Ruapehu Alpine Lifts Limited
[2022] NZHC 2738
•21 October 2022
|
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-001993
[2022] NZHC 2738
UNDER Part 19 of the High Court Rules 2016 and Part 15A of the Companies Act 1993 IN THE MATTER OF
Ruapehu Alpine Lifts Limited (Administrators Appointed)
BETWEEN
JOHN HOWARD ROSS FISK and RICHARD JOHN NACEY of
PriceWaterhouseCoopers as administrators of Ruapehu Alpine Lifts Limited (Administrators Appointed)
Applicants
Hearing: On the papers Counsel:
L Sizer for the Applicants
Judgment:
21 October 2022
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 21 October 2022 at 9.45 a.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 2738 [21 October 2022]
[1] The applicants, John Fisk and Richard Nacey (Administrators) are administrators of Ruapehu Alpine Lifts Limited (the Company), in administration under Part 15A of the Companies Act 1993 (the Act). The Administrators apply for orders extending the period before which a watershed meeting must be convened, extending the period for giving notice of termination of employment contracts, and modifying the service requirements for notices under the Act. The Administrators also request permission to commence the proceeding by way of originating application.
[2] The Company operates the Whakapapa and Tūroa ski fields on the slopes of Mount Ruapehu in the central North Island. It is a nationally and regionally significant business. It is one of the largest employers in the Ruapehu region and operates within the Tongariro National Park (a UNESCO Dual World Heritage Area). The ski fields (and Ruapehu generally) are of major significance to local iwi and subject to Te Tiriti o Waitangi claims and co-governance arrangements.
[3] The Administrators were appointed on 11 October 2022 by director resolution. The Company’s present financial difficulties appear to be related to COVID-19 and lack of snow resulting in significantly reduced patronage.
[4]The Administrators face two immediate deadlines:
(a)Under s 239AT(2) of the Act, they must convene a watershed meeting within 20 working days of their appointment, namely 9 November 2022, unless the Court extends the convening period under s 239AT(3) of the Act.
(b)Under s 239Y, the Administrators will be personally liable to pay employees’ wages and salaries under a contract of employment, unless they give notice of termination under s 239Y(3) within 14 days of their appointment, namely 25 October 2022, unless the Court extends that period under s 239Y(4).
[5]The Administrators apply to extend both time periods to 9 May 2023.
Application to extend time for the watershed meeting
[6] The voluntary administration provisions are set out in Part 15A of the Act. The objects of voluntary administration are explained in s 239A:
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.
[7] An administrator appointed under the Act has by default a short statutory time frame to try to agree on a rehabilitation plan for the company. In the best case, the administrator will be able to put forward a proposal (a deed of company arrangement) for consideration by the company's creditors to rescue and rehabilitate the insolvent company. A deed of company arrangement is defined in s 239B as “the deed that is executed by the company and its creditors providing for payment towards the creditors’ debts”.
[8] A watershed meeting is the meeting of creditors to decide the future of the company. At the watershed meeting, the creditors may resolve that the company execute a deed of company arrangement; resolve that the administration should end; or resolve to appoint a liquidator.1
[9] An administrator must, not less than five working days before the watershed meeting, give written notice of the meeting to as many of the company's creditors as reasonably practicable, and advertise the meeting.2 A number of detailed documents must accompany the notice of the watershed meeting that is sent to the company's creditors. They include a report by the administrator about the company's business, property, affairs, and financial circumstances; and a statement setting out the administrator’s opinion on whether it would be in the creditors' interests for the
1 Section 239ABA.
2 Section 239AU.
company to execute a deed of company arrangement, or for the administration to end, or for the company to be placed in liquidation. If a deed of company arrangement is proposed, details of the proposed deed must be provided.
[10] Applications to extend the time for the watershed meeting have been considered, and the relevant principles set out, in several decisions of this Court. In the leading case of Re Nylex (New Zealand) Limited, Heath J discussed the use of s 239AT(3) as follows:3
[18] It is clear from the strict time limits contained in the legislation and the need to keep a moratorium against the exercise of certain creditors' rights in place for the least time practicable, that courts should take care in determining whether to grant applications to extend the convening period.
