Shearing Services Kamupene Limited (in liquidation) v Tarahau Farming Limited
[2021] NZHC 2376
•10 September 2021
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE
CIV-2021-488-000089
[2021] NZHC 2376
BETWEEN SHEARING SERVICES KAMUPENE LIMITED (IN LIQUIDATION)
ApplicantAND
TARAHAU FARMING LIMITED
First Respondent
RIO GREENING
Second Respondent
Hearing: 3 September 2021 Appearances:
G A D Neil and R Hindriksen for Applicant Mr Te Whata for himself
Mr Renata for himself
Judgment:
10 September 2021
JUDGMENT OF WHATA J
This judgment was delivered by me on 10 September 2021at 3.00 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date: ………………………….
Solicitors: Meredith Connell, Auckland
SHEARING SERVICES KAMUPENE LTD (IN LIQUIDATION) v TARAHAU FARMING LTD [2021] NZHC
2376 [10 September 2021]
[1] This is an originating application seeking orders in relation to the purported voluntary administration of the respondent, Tarahau Farming Limited (TFL). The applicant, Shearing Services Kamupene Limited (in liquidation) (Shearing Services) claims, in short, that the required statutory steps were not taken to effect the voluntary administration of TFL and that the administration was a clear abuse of process designed to defeat Shearing Services’s enforcement of its judgment debts.
[2] I note that this matter has come to me under urgency and subject to the restrictions imposed by the courts in response to the government’s orders under COVID-19 Alert Level 4. It is difficult to see why urgency was sought. Charging orders protect the applicant’s position in relation to its judgment debts. While the voluntary administration may hinder the immediate enforcement of those charging orders, it is not clear why that fact should require affected persons to be forced into an urgent hearing, particularly given (as I will shortly detail) the highly contentious and complex background to this matter. It appears to me that, at most, only interim orders preventing further steps in the voluntary administration pending determination of the application were strictly necessary under urgency. It transpires that is the position I have effectively reached, together with orders removing the appointed administrator and directions for a Court-directed settlement conference to see whether some sensible middle ground may be found.
[3]My reasons follow.
Appearances
[4] TFL was not represented by a solicitor in the hearing before me. Instead, Mr Pessiman Te Whata, a director of TFL, appeared in opposition to the application. As Mr Neil, counsel for Shearing Services noted, he could not appear for TFL without leave. Given the background to this matter (summarised below) that is highly problematic. However, rather than expend more time on a peripheral issue, I grant leave to Mr Te Whata to appear and be heard at the hearing before me as a person interested in the administration of TFL. To the extent this represents a departure from the rule in Re G J Mannix1 and the approach taken by van Bohemen J in an earlier
1 Re G J Mannix [1984] 1 NZLR 309, (1984) 2 NZCLC 99,095 (CA).
judgment (discussed below),2 I consider it is justified. First, the proceedings have now reached a point where enforcement procedures involving the sale of ancestral land are imminent and the principle of access to justice is fully engaged. Second, Mr Te Whata, his whānau and his hapū appear to have a legitimate interest in how TFL is administered given their connection to the shareholder, Maunga Hikurangi Koporeihana Māori (MHKM) and their ancestral connection to TFL’s lands. In this regard, s 239ADO of the Companies Act 1993 specifically contemplates the involvement of interested persons in proceedings concerning voluntary administration.3 Third, urgency was sought by the applicant and I think little would be served by adjourning this matter for the purpose of investigating whether legal counsel could be retained. Fourth, Mr Te Whata and MHKM were afforded standing by Bell AJ in earlier liquidation proceeding relating to TFL.4 However, for absolute clarity, nothing in this decision confers party status on Mr Te Whata in any subsequent substantive hearing of this application. This is a preliminary judgment given under some urgency. Mr Te Whata will need to apply for standing in his own right, or require the leave of this Court in terms of ongoing involvement on behalf of TFL, if counsel for TFL is not retained.
Background
[5] Save for the most recent events, the background to this matter is largely set out in the judgment of van Bohemen J of 16 December 2020.5 I repeat relevant parts of it here for ease of reference:
2 Shearing Services Kamupene Ltd (in liq) v Tarahau Farming Ltd [2020] NZHC 3352 [Judgment of van Bohemen J]
3 Section 239ADO is set out in full below. While the point was not argued fully before me, I note it appears there is nothing in New Zealand statute or authority defining “interested persons” for the purposes of s 239ADO. However, that section mirrors s 447A of the Australian Corporations Act 2001. The meaning of “interested persons” under the equivalent to pt 15A of the Companies Act— pt 5.3A of the Corporations Act—was considered in BE Australia WD Pty Ltd v Sutton [2011] NSWCA 414 and Allatech Pty Ltd v Construction Management Group Pty Ltd [2002] NZSWSC
293. Those judgments (and the authorities cited therein) emphasise the breadth of the powers conferred by s 447A and its remedial purpose, reinforced by pt 5.3A as a whole. In Allatech, at [18], Austin J held these considerations make it likely “the legislature intended to give standing to apply for such relief to a broad class of applicants.”
