SPMAAH Pty Limited v ASJ Commodities LP
[2022] NZHC 1580
•7 July 2022
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE
CIV-2022-488-000014
[2022] NZHC 1580
BETWEEN SPMAAH PTY LIMITED
Plaintiff
AND
ASJ COMMODITIES LP
Defendant
Hearing: 27 June 2022 Appearances:
P Murray for the Plaintiff
T Bowler for the Defendant
Judgment:
7 July 2022
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 7 July 2022 at 2.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors:
Fortune Manning, Auckland Neilsons Lawyers, Auckland
P Murray, Auckland
SPMAAH PTY LTD v ASJ COMMODITIES LP [2022] NZHC 1580 [7 July 2022]
Introduction
[1] This decision concerns whether interim liquidators should be appointed to ASJ Commodities LP (ASJ LP), a limited partnership that imports and supplies meat products.
[2] One of the limited partners, SPMAAH Pty Limited (SPMAAH), says that the general partner and other limited partner have breached the partnership agreement by competing with the partnership, neglecting to keep accurate accounts, and failing to provide financial reports and disclosure. It also says that it is reasonably impracticable for the partners to carry on the business of the partnership as there has been a complete breakdown of their relationship. SPMAAH says that it is necessary and expedient for the Court to appoint interim liquidators because the assets of the partnership are in jeopardy and independent oversight is urgently required.
[3] ASJ LP opposes interim liquidators being appointed. It says that the Court does not have jurisdiction and the proceeding should be stayed because the partners agreed to resolve any disputes between them by alternative dispute resolution. It also says that there is no urgent need for a liquidator to be appointed.
[4] The essential question is whether I should exercise my discretion under s 246 of the Companies Act 1993 to appoint interim liquidators to the limited partnership. That involves these issues:
(a)Will SPMAAH’s liquidation application probably succeed?
(b)Is an interim liquidator necessary or expedient to preserve the limited partnership’s assets?
[5] I also need to decide on the effect of the dispute resolution clause in the partnership agreement. I consider this issue last, because it depends on facts that emerge out of my consideration of the first two issues.
Background
[6] SPMAAH (as trustee of the SMAH Asset Trust) and Jeff Putt decided to go into business together to import and sell meat products in New Zealand. SPMAAH is part of a group of Australian companies which imports, exports and trades in mainly meat products. The arrangement was for SPMAAH to supply meat products from Australia and other countries to Mr Putt, who would sell the products to butchers, restaurants and other retailers in New Zealand.
[7] They established ASJ LP as the vehicle for the business and signed a Limited Partnership Deed in early September 2020. ASJ Commodities NZ Limited (ASJ NZ Ltd) was incorporated to be the general partner, with Mr Putt its sole director and shareholder. SPMAAH became the majority limited partner of ASJ LP and Mr Putt the second limited partner.
[8] A company related to SPMAAH, Australian Quality Exporters Pty Ltd (AQE), provided “seed funding” to the partnership of around AUD226,735. It also paid certain invoices for ASJ LP in the early months of the business.
[9] Before long, problems developed between the limited partners. SPMAAH was concerned about Mr Putt’s business practices and lower than expected sales volumes. Mr Putt had his own issues with SPMAAH, including concerns about the standard of some of the meat products supplied, and the way the directors treated him.
[10] On 16 August 2021, Sean McCarthy, director of SPMAAH, informed Mr Putt that they wanted to end the partnership. Mr McCarthy and Mr Putt give different accounts of what they agreed about SPMAAH/AQE operating in New Zealand. Mr Putt says that Mr McCarthy agreed in principle to a restraint of trade. Mr McCarthy denies that, saying that he only agreed that SPMAAH/AQE would not trade Kilcoy Global Foods meat products in New Zealand.
[11] Shortly afterwards, Mr Putt presented the directors of SPMAAH/AQE with a restraint of trade document for their signature. The document acknowledged that the partners had resolved to dissolve the partnership, voluntarily liquidate ASJ NZ Ltd, and that Mr Putt’s new company, BBQ Butcher Ltd, would carry on the meat import
and supply business. It stated that in consideration for Mr Putt and ASJ NZ Ltd agreeing to dissolve the partnership, SPMAAH and AQE would not import or export specified meat products in New Zealand for five years. SPMAAH/AQE did not agree to this restraint of trade.
