Technology Holdings Limited
[2024] NZHC 1935
•16 July 2024
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2024-485-370
[2024] NZHC 1935
UNDER Part 15A of the Companies Act 1993 and Part 19 of the High Court Rules 2016 IN THE MATTER
of EFTPOS SPECIALISTS
(WELLINGTON) LIMITED (in voluntary administration)
Continued …
AND IN THE MATTER
of an application pursuant to section 239AT(3) of the Companies Act 1993 by
RYAN EATHORNE of Wellington, licenced insolvency practitioner for an order extending the convening period of the voluntary administration of TECHNOLOGY HOLDINGS LIMITED, EFTPOS
SPECIALISTS (WAIKATO) LIMITED, EFTPOS SPECIALISTS (MANAWATU) LIMITED EFTPOS SPECIALISTS
(NELSON) LIMITED, EFTPOS SPECIALISTS (OTAGO) LIMITED,
EFTPOS SPECIALISTS (AUCLKLAND) LIMITED, EFTPOS SPECIALISTS (CHRISTCHURCH) LIMITED
Applicant
Hearing: On the papers Appearances:
J D Haig for the Applicant
Judgment:
16 July 2024
JUDGMENT OF BOLDT J
RE TECHNOLOGY HOLDINGS LTD, EFTPOS SPECIALISTS (WAIKATO) LTD, EFTPOS SPECIALISTS (MANAWATU) LTD EFTPOS SPECIALISTS (NELSON) LTD, EFTPOS SPECIALISTS (OTAGO) LTD,
EFTPOS SPECIALISTS (AUCLKLAND) LTD, EFTPOS SPECIALISTS (CHRISTCHURCH) LTD [2024] NZHC 1935 [16 July 2024]
Continued …
TECHNOLOGY HOLDINGS LIMITED (in
voluntary administration and receivership)
EFTPOS SPECIALISTS (WAIKATO)
LIMITED (in voluntary administration)EFTPOS SPECIALISTS (MANAWATU)
LIMITED (in voluntary administration)
EFTPOS SPECILISTS (NELSON)
LIMITED (in voluntary administration)ADVANCE EQUIPMENT SUPPLIES LIMITED (IN VOLUNTARY ADMINISTRATION)
EFTPOS SPECIALISTS (OTAGO)
LIMITED (in voluntary administration)EFTPOS SPECIALISTS (AUCKLAND)
LIMITED (in voluntary administration)EFTPOS SPECIALISTS (CHRISTCHURCH) LIMITED (in
voluntary administration)
EFTPOS SPECIALISTS (NORTHLAND)
LIMITED (in voluntary administration)EFTPOS SPECIALITS (CENTRAL
OTAGO) LIMITED (in voluntary administration)
EFTPOS OTAGO LIMITED (in voluntary administration)
This judgment was delivered by me on 16 July 2024 at 10:00 am pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
Introduction
[1] Technology Holdings Limited (THL) is the third largest supplier of EFTPOS terminals in New Zealand. It has 11 subsidiary companies. The subsidiaries provide sales, leasing and maintenance support for EFTPOS terminals around New Zealand.
[2] On 28 May 2024, the directors of THL resolved that it should be placed in voluntary administration. They appointed Mr Ryan Eathorne as the administrator of THL and its subsidiaries (collectively, the group).
[3] On 10 June 2024, Mr Eathorne convened and held the first meeting of the group’s creditors, as required by s 239AN of the Companies Act 1993 (the Act). Creditors confirmed Mr Eathorne as administrator, and creditor committees were formed. ASB Bank is the group’s only secured creditor.
[4] On 11 June 2024, ASB Bank appointed BDO Christchurch as receivers of THL. As a result, there was some uncertainty as to whether the administration of the group would continue. On 21 June 2024, an agreement was reached between Mr Eathorne and the receivers about the process for sale, and THL is now subject to concurrent receivership and voluntary administration.
[5] As the first creditors meeting has been convened, the next step in the voluntary administration is a watershed meeting — a meeting of the creditors to decide the future of the group and, in particular, whether to execute a deed of company arrangement under subpt 13 of pt 15A of the Act.1 This meeting must be convened within 20 working days after an administrator has been appointed (the convening period).2 Accordingly, that meeting should have taken place by 26 June 2024.
[6] If a watershed meeting has not been convened in the convening period, and no application has been made for the convening period to be extended, the administration automatically comes to an end. Here, an application to extend the convening period
1 Companies Act 1993, ss 239AS and 239ABA.
2 Section 239AT(2).
was made before the period expired, meaning the administration will continue unless or until the application for extension is refused.3
On 24 June 2024, Mr Eathorne applied for orders:
(a)granting leave to commence proceedings and bring an application without notice;
(b)extending the convening period for the watershed meeting under s 239AT(3) of the Act;
(c)permitting the administrator to inform the group creditors of the extended convening period by way of email and advertisement in regional newspapers;
(d)making an order that the protocol agreement between the administrator and appointed receivers (the Protocol) and should not be accessed without the permission of a Judge; and
(e)providing that the administrator’s solicitor/client costs in bringing the application are an expense incurred by him carrying out his duties as administrator and are payable from THL’s account.