4 Commissioner of Inland Revenue v Tarahau Farming Limited [2019] NZHC 1783 at [9]-[10] [Judgment of Associate Judge Bell].
5 Judgment of van Bohemen J, above n 2.
Shearing Services put into liquidation
[12] In June 2016, Shearing Services was put into liquidation following non-payment of a statutory demand by the Commissioner of Inland Revenue for payment of $4,373,780.59 for outstanding assessed taxes, penalties and interest.
[13] That demand followed an investigation by the Commissioner into the way Shearing Services accounted for PAYE for those who performed shearing and shed hand services for the company. That investigation, in turn, was followed by a report from the Commissioner’s Adjudication Unit, two decisions by the Taxation Review Authority, which partially and then fully struck out Shearing Services’ claim challenging the findings of the Adjudication Unit, and a decision by Mallon J declining an application for leave to extend time to appeal the decisions of the Taxation Review Authority.
[14] In his decision appointing Mr Sanson and Mr Bridgman as liquidators for Shearing Services, Bell AJ accepted that Mr Te Whata could oppose the Commissioner’s application as a director of Shearing Services. However, Bell AJ also held that, because Mr Te Whata was not a lawyer, he had no standing to act on behalf of the company in applications to set aside the statutory demand.
Liquidators seek recovery of funds from Tarahau Farming
[15] After investigating the affairs of Shearing Services, the liquidators determined that Tarahau Farming was indebted to Shearing Services for
$149,704.43.
[16] The investigation included obtaining Court orders requiring Mr Te Whata to give oral evidence and to produce company records. Me Te Whata was examined before Bell AJ on 8 February 2018.
[17] During that examination, Mr Te Whata agreed there was an informal loan agreement between Shearing Services and with Tarahau Farming which was “… to help the farm and then the farm can help the company back.” Mr Te Whata also said that some, if not all, of the loans had been paid back by mahi aroha through services provided to Shearing Services. Mr Te Whata also referred to the loans as koha.
Judgment by Downs J
[18] On 5 February 2019, Shearing Services issued a letter of demand to Tarahau Farming to repay the amount of the loans. When Tarahau Farming did not respond, Shearing Services brought the present proceeding, seeking judgment for the sum of $149,704.43 on the basis of two alternative causes of action:
(a)The advances made by Shearing Services to Tarahau Farming were loans repayable at the dates advanced or on demand, and demand had been made; and
(b)To the extent the advances were not loans, they were transfers for inadequate consideration covered by s 298 of the Companies Act 1993 and which the liquidators could recover.
[19] Tarahau Farming did not file a statement of defence or otherwise engage. Accordingly, the proceeding was set down for formal proof.
[20] Downs J heard the claim on 6 June 2019 and issued an oral judgment that day. The operative passages of the judgment were admirably brief:
“[2] Mr Te Whata was examined on oath. He described the advances as loans, and inconsistently, as koha. …
[4] Shearing Services contends its advances are repayable as a loan. So too interest. I agree. Absent the presumption of advancement, if A pays money to B then B must repay A. If B claims the money was a gift, B must prove as much. The presumption of advancement does not arise. Tarahau has not filed a statement of defence. Or evidence. The first cause of action is established.
[5] Shearing Services also contends the advances constitute transactions for inadequate consideration (under s 298 of the Companies Act 1993) as an alternative to the first cause of action. Although it is not necessary to determine this cause of action, I would have found it proved. Shearing Services disposed of property— money—to Tarahau. The dispositions occurred within the three-year period contemplated by the section. They were made to a person who falls within the section. And, value exceeds consideration. It follows the second cause of action would also be established.”
(citations omitted)
Tarahau Farming appeal to Court of Appeal
[21] On 18 July 2019, Mr Te Whata lodged a notice of appeal on behalf of Tarahau Farming against Downs J’s decision.
[22] The grounds of appeal included that this was a matter of whānau hapū rights to ancestral land, property interests and tikanga Māori and that the respondent was unqualified to make assessments of the relationship between Tarahau Farming and Shearing Services. The application also referred to Tikanga Regulations, the exchange of kāwanatanga for the protection of rangatiratanga, and various other matters.
[23] Because the notice of appeal was served on the respondents after the expiry of the required period for service, Tarahau Farming applied for an extension of time under r 29A of the Court of Appeal (Civil) Rules 2005 (Court of Appeal Rules). That application was decided on the papers on 29 November 2019.
[24] The Court of Appeal considered that the grounds of appeal were vague, not clearly articulated and did not inspire confidence in their prospects of success. It also noted that it was open to Tarahau Farming to apply to the High Court to set aside or vary the judgment under r 15.10 of the High Court Rules 2016.
[25] The Court of Appeal referred to the rule in Re G J Mannix under which a lay person, even a director, may not represent a company in Court except with the leave of the Court, and noted that this rule extended to the filing of
documents, including the notice of appeal which, under the Court of Appeal Rules, had to be signed by a lawyer.
