Stu MacDonald Motors Limited v Hawkes Bay Vehicle Exchange Limited HC Napier CIV 2007 441 608
[2007] NZHC 1977
•7 August 2007
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
CIV 2007 441 608
BETWEEN STU MACDONALD MOTORS LIMITED HAWKE’S BAY VEHICLE EXCHANGE LIMITED
Plaintiffs
ANDHAWKE’S BAY VEHICLE EXCHANGE LIMITED
Defendant
Judgment: 7 August 2007
JUDGMENT OF ASSOCIATE JUDGE D I GENDALL
[1] The plaintiff has made an ex parte application for an order for the appointment of an interim liquidator of the defendant Hawke’s Bay Vehicle Exchange Limited. The application is made pursuant to s246 Companies Act 1993.
[2] Section 246 Companies Act 1993 authorises the Court to appoint an interim liquidator of a company if the Court is satisfied that:
a) An application has been made to the Court to place the company into liquidation.
b)It is necessary or expedient for the purposes of maintaining the value of assets owned or managed by the company for an interim liquidator to be appointed.
[3] In considering s246, Brooker’s Company Law at para CA246.02 sets out the preconditions to appointment of an interim liquidator in the following way:
STU MACDONALD MOTORS LIMITED AND ANOR V HAWKE’S BAY VEHICLE EXCHANGE LIMITED HC NAP CIV 2007 441 608 7 August 2007
CA246.02 Preconditions to appointment of interim liquidator
There are three main preconditions to the liquidator’s appointment:
(a) A liquidation application must have been filed in the Court disclosing good grounds for putting the company into liquidation. An interim liquidator is unlikely to be appointed unless there is a good prima facie case for liquidation. If a company is not in fact put into liquidation, it follows that the Court has no power to appoint an interim liquidator and any existing appointment will come to an end: Re a Company [1973] 1 WLR 1566; [1974] 1 All ER 256; J C Scott Constructions v mermaid Waters Tavern Pty Ltd [1983] 2 Qd
243; (1984) 2 ACLC 35; (1983) 8 ACLR 687; Re Highfield
Commodities Ltd [1984] 3 All ER 884.
(b) The Court must be satisfied that there is the need for urgency.
Normally, ex parte applications for the appointment of an interim liquidator will not be successful unless special
circumstances can be demonstrated. An undertaking as to
damages will be required in such cases: Re Clearwater Pty Ltd
(1981) 1 aclc 129; Re Gasbourne Pty Ltd (1984) 2 ACLC 103; 8
ACLR 618; Re Highfield Commodities Ltd [1984] 3 All ER 884.
(c) The circumstances must not only be urgent – they must also justify the appointment of an interim liquidator: CA246.04.
[4] As Brooker’s Company Law goes on to note at para 246.04, the circumstances justifying appointment of an interim liquidator were considered by the High Court in Robert Bryce & Co Ltd v Chicken & Food Distributors Ltd (1990) 5
NZCLC 66,648. The Court there stated that in determining whether there is a need for interim control of the company in question, the following factors need to be considered:
a) Whether the company’s assets are in jeopardy;
b) Whether the status quo should be maintained; and c) Whether the interests of creditors are safeguarded.
[5] Important aspects with respect to the factors required for appointment of an interim liquidator are:
a) The need to maintain the value of the assets owned or managed by the company; and
b)As Brooker’s Company Law at CA246.02(b) noted above indicates, normally ex parte applications for the appointment of an interim liquidator will not be successful unless special circumstances can be shown and in addition an undertaking as to damages will be required in these cases. I will return to this aspect later.
[6] Turning now to consider the three preconditions to the appointment of an interim liquidator, in the present case an application has been brought to have the defendant company placed into liquidation in terms of s241 Companies Act 1993. The grounds put forward by the plaintiff in this liquidation application are:
a) A s289 Companies Act 1993 statutory demand was served upon the defendant Company on 6 July 2007 requiring payment of $43,467.54.
b)This debt related to a judgment of the District Court at Napier given on 7 December 2006 in favour of the plaintiff against the defendant for $21,897.65 unsuccessfully appealed by the defendant Company together with costs and disbursements.
[7] The defendant Company has neglected to pay this $43,467.54 or any portion thereof or to secure or compound for the same to the reasonable satisfaction of the plaintiff.
[8] Supporting affidavits of Stuart Douglas MacDonald have been filed both in support of the liquidation and in support of the ex parte application for appointment of interim liquidators.
[9] In the affidavit of Stuart Douglas MacDonald sworn 31 July 2007 in support of the present application, as a director of the plaintiff Company, Mr MacDonald deposes that he is very concerned that the assets of the defendant Company are in jeopardy due to the actions of its sole director and shareholder, Peter Jordan.
[10] The defendant Company has ceased to trade for some time and its solicitors, Elvidge & Partners, in a letter dated 15 June 2007 state:
… Unfortunately our client (the defendant) is insolvent, and therefore unable to make any payment to your client.
[11] Notwithstanding this, Mr MacDonald in his affidavit annexes e-mails and details of the proposed sale by Mr Jordan on “Trade Me” of a Holden Commodore registration no. BEE563 in his own name. The vehicle history for this Holden Commodore shows that it was owned by Hawke’s Bay Vehicle Exchange Limited and transferred to Mr Peter Jordan on 1 June 2007, some 11 days after the unsuccessful appeal by the defendant to the High Court against the District Court judgment noted above.