[19] There will be cases (though this is not one) where such an application is only made for the purpose of delay and extension of the moratorium. But, in a case where complexity reigns and an administrator cannot, in the time prescribed, conduct a proper investigation to form opinions to put to creditors at a watershed meeting, it is appropriate (and indeed necessary) to extend the convening period so that the administrator can perform his or her functions properly and creditors, at the watershed meeting, can make informed decisions.
[…]
[22] […] an application to extend time requires a balance to be struck between the expectation that an administration will be relatively speedy and the need to ensure that undue haste does not prejudice sensible and constructive actions directed towards the object of the regime, namely maximising returns of the creditors.
[11] In Re Grenfell, the High Court confirmed that the appropriateness of an extension will be a "fact specific determination," with six months regarded as a "significant period" and at the top of the range.4 The Court went on to endorse the non-exhaustive list of factors identified in Re Riviera Group Pty Limited, which included:5
(a)the size and scope of the business;
(b)the large number of employees with complex entitlements;
3 Re Nylex (New Zealand) Limited HC Auckland CIV 2009-404-1217, 11 March 2009.
4 Re Grenfell [2016] NZHC 36 at [14].
5 Re Riviera Group Pty Limited (2009) 72 ACSR 352 (SCNSW).
(c)a complex corporate group structure and intercompany loans;
(d)the time needed to execute an orderly process of disposal of assets;
(e)the time needed for a thorough assessment of a proposal for a deed of company arrangement;
(f)the possibility that an extension will allow a sale of the business as a going concern; and
(g)more generally, additional time being likely to enhance the return for unsecured creditors.
[12] Turning to the present Company, there can be no doubt that the Administrators require additional time to become familiar with its affairs and operations, understand its complete financial position, consult with stakeholders and formulate a plan for the Company’s future. Aspects of the Company’s business are unique and mean that the administration process will be complex.
[13] Notably, at the date of administration, the Company had approximately 196 employees, 150 unsecured creditors (in addition to approximately 16,000 life pass holders who may be contingent creditors), and 36 secured creditors, including ANZ as first-ranking GSA holder and 45 security interests registered on the Personal Property Security Register.
[14] Furthermore, the Company has a complex range of stakeholders, including the Department of Conservation, numerous iwi, MBIE, the Ruapehu District Council, Taupō District Council, community trusts, private entities, and its life pass holders.
[15] The Company’s ability to operate the Whakapapa and Tūroa ski fields arises under concessions granted by DOC, on conservation land that is taonga. Therefore, the Administrators will need DOC’s consent to any sale of the company’s business. DOC, in turn, has obligations under Te Tiriti o Waitangi and s 4 of the Conservation Act 1987 to consult with mana whenua.
[16] In addition, there are co-governance arrangements in place with mana whenua. There is a co-governance group involving Ngāti Tūwharetoa, known as Te Pae Maunga, for Whakapapa. A similar group, Te Pae Toka, exists with Ngāti Rangi in relation to the Tūroa ski field. The Administrators will need to consult with these groups about the administration process and the future of the Company. Secured creditors (including ANZ and the parties with security over Sky Waka, who are still being identified) will also need to form part of the discussions.
[17] In view of these factors and the other considerations outlined in the affidavit of Mr Nacey, I am satisfied that it is appropriate to extend the convening period for six months. Such an extension is likely to be in the best interests of the Company’s creditors as a whole because it maximises the chances of the Company’s business continuing and being sold as a going concern. If there is any prejudice to creditors, they will be able to apply to vary the orders sought.
[18] The alternatives to extending the convening period are unattractive, namely holding the watershed meeting and then adjourning it for a period of up to 30 working days under s 239AZ. This would still not provide enough time for the Administrators to properly prepare for the watershed meeting. Another alternative is holding the watershed meeting and immediately putting the Company into liquidation. Such a scenario would not be consistent with the objects of voluntary administration of maximising the chances of the business continuing and achieving the best outcome for creditors.
Extension of time for termination of employment contracts
[19] Under s 239Y(3) of the Act, the Administrators are personally liable for wages and salaries that accrue under a contract of employment unless they lawfully give notice of termination within 14 days of appointment. Under s 239Y(4), the Administrators may apply to the Court to have the 14 day period extended on any terms and conditions that the Court deems appropriate.