[12] On 10 September 2021, AQE’s solicitors wrote to Mr Putt in his capacity as director of ASJ NZ Ltd. AQE demanded that ASJ NZ Ltd repay AQE “loans” of
$448,252.76. These were said to be the seed funding and the invoices paid for the partnership between September and December 2020 (less $150,000 repaid).
[13] On 5 October 2021, this letter was personally served on Mr Putt, ostensibly as service on ASJ Ltd and ASJ LP.
[14] On 20 October 2021, SPMAAH, by its solicitors, wrote to Neilson Lawyers as the solicitors for ASJ NZ Ltd and ASJ LP. They attached the earlier demand on Mr Putt/ASJ NZ Ltd and asked that ASJ NZ Ltd agree to place ASJ LP in voluntary liquidation within five working days. They stated that the partnership was considered insolvent as it had failed to pay the debt to AQE. They went on to identify how Mr Putt/ASJ NZ Ltd were said to be in breach of the Limited Partnership Deed by setting up a competing business and failing to keep financial records and give financial disclosure. They reiterated that ASJ NZ Ltd was liable for the debts of ASJ LP. They requested an urgent meeting under cl 15.1(b) of the Partnership Deed.
[15] On 27 October 2021, AQE commenced liquidation proceedings against ASJ LP based on the unmet demand for AQE’s advances. ASJ LP defended that liquidation proceeding on the basis that it was not agreed that the advances were loans. The application was heard on 29 June 2022 and a decision reserved.
[16] On 8 November 2021, solicitors for Mr Putt emailed solicitors for AQE advising that he did not accept that the advances from AQE to ASJ LP were loans.
[17] On 18 November 2021, solicitors for SPMAAH responded, reiterating much of the 20 October 2021 letter. In a separate letter written on behalf of AQE, they set
out their argument for why the seed funding and invoice payments were loans to the limited partnership, rather than capital advances.
[18] On 4 March 2022, ASJ LP’s solicitors provided SPMAAH’s solicitors with the partnership’s financial statements for the seven months to 31 March 2021 and a tax return, for signature. SPMAAH did not sign the documents because the financial statements recorded the advances from AQE as equity rather than a liability.
[19] On 6 April 2022, SPMAAH filed proceedings to place ASJ LP in liquidation and an ‘on-notice’ application for the appointment of an interim liquidator. SPMAAH then filed a ‘without notice’ interlocutory application for the appointment of an interim liquidator on 13 April 2022. I declined to determine the matter on a ‘without notice’ basis and made directions for service on ASJ LP.1
Legal principles
[20] Under s 90(1) of the Limited Partnerships Act 2008 (the Act), the Court may appoint a liquidator to a limited partnership on (amongst others) any of the following grounds:
(a)A material breach by any partner of the partnership agreement (s 90(1)(f)).
(b)Conduct of any partner that has prejudiced, or is likely to prejudicially affect, the business of the limited partnership (s 90(1)(e)).
(c)Conduct of any partner that makes it reasonably impracticable for the other partners to carry on the business in partnership with that partner (s 90(1)(g)).
(d)That it is just and equitable that the limited partnership terminates (s 90(1)(i)).
1 SPMAAH Pty Ltd v ASJ Commodities LP CRI-2022-488-000014 (Minute of Gardiner AJ dated 2 May 2022).
[21] Section 246 of the Companies Act (which applies by virtue of s 92 of the Act) provides:
246 Interim liquidator
(1) If an application has been made to the court for an order that a company be put into liquidation, the court may, if it is satisfied that it is necessary or expedient for the purpose of maintaining the value of assets owned or managed by the company, appoint a named person, or an Official Assignee for a named district, as interim liquidator.
[22] Associate Judge Osborne summarised the relevant considerations in Truck & Trailer Holdings Ltd v Skelly Holdings Ltd:2
[5] The application is filed under s 246 Companies Act 1993 which permits the Court to appoint an interim liquidator if it satisfied that it is necessary or expedient for the purpose of maintaining the value of assets owned or managed by the company. Accordingly, the over-arching criteria are necessity and expediency. The threshold indicated by the latter term has been explained by the Court in Carter Holt Harvey Ltd v Timbalok NZ Ltd as meaning:
fitting, suitable, desirable or convenient.