Should the proceeding continue on a without notice basis?
[8] Rule 7.23(2) of the High Court Rules 2016 (the Rules) provides the criteria for a without notice application. It, relevantly, provides:
7.23 Application without notice
…
(2)An application without notice may be made only—
(a)on 1 or more of the following grounds:
3 Section 239E.
(i)that requiring the applicant to proceed on notice would cause undue delay or prejudice to the applicant:
(ii)that the application affects only the applicant:
(iii)that the application relates to a routine matter:
(iv)that an enactment expressly permits the application to be made without serving notice of the application:
(v)that the interests of justice require the application to be determined without serving notice of the application; and
(b)if the applicant has made all reasonable inquiries and taken all reasonable steps to ensure that the application and supporting documents contain all material that is relevant to the application, including any defence that might be relied on by any other party and any facts that would support the position of any other party.
[9] Mr Haig, for Mr Eathorne, relies on the grounds set out in rr 7.23(2)(a)(i) and 7.23(2)(a)(v). He argues that service on all creditors would create undue delay, especially as creditors would need to be given reasonable time to respond. Mr Eathorne says he would have made this application earlier, but he could only do so once agreement had been reached with the receivers.
[10] Mr Haig submits the risk of prejudice arising from proceeding without notice is minimised because:
(a)at the first meeting the administrator advised creditors that if receivers were appointed it was likely an extension of time for the watershed meeting would be required, and no creditors objected;
(b)the administrator will inform creditors of the extended timeframe, and they will still have an opportunity to vote at the meeting; and
(c)he seeks an order reserving leave for any interested party to vary or modify the order for extension.
[11]Mr Haig has certified the application pursuant to r 7.23(2)(b).
[12] The need for administration is clear. Mr Eathorne has also adequately explained why the extension was not sought sooner. The position of creditors will not be prejudiced and they will, in any event, have leave to apply to vary the order if any issues arise. I am satisfied it is appropriate for the application to be brought without notice.
Should the watershed convening period be extended?
[13] Section 293AT(3) of the Companies Act permits the Court to extend the convening period on the administrator’s application. The power to extend is to be exercised in light of the purposes of the voluntary administration regime and the duties imposed on administrators.4 The purpose of the regime is set out in s 239A of the Act:
239A Objects of this Part
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.
[14] Achieving these objectives requires a balance between the expectation of a relatively speedy and summary process on one hand, and the requirement that undue speed should not prejudice the return for creditors on the other.5 Every case turns on its own facts, however relevant factors are likely to include:6
(a)the size and scope of the business;
(b)the number of employees;
4 Re Nylex New Zealand Ltd HC Auckland, CIV-2009-404-1217, 11 March 2009; Re Grenfell [2016] NZHC 36; Re Kumfs Group & Ors [2019] NZHC 2552; and Re Advanced Building and Construction Ltd [2021] NZHC 937.
5 Re Kumfs Group & Ors, above n 4, at [13]; and Re Hodgkinson [2023] NZHC 1015 at [19].
6 Re Grenfell, above n 4, at [14].
(c)the nature and complexity of the corporate structures;
(d)the nature of the transactions entered into by the company;
(e)the availability of the financial records;
(f)the time needed to exercise an orderly process and an assessment proposal for a deed of company arrangement;
(g)whether the extension would allow the sale of the business as a going concern; and
(h)whether additional time is likely to enhance the return for unsecured creditors.
[15] Mr Haig submits that (c) and (g) are the most relevant factors here. Mr Eathorne is seeking an extension so he can properly reconcile the financial position of the group. The structure the companies is somewhat complex, with THL providing a treasury function and using a different accounting system to the rest of the group. Mr Eathorne has not been able to complete a full reconciliation and would be unable to present information required under the Act when giving notice of the watershed meeting.7
[16] In addition, Mr Eathorne seeks further time to facilitate the sale of the group as a going concern. In his affidavit he indicates it is unlikely the group will be handed back to the directors. He has settled a sale process with the receivers if the creditors agree at the watershed meeting to sell as a going concern. Extending the period will allow the businesses to continue running and will help facilitate their sale at the best price. There are two obvious potential purchasers.
