Ruapehu Alpine Lifts Limited v Fisk
[2023] NZHC 1053
•4 May 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-1993
[2023] NZHC 1053
UNDER Part 19 of the High Court Rules and Part 15A of the Companies Act 1993 BETWEEN
Ruapehu Alpine Lifts Limited (Administrators Appointed)
AND
JOHN HOWARD FISK and RICHARD
JOHN NACEY as Administrators of Ruapehu Alpine Lifts Limited (Administrators Appointed) Applicants
Hearing: On the papers Appearances:
D T Broadmore and L C Sizer for Applicants M Kersey for ANZ Bank New Zealand Limited
M D Arthur for Crown Regional Holdings Limited
Judgment:
4 May 2023
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 4 May 2023 at 3pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Buddle Findlay, Auckland for Applicants
Russell McVeagh, Auckland for ANZ Bank New Zealand Limited Chapman Tripp, Auckland for Crown Regional Holdings Limited
Ruapehu Alpine Lifts Limited v FISK and Anor [2023] NZHC 1053 [4 May 2023]
Introduction
[1] A without notice application for further orders in relation to the voluntary administration of Ruapehu Alpine Lifts Limited (Administrators Appointed) (Company) has been filed dated 28 April 2023.
[2] The administrators, John Fisk and Richard Nacey (Administrators), are seeking urgent orders:
(a)further extending the period by which the Administrators must convene the watershed meeting for the Company from 9 May 2023 until 13 June 2023 under s 239AT(3) of the Companies Act 1993 (Act);
(b)further extending the time period within which notice of termination of contracts of employment are required to be given from 9 May 2023 until 13 June 2023, with wages and salary to be treated as a cost of the administration, under s 239Y(4) of the Act; and
(c)permitting voting and the appointment of proxies at the watershed meeting through an online voting platform provided by Link Market Services Limited under s 239ADO of the Act.
Background
[3] The background is set out in detail in the three judgments already issued in this proceeding.1 In summary:
(a)The Company operates the Whakapapa and Tūroa ski fields of Mount Ruapehu in the central North Island.
(b)On 11 October 2022, the directors of the Company appointed the Administrators.
1 Re Ruapehu Alpine Lifts Ltd [2022] NZHC 2738 [First Judgment],
Re Ruapehu Alpine Lifts Ltd [2022] NZHC 3077 [Second Judgment],
Re Ruapehu Alpine Lifts Ltd [2023] NZHC 20 [Third Judgment].
(c)On 21 October 2022, Associate Judge Gardiner made orders in relation to the administration including the following:2
(i)extending the end date of the convening period for the watershed meeting under s 239AT(3) to 9 May 2023, instead of 9 November 2022 (being an extension of six calendar months);
(ii)extending the date by which the Administrators were required to give notice of termination of contracts of employment under s 239Y(3) to 9 May 2023, instead of 25 October 2022 (with any wages or salary accruing under such contracts to be an expense of the administration under schedule 7, clause 1(1)(b) of the Act).
(iii)permitting the Administrators to give notices under Part 15A of the Act by uploading them to PwC's website and emailing them to creditors.
(d)On 24 November 2022, Associate Judge Gardiner made orders limiting the Administrators' liability under a Term Loan Facility Deed dated 17 November 2022 (Facility) given by ANZ Bank New Zealand Limited (ANZ) and Crown Regional Holdings Limited (CRHL) to enable the administration to continue.3
(e)On 20 January 2023 I made directions confirming that further lending given under the deed of amendment and restatement to the Facility was a liability incurred by the Administrators arising out of or in connection with the Facility (having the effect of limiting the Administrators' liability under the Facility as varied by the deed of amendment and restatement).4
2 First Judgment, above n 1, at [32].
3 Second Judgment, above n 1, at [19].
4 Third Judgment, above n 1, at [30].
Voluntary Administration — relevant statutory provisions
[4] The voluntary administration provisions are set out in Part 15A of the Act. Section 239A sets out the objects of voluntary administration as follows:
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.
[5] The statutory timeframes in Part 15A within which an administrator appointed under the Act is required to try to agree on a rehabilitation plan for the company are very short. Section 239AT(2) requires the Administrators to convene a watershed meeting within 20 working days of their appointment unless time is extended by the Court. A watershed meeting is a meeting of creditors to decide the future of the company and, in particular, whether the company and the deed administrator should executive a deed of company arrangement (DOCA).5 At the watershed meeting, the creditors may:6
(a)resolve that the company execute a DOCA specified in the resolution;
(b)resolve that the administration should end, handing control of the company back to its directors; or
(c)resolve to appoint a liquidator.