[26] The Court recorded it was “… troubled by the way in which the grounds of appeal advanced so far have been articulated,” and said Mr Te Whata may wish to consider the wisdom and desirability of seeking legal representation and, if so advised, filing amended grounds of appeal. The Court noted that that advice might extend to advice on the less costly option of applying to the High Court to set aside or vary the decision of Downs J.
[27] The Court of Appeal granted the application for an extension of time on condition that an amended notice of appeal complying with r 30(1A) of the Court of Appeal Rules was filed and served by Tarahau Farming ...
[28] No notice of appeal complying with r 30(1A) of the Court of Appeal Rules was filed and served within the timeframe set by the Court of Appeal. Accordingly, the appeal could not proceed.
Application for costs
[29] In judgment dated 15 June 2020, the Court of Appeal granted costs in favour of Shearing Services and the liquidators. The Court agreed that the respondents were entitled to increased costs on the grounds that Tarahau Farming had acted unnecessarily in filing its notice of appeal and contributed unnecessarily to the time and expense of the appeal. The Court pointed in particular to Tarahau Farming’s conduct:
… in filing the notice of appeal without having sought a rehearing in the High Court, the filing of prolix documents that contained significant irrelevant material, as well as its failure to comply with the Rules.
[6] On 7 February 2020 Mr Te Whata applied, without notice, to set aside Downs J’s decision. The application was advanced on the bases the Judge and the liquidators failed to consider the owners’ rights in exercising tikanga Māori over the land, which the plaintiff was not, in turn, qualified to assess, and relied on annual accounts without knowledge of historical consideration given to Shearing Services. In addition, TFL claimed set-off for services provided to Shearing Services through “mahitahi, hangatanga, kaiwhaako, taonga, manaakitanga i te mahi atu”, as set out in a “Whaiwhakaaro Utu Account”, in the sum of $1,341,640.6
[7] Shearing Services and its liquidators opposed the application on the basis it was a nullity because Mr Te Whata had no standing to represent TFL.7
6 Judgment of van Bohemen, above n 2, at [32]-[33]. The “Whaiwhakaaro Utu Account” was dated 7 February 2020 and was provided in an affidavit of Mr Te Whata sworn on that date.
7 By notice dated 21 February 2020.
[8] By way of an amended application dated 9 March 2020, on notice, Mr Te Whata sought on behalf of TFL orders setting aside Downs J’s judgment or, alternatively, orders varying the judgment and transferring the case to the Māori Appellate Court.8
[9] The applicatIon was heard by Brewer J, who resolved TFL required legal representation because of the complex legal issues in the case, in particular the intersection of tikanga Māori and liquidators’ duties in statute.9 Accordingly, Brewer J stayed the application until a solicitor was on the record acting for TFL by 4 June 2020, and directed if this was not done so, Shearing Services may apply to strike out the application.10
[10] On 19 June 2020, Mr Te Whata filed a further amended application on behalf of TFL to vary and set aside Downs J’s decision. Relevantly, the application named MHKM as second defendant; stated TFL would be represented by a named lawyer; and sought various orders including an order recognising Mr Te Whata as representative of MHKM as second defendant.
[11] On 13 July 2020, Shearing Services and the liquidators applied to strike out TFL’s application on the bases Mr Te Whata had no standing to act for TFL; the applications were a nullity because they had not been signed by a solicitor; Mr Te Whata had failed to comply with Brewer J’s directions; and there would be no miscarriage of justice if Downs J’s decision were allowed to stand.11 TFL opposed the application.12
[12] The matter again came before Brewer J on 27 August 2020. Against the background of his earlier directions, and in light of Mr Te Whata’s application to represent MHKM and Mr Te Whata’s advice TFL had applied for legal aid, Brewer J directed Mr Te Whata to file an affidavit explaining TFL’s financial position, the details of the legal aid application and its outcome, and the ability otherwise of TFL
8 Under s 61 of Te Ture Whenua Māori Act 1993.
9 Tarahau Farming Ltd v Shearing Services Kamupene Ltd (in liquidation) HC Auckland CIV-2019- 488-12, 7 May 2020 (Minute No 1 of Brewer J).
10 At [4].
11 Judgment of van Bohemen J, above n 2, at [44].
12 By way of notice dated 25 August 2020.
to instruct a lawyer.13 Brewer J also noted Mr Te Whata’s representation application extended to include TFL, as well as MHKM.