[20] In Re WGL Retail Holdings, an application for directions under both ss 239Y(4) and 239AT(2) was made by the administrators and determined together.6 The Court granted both extensions of time because:
(a)the extensions would promote continuity of employment relationships, which was likely to be in the best interests of both creditors and employees;
(b)the extensions would allow the applicants to continue their "business as usual" approach; and
(c)the risks of not extending time under s 239Y of the Act were that the administrators may feel constrained to terminate employment, reducing the chances of a successful administration.
[21] Similar orders have been made in other cases. For example, in Arrow International Group Ltd, the Court granted an extension under s 239Y(4) of two and a half months to align with the extension to the convening period.7 The extension in that case was granted to provide employees comfort as to their immediate future, minimise disruption and cost, avoid adverse media coverage, and maximise the possibility of keeping the companies trading. In doing so, the Court required the employees' salaries and wages to be a cost of the administration under sch 7, cl 1(1)(b) of the Act.
[22] The Company presently has 196 employees. The Administrators submit that a six month extension to the notice period under s 293Y(3) is appropriate because:
(a)Unless an extension is granted, notice of termination would be given to the 196 employees by 25 October 2022, so that the Administrators avoid personal liability for their employment contracts.
6 Re WGL Retail Holdings Ltd [2011] NZCCLR 22.
7 Arrow International Group Ltd HC Auckland CIV-2019-404-408 (Minute dated 12 March 2019) at [11]-[15].
(b)The Administrators would then need to re-employ the Company's employees, which would incur significant legal and Administrators' costs. Offers of re-employment might be declined by the Company's employees and attract adverse media attention.
(c)The Company's employees will not be materially prejudiced, since they remain free to resign, and their wages and salaries will be treated as an expense in the administration under sch 7, cl 1(1)(b) of the Act.
(d)129 of the employees are on seasonal or fixed term contracts, which may expire during the administration. Accordingly, the stress and inconvenience of terminating and re-hiring those employees is not warranted in circumstances where their employment may terminate shortly in any event.
[23] I accept that these are good reasons to extend the period under s 239Y(3). Fundamentally, the extension will assist the Administrators in achieving their objective of attempting to sell the Company as a going concern. It will minimise stress and inconvenience to the Company’s employees and preserve the Company’s goodwill with them while maximising the prospects of continuity of employment. Retaining a core group of employees will enable the assets to be maintained over the summer period to keep the Company’s potential options open.
Notice requirements under the Act
[24] The Administrators seek orders with retrospective effect directing that notices or other documents that they are required, or may elect, to give under Part 15A of the Act are to be given by electronic means.
[25] Section 239ADO(1) of the Act provides a general jurisdiction for the Court to make "any order that it thinks appropriate about how [Part 15A] is to operate in relation to a particular company". That section has been used by this Court to authorise the giving of notices and other documents under Part 15A to creditors electronically.
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.
[26] In Re Pumpkin Patch Ltd (in receivership and administrators appointed), Heath J discussed methods of service on creditors of companies in voluntary administration.8 In that case, the Court was asked to vary the method of service for documents which the administrators were required to serve on creditors, together with the notice of the watershed meeting of creditors and the accompanying documents. Heath J stated:9
In my view, the Court's approach to this issue should be guided by the need to achieve an outcome that accords with the overall objectives of the voluntary administration regime. Viewed in that way, the question becomes: what is the best method by which the accompanying documents can be provided to ensure creditors have an adequate opportunity to consider them before the meeting? The purpose of providing the accompanying documents is to enable creditors to consider the content and make an informed decision on the important questions to be debated at such a meeting. That means that, when exercising the discretion, the Court's focus is on the promotion of the interests of creditors and ensuring that the objectives of Part 15A are met.