[6] Section 239AU requires the administrator not less than five working days before the watershed meeting to give written notice of the meeting to as many of the company’s creditors as reasonably practicable and to advertise the meeting in the New Zealand Gazette and a local newspaper.7 A number of detailed documents must
5 Companies Act 1993, s 239AS.
6 Section 239ABA.
7 Section 3(1)(a).
accompany the notice of the watershed meeting sent to the company’s creditors including:8
(a)an updated interests statement;
(b)a report by the administrator about:
(i)the company’s business, property, affairs, and financial circumstances;
(ii)any other matter material to the creditors’ decisions to be considered at the meeting;
(c)a statement setting out the administrator’s opinion, with reasons for that opinion, about each of the following matters:
(i)whether it would be in the creditors’ interests for the company to execute a DOCA;
(ii)whether it would be in the creditors’ interests for the administration to end;
(iii)whether it would be in the creditors’ interests for the company to be placed in liquidation; and
(d)if a DOCA is proposed, a statement setting out the details of the proposed deed.
[7] Section 239AT(3) of the Act provides that the Court may extend the “convening period” of a company in voluntary administration thereby extending the deadline by which the administrator must call the watershed meeting.
8 Section 239AU.
[8] In Re Nylex (New Zealand) Ltd Heath J referred to the strict time limits in the voluntary administration regime but held that an application to extend under s 239AT(3) “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.”9
[9] In Re Grenfell Courtney J 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.10 The Court endorsed the non-exhaustive list of relevant factors in Re Riveria Group Ltd,11 as set out in Associate Judge Gardiner’s judgment of 21 October 2022.12
[10] In Re McElhinney, the Court held that multiple extensions to the convening period were permissible,13 citing Re Strawbridge, which in turn cites Australian authorities in support.14
[11] In Re Strawbridge the Court confirmed that the relevant factors when deciding whether to grant a further extension are the same as those considered on an initial application to extend the convening period.15
Is a further extension appropriate in this case?
[12] The Administrators submit that in light of the above principles a further short extension of approximately one month to the six-month extension already granted is appropriate, particularly considering the factors below.
9 Re Nylex (New Zealand) Ltd HC Auckland CIV-2009-404-1217, 11 March 2009 at [22].
10 Re Grenfell [2016] NZHC 36 at [14]–[15].
11 Re Riviera Group Pty Ltd [2009] NSWSC 585 at [13].
12 First Judgment, above n 1, at [11].
13 Re McElhinney [2020] NZHC 2312 at [7]–[9].
14 Re Strawbridge [2020] NZHC 1146 at [3]–[8].
15 At [9].
Size, scope and complexity of the Company
[13] The Administrators submit that this administration is especially complex, as traversed in the Court’s previous judgments in this proceeding.16 The administration involves unique assets with complex stakeholder and partner interests. The Administrators therefore submit a significant convening period is warranted on the facts.
Orderly disposal of assets and sale of business as a going concern
[14] The Administrators submit the best return for creditors will likely be if the Company can be sold as a going concern. One of the Administrators, Mr Nacey, has filed an affidavit in support of this application confirming that attempting to sell the Company is a complex and time-consuming undertaking. The Crown, through CRHL and Kānoa – Regional Economic Development & Investment Unit, is leading the development and consideration of restructuring options for the Company because the Crown will need to consent to any restructuring proposal. CRHL received bids to purchase some or all of the Company's business on or about 20 April 2023. CRHL has advised the Administrators that it requires more time, but only until 13 June 2023, to consider and develop those bids in conjunction with the relevant stakeholders and partners, including iwi, bondholders, the Department of Conservation, and the local community.
[15] Mr Nacey’s affidavit records that originally the Administrators intended to apply for an extension of the convening period until the end of November 2023 with the Creditors’ Committee supportive of such an extension. This further extension would have allowed the Company to trade through winter if a restructuring proposal could not be developed, agreed and implemented before the commencement of that season. The intended extension was publicized on Radio New Zealand on 26 April 2023 and the Company’s management team was informed. The employees affected by the application under s 239Y of the Act to extend the time period within which notices of termination are required to be given had also been advised.
16 First Judgment, above n 1, at [12]–[16].
[16] However, Mr Nacey’s evidence is that the Crown, through the Ministry of Business, Innovation and Employment (MBIE), informed the Administrators by letter on 27 April 2023 that it only required an extension of the convening period until 13 June 2023 and would provide funding until that date.