[13] Mr Te Whata did not do so on the exact terms directed, but applied for a hearing under r 9.17 of the High Court Rules 2016 for a viva voce hearing to give evidence and call two witnesses.14 Accompanying the application was an affidavit sworn by Mr Te Whata advising TFL had no funds to secure legal representation, but he had previously contacted several lawyers in Northland, and began to work with a solicitor in Whangārei but this did not continue as they could not agree on the case.15
[14] On 14 October 2020, van Bohemen J heard Mr Te Whata’s representation application and the plaintiffs’ strike-out application, together with Mr Te Whata’s application to give and call viva voce evidence. The latter application was declined.16
[15] As to the question of representation, van Bohemen J declined to grant Mr Te Whata’s application to represent both TFL and MHKM. In respect of MHKM, Mr Te Whata acknowledged it is not a legal entity but rather arises out of hapū arrangements, and van Bohemen J held Mr Te Whata could not represent MHKM given there was no basis for it to be a party to the proceeding.17 In respect of TFL, van Bohemen J held the circumstances did not fall within the exceptions contemplated in Re G J Mannix, but that was “not the end of the matter”, stating:18
[77] Mr Te Whata told the Court on 14 October 2020 that he has been instructed by his whānau to represent its interests, and whānau members wanted him to continue in that role. Mr Te Whata explained that while he had made some effort to find a suitable lawyer, he knew that whānau members would not accept a lawyer who did not understand tikanga and the way the whānau operates. Mr Te Whata referred to the liquidation of the company that had previously held the family land which, he said, had happened after the whānau had followed legal advice on the use of corporate structures to advance whānau interests. In other words, according to Mr Te Whata, the whānau members preferred Tarahau Farming to be represented by Mr Te Whata rather than by a lawyer.
13 Tarahau Farming Ltd v Shearing Services Kamupene Ltd (in liquidation) HC Auckland CIV-2019- 488-12, 27 August 2020 (Minute No 2 of Brewer J).
14 Judgment of van Bohemen J, above n 2, at [49].
15 Judgment of van Bohemen J, above n 2, at [50].
16 Judgment of van Bohemen J, above n 2, at [55]-[60].
17 At [65].
18 (Citations omitted).
[78] While a preference of whānau members cannot be a reason for departing from a well-established rule on the representation of companies in Court proceedings, the question that Mr Te Whata’s application raises is whether tikanga should have any bearing in deciding that application.
[79] The relevance or otherwise of tikanga was not a consideration in Re G J Mannix or in subsequent decisions such as Time Ticket International Ltd v Broughton, Pro-Pacific Ltd v Wilson, Commissioner of Inland Revenue v Chesterfields Preschools, and Oceanic Palms v Kiwi Rail Ltd. To that extent, the issue has not been considered. Nor was it addressed in the submissions of Mr Neil or, other than inferentially, in the presentation of Mr Te Whata.
[80] I have considered whether account should be taken of tikanga when weighing the applicability of the rule in Re G J Mannix to companies such as Tarahau Farming where the company is said, in effect, to be a proxy for collective ownership of assets by Māori interests who, for reasons associated with tikanga, are unwilling to be represented by lawyers. I have concluded, however, that while there may be an occasion for considering that question, this is not such an occasion. To the contrary, I am satisfied that in the present case there are strong practical reasons for not adding to the exceptions to the rule in Re G J Mannix.
[16] Justice van Bohemen went on to refer to the many errors and deficiencies to date resulting from TFL’s lack of representation by legal counsel, despite Mr Te Whata’s obvious good faith, and the risk these problems may continue to jeopardise TFL’s position.19
[17] On the substantive question of strike-out, van Bohemen J ultimately resolved to strike out TFL’s application to set aside Downs J’s judgment because of its unrectified representation issues. In reaching that conclusion, van Bohemen J did not accept Shearing Services’ contentions the application had no merit, no miscarriage of justice would occur if the application were struck out, and TFL had no arguable defence to the claim on which Downs J’s judgment was entered; and considered those submissions missed the essence of TFL’s application.20 While Downs J did not consider tikanga in his judgment, owing to the forum of formal proof and the fact TFL’s arguments were not put to him, van Bohemen J noted:
[103] To that extent, I am satisfied that Tarahau Farming has put forward a reasonably arguable case, even if it has yet to be established, as a matter of fact, that Shearing Services and Tarahau Farming operated according to tikanga. Assuming that Tarahau Farming were able to establish the factual basis for the claim, the question that would then arise is whether that tikanga and related matters should be taken into consideration when assessing whether
19 At [81]-[87].
20 At [99]-[100].
the advances made by Shearing Services to Tarahau Farming were loans or transactions to which s 298 of the Companies Act applies. That is not a straightforward question, as Brewer J acknowledged in his minutes of 7 May and 27 August 2020.
[104] In other words, Tarahau Farming would be likely to face substantial evidential and legal challenges in making the case that Downs J’s decision should be set aside. However, just because it would face those challenges does not make the case unmeritorious or frivolous. In my view, there may well be real issues that warrant the Court’s attention.
[105] However, the above considerations do not change the reality that Tarahau Farming has failed to appoint a lawyer to represent it in its application despite clear guidance from the Court of Appeal and direct instructions from the High Court that it must do so. Nor has Tarahau Farming established that it is unable to appoint a lawyer. As I have held, Mr Te Whata’s evidence falls short of establishing an inability to pay or that he made a serious effort to obtain legal aid. I understood from Mr Te Whata’s presentation to the Court that he and those he represents prefer Tarahau Farming to be represented by Mr Te Whata rather than a lawyer.
