Tobem Holdings Limited v Grant - [2023] NZHC 3473

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2023-404-001624

[2023] NZHC 3473

UNDER Companies Act 1993 and Part 19 of the High Court Rules 2016

BETWEEN

TOBEM HOLDINGS LIMITED

Applicant

AND

DAMIEN GRANT and ADAM

STEVENSON BOTTERILL (as liquidators of KID COUNTRY HOLDINGS LIMITED)

Respondents

Hearing: 2 October 2023

Appearances:

D Bigio KC and T Nelson for the Applicant K A Cocks and L Z Rong for the Respondents

Judgment:

30 November 2023

JUDGMENT OF TAHANA J

This judgment was delivered by me on 30 November 2023 at 4.30pm Pursuant to Rule 11.5 of the High Court Rules

…………………………

Registrar/Deputy Registrar

Solicitors/Counsel:
Patel Nand Legal, Auckland
Waterstone Insolvency, Auckland Shortland Chambers, Auckland Bankside Chambers, Auckland

TOBEM HOLDINGS LIMITED v GRANT [2023] NZHC 3473 [30 November 2023]

Access to company records

[1] Tobem Holdings Ltd (Tobem) is the principal creditor in the liquidation of Kid Country Holdings Ltd (KC Holdings) (in liquidation). The sum owing to Tobem currently amounts to more than 99.75 per cent of KC Holdings’ total indebtedness to creditors.

[2] Tobem seeks access under s 256(1) of the Companies Act 1993 (the Act) to records of KC Holdings for the purpose of determining whether it should fund investigations into potential claims against the directors of KC Holdings. Tobem says the liquidators have failed to investigate, and have indicated there are insufficient funds to do so.

[3] The liquidators oppose access in part. They say they have not acted unreasonably and that they are willing to investigate further but Tobem has refused to meet with them.

[4] The Court may require a liquidator to provide a creditor access to documents if there are good reasons for doing so.1 Before considering whether there are good reasons, I first set out the relevant background, the categories of documents sought and the relevant law.

Relevant background

Tobem claims against KC Holdings

[5] On 29 June 2020, Tobem filed a claim against KC Holdings claiming damages due to the cancellation of its lease at Lincoln Road, Henderson and claiming unpaid monies (for rent and operating expenses) under that lease.

[6] The childcare business that was intended to operate out of the Lincoln Road premises was a wholly owned subsidiary of KC Holdings, KC Lincoln Road Ltd (KC Lincoln Road), which was incorporated on 17 April 2018.

1 Levin v Lawrence [2013] NZCA 394.

[7] On 6 October 2020, KC Holdings resolved to remove its wholly owned subsidiary, Kid Country St Johns Ltd (KC St Johns) from the register and the company was removed on 15 October 2020. The business of KC St Johns was sold.

[8] On 31 March 2022, KC Holdings resolved to remove another of its wholly owned subsidiaries, Kid Country Te Atatū Ltd (KC Te Atatū). The reason for this is unknown.

[9] On 31 May 2022, less than two weeks prior to the scheduled hearing of Tobem’s claim, the shareholders resolved to place KC Holdings into liquidation.…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] NZHC 3473
Decision Date: 30 November 2023

CaseChat Overview and Summary

Tobem Holdings Limited, the principal creditor of Kid Country Holdings Limited (KC Holdings) in liquidation, applied for access to company records to determine whether it should fund investigations into potential claims against the directors of KC Holdings. The liquidators opposed the application, asserting that they had not acted unreasonably and were willing to investigate further, but that Tobem had refused to meet with them. The Court considered the legal principles applicable under the Companies Act 1993 and relevant case law, particularly Levin v Lawrence, which sets out the threshold for granting access to documents. The Court found that Tobem had a reasonable basis to suspect potential claims against the directors and that it was not unreasonable for Tobem, as the largest creditor, to seek access to determine whether to fund any investigation. The Court concluded that the liquidators should permit inspection of the documents sought, subject to certain conditions, including that Tobem pay the liquidators' reasonable costs of compiling and providing the documents.

In summary, the Court granted Tobem’s application for access to KC Holdings’ records, subject to specific conditions aimed at protecting confidentiality and commercial sensitivity, and ordered Tobem to pay the liquidators’ reasonable costs. The Court also granted leave for Tobem to apply for further directions if the parties could not agree on the disclosure of additional documents reasonably requested by Tobem’s forensic accountant.

Orders