[6]Chisholm J observed that this conveys a relatively low threshold.
[7] Beyond the statutory criteria it has been recognised that there are three main pre-conditions to an interim liquidation:
(i)There must be a valid winding-up application underway.
(ii)The application will in all probability succeed.
(iii) The circumstances must be not merely urgent, but also justify the appointment of an interim liquidator.
[8]The Court has recognised as three important factors:
(a)Whether the company assets are in jeopardy.
(b)Whether the status quo should be maintained.
(c)Whether the interests of creditors are safeguarded.
[9] These various formulations are ways of measuring whether necessity or expediency are established. They are a "litmus test", not exhaustive.
2 Truck & Trailer Holdings Ltd v Skelly Holdings Ltd HC Christchurch, CIV-2012-409-000541, 11 May 2012.
Will the liquidation application probably succeed?
[23] SPMAAH contends that there is a strong prima facie case for liquidation of ASJ LP under s 90 of the Act because:
(a)There have been material breaches of the Partnership Deed by ASJ NZ Ltd and Mr Putt (s 90(1)(f)) and their conduct has prejudiced the business of the limited partnership (s 90(1)(e)), including by:
(i)competing with the limited partnership and taking the partnership’s business and assets for their own benefit;
(ii)failing to keep accurate accounts and failing to provide reports and financial disclosure to SPMAAH as required by cls 8.5, 8.6 and 8.7 of the Partnership Deed and s 49(1)(a) of the Act; and
(iii)failing to call a meeting of the partnership when requested by SPMAAH in breach of cl 15.1(b) of the Partnership Deed.
(b)It is reasonably impracticable for the partners to carry on business in partnership (s 90(1)(g)). SPMAAH says that in their telephone discussion on 16 August 2021, Mr McCarthy and Mr Putt recognised that the limited partnership should be dissolved and agreed that the partners would go their separate ways and establish their own trading companies. That is what the parties did, with both SPMAAH and Mr Putt establishing their own companies. SPMAAH submits that Mr Putt recognised that the business relationship was at an end when he prepared a deed of covenant to record a restraint of trade to protect his business interests, and asked SPMAAH to sign the deed.
(c)SPMAAH submits that in all the circumstances, it is just and equitable that the limited partnership terminates (s 90(1)(i)).
[24] While ASJ LP has filed a statement of defence, its submissions on this issue are limited. Its main arguments against the appointment of an interim liquidator are
that the situation is not urgent; and that the Court does not have jurisdiction because of the dispute resolution clause in the Partnership Deed. I consider those matters separately.
[25] I am satisfied that the liquidation proceedings are likely to succeed. First, I consider that there are good grounds for appointing a liquidator under s 90(1)(f)), because ASJ NZ Ltd and Mr Putt have materially breached the Partnership Deed by failing to provide financial disclosure when requested.
[26] Clause 8.7 of the Partnership Deed requires the general partner to prepare six- monthly reports, and any other reports requested by the limited partners from time to time.
[27] On 6 October 2020, ASJ NZ Ltd agreed to provide SPMAAH with a weekly stocktake and that SPMAAH would have full access to the Xero account for the partnership.3
[28] From 10 September 2021, ASJ NZ Ltd/Mr Putt ceased providing the weekly stocktake and terminated SPMAAH’s access to Xero. Mr Putt deposes that he did this when he discovered that the directors of SPMAAH had established two New Zealand based meat trading companies, two weeks before they informed him that they wanted to end the partnership.4
[29] From 13 September 2021, SPMAAH made numerous requests for its access to Xero to be restored, for a current and up-to-date stocktake, and for ongoing weekly stocktakes. These requests were made on 13 September 2021, 20 September 2021, 29 September 2021, 5 October 2021 and 13 October 2021. ASJ NZ Ltd/Mr Putt did not respond to these requests.
[30] On 20 October 2021, SPMAAH requested that ASJ NZ Ltd summon a meeting of ASJ LP. Clause 15.1(b) of the Partnership Deed requires the general partner to summon a meeting when requested. ASJ NZ Ltd did not respond to this request.