[106] In these circumstances, I am satisfied that the maintenance of the application by Tarahau Farming to set aside Downs J’s judgment in circumstances where Tarahau Farming has repeatedly failed to appoint a lawyer to represent its interests would cause delay and would be an abuse of the Court’s process and should be struck out.
[107] In reaching that conclusion, I am cognisant that the power to strike out proceedings should be exercised sparingly, particularly in a case in which the law may be developing. However, the consequence of not striking out the application would be to leave on foot an application by a company that has declined to appoint counsel despite a Court order to do. That would be a most unsatisfactory result.
[18] Justice van Bohemen then noted with caution the likely severe consequences that may result from liquidation proceedings in this particular case—the risk of whānau losing ancestral lands—citing Bell AJ’s statements to this effect in his earlier judgment.21 Costs were awarded to Shearing Services on a 2B basis, and later sealed in the amount of $15,415.50.
[19] In summary, the judgments to date enter sums in the following amounts against TFL, now debts it owes to Shearing Services:
(a)$205,091.66, ordered by Downs J;
21 At [109], citing Bell AJ’s judgment, above n 4.
(b)$15,415.50, costs awarded by van Bohemen J; and
(c)$12,050.00, costs awarded by the Court of Appeal.
The (purported) voluntary administration
[20] Since that judgment, on 26 July 2021, Shearing Services made demand on TFL for payment of the judgment debts. On 6 August 2021, Mr Te Whata responded to the demand by claiming that TFL had resolved to go into voluntary administration and that Rio Greening had been appointed as its administrator. A notice to creditors records, among other things, the following:
1.Tena koutou katoa, I, Rio Greening Kaiwhakawa for Maunga Hikurangi Koporeihana Maori (MHKM) have been appointed by MHKM as the ultimate holding company as the Administrator to take care of all secured and unsecured creditors to maximise the chances of the company continuing to farm.
2.I have had meetings with the Directors Shareholders of TARAHAU FARMING LIMITED (TFL) regarding claims and debts incurred who have expressed sincere apologies for not meeting its commitments to the genuine creditors of TFL.
3.As the business has been impeded from reaching its full potential; and in relation to the current financial crisis, time is needed to allow myself as Administrator to re-organise the company’s operation in order to facilitate in honouring genuine creditor commitments.
4.I would like to make it clear that several hapu owners do not wish to go into bankruptcy proceedings and forfeit interests and obligations and therefore agree and have been instructed to make the following proposal below to all creditors.
5.TFL claims outstanding accounts yet unrealised against the COMMISSIONER OF INLAND REVENUE (IRD) after a retrospective audit by our accountant from 2004-2021. The audit has found expense accounts unaccounted by previous accountants of historical accounts now brought forward by bad debts, idle capacity, unaccounted labour costs and depreciations.
6.IRD filed an application to liquidate TFL for $32,000 GST assessment in 2019 – Associate Judge RM Bell CIV 2019-488-001. TFL filed retrospective returns up to 2018 in the High Court hearing held on the 10th June 2019. The Court was adjourned for an audit to be done. Last year the application was discontinued by IRD as their $32,000 GST assessment was now shown to be incorrect. Currently TFL has a credit balance of $159,576.32 GST outstanding.
7.TFL is nearing the completion of the audit and to date TFL has accounted over $2 million tax credit over the 17 years audited. The historical debt incurred from the previous IRD liquidate of PAT TE WHATA & SONS LIMITED in 2004 was rolled by the SBS Bank mortgagee default to the purchase by TFL after ... 9 years of penalty accruals while idle depreciation through decreases of land value and stocking rates from a 250-cow dairy platform of high-quality grass paddocks to gorse and manuka.
8.TFL is nearing a settlement meeting with Phillip Shields of IRD Whangarei office, who is prepared to include their legal team and Jordan Takiwa Kaiwhakahaere IRD Manukau office. With the historical and current liquidations pending we can come up with a solution to balance the books and set the right path.
9.As the PTS liquidation in 2004 left the landowners without a herd and young stock alternatives have had to take second ... place against the barrage of systematic debt. Notwithstanding these challenges TFL continues to be proactive with future development as a part of a local working group formed specifically for cash crops and horticulture ventures under the Multiple Maori Owned land project compiled by Government and local stakeholders within a 50km radius of Kaikohe.
10.TFL was elected as a Maori authority in accordance with Te Ture Whenua Maori Land act 1993 for the direct benefit of nga hapu owners. The non-acceptance of IRD regarding the Maori authority tikanga Maori customary laws, values and practices has caused so much angst and rejection [from] the legal fraternity to date. Such tikanga is impeded by European values only which continues to play out in the court.
11.TFL has identified a solution in the legal structure to change to enhance the cultural, commercial and longevity succession which the company structure does not provide. The landowners have applied to the Maori Land Court to incorporate the land in accordance with section 247 of Part XIII of Te Ture Whenua 1993.
12.TFL has outstanding accounts with ANZ Bank, with FNDC and now the liquidators of SHEARING SEARVICES KAMUPENE LIMITED.
