Ruapehu Alpine Lifts Limited
[2022] NZHC 3077
•24 November 2022
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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-001993
[2022] NZHC 3077
UNDER Part 7 of the High Court Rules 2016 and Part 15A of the Companies Act 1993 IN THE MATTER OF
RUAPEHU ALPINE LIFTS LIMITED
(Administrators Appointed)
AND
JOHN HOWARD ROSS FISK and RICHARD JOHN NACEY as
Administrators of Ruapehu Alpine Lifts Limited (Administrators Appointed) Applicants
Hearing: On the papers Counsel:
D T Broadmore / L C Sizer for the Applicants
Judgment:
24 November 2022
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 24 November 2022 at 2.15 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors:
Buddle Findlay, Auckland
RE RUAPEHU ALPINE LIFTS LTD [2022] NZHC 3077 [24 November 2022]
[1] On 11 October 2022, John Fisk and Richard Nacey were appointed as administrators (Administrators) of Ruapehu Alpine Lifts Limited (in administration) (Company).
[2] The Administrators apply for orders under s 239ADO of the Companies Act 1993 (Act) that Part 15A of the Act operates in relation to the Administrators as if s 239ADH provides that:
(a)any liability incurred by the Administrators arising out of or in connection with a Term Loan Facility Deed dated 17 November 2022 (Facility) given by ANZ Bank New Zealand Limited (ANZ) and Crown Regional Holdings Limited (CRHL) is in the nature of debts incurred by the Administrators in the performance and exercise of their functions as joint and several administrators of the Company; and
(b)their personal liability for such debts is limited to the available assets of the Company and any available statutory and equitable indemnities of the Administrators in relation to those assets, except to the extent agreed under the Facility.
[3] The orders are necessary to permit the Administrators to draw down on the Facility, to meet the ongoing liabilities of the Company, and to enable the Administrators to develop a restructuring proposal. Mr Fisk deposes that without the Facility, the Company will have insufficient funds to continue trading up until the anticipated watershed meeting on or around 16 December 2022.
[4] ANZ and CRHL consent to the orders sought, as confirmed in a joint memorandum of counsel dated 18 November 2022.
[5] The orders are necessary to the Administrators because of the effect of s 239ADH(1) of the Act. This provision provides that an administrator is liable for debts that he or she incurs in the performance, exercise, or purported performance or exercise of any of his or her functions and powers as administrator, including for the purpose of funding the company.
[6] In turn, an administrator has an indemnity to the extent of the company’s property for such a personal liability,1 which is secured by a statutory lien.2 Accordingly, if the assets of the Company are insufficient to meet the Administrators’ personal liability under s 239ADH of the Act, then the Administrators will be required to satisfy their personal liability from their own assets.
[7] To avoid those consequences, the Administrators seek orders under s 239ADO of the Act limiting their personal liability in relation to the Facility. Such orders have been made on a number of occasions in Australia and have also been made once previously in New Zealand.
[8] Under s 239ADO, the Court may make “any order that it thinks appropriate about how [Part 15A] is to operate in relation to a particular company”. The overriding principle is that the Court should only exercise the power to ensure that the objectives of Part 15A are maintained in the case of a particular company.3 Those objectives are outlined in s 239A of the Act:
The objects of this Part are to provide for the business, property, and affairs of an insolvent company, or a company that may in the future become insolvent, to be administered in a way that –
(a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or
(b) if it is not possible for the company or its business to continue in existence, results in a better return for the company’s creditors and shareholders than would result from an immediate liquidation of the company.
[9] In Re Jackson, Hinton J made orders under s 239ADO of the Act limiting the administrators’ personal liability under an on-demand overdraft provided by ANZ for the purpose of funding the administration to the available assets of the relevant companies (except to the extent agreed otherwise with ANZ).4 In doing so, her Honour considered that:
1 Section 239ADL(a).
2 Section 239ADN.
3 Re EncoreFX (NZ) Ltd [2020] NZHC 674 at [8].
4 Re Jackson [2018] NZHC 368.
(a)the proposed arrangements were in the interests of creditors generally, because without the funding arrangements there would be no monies to fund the administration;5
(b)there was no prejudice to ANZ in granting the orders sought, as ANZ had already agreed that the administrators’ liability would not extend beyond the value of the companies’ available assets;6 and
(c)there was no prejudice to any other party.7
[10] The approach in Re Jackson is consistent with a significant number of Australian cases decided under ss 443A and 447A(1) of the Corporations Act 2001 (Cth) (Corporations Act).8 Those provisions are in materially identical terms to ss 239ADH and 239ADO of the Act.