3 Affidavit of Mr McCarthy at [15].
4 Affidavit Putt at 13.
[31] The only financial information provided to SPMAAH about the business since September 2021 are the seven month financial statements and a tax return sent by Mr Putt’s lawyers on 4 March 2022. SPMAAH considers that these financial statements are inaccurate because they record the advances from AQE as equity rather than a liability. As noted, Mr Putt disputes that the advances from AQE to the limited partnership were loans. This is at the heart of AQE’s liquidation proceedings.
[32] Second, I consider that there are good grounds for appointing a liquidator under s 90(1)(g), because the conduct of the partners has made it reasonably impracticable for the partnership to continue. The relationship between the directors of SPMAAH and Mr Putt has deteriorated to one of mutual distrust and suspicion. The directors of SPMAAH consider that Mr Putt is competing with the limited partnership using the partnership’s business and assets for his own benefit. That allegation is discussed more fully below. They also consider that Mr Putt has directed the partnership’s accountant to “retrospectively change the records of the Limited Partnership to avoid having to repay the loan”.5 In letters from their solicitors described above, SPMAAH makes a range of serious allegations about Mr Putt.
[33] On Mr Putt’s side, he believes that SPMAAH’s directors entered into the partnership with him to divert his long-standing suppliers and customers to their own businesses. Further, he considers that SPMAAH has an ulterior motive in bringing this application, as it was brought not long after ASJ LP filed its defence against AQE’s winding-up application and brought a counterclaim against AQE.
[34] Mr Putt/ASJ NZ Ltd and the directors of SPMAAH have not spoken directly since 10 September 2021. All communications have been through lawyers.
[35] Taken together, I consider that these circumstances provide good grounds for the liquidation of ASJ LP. Mr Putt/ASJ NZ Ltd has refused to provide SPMAAH with the information they have requested about the financial status of the partnership, particularly relating to the inventory, in breach of cl 8.7 of the Partnership Deed and s 49(1)(a) of the Act. Through the conduct of all the partners, it is clearly reasonably impracticable for them to carry on business in partnership (s 90(1)(g) of the Act).
5 Affidavit of Sean McCarthy sworn 4 April 2022 at [35].
Overall, there is a good case that it is just and equitable that the partnership terminates (s 90(1)(i)).
Is an interim liquidator necessary or expedient to preserve the limited partnership’s assets?
[36] SPMAAH submits that it is necessary and expedient to appoint interim liquidators because of the ongoing failure of Mr Putt and ASJ NZ Ltd to provide full financial disclosure. And, because, through BBQ Butcher Limited (established by Mr Putt on 16 August 2021), they are competing with ASJ LP and using the partnership’s business, goodwill, assets, and supply arrangements for their own benefit.
[37] SPMAAH submits that in the context of an application for interim liquidators, determining whether a partnership’s assets are in jeopardy first requires an informed determination of what the assets are.6 It submits that Mr Putt’s failure to disclose the assets of the limited partnership, specifically the inventory, demonstrates that it is necessary and expedient that interim liquidators are appointed.
[38] SPMAAH stresses that it has made repeated requests for financial information and, even in the face of an application for liquidation and the appointment of interim liquidators, Mr Putt and ASJ NZ Ltd have failed to provide the information. SPMAAH emphasises that the disclosure required is not onerous. The full financial position of ASJ LP is available to Mr Putt on Xero and he receives regular management reports from the partnership’s accountant. Despite the information available to him, the extent of disclosure provided by Mr Putt in his affidavit is the bank account balance.
[39] As to the allegations of competition, Mr McCarthy has put in evidence images from the websites of ASJ and of BBQ Butcher. Comparing the two, the BBQ Butcher’s website is almost identical to ASJ’s website but with references to “ASJ Commodities” replaced with “BBQ Butcher”. Further, the BBQ Butcher website lists butchers, retail outlets and wholesalers who “purchase from us”. Most of those customers (but not all) are customers of ASJ and are listed on its website. There is no
6 Eden Crescent Ltd (in liq) v First City Trust No 2 Ltd HC Auckland CIV-2006-404-3329, 21 September 2006 at [48].
mention of ASJ LP or its brand, ASJ NZ Ltd, on the BBQ Butcher website. SPMAAH contends that Mr Putt has used his new company to start buying product from suppliers in Australia and sell the product to ASJ’s customers.