[21] The notice also records a proposal to creditors which appears to envisage settlement with the Inland Revenue Department (IRD), an application to incorporate the land under a Māori incorporation, a bond or similar instrument to be issued by the landowners as a form of set-off. It ialso states:
E.As the land blocks and assets of TFL are owned by the collective of hapu of Ngatokimatawhaorua Waka Native District for the security of the landowners and all creditors including ANZ Banking and FAR NORTH DISTRICT COUNCIL disclosure must be full and complete and not misleading and certified by notary public as valid original documentations which include but not limited [to]:
(i)Original titles to land with valid receipts of purchases from the original Maori landowners. Particularly those titles incurring rates, bad debt and taxation.
(ii)Identification of valid subordinate legislation within the second schedule of the Imperial Laws Application Act 1988 and by which such creditor rights are claimed.
[22] In a supporting affidavit, Mr Te Whata records that his hapū is Ngatimoerewa, Ngatirangi o Ngā Puhi. He provides an account of the background, noting that the company is farming ancestral Māori customary land which title is protected under article two of Te Tiriti o Waitangi 1840. He also refers to a series of purported tikanga- based regulations pursuant to Te Ture Whenua Māori Act 1993 which, among other things, retrospectively incorporated MHKM.
[23] Counsel for Shearing Services raised issues with the purported administration with Mr Te Whata including, in particular, the appointment of Mr Greening and claimed various non-compliances with statutory requirements under Part 15A of the Companies Act. No substantive response was received to these claims. This application was then made. The grounds of the application are addressed below.
The opposition
[24] A document purporting to be a notice of opposition was filed by Mr Te Whata though in respect of differently named proceedings. It claims that:
(a)the applicants continue to breach the principles of Te Tiriti o Waitangi, which include the right for Parliament to form a colonial government and to make laws for its people only and not for whānau hapū to exercise rangatiratanga;
(b)where there is a question of retention, control and development of land in the hands of whānau hapū, the IRD and Companies Act fall short of effecting Treaty principles;
(c)the Imperial Laws Application Act 1988 reaffirms Treaty principles where the Tax legislation and Companies Act are absent from sch 2 of
the Imperial Laws Application Act as subordinate legislation, and this raises issues as to the validity of that legislation;
(d)granting the application would deny the rights of the owners of the customary land;
(e)the land, TFL and Shearing Services are vested in the Te Whata Whanui Trust (Whanui Trust) in accordance with Te Ture Whenua Māori Act;
(f)TFL may have a right of set off, including in respect of monies owed to it by the IRD;
(g)the land may still be Māori customary title; and
(h)the applicants are not a preferred class of alienee.
[25] In argument Mr Te Whata emphasised that the TFL lands were improperly alienated from the hapū, that the property titles were therefore defective and that an urgent application to the Māori Land Court for orders declaring and affirming that the properties are in fact Māori customary land. He also emphasised that the IRD in fact owes TFL and that this should be applied to the Shearing Services debt. I also understand him to be arguing that that the voluntary administration is not subject to the Companies Act; rather, it is a process followed by MHKM, a body representing the hapū owners of the ancestral lands, and shareholder of TFL. He also explained that MHKM was established following tikanga-based process, including hui at the local marae, for the specific purpose of protecting the TFL lands. Finally, I also understand him to be saying that in the event a creditors’ meeting is called, 200 hapū were potential creditors of TFL given their connection to TFL and the TFL lands.
Statutory threshold
[26] Part 15A of the Companies Act establishes a regime for voluntary administration, an alternative to liquidation for companies that are insolvent or in danger of becoming in insolvent. Section 239A provides:
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.
[27] Administration begins when an administrator is appointed under Part 15A.22 Section 239I relevantly provides:
(1)A company may appoint an administrator if the board of the company has resolved that,—
(a)in the opinion of the directors voting for the resolution, the company is insolvent or may become insolvent; and
(b)an administrator of the company should be appointed.
(2)The appointment must be in writing and must state the date of the appointment.
...
[28] A “board” is defined in the Act as no less than the required quorum of directors acting together as a board, or if the company has one director, that director.23 “Quorum” is defined as a majority of the directors.24
[29] Section 239F then provides a person may be appointed as an administrator if they are a licensed insolvency practitioner and permitted to act under the Insolvency Practitioners Regulation Act 2019; and are not otherwise disqualified.25
The problems
[30]As submitted by Mr Neil on behalf of Shearing Services, it is clear that:
22 Companies Act, s 239D.
23 Companies Act, s 127.
24 Companies Act, sch 3, cl 4.
25 In the meaning of s 239F(2).
(a)contrary to s 239I, there was no resolution of the board of directors, with the requisite quorum, recorded in writing. No resolution signed by both directors (Mr Pessiman Te Whata and Mr Tokikapu Te Whata) has been produced; and
(b)contrary to s 239F, Mr Greening is not a licensed insolvency practitioner who is permitted to act as an administrator of TFL.