[17] The main consequence of extending the convening period is that the moratorium on creditors taking enforcement steps will be extended. Mr Haig submits creditors will not be unduly affected as the administrator is personally liable for the
7 Companies Act, s 239AU(3).
business expenses incurred during administration, thereby protecting the interests of trade creditors, and the delay will provide the creditors with the best chance of a market value sale as a going concern.
[18] The evidence supports the extension Mr Eathorne seeks. I agree an extension will be in the best interests of creditors, both in terms of the information available to them and in maximising the chances of a sale at market value as a going concern. Although the mortarium will be extended, the prejudice to creditors will be minimal.
Notification
[19] Under s 239ADO of the Act, the Court can make any order it thinks appropriate about how pt 15A is to operate in relation to a particular company. Under s 239AU(1) and (2), an administrator is required to notify creditors of the watershed meeting not less than 5 working days before the meeting. The administrator must advertise the meeting in accordance with s 3(1)(a), which requires publication of a notice in the Gazette.8
[20] Mr Eathorne also seeks a direction that notice be published in at least one issue of a newspaper circulating in the company’s principal place of business, as contemplated in s 3(1)(b). I agree that course is appropriate. It will require notice to be published in newspapers throughout virtually the whole of New Zealand, given the comprehensive geographical reach of the companies in the group. Mr Eathorne also has a list of creditors’ email addresses. I direct that creditors be notified of the watershed meeting by way of Gazette notice, by email and by issuing a notice in local newspapers.
Access to Protocol
[21] Rule 5(2) of the Senior Courts (Access to Court Documents) Rules 2017 recognises this Court’s inherent power to direct that particular documents may not be
8 See Bartletts Creek Vineyard Ltd Partnership v Maginness [2021] NZHC 2295 at [48].
accessed without the permission of the Judge. The law was helpfully summarised by Woolford J in FFP Trustee (NZ) Ltd v Low:9
[29] In Erceg v Erceg the Court held that a party seeking a confidentiality order must show specific adverse consequences that are sufficient to justify an exception to the fundamental rule, and the standard is a high one. A court will need to have sound reasons for finding that the presumption favouring publication is displaced, but there is no onus on an applicant.
[30] The correct approach requires the Court to strike a balance between open justice considerations and the interests of the party who seeks confidentiality. The balancing exercise is case specific and will depend on the legitimate public interest in knowing the relevant information, for example, the identity of the party or witness. In addition, in the context of a trustee seeking directions from the Court, where the trustee is under an obligation of full and frank disclosure of all material matters to the Court, it is often accepted that as a corollary to that obligation some or all of the material put before the Court may remain confidential and not be disclosed to certain parties.
[22] Although Mr Eathorne is not a trustee, as an administrator making a without notice application he is likewise under an obligation to make full and frank disclosure. The document he seeks to keep confidential is the Protocol between the administrator and the receivers about the concurrent voluntary administration and receivership. It contains commercially sensitive information, including the proposed sale process. Commercial sensitivity is a well-recognised ground for sealing a document.10 I am satisfied that if the Protocol were publicly available it may detrimentally affect the sale. After reviewing the document, I also consider there is little legitimate public interest in its contents. I direct the Protocol should not be accessed without the permission of a Judge.
Costs
[23] It is usual practice under s 239AT(3) to treat the costs of the application as an expense incurred by an administrator in the company’s administration.11 Accordingly, the costs order Mr Eathorne seeks is granted.
9 FFP Trustee (NZ) Ltd v Low [2021] NZHC 3507 citing Erceg v Erceg [2016] NZSC 135 at [8] and [13]; and Y v Attorney-General [2016] NZCA 474, (2016) 23 PRNZ 425 at [29].
10 Spark New Zealand Trading Ltd v Commerce Commission [2017] NZHC 238.
11 See for example Re Black Dog Consulting Ltd [2023] NZHC 573 at [24].
Orders
[24]I make the following orders:
(a)I give Mr Eathorne leave to bring this application without notice;
(b)Pursuant to s 239AT(3) of the Act, I order that that the watershed meeting must be convened by 30 August 2024, and extend the convening period accordingly;
(c)I give leave to any person who can demonstrate sufficient interest to apply to the Court to modify or discharge these orders on appropriate notice to the applicant and the Court;
(d)I direct that the Protocol, exhibited and marked RE3 to the affidavit of Ryan Eathorne sworn 24 June 2024, may not be accessed without the permission of a Judge;
(e)I direct that the costs of and incidental to this application are to be treated as an expense incurred in carrying out duties as administrator and are accordingly to be paid from the accounts of THL as parent company of the group;
(f)Pursuant to s 239ADO of the Act I direct that notice of these orders is to be provided to creditors of THL and its subsidiaries by way of Gazette notice, by email and by advertisement in a newspaper in each region where the group operates.
Boldt J
Solicitors:
J D Haig (for the Applicant), Mallet Partners, Wellington
0
7
1