[40] In response, ASJ LP submits that this is not an urgent situation justifying the appointment of interim liquidators. It notes that the issue around credit applications, said by Mr McCarthy to be SPMAAH’s most significant problem with the way Mr Putt ran the business, arose in February 2021 and was the subject of discussions between Mr Putt and Mr McCarthy at that time.7
[41] Further, on SPMAAH’s own evidence, matters came to a head between SPMAAH and Mr Putt in August/September 2021. Yet SPMAAH did not act until April 2022 when it filed its application for liquidation of ASJ LP.
[42] Additionally, the liquidation application was initially dated 4 April 2022 and the supporting affidavit by Mr McCarthy was sworn on 4 April 2022. There was no contemporaneous application for the appointment of an interim liquidator. Not until nine days later, on 13 April 2022, did SPMAAH file a without notice application for the appointment of interim liquidators.
[43] ASJ LP submits that the current circumstances are like those in Mosaic Enterprises Ltd v Mosaic Enterprises Ltd.8 In Mosaic Enterprises, Associate Judge Andrew declined to appoint an interim liquidator because he was not persuaded that to allow the proceedings to continue in the normal way — to a hearing in six weeks’ time — would make any appreciable difference to the critical issue of the value and protection of the assets.
[44] ASJ LP submits that there is no serious risk that assets of the partnership have been or will be dissipated or transferred to other entities and not applied to the satisfaction of the limited partnership’s creditors. It compares this situation to the circumstances in Apostolakis v Café Italiano Wellington Ltd,9 where there was clear
7 As demonstrated by the email exchange on 18 and 19 February 2021 between Mr Putt and Mr McCarthy.
8 Mosaic Enterprises Ltd v Mosaic Enterprises Ltd [2018] NZHC 692.
9 Apostolakis v Café Italiano Wellington Ltd HC Wellington CIV-2011-485-583, 1 April 2011.
evidence of transfer of assets to unrelated entities, and underlying concerns of previous criminal convictions by the director.
[45] Further, Mr Putt denies that BBQ Butcher is selling wholesale meat in competition with the partnership.10 He deposes that BBQ Butcher is the social media and marketing arm of ASJ, the wholesale arm of the business. He states that is why the websites are almost identical.
[46] Mr Putt deposes that the limited partnership is solvent. He states that he is waiting for ASJ LP’s accountant to finalise the most recent accounts, which will be supplied and made available. He deposes that the bank balance for the partnership is currently $302,683.86, which is more than enough to pay the purported loan owing to AQE, together with any other creditors. He deposes that the inventory of ASJ LP has not been used for any other purpose.
[47] Finally, ASJ LP emphasises that appointing an interim liquidator would result in significant prejudice to the business, which is relationship-focused. The liquidation will only result in increased expenses and diminish the financial position of the partnership. ASJ LP submits that the appropriate course is for the parties to engage in an alternative dispute resolution process according to the Partnership Deed. Mr Putt states in his affidavit that he is willing to attend mediation.
[48] I consider that it is necessary and expedient for interim liquidators to be appointed to ASJ LP, for the following reasons.
[49] First, SPMAAH does not have a complete picture of the financial status of the partnership, having only received minimal information over around nine months. That situation is unsustainable and must be quickly remedied. Because of the distrust of Mr Putt, any financial statements prepared by the LP’s accountant on his instructions are likely to be met with scepticism. On the other hand, Mr Putt is unwilling to provide the directors with access to the partnership’s financial systems and records because of his suspicion that they are engaging or intending to engage in a competing
10 Affidavit of Jeffrey Paul Putt sworn 9 May 2022 at [27]–[34] and [36].
business. These circumstances point strongly towards the immediate appointment of an independent person to assess and report on the partnership’s financial position.
[50] Second, it is impossible to assess whether the assets are at immediate risk because of the dearth of financial information before the Court. SPMAAH has presented evidence that could suggest that Mr Putt is competing with the limited partnership. Mr Putt denies this, but without more it is not possible to discount this possibility. Mr Putt has had the opportunity to present comprehensive financial information to dispel the allegations made by SPMAAH, but he has elected not to do so. Again, this absence of information points towards the immediate appointment of an interim liquidator to take stock of the situation and preserve the status quo.