[12] Mr MacDonald deposes that he understands Mr Jordan has now sold this Holden Commodore vehicle for approximately $26,000. The whereabouts of these funds would appear to be unknown.
[13] Next, Mr MacDonald in his affidavit annexes details of a further sale advertised on “Trade Me” of a Suzuki Carry four wheel drive truck in July 2007 showing the seller as Mr Jordan, the defendant’s director.
[14] Then details are annexed to Mr MacDonald’s affidavit of further “Trade Me” sales advertised in the name of Mr Peter Jordan of, first, a tandem car transport trailer, which appears to have been sold for $3,500 on 5 June 2007, another Suzuki four wheel drive truck put up for sale on “Trade Me” by auction but it did not sell, and a range of alloy wheels and tyres, again put up for auction, which apparently closed on 13 June 2007, but the reserve price was not met.
[15] In addition, Mr MacDonald in his affidavit deposes that Mr Jordan has advertised on “Trade Me” for the sale of his home and rural lifestock block property at 92 Chors Road, Hastings. He deposes further that “I have heard that Mr Jordan may be intending to leave New Zealand”, and:
I understand that Mr Jordan still has a number of imported vehicles which he has yet to dispose of, but I am not able to trace these vehicles as they have not yet been registered and thus do not have registration numbers.
[16] Further, Mr MacDonald deposes at paragraph 22 of his affidavit that he believes also:
… that Mr Jordan sold a 1997 Mitsubishi Diamante some time in the month of June 2007.
[17] From all of this, Mr MacDonald, in his affidavit, indicates his extreme concern that Mr Jordan as sole director and shareholder of the defendant Company is putting the Company’s assets in jeopardy, and it is critical for the plaintiff and other creditors of the Company that the status quo should be maintained and the interests of all creditors safeguarded.
[18] In considering all these matters, I am of the view that the plaintiff’s liquidation application included in its statement of claim filed in this proceeding does disclose good grounds for placing the Company into liquidation in terms of s241(4) Companies Act 1993.
[19] A statutory demand for a significant debt supported by Court judgments has been issued and served on the defendant Company and remains unremedied. I am satisfied the plaintiff has provided a sufficient argument to the Court to warrant findings that first the defendant Company is insolvent and secondly an order appointing a liquidator ultimately is appropriate in terms of s241(4)(a) Companies Act 1993 on the basis that the Company is unable to pay its debts.
[20] That said, I now turn to the second requirement for appointment of an interim liquidator, which is that the Court must be satisfied there is a need for urgency for the order sought to be made.
[21] As to this, from the evidence before the Court in the affidavit of Mr MacDonald, in my view special circumstances exist here, which suggest that the actions of Mr Jordan as a sole director and shareholder of the defendant Company are such that the assets of the defendant Company may well be in jeopardy. Preservation of those assets is critical.
[22] I conclude that on the evidence before the Court the plaintiff has done enough to show that there is a real risk that the defendant Company, through its director, may be either in the process of or intending to dissipate its assets and this will have a significant impact on all creditors of the Company and other parties dealing with it.
[23] Given this conclusion, I find that special circumstances do exist here which are such that the Court can be satisfied there is a real need for urgency, and that it is appropriate therefore that an interim liquidator of the defendant Company is appointed. As I see it, this is necessary to preserve the status quo and to exercise some proper control over the Company’s assets and any possible dissipation of those assets, which would impact upon all its creditors.
[24] The third requirement is that the circumstances must not only be urgent but they must also justify the appointment of an interim liquidator. In Elders Pastoral v New Zealand Ostriches Ltd HC ROT M2/99 8 February 1999 Williams J made clear that the appointment of an interim liquidator “trenches across directors’ powers, affects a major irruption into the company’s business and, to a large degree, amounts to a pre-judgment on the winding up application itself”.
[25] Notwithstanding these comments, in my view under the circumstances represented to the Court here, it is expedient for an interim liquidator to be appointed and such an order is justified. In Carter Holt Harvey v Timberlock New Zealand Ltd (1997) 11 PRNZ 435 the Court indicated that the word “expedient” in s246 suggests that a relatively low threshold is required. In my view that threshold is met here. The status quo needs to be preserved.
[26] In summary, I find that in view of the urgency required in this matter and given that special circumstances do exist here, it is appropriate for the appointment of an interim liquidator for the defendant Company to be made on an ex parte basis.
[27] As I have noted above, however, for such an order to be made on an ex parte application an undertaking as to damages will be required. No undertaking as to damages has been filed by the plaintiff here. This order therefore is to lie in Court until such an undertaking is provided.
[28] A consent to act as interim liquidator of John Francis Managh has been filed. [29] I conclude therefore that the plaintiff’s application succeeds.
[30] An order is now made that John Francis Managh is appointed as interim liquidator of the defendant Company Hawke’s Bay Vehicle Exchange Limited.
[31] This order is to lie in Court until the plaintiff has provided an appropriate undertaking as to damages to the satisfaction of the Registrar.
[32] Insofar as it may be appropriate, I note that this order is timed at 10.30 am today, 7 August 2007.
[33] Costs are reserved. If they are in issue, then I will receive appropriate memoranda and make a decision on costs based upon the material filed.
‘Associate Judge D.I. Gendall’
Solicitors:
Olphert Sandford, Rotorua for the Plaintiff
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