Tieg Limited, HC Christchurch CIV 2010-409-471

[2010] NZHC 592

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2010-409-471

UNDERPart 19 of the High Court Rules and ss280 to 286 of the Companies Act 1993

IN THE MATTER OF     TIEG LIMITED AND

IN THE MATTER OF     RICHARD GRANT SIMPSON and

SIMON JOHN THORN Applicants

Hearing:         On Papers

Counsel:         W Palmer for Applicants

Judgment:      10 March 2010 at 3.00 pm

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

This judgment was delivered by Associate Judge Gendall on 10 March 2010 at 3.00 pm pursuant to r 11.5 of the High Court Rules.

Solicitors:           Buddle Findlay, Solicitors, PO Box 322, Christchurch

SIMPSON & ANOR V TIEG LTD HC CHCH CIV-2010-409-471  10 March 2010

Introduction

[1]      Before the Court is a without notice application by Richard Grant Simpson and Simon John Thorn (“the applicants”) that  they may be appointed to act as liquidators  of  Tieg  Limited  (“the  company”).    They  make  this  application  to establish  whether  they  are  qualified  to  accept  appointment  (pursuant  to  s.  280

Companies Act 1993 “the Act”) on the basis that their firm Grant Thornton provides services to a secured creditor of the company.   As this would appear to be “a continuing business relationship” with a secured creditor of the company and a potentially disqualifying factor, as contemplated by s. 280(1)(cb) of the Act, they seek an order that they may be appointed and act as liquidators notwithstanding the provisions of s 280 of the Act.

[2]      The Court is also required here to consider whether to grant leave to the applicants to bring the present application by way of originating application and whether it is appropriate to determine these matters on a without notice basis.

Background

[3]      The applicants are both partners and experienced insolvency practitioners at the firm of Grant Thornton in their Wellington and Christchurch offices respectively. The first-named applicant has over 25 years New Zealand experience in insolvency work and the second-named applicant over 14 years accountancy practice experience in Australia and the United Kingdom together with 1 year in New Zealand.

[4]      The application is brought under circumstances of urgency.  The applicants have been requested by the shareholders of the company to accept appointment as liquidators.  The shareholders apparently consider the company to be insolvent and intend immediately to place the company into liquidation by special resolution pursuant to s 241(2)(a) of the Act.

[5]      Since being approached to accept appointment. the applicants have made enquiries to determine whether they are qualified to accept appointment.  They state they have come to the view that they are potentially disqualified but only by reason

of the fact that their firm provides a variety of services to one of the twenty-one secured creditors of the company, Westpac New Zealand Limited (“Westpac”).

[6]      That  relationship  with  Westpac  is  apparently  one  which  comprises  first, Grant Thornton having previously acted for Westpac by acting on its instructions as receivers for a number of other companies and secondly Grant Thornton having its own banking arrangements with Westpac.

[7]      As  I  have  noted,  Westpac  is  only  one  of  the  secured  creditors  of  the company.  There appear to be 21 secured and more than 150 unsecured creditors of the company.  The total outstanding indebtedness to secured creditors appears to be around $600,000.00 and to unsecured creditors around $439,000.00.

Leave to Bring Application Without Notice

[8]      As  I  have  noted  above,  this  application  is  brought  without  notice  in  a situation of urgency.

[9]      In the past, a number of similar applications by intending liquidators have also been brought without notice and this Court has regularly granted leave for that to occur.

[10]     The criterion for granting leave is whether it is in the interests of justice to do so.  Ample precedent exists for granting leave for applications under s 280 or s 286 of the Act and on a without notice basis – Re Mountainview Developments Limited (in liquidation) Ex parte Caddis High Court, Auckland, M1730/00, 21 November

2000, Chambers J, Bridgecorp Holdings Ltd v Goodman Limited, High Court, Auckland, CIV-2007-404-4866, 9 August 2007, Courtney J and Joeleen Enterprises Ltd Re Blanchett & Fatupaito High Court, Auckland, CIV-2008-443-485, October  3

2008, Associate Judge Abbott.