[51] Third, I do not accept that SPMAAH’s failure to bring proceedings until April of this year indicates that the situation is not urgent. Initially, SPMAAH proposed voluntary liquidation. SPMAAH’s evidence is that it has become increasingly concerned about the lack of financial disclosure and about Mr Putt’s conduct. SPMAAH did in fact apply for the appointment of an interim liquidator when it filed the proceedings on 6 April 2022. It filed a second ‘without notice’ application later, on 13 April 2022, when the Registry advised that the ‘on notice’ application would not be dealt with urgently. I declined to appoint interim liquidators on a ‘without notice’ basis because I did not consider, on the information before me then, that the situation as so urgent that it should be dealt with ‘without notice’. Now, with more information, and as Mr Putt has had the opportunity to respond, I am satisfied that the situation calls for interim relief.
[52] In all these circumstances, and in view of the good case for liquidation, I consider it necessary and expedient to appoint interim liquidators.
The dispute resolution clause
[53] ASJ LP protests the jurisdiction of the Court because of a dispute resolution clause in the Partnership Deed. It says that the dispute resolution procedure is mandatory, and the proceeding should be stayed while the partners perform that clause.
[54] It refers to authorities such as EXAPL Ltd v Pact Group (NZ) Ltd.11 In that case, the Court held that it has authority under r 15.1 of the High Court Rules 2016, or its inherent jurisdiction, to stay proceedings that are otherwise properly before the Court where the parties have agreed an alternative method of dispute resolution and that agreement is sufficiently certain.12 To allow otherwise would be to permit an abuse of process of the Court.
[55]The dispute resolution clause in the Partnership Deed states:
20.1 The parties shall meet and discuss in good faith any dispute between them arising out of this deed.
20.2 If the discussions referred to in clause (19.1) fail to resolve the relevant dispute, any party may (by written notice to the other parties) require that the dispute be submitted for mediation by a single mediator nominated by the President for the time being of The Arbitrators’ and Mediators’ Institute of New Zealand Incorporated. In the event of any such submission to mediation:
(a) the mediator shall be deemed… to be not acting as an expert or as an administrator;
(b) the mediator shall determine the procedure and timetable for the mediation; and
(c) the cost of the mediation shall be shared equally between the parties.
20.3 No party may require any arbitration or issue any legal proceedings (other than for urgent interlocutory relief), in respect of any such dispute, unless that party has first taken all reasonable steps to comply with clauses (19.1) and (19.2).
[56] ASJ LP submits that SPMAAH has not taken steps, let alone reasonable steps, to comply with cls 20.1 and 20.2. It highlights the mandatory nature of the word “shall” in cl 20.1. It submits that the word “may” in cl 20.2 means that either party may require that the dispute be submitted for mediation, but that it is mandatory for any party to take this step before requiring arbitration or issuing legal proceedings, whether or not a meeting has taken place under cl 20.1. ASJ LP says that SPMAAH has not made any attempt to give notice to appoint a mediator under cl 20.2. It submits
11 EXAPL Ltd v Pact Group (NZ) Ltd HC Auckland CIV-2011-404-005919, 12 December 2011.
12 See also Waterco (NZ) Ltd v Simpson [2012] NZHC 2361 and Braid Motors Ltd v Scott (2001) 15 PRNZ 508 (HC).
that the onus is on SPMAAH to issue the notice for mediation given that it is the party that has subsequently issued legal proceedings.
[57] Further, it submits that the present application does not fall within the exception for urgent interlocutory relief in cl 20.3, because the situation is not urgent.
[58] In contrast, SPMAAH submits that the cl 20.3 prohibition on issuing proceedings does not apply because the application for the appointment of interim liquidators is an application for urgent interim relief.
[59] In any case, it submits that mediation is not mandatory, as under cl 20.2 a party “may” serve a notice requiring that a dispute be submitted for mediation. It emphasises that neither party has issued a notice under cl 20.2 requiring mediation.
[60] Further, it says that it has taken all reasonable steps to attempt to resolve the dispute according to the clause. It asked ASJ NZ Ltd for a meeting on 20 October 2021 as required by cl 20.1, tried to resolve the issue through correspondence, and proposed an orderly liquidation.