[17] Mr Nacey’s evidence is that MBIE informed the Administrators separately to the above letter that the Crown is supporting an extension until 13 June 2023 because that is when it will have any acceptable restructuring proposals finalised and ready for implementation. Mr Nacey therefore explains that despite the fact that the Administrators had earlier reached the clear view that a longer extension to the convening period was appropriate and in the best interests of the Company’s creditors, there is no point in seeking a longer extension as, based on the Crown’s current position, the Administrators would inevitably need to convene the watershed meeting by 13 June 2023.
[18] The Administrators held a further Creditors’ Committee meeting and confirmed the creditors supported the extension until 13 June 2023.
[19] In addition the Administrators discussed the shorter proposed extension with the Company’s management and staff. The Company’s management would have preferred that the Company retain the ability to trade for longer if that ended up being necessary but accepted that it would be pointless to seek a longer period of extension in circumstances where the Crown would be unwilling to support it.
[20] Mr Nacey confirms that at the time of affirming his affidavit he had not heard back from the staff. Mr Nacey therefore records that although the Administrators consider there is a real possibility that restructuring proposals will not be ready by 13 June 2023, it is still appropriate that the extension is sought only until that time.
Likely to enhance returns to unsecured creditors
[21] The Administrators submit that if a restructuring proposal cannot be developed, the alternative is likely to be that the Company will be liquidated, resulting in multi- million-dollar remediation costs for taxpayers (which Mr Nacey deposes may exceed
$80 million) and with significantly reduced returns to the Company's creditors.
Prejudice to the Company’s creditors
[22] The Administrators submit that an extension of the convening period is unlikely to prejudice the Company's creditors for the following reasons:
(a)The extension maximises the possibility of the Company's business being sold as a going concern (as confirmed in the second affidavit of Richard Nacey affirmed on 27 April 2023).
(b)The extension – of approximately one additional month – is modest when viewed against the existing six-month extension.
(c)The Creditors' Committee (including ANZ and bondholders who are major secured creditors) is supportive of the extension, which, although not determinative, is a factor in favour of granting it.17
(d)The Administrators have sought an order confirming that they can convene the watershed meeting for the Company at any time within the period for which the extension has been granted. If it becomes clear that the Company should be liquidated, the Administrators can bring the administration to a close.
(e)Despite extending the convening period for six months with leave being reserved for creditors to apply to vary the orders, no creditors have filed any opposition to the extension.
(f)If there is any prejudice to creditors with the further extension, they will again be able to apply to vary the orders sought, pursuant to leave being reserved for that purpose as proposed.
[23] The Administrators submit that the alternatives to extending the convening period are impractical. There is an ability to adjourn a watershed meeting once convened for a period of up to 30 working days pursuant to s 239AZ of the Act. This
17 Re Rathner, Citius Property Pty Ltd (Administrator Appointed) [2023] FCA 26 at [44].
would be likely to have similar practical effect to the application for an extension to 13 June 2023. The Administrators however submit that this approach would incur significant wasted costs, create uncertainty and confusion, and disrupt the current development of the restructuring proposals. The remaining alternative would be to hold the watershed meeting and put the Company into liquidation. Mr Nacey deposes that this would be the worst outcome for creditors.
[24] Taking the above factors into consideration it appears appropriate for the modest extension sought to be granted as the balancing exercise discussed in Re Nylex (New Zealand) Ltd lands firmly on the side of granting the extension. The alternatives if an extension is not granted are clearly not likely to maximise the chances of the Company continuing or to maximise the returns to creditors if that is not possible. I therefore grant the extension sought below.
Extension of notice period for termination of employment contracts
[25] In addition the Administrators seek an extension of the period by which notices of termination are to be given under s 239Y(3) of the Act until 13 June 2023.
[26] Under s 239Y(3) of the Act the Administrators are personally liable for wages and salary that accrue under an employment contract with the company unless the Administrators lawfully give notice of termination within 14 days of appointment. Section 239Y(4) allows the Administrators to apply for an extension of the 14 day period on any terms and conditions that the Court deems appropriate. The principles applying to the exercise of discretion pursuant to s 239Y(4) were discussed in Associate Judge Gardiner’s judgment of 21 October 2022.18
[27] In terms of further extensions, Associate Judge Bell re-extended the period under s 239Y when further extending the convening period under s 239AT in Re McElhinney.19
[28] The Administrators submit that unless an extension is granted, notice of termination will need to be given to the 45 employees who have remained employed
18 First Judgment, above n 1, at [20]–[21].
19 Re McElhinney, above n 13, at [10].
since the start of the administration (Retained Staff) by 9 May 2023 so that the Administrators avoid personal liability for their employment contracts. In those circumstances, the Administrators would then need to re-employ the Retained Staff, which would incur significant legal and Administrators' costs.