[27]The Administrators submit that the orders should be made because:
(a)almost all the creditors of the Company appear to be natural persons and the applicants have identified email addresses for all trade creditors and employees, and approximately 12,130 of the life pass holders;
(b)for those without email addresses, the notices and documents will also be available on PwC's website and the Court's orders will also be advertised in newspapers and posted on PwC’s website;
(c)the costs and administrative burden of sending by post the notices, and any other correspondence, to the Company's creditors would be excessive (incurring at least $27,000 plus GST per round of notices);
(d)while there are approximately 4,000 life pass holders who do not have an email address, the Company does not have postal addresses for all
8 Re Pumpkin Patch Ltd (in receivership and administrators appointed) [2016] NZHC 2771.
9 At [25].
of them, and those which are available may not be adequate to give notice in any event given some of the life passes were granted a long time ago;
(e)providing access to the required documents and notices by sending a link to PwC’s website would be efficient (and would permit large attachments to be efficiently distributed);
(f)sending notices and other documents by electronic means accords with the objects of Part 15A in s 239A of the Act for the business, property and affairs of the Company to be administered in an efficient way; and
(g)the Administrators’ reports will be sent to the Registrar and will be publicly available for review and download on the applicants' website and on the Companies Office website.
[28] The Administrators ask that the orders have retrospective effect, to apply to the notice the Administrators were required to give for the first creditors’ meeting on 14 October 2022. This is necessary because it was not possible for the Administrators to give notice by the required statutory means, having only been appointed on 11 October 2022 and as the full extent of the Company’s potential creditors did not emerge until 13 October 2022.
[29] I am satisfied that electronic notice is appropriate in the circumstances, particularly the large number of creditors and potential creditors, and the likelihood of there being numerous and lengthy documents to be conveyed given the complexity of the administration process.
Without notice application
[30] The administrators have applied without notice. This is common with applications to extend the time to take steps under Part 15A. I am satisfied that requiring the Administrators to proceed with the application on notice would cause undue delay or prejudice and would not be in the interests of justice
given the immediate statutory deadlines. I accept that the Company’s employees and creditors will not suffer any prejudice if service is dispensed with because they will be notified of the orders and they will have the right to apply to vary them.
[31] I also accept that it is appropriate that the employees be notified by advertisement, rather than personal service. The Court has previously held that it was appropriate to notify creditors and employees by advertising the orders in a daily newspaper and posting the orders on the administrator’s website.10
Orders
[32]I order that:
(a)the convening period as defined in s 239AT(2) of the Companies Act 1993 (Act) in the administration of Ruapehu Alpine Lifts Limited (Administrators Appointed) (Company) is extended under s 239AT(3) to an end date of 9 May 2023, instead of 9 November 2022 (being an extension of six calendar months);
(b)the applicants may convene a watershed meeting for the Company at any time within the period for which the extension has been granted;
(c)the period of time in which the applicants are required to give notice of termination of a contract of employment under s 239Y(3) of the Act is extended under s 239Y(4) of the Act to an end date of 9 May 2023, instead of 25 October 2022, with any wages or salary that accrue under such contracts being an expense of the administration under sch 7, cl 1(1)(b) of the Act;
(d)any notices or other documents the applicants are required or may elect to give under Part 15A of the Act (in particular under ss 239AO and 239AU) are to be given by the following methods:
10 Re Nylex (New Zealand) Ltd HC Auckland CIV 2009-404-1217, 11 March 2009;
Re WGL Retail Holdings Ltd [2011] NZCCLR 22; and Re Gourmet Food Holdings New Zealand Ltd [2012] NZHC 3606.
(i)uploading a copy to PwC’s website: and
(ii)emailing the creditor or person at the email address or addresses (if any) by which the Company normally communicates with the creditor or person, or such other email address (if any) that the creditor or person may designate to the applicants:
(1) the notices or other documents (if practicable, in light of any applicable file size limits); and
(2) a link to PwC's website, where copies of any notices and other documents can be downloaded;
(e)any notices or other documents given by the applicants in accordance with the preceding order in connection with the first creditors’ meeting are to be treated as having been given under and in terms of the order effective from 14 October 2022 (even if given before the date of this order and notwithstanding any delay in the upload of such notices or documents to PwC’s website);
(f)leave to apply to modify or discharge the above orders is granted to the applicants, and any person who can demonstrate a sufficient interest in the administration upon appropriate notice being given to the applicants;
(g)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); and
(h)the applicants’ reasonable costs of this application will be paid out of the assets of the Company.
Associate Judge Gardiner
5
4
0