[11]     I  am  satisfied  therefore  that  it  is  appropriate  to  deal  with  the  present application for leave by way of an originating application and on a without notice basis and that leave should be granted having regard to the nature of the application

before the Court.  I note also that creditors (the parties most likely to have an interest in the application) will receive notice of the application at the same time as the liquidators provide their first report to creditors under s 255 of the Act.

[12]     Leave is granted to bring this proceeding without notice and by way of an originating application.

Proper Registry of the Court

[13]     The application also seeks a direction that the Christchurch Registry of the

Court is the proper Court in which to commence this proceeding.

[14]     The registered office of the company is at Ashburton.  It carries on business as a provider of engineering services in Canterbury and its directors and shareholders appear to be resident in Christchurch.

[15]     I am satisfied that the Christchurch registry of this Court is the proper Court in which to commence this proceeding and I direct accordingly.

The Substantive Application

[16]     The present application is required because of the provisions of s 280(1)(cb)

of the Act which read as follows:

“280     Qualifications of liquidators

(1)         Unless the Court orders otherwise, none of the following persons may be appointed or act as a liquidator of a company:

.................

[(cb)      a person who has, or whose firm has, within the 2 years immediately before the commencement of the liquidation, had a continuing business relationship (other than through the provision of banking or financial

services) with the company, its majority shareholder, any of its directors, or any of its secured creditors, unless, within 20 working days before the appointment of the liquidator, the board of the company resolves that the company will, on the appointment of the liquidator, be able to pay its debts and a copy of the resolution is delivered to the Registrar for registration:]”

[17]     The present application is brought under both s 280 and 286 of the Act.

[18]     The applicants do not consider there to be any real conflict of interest in the circumstances of this case to disqualify them from acting as liquidators because of the following matters:

(a)The firm Grant Thornton is a large organisation and has acted as receivers appointed by one of the secured creditors, Westpac Bank, in a number of previous occasions.

(b)      Neither of the applicants personally have been or are in any way involved at present in receiverships conducted on behalf of Westpac.

(c)None of the services provided by Grant Thornton to Westpac related to:

(i)        The company being placed into liquidation; (ii)          The directors of the company; or

(iii)      The shareholders of the company;

(d)Although  there  might  be  a  theoretical  possibility of  a  conflict  of interest arising out of Grant Thornton’s relationship with Westpac, the creditors would not suffer any prejudice by being served with the originating application within 5 working days of their appointment and retain a right to challenge that appointment at a normal creditors meeting convened under the Act.

[19]     I accept on the facts of the present case that the provision of services by Grant Thornton to one of the secured creditors of the company Westpac will not compromise the applicants’ independence here or their ability to carry out their tasks as liquidators of the company in a professional and effective manner.  Subject to the matter I will mention in para. [20] following, in my view, their appointment will not be likely to cause risk to creditors or any other third parties.

[20]     On the evidence before the Court I am satisfied that there is a prima facie case for the granting of the present application.  It is important, however, to preserve the right of any creditor to be heard with regard to that application and I am satisfied this aspect can be met by the provision of disclosure to all creditors in the manner suggested by the applicants in their application.

[21]     For all these reasons I now make the following directions and orders:

(a)       I direct that the Christchurch Registry of this Court is the proper

Court in which to commence this proceeding.

(b)      Leave is granted to the applicants to commence this proceeding by way of a without notice originating application.

(c)Pursuant  to  s  280  and/or  286(4)(b)  Companies  Act  1993  the applicants Richard Grant Simpson and Simon John Thorn may act as liquidators of the company Tieg Limited.

(d)This originating application and the present orders made by this Court are to be served upon all known creditors of the company at the same time and in the same manner as the liquidators first report under s

255(2)(c)(ii) of the Act.

(e)      Any creditor of the company is granted leave to apply to the Court (within  5  working  days  of  service  as  above)  to  set  aside  the applicants’ appointment as liquidators.

(f)The applicants’ reasonable solicitor/client costs of this application are to be an expense incurred by the applicants in carrying out their duties as liquidators of the company.

‘Associate Judge D.I. Gendall’