Scott v Pacific Trust Canterbury

[2016] NZHC 2076

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2016-409-000801 [2016] NZHC 2076

UNDER

the Charitable Trusts Act 1957

AND

IN THE MATTER

of the liquidation of PACIFIC TRUST CANTERBURY

BETWEEN

SELMA SCOTT, EARL SIMPSON, MOSESE HAVILI FIFITA, LIZ KENETI, MEMEA MAAELOPA, SAM UTAI AND TULE MISA, AS TRUSTEES OF THE BOARD OF PACIFIC TRUST CANTERBURY

Plaintiffs

AND

PACIFIC TRUST CANTERBURY Defendant

Hearing:	2 September 2016 (Determined on the papers)
Counsel:	C R Vinnell for Plaintiffs
Judgment:	2 September 2016

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1]      The  plaintiffs  are  the  trustees  of  Pacific  Trust  Canterbury,  a  registered charitable trust.   In this proceeding they seek the liquidation of the Trust on the ground that it is just and equitable that it should be put into liquidation.  The basis of this is that the Trust is insolvent and can no longer operate.

[2]      The  plaintiffs  also  apply  without  notice  for  appointment  of  Wendy Ann

Somerville and Malcolm Grant Hollis as interim liquidators.   Ms Somerville and

Mr Hollis are directors of PricewaterhouseCoopers at its Christchurch office.

SCOTT & OTHERS, AS TRUSTEES OF THE BOARD OF PACIFIC TRUST CANTERBURY v PACIFIC TRUST CANTERBURY [2016] NZHC 2076 [2 September 2016]

[3]      The Board is one of the identified applicants for appointment of liquidators in s 25(2) of the Charitable Trusts Act 1957.  Section 25(4) provides that Parts XVI and XVII  of  the  Companies  Act  1993  apply,  with  such  modifications  as  may  be necessary, to an application for appointment of a liquidator, as though the application were under s 241(2)(c) of the Companies Act.  Section 246 of the Companies Act provides that the Court may appoint an interim liquidator of a company, so this section applies also to appointment of an interim liquidator of a charitable trust.

[4]      Section 246(1) provides that an interim liquidator may be appointed by the Court if it is satisfied that it is “necessary or expedient for the purpose of maintaining the value of assets owned or managed by the [charitable trust].”

[5]      Evidence in support of the application is given by way of an affidavit of Ms Selma Scott, the Chair of the Board and the first-named plaintiff.  It is clear from her affidavit that the Trust is in a critical financial position.

[6]      The Trust’s budget predicts an operating loss of $473,687 in the current financial year.  Its forecast deficit as at 30 June 2017 exceeds $660,000.  As well, it has received advanced funding from the Ministry of Health, and from Whanau Ora of over $957,000 which was granted for the provision of services on which the Trust has under-delivered.   Within the next week the Trust is required to pay overdue creditors of over $150,000 together with rent of $40,000 and weekly wages and vehicle lease payments.  It has cash in the bank of $138,000 so requires an overdraft of $131,000 if these payments are to be met.  Ms Scott says the Trust does not have sufficient realisable assets to secure an overdraft facility to meet this deficit.  It is in arrears with PAYE due to the Inland Revenue Department.

[7]      It is plain that the present financial position of the Trust is a significant reason for appointment of interim liquidators.

[8]      As  well,  Ms  Scott  says  that  it  is  necessary to  ensure that  all  assets  are retained, once staff have been informed of the difficulties and the business ceases to operate.  In particular Ms Scott says the Board is concerned to secure and manage

client and patient files which are confidential and which may have a commercial value.  Independent overseeing of this is seen as essential.

[9]      The trustees have considered invoking the procedure given by s 24 of the Charitable Trusts Act to appoint a liquidator.  Ms Scott notes, however, that the deed under which the Trust operates requires at least 10 working days’ notice of a general meeting, and that s 24 provides that a general meeting must first pass a resolution to appoint a liquidator, and it must then be confirmed at a subsequent general meeting no sooner than 28 days after the first meeting.  As a result, even if a quorum was achieved for each of the meetings and the time limits were complied with, but no further delays were experienced, an interim liquidator could not be in place until

20 October at the earliest.  I agree with the trustees that the present situation calls for a more immediate response.

[10]     I am satisfied that the proposed liquidators are suitable for appointment. Both are experienced liquidators and both are frequently appointed as liquidators by this Court. Responsibly, Ms Somerville in an affidavit discloses that PricewaterhouseCoopers acts for certain creditors of the Trust, but advises that the liquidators act in a different department of the company and will not act for any of those creditors during the course of the liquidation.   She also says, and I accept without hesitation, that if an actual conflict arose she is confident that the liquidators have the experience and integrity to identify it and act appropriately.   I therefore direct that the proposed liquidators are not disqualified to act as liquidators.

Outcome

[11]     I am satisfied it is necessary or expedient for the purpose of maintaining the value of the assets of the Trust to appoint interim liquidators.  I appoint Wendy Ann Somerville and Malcolm Grant Hollis as interim liquidators of the Board of Pacific Trust Canterbury.  They may exercise their powers individually under s 242 of the

Companies Act. These orders are timed at 11.00 am on 2 September 2016.

J G Matthews

Associate Judge

Solicitors:

Anthony Harper, Christchurch