[11] The principles governing the grant of such orders, as summarised in the leading Australian case of Re Unlockd Ltd, are:9
(a)the proposed arrangements are in the interests of the company's creditors and consistent with the objectives of Part 5.3A of the Corporations Act 2001 [ie Part 15A of the Act];
(b)typically, the arrangements proposed are to enable the company's business to continue to trade for the benefit of the company's creditors;
(c)the creditors of the company are not prejudiced or disadvantaged by the types of orders sought and stand to benefit from the administrators entering into the arrangement; and
5 At [23].
6 At [24].
7 At [26].
8 Crutchfield’s Voluntary Administration (online ed, Thomson Reuters) at [30.443A, 20].
9 Re Unlockd Ltd (administrators appointed) [2018] VSC 345 at [60]-[64], citing Re Mentha (in their capacities as joint and several administrators of the Griffin Coal Mining Company Pty Ltd (administrators apptd) (2010) 82 ACSR 142; [2010] FCA 1469 at [30], and recently affirmed in Re Ovato Ltd (Admins apptd) [2022] FCA 903 at [15].
(d)notice has been given to those who may be affected by the order.
[12] While the "general rule" in Australia is that it is preferable that creditors are advised of such applications, that rule has been departed from where the circumstances indicate a need for urgency and creditors have leave reserved to them to apply to vary the orders.10
[13]I am satisfied that the applicable principles set out in Re Jackson and
Re Unlocked Ltd are met in this case.
[14] The Facility is in the interests of the Company's creditors and consistent with the objectives of Part 15A of the Act. It will enable the Company to continue trading and maximise the possibility that it can be sold as a going concern, which is to the benefit of unsecured creditors.
[15]The Company's creditors are not prejudiced by the orders sought:
(a)ANZ and CRHL have consented to the orders and agreed the Facility (which contractually limits the Administrators' liability, despite s 239ADH(2) of the Act).
(b)The Company's unsecured creditors are not prejudiced, and will in fact stand potentially to benefit from the orders because the funding is necessary to maximise the prospect of the Company being sold as a going-concern and the Company is receiving value for the increase in secured indebtedness. Without the orders, the Administrators would be unwilling to assume personal liability for the Facility, which would likely result in the immediate liquidation of the Company. If that were to occur, as Mr Fisk's and Mr Nacey's affidavits depose, that would be the worst outcome for the Company's creditors. It would destroy the value of the Company and reduce the potential returns to unsecured creditors.
10 Re Unlockd Ltd (administrators appointed) [2018] VSC 345 at [69]-[71].
[16] As much notice as possible has been given to the Company’s creditors. ANZ and CRHL, who are most directly affected by the orders, have consented to them. The Administrators have sent a copy of the application and supporting documents to the Company’s creditors consistent with the approved service methods. An on notice hearing would be impractical for the Company’s 16,000 creditors. Leave will be reserved for them to apply to vary the orders.
[17] Considering that the Administrators need to secure funding urgently to continue trading the Company, I consider that a without notice application is appropriate.
[18] I record that since filing the without notice interlocutory application, the Administrators made a limited drawdown under the Facility to meet urgent liabilities of the Company. Mr Fisk deposes that the position remains that without the orders sought, the Company will not be able to continue trading and will have to be placed into liquidation. That is because the Administrators are not prepared to assume the risk of personal liability for the level of borrowing that the Company would need to continue trading for the period of time required to preserve the possibility of selling the Company as a going concern.
Orders
[19]I order:
(a)under s 239ADO of the Companies Act 1993 (Act), that Part 15A of the Act operates in relation to the applicants as if s 239ADH of the Act provides that:
(i)any liability incurred by the applicants arising out of or in connection with the Term Loan Facility Deed dated 17 November 2022 (Facility) given by ANZ Bank New Zealand Limited and Crown Regional Holdings Limited is in the nature of debts incurred by the applicants in the performance and exercise of their functions as joint and several administrators of
Ruapehu Alpine Lifts Limited (Administrators Appointed) (Company);
(ii)notwithstanding the liabilities in paragraph 19(a)(i) above are debts incurred by the applicants in the performance and exercise of their functions as joint and several administrators of the Company, the applicants’ personal liability for such debts (whether in contract, tort (including negligence) or otherwise) is limited to the available assets of the Company and any available statutory and equitable indemnities of the applicants in relation to those assets, except to the extent agreed under the Facility;
(b)leave is reserved for the applicants and any other person who can demonstrate a sufficient interest in the administration of the Company to apply for variation or discharge of these orders upon appropriate notice being given to the applicants;
(c)within seven days of the Court’s orders, the applicants must:
(i)advertise the Court’s orders in The New Zealand Herald and The Dominion Post; and
(ii)post of copy of the Court’s orders on PwC’s website; and
(iii)email a copy of the Court’s orders to each creditor's email address by which the Company normally communicates with that creditor (to the extent such an address is available).
(iv)the reasonable costs of this application be paid out of the assets of the Company.
Associate Judge Gardiner
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