[31] Defects in the appointment of an administrator will not however automatically invalidate the liquidation. In this regard, s 239G(3) states:
The acts of a person as an administrator are valid even if the person does not meet the requirements of section 239F(1) or fails to certify the matters set out in subsection (1)(b).
[32]As stated by Heath J in relation to the invalid appointment of a liquidator in
Zhang v Kamal:26
[50] There is no doubt that Mr Kamal was invalidly appointed, for the reasons I have given. I shall make an order to that effect and remove Mr Kamal from office. However, that does not necessarily mean that the liquidation should be regarded as invalid from its inception. Although, in this case, no external creditors will be affected by a declaration that the liquidation was unlawfully commenced, the same position is unlikely to pertain in other cases that may arise. That means there is a need for the Court to exercise caution in the way in which it restores the company's affairs to the status quo that ought to have existed immediately before the invalid liquidation resolution was passed.
[51] There are two statutory or regulatory provisions that support that approach:
(a)The first is s 283(1) of the Act which deals with vacancies in the position of liquidator. While specific reference is made only to a vacancy arising out of resignation, death or disqualification,4 s 283(5) is expressed more broadly. It speaks of a vacancy arising "for any reason other than resignation". Although it might be possible to interprets 283 as referring only to the type of vacancy to which s 283(1) refers, I consider that a purposive approach requires any other form of vacancy to be covered. In this case, a vacancy arises out of the invalid appointment of the liquidator.
26 Zhang v Kamal [2017] NZHC 1943 (citations omitted).
(b)The second is reg 36 of the Companies Act 1993 Liquidation Regulations 1994. That provides that no defect or irregularity in the appointment of a liquidator shall invalidate any act done by him or her in good faith. That suggests that if a liquidator were invalidly appointed he or she is, nevertheless, regarded as having been lawfully acting in that capacity.
[33] Citing those passages, Smith AJ held in Minister of Education v Nayacakalou:27
[27] I agree with Heath J that the effect of Regulation 36 of the Companies Act 1993 Liquidation Regulations 1994 is that an invalidly appointed liquidator is still to be regarded as having acted lawfully in his or her capacity as liquidator (at least to the extent he or she has acted in good faith). The corollary is that the company is treated as in liquidation, notwithstanding the defect in the liquidator's appointment. ...
[34] This approach is also broadly consistent with the law as it relates to defective appointments of directors and s 158(b) of the Companies Act, which provides for validation of defective appointments.28 I therefore approach the defective appointment of an administrator on the same basis, namely that the company is treated as in voluntary administration, notwithstanding a defect on the appointment of the administrator.
The remedy
[35] What then is the remedy in this case? I consider that both of the defects are either not fatal or are capable of remedy. First, it is clear that both directors agreed to place TFL in liquidation. Mr Tokikapu Te Whata indicated this at the hearing. This defect is therefore one of form only. Second, while the appointment of Mr Greening is a defect of substance and he must be removed, there is an obvious remedy: appointing an administrator that is properly qualified.
[36] The applicant contends however that the administration should be terminated for abuse of process and because any administration would likely be unworkable in
27 Minister of Education v Nayacakalou [2020] NZHC 1874.
28 I note for completeness that in Re Northwestern Autoservices Ltd [1980] 2 NZLR 302 (CA) at 310, the Court distinguished between the defective exercise of power, which is capable of validation, and the absence of power to appoint, which is not capable of validation.
the circumstances where it appears 200 hapū members with connection to the TFL properties will claim to be creditors. In this regard, s 239ADO of the Companies Act provides:
Court’s general power
(1)The court may make any order that it thinks appropriate about how this Part is to operate in relation to a particular company.
(2)For example, the court may terminate the administration under subsection (1) if the court is satisfied that the administration should end—
(a)because the company is solvent; or
(b)because the provisions of this Part are being abused; or
(c)for some other reason.
(3)The court’s order may be made subject to conditions.
(4)The court may make an order under this section on the application of—
(a)the company or a shareholder of the company; or
(b)a creditor of the company; or
(c)the administrator; or
(d)the deed administrator; or
(da)the FMA (if the company is a financial markets participant); or
(e)the Registrar; or
(f)any other interested person.