[29] The Administrators further say that offers of re-employment might be declined by the Retained Staff and attract adverse media attention at a time shortly before the date of 13 June 2023 by which the watershed meeting would be convened. The Administrators submit that an extension would assist them in achieving the objective of attempting to sell the Company as a going concern because it would minimise stress and inconvenience to the Retained Staff and preserve the Company's goodwill with them, while maximising the prospects of continuity of employment.
[30] Mr Nacey confirms in his affidavit that he has informed the Retained Staff of the Administrators' intention to seek a further extension to the notice period under s 239Y(3). The Administrators advised that they would inform the Court of any opposition to the extension from the Retained Staff although they did not expect any. No advice to the contrary has been received by the Court.
[31] In the Administrators’ submission the Retained Staff 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.20
[32] As the convening period is being extended I consider it is appropriate at the same time to extend the notice period for termination of the employment contracts of the Retained Staff for the reasons discussed above.
Electronic voting
[33] The final application made by the Administrators is in relation to the form of voting and appointment of proxies. The Administrators intend to use an online voting platform provided by Link Market Services Limited (Platform).
20 Companies Act, sch 7 cl 1(1)(b).
[34] Section 239AK of the Act provides for the conduct of creditors’ meetings. It includes provision that a resolution will be adopted if a majority in number representing 75 per cent in value of the creditors or class of creditors voting in person, or by proxy vote or by postal vote, vote in favour of the resolution. Clauses 6 and 7 of schedule 5 of the Act regulates the appointment of proxies and postal votes but does not contemplate electronic voting. The clauses are also silent on the electronic appointment of proxies.
[35] The Administrators therefore apply for orders permitting electronic voting and the use of the Platform for the appointment of proxies and the making of proxy votes. These orders are sought pursuant to s 239ADO which provides the Court with a general power to make any order that the Court “thinks appropriate about how [Part 15A] is to operate in relation to a particular company.”
[36] The Court’s power under s 239ADO has been held to be a “broad and expansive” one,21 but the Court must exercise its powers under s 239ADO to ensure that the objectives of Part 15A are maintained in the case of a particular company.
[37] Orders have previously been made permitting electronic voting but in the context of COVID-19 restrictions which made postal voting by creditors impractical.22 The Administrators submit, however, that the underlying rationale for those orders are applicable to this application. While the Administrators could use postal voting as the sole means of voting (as they did for the first creditors' meeting), the Administrators say that it would be impractical, costly and inefficient compared to the use of the Platform. In the Administrators’ submission, having the Platform available for use will best promote the interests of creditors by being likely to reduce cost and maximise creditor participation, ensuring that the objectives of Part 15A are met.
[38] The memorandum filed on behalf of the Administrators records that there is a possibility that the Platform may end up only being cost neutral to creditors but submits that the orders would remain appropriate as the Platform provides significant
21 Adams Plumbing and Drainage (2010) Ltd v Hartland Construction Ltd [2012] NZHC 1095 at [12].
22 Re EncoreFX (NZ) Ltd [2020] NZHC 674 at [21]; Re STA Travel (NZ) Ltd HC Auckland CIV- 2020-404-1401, 26 August 2020 (Minute of Associate Judge Bell) at [11].
accessibility and participation advantages to the very large number of creditors. The Administrators refer to the Court’s analysis in Re Pumpkin Patch Ltd, which concerned electronic service on creditors, and submit the Platform can be described as the “best method” by which creditors can be given an opportunity to vote at the watershed meeting, which accords with the overall objectives of voluntary administration.23
[39] Mr Nacey has summarised the key features of the Platform in his affidavit, including that the Platform is used for proxy voting in a large number of annual and special meetings for NZX listed companies, that it is readily accessible across various devices and computer operating systems, that access to the platform is easily controlled and voting on the Platform is private, secure, accurate and tamper-proof. Mr Nacey further confirms that the votes can easily be counted and verified, and that there may be significant cost savings through using the Platform, as discussed above, and that the Creditors’ Committee supports the availability of the Platform.
[40] The Administrators further refer to the equivalent provisions in England and Wales — the Insolvency (England and Wales) Rules 2016. These rules allow electronic voting for creditor meetings subject to the following three criteria:24
(a)the notice delivered to creditors must give them any necessary information as to how to access the voting system including any password required;
(b)except where electronic voting is being used at a meeting, the voting system must be a system capable of enabling a creditor to vote at any time between the notice being delivered and the decision date; and
(c)in the course of a vote the voting system must not provide any creditor with information concerning the vote cast by any other creditor.