[61] I find that cl 20.3 requires SPMAAH to take reasonable steps to comply with cls 20.1 and 20.2 of the dispute resolution clause before commencing proceedings (other than for urgent interim relief).
[62]I further find that SPMAAH did not take reasonable steps to comply with cls
20.1 or 20.2 before it filed liquidation proceedings on 6 April 2022. I base that finding on my review of the correspondence between the directors of SPMAAH, Mr Putt, ASJ NZ Ltd and their respective solicitors.
[63] Mr McCarthy deposes that he repeatedly tried to contact Mr Putt, but that Mr Putt stopped communicating with him and the other director of SPMAAH on 10 September 2021. Yet Mr McCarthy has not proffered any evidence of these attempts to engage with Mr Putt, aside from a series of emails requesting that SPMAAH’s Xero access be restored.
[64] Instead, the first communication to Mr Putt in evidence is AQE’s legal letter of demand and threat of liquidation dated 10 September 2021. In that letter, AQE set out the provisions of the Limited Partnership Deed that state that the general partner is liable for the limited partnership’s debts and liabilities. It demanded that ASJ NZ Ltd repay AQE the “loans” of $448,252.76 within 14 days and stated that if payment was not made in full within three weeks, AQE would apply to the Court to place the partnership into liquidation.
[65] That was followed by a solicitor’s letter written on behalf of SPMAAH on 20 October 2021, in which they asked that ASJ NZ Ltd agree to place ASJ LP in voluntary liquidation within five working days, and identified how Mr Putt/ASJ NZ Ltd were said to be in breach of the Limited Partnership Deed. They reiterated that ASJ NZ Ltd was liable for the debts of ASJ LP. Further, they demanded that Mr Putt immediately resign from any position outside ASJ NZ Ltd and provide SPMAAH with full access to the partnership’s financial records. While this letter contained a request for a meeting, I do not consider that it can reasonably be interpreted as an invitation to Mr Putt meet to try to resolve matters between the partners as required by cl 20.1.
[66] On 27 October 2021, AQE commenced liquidation proceedings against ASJ LP based on the unmet demand for AQE’s advances.
[67] On 18 November 2021, solicitors for SPMAAH wrote again, reiterating much of their earlier 20 October 2021 letter.
[68] In all, I see no evidence of an effort by SPMAAH to resolve the dispute by means of alternative dispute resolution as required by the Partnership Deed, before commencing proceedings on 6 April 2022.
[69] However, SPMAAH’s interlocutory application for the appointment of interim liquidators is legitimately an application for urgent interim relief in terms of cl 20.3. That follows from my finding that it is necessary and expedient for interim liquidators to be appointed to take stock of the financial position of the partnership, the partnership’s assets, and preserve the status quo. That is, the situation is urgent. Therefore, the interlocutory application for interim liquidators falls outside the
mandatory dispute resolution process. It is not an abuse of the Court’s processes for such an application to have been brought.
[70] Accordingly, I will make orders appointing interim liquidators to preserve the status quo. However, the substantive liquidation proceeding will be stayed while the parties make reasonable efforts to resolve the underlying dispute according to the dispute resolution procedures set out at cls 20.1 and 20.2 of the Limited Partnership Deed. Those efforts should be assisted by independently verified financial information from the interim liquidators.
Result
[71]I order:
(a)Christopher Carey McCullagh and Stephen Mark Lawrence are appointed interim liquidators of ASJ Commodities LP.
(b)The rates of remuneration of the liquidators and staff working under their supervision and control are set at the rates set out in the interim liquidators’ consent dated 13 April 2022.
(c)The interim liquidators are to apply to the Court for approval of their remuneration at the conclusion of the liquidation.
(d)The interim liquidators are to prepare a report for the Court and the parties within 20 working days that summarises the financial position of the partnership, including the inventory.
(e)The substantive application for liquidation is stayed while the partners comply with clause 20 of the Limited Partnership Deed.
[72]The time of these orders is 2:30 pm.
[73] The substantive proceeding will be listed for review in a Chambers List on a date after 5 September 2022.
[74] As to costs, there has been a degree of success on both sides. I invite counsel to confer and agree costs. If they are unable to do so, memoranda may be filed. ASJ LP is to file its memorandum within five working days of SPMAAH filing its memorandum.
Associate Judge Gardiner
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