 15A were maintained in the case of EncoreFX, while also taking into account the current Covid-19 lockdown situation.

Orders