23 Re Pumpkin Patch Ltd [2016] NZHC 2771 at [25].
24 Insolvency (England and Wales) Rules 2016, r 15.4.
[41] Mr Nacey deposes in his 27 April 2023 affidavit that the Platform fulfils these criteria. The draft orders proposed include that the Administrators are to send the website address at which the Platform can be accessed and access instructions together with the notice to creditors of the watershed meeting under s 239AU. This would satisfy the first of the three criteria for electronic voting in England and Wales. Mr Nacey’s affidavit confirms that creditors will be provided with a link and will be able to use the Platform at any time to cast their vote until the cut-off date. The Platform therefore appears to meet the second criteria as well. The third criteria, that the voting system must not provide any creditor with information concerning the vote cast by any other creditor, appears to be met by how the Platform operates, with Mr Nacey’s affidavit confirming it is private and does not disclose votes cast by other creditors.
[42] In addition, the Administrators say that the Company stands to benefit from the use of the Platform for the following reasons:
(a)the Platform will provide a means of effective participation for creditors, including those overseas (relevant in this case given the large number of life pass holders) who may otherwise be unable to appoint a proxy or send a postal vote for receipt two working days before the start of the meeting;
(b)the Administrators anticipate that the Platform may result in significant cost savings to the administration, and it will also be much more efficient; and
(c)the Creditors' Committee supports the use of the Platform to remove the barriers of using paper forms.
[43] Considering the above factors in the context of the broad power in s 239ADO and the objectives of Part 15A of the Act, it is appropriate to allow electronic voting on the Platform as proposed and for the appointments of proxies and proxy voting. The Administrators have confirmed that they will continue to accept postal votes in the normal way.
Without notice application
[44] Finally I confirm that I am satisfied that the applications can be dealt with on a without notice basis. Service of the application on all of the Company’s creditors and employees would be an added expense to the administration and highly impractical given the number of parties to serve. Convening a contested hearing would be difficult within the statutory timeframes. Although the convening period can be extended retrospectively, it would lead to confusion and wasted costs in the interim. The orders sought are likely to greatly assist in the consultation and sale process which is in the best interests of the creditors and employees. Furthermore the Company’s employees and creditors will be unlikely to suffer any prejudice if service is dispensed with because they will be notified of the orders granted and will have the right to apply to vary them.
[45] The Administrators further submit that the orders ought to be notified by advertisement rather than personal service. The Administrators propose that within seven days from the dates of the orders they will:
(a)advertise the orders in the New Zealand Herald and the Dominion Post;
(b)post a copy of the orders on PwC’s website; and
(c)email of a copy of the orders to all creditors at the email address by which the Company normally communicates with that creditor.
[46] This is consistent with the approach taken in similar cases and by this Court in relation to orders made in the previous judgments on this matter. In these circumstances I consider it is appropriate for the applications to have been brought on a without notice basis and for directions to be made as to service of the orders as proposed.
Costs
[47] Finally the Administrators seek an order that the reasonable costs of the application are to be paid out of the assets of the Company. This appears to be appropriate and so I include a costs order to this effect below.
Orders
[48]I order as follows:
(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) be further extended under s 239AT(3) of the Act to an end date of 13 June 2023, instead of 9 May 2023;
(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 contracts of employment under s 239Y(3) of the Act be further extended under s 239Y(4) of the Act to an end date of 13 June 2023, instead of 9 May 2023, with any wages or salaries that accrue under such contracts being an expense of the administration under schedule 7, clause 1(1)(b) of the Act;
(d)under s 239ADO of Act, Part 15A of the Act operates in relation to the applicants and Company as if s 239AK(1) and schedule 5 of the Act provide that:
(i)under schedule 5, clause 6 of the Act, a proxy may be appointed by notice in writing, and may be delivered to the applicants, by use of the online electronic voting platform made available by Link Market Services Limited (Platform);
(ii)under schedule 5, clause 7 of the Act, postal votes may be given by use of the Platform;
(iii)the applicants are to send a website address at which the Platform can be accessed together with access instructions with the notice to creditors of the watershed meeting under s 239AU;
(iv)nothing in these orders limits the use of postal votes under schedule 5 of the Act in connection with the administration of the Company;
(e)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;
(f)within seven days of these orders, the applicants must:
(i)advertise these orders in The New Zealand Herald and The Dominion Post; and
post a copy of the orders on PwC’s website; and
(iii)email a copy of the 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
(g)the reasonable costs of this application are to be paid out of the assets of the Company.
Associate Judge Sussock
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