[37] The applicant claims that TFL has not gone into voluntary administration in order to achieve either of the objectives in s 239A. Rather, it claims voluntary administration was done with the ulterior motive of compromising Shearing Services’ ability to enforce the judgment debts. In support of this submission, Mr Neil contends:
(a)section 239ABG prevents an enforcement process being taken against the property of a company in administration without the Court’s permission;
(b)it is consistent with the tactics of delay and obfuscation that have previously been employed by Mr Te Whata and TFL in earlier proceedings;
(c)TFL has made little attempt to initiate a genuine administration that complies with pt 15A of the Companies Act, noting:
(i)it did not appoint a licenced insolvency practitioner, but rather chose a person, Mr Greening, whose views align with Mr Te Whata’s;
(ii)Mr Greening previously (mistakenly) referred to Te Ture Whenua Māori Act despite it having no application to TFL;
(iii)Mr Te Whata and Mr Greening are purporting to act for an unincorporated body of persons MHKM who wrongly claim to be secured creditors of TFL;
(iv)Mr Greening has failed to give notice of or hold a first creditor’s meeting as required by ss 239AN and 239AO of the Companies Act, or a watershed meeting within the 25-working day maximum period for doing so prescribed by ss 239AT and 239AV of the Companies Act;
(v)Mr Greening scheduled a watershed meeting 39 working days after the commencement of administration but failed to provide to provide information as required by s 239AU(3) of the Companies Act; and
(vi)the administration provides no discernible benefit to the creditors of TFL; there is no proposal for repaying the Judgment debts or the debts of ANZ or FNDC, but instead there is reference to “set off” and incorporating the land under the Te Ture Whenua Māori Act.
[38] There is much force to these points, especially given the full litigation history of this matter. Furthermore, the notice to creditors and the submissions by Mr Te Whata strongly suggest that the claim by Shearing Services will require further proof and that the TFL lands are or will not be available for the purpose of satisfying its claim in the voluntary administration. Overall therefore, I accept there is at least a prima facie case for abuse of process. The applicant’s case is also assisted somewhat by Mr Te Whata’s submission that it was not his intention to put the company into voluntary administration under the Companies Act. I note also that an apparently similar previous attempt at voluntary administration of TFL was given short shrift by Bell AJ.29 Lastly, while this is not the occasion to make definitive findings on the various tikanga-based claims by Mr Te Whata, the claims that the TFL lands are customary lands or that the lands have been transferred out of the reach of Shearing Services for the purpose of enforcement appear weak because the land is registered as general land and the charging orders presently prevent disposition of those lands without recourse to this Court.
[39] But, at the core of this dispute is a legitimate concern, namely the potential alienation of ancestral lands so as to satisfy the judgment debts. In tikanga Māori, land is tāonga tuku iho. While that land is general land in the ownership of TFL, it is evident that physical and ancestral connection of the tangata whenua remains.30 Steps taken by the directors that seek to preserve ancestral connection of the affected whānau and hapū to that land is not obviously an abuse of process, provided that the interests of creditors are adequately met. Indeed, it is at least arguable that it serves the object of s 239A(b) insofar as it results in a better return for the company’s creditors and shareholders than would result from an immediate liquidation of the company. In this regard, whatever the formal legal status of the shareholder MHKM, it appears to represent Mr Te Whata, his whānau and hapū in accordance with tikanga Māori. Furthermore, Mr Te Whata has consistently maintained that both Shearing Services and TFL operated on what he calls a mahi tahi and mahi aroha basis: that is, on the basis there would likely have been very substantial whānau and hapū contributions to both companies.
29 Judgment of Bell AJ, above n 4.
30 As to ancestral connection and the significance of it, with respect, I endorse the comments made by Bell AJ in his judgment above n 4, at [30]-[31].
[40] Given this, I am not prepared in any rushed way, and under COVID-19 Alert Level 4 restrictions, to terminate the voluntary administration on the assumption that it will not serve a legitimate interest to be protected; that there are no creditors that might support it; or that there is no potential source of funds that might be used to pay the debts. The fact also that there might be multiple hapū creditors and thus making the voluntary administration difficult is not an obvious reason to terminate it. I accept, however, that the voluntary administration as presently framed by the notice of administration is not sustainable. The administration must instead be directed to achieving a result than overtly seeks to provide for creditors’ interests, not look to subvert them.
[41] Accordingly, I consider that the proper relief is a mixture of final and interim orders, namely:
(a)an order removing Mr Greening as administrator;
(b)an order that no further steps may be taken pursuant to the voluntary administration until further order of this Court and pending attendance by the applicants and Mr Te Whata at a Court-directed settlement conference pursuant to r 7.79 of the High Court Rules, to be conducted by Associate Judge Bell if possible for the purpose of negotiating a form of voluntary administration (including the appointment of a suitably qualified independent administrator) that might be acceptable to the applicant and interested persons; and
(c)a direction this matter be brought before a High Court Judge on the first available date after the Court-directed settlement conference for final consideration as to whether the voluntary administration should proceed or should be terminated;
(d)leave is granted to the applicant for further assistance of the Court if there is undue delay in undertaking of the settlement conference, including due to the impact of COVID-19 Alert Levels.
[42] I understand that Associate Judge Bell will shortly issue a minute addressing the timing and venue of the settlement conference.
[43] I wish to make a final comment. I observe the creditors, shareholders of TFL and potentially interested persons (including, for present purposes, the affected whānau and iwi) have not been well served by the use of summary procedures to date. Summary disposition has not led to quick or satisfactory resolution. On the contrary, the summary procedure has spawned multiple layers of litigation. A pause is needed, together with an opportunity for the parties to confer about a way forward. Too much is at stake to move in haste.
[44] Costs are reserved to the substantive hearing, if any, of the application to terminate the voluntary administration.
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