Truck and Trailer Holdings Limited v Skelly Holdings Limited

[2012] NZHC 1080

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2012-409-000541 [2012] NZHC 1080

UNDER  the Companies Act 1993

BETWEEN  TRUCK AND TRAILER HOLDINGS LIMITED

Plaintiff

ANDSKELLY HOLDINGS LIMITED Defendant

Hearing:         11 May 2012

Appearances: HDP van Schreven for R E Peter

Judgment:      11 May 2012

REASONS FOR DECISIONS OF ASSOCIATE JUDGE OSBORNE

as to Interim Liquidator’s Appointment

[1]      This  was  a  without  notice  application  for  appointment  of  an  interim liquidator.   I made orders in terms of the application at 2.18 p.m. today, 11 May

2012.

[2]      I said I would give reasons, and these are they.

[3]      On 18 March 2012 the plaintiff filed this proceeding for an order putting the defendant into liquidation.   The proceeding, which has been served, is due for its first call on 15 May 2012.

[4]      Mr Peter, who has filed the present application, is the attorney of Christopher Edward Eric Skelly, the sole director and shareholder of the defendant.  He deposes that he is authorised by Mr Skelly to make the affidavit filed in support of the

application.

TRUCK AND TRAILER HOLDINGS LIMITED V SKELLY HOLDINGS LIMITED HC CHCH CIV-2012-

409-000541 [11 May 2012]

[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:[1]

[1] Carter Holt Harvey Ltd v Timbalok NZ Ltd (1997) 11 PRNZ 435 at 438.

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.[2]

[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.[3]

[2] Carter Holt Harvey Ltd; Robert Bryce & Co Ltd v Chicken and Food Distributors Ltd (1995) 5

NZCLC 66,648 (CA).

[3] Robert Bryce & Co Ltd.

[9]      These various formulations are ways of measuring whether necessity or expediency are established. They are a “litmus test”, not exhaustive.[4]

The facts

[4] Shen v An Ying International Finance Ltd  High Court Auckland CIV-2006-404-003088, 28 July

2006 at [15].

[10]     Mr  Skelly  has  left  New  Zealand  (on  13 April  2012)  ahead  of  a  feared deportation.   No-one has been left in New Zealand who can direct decisions in relation to the company’s governance.   Some staff have resigned.   Mr Peter, as attorney, is not in a position to manage and operate the business.

[11]     The company is in the business of demolition.  It has a lease ($450,000 plus GST per annum) over New Zealand Railways Corporation land.  It has introduced to that land demolition material.  Mr Peter estimates the residual liability for removal of that material from the land at $2m to $4m, which may be greater than any recovery from recycling.

[12]     The New Zealand Police, on 7 May 2012, seized computers of the company as part of an investigation.   The computer contained prime records necessary for dealing with the company’s creditors.

[13]     The company is unable to operate on a day-to-day basis.

[14]     Against  this  background,  and  at  the  request  of  Mr  Skelly,  Mr  Peter  as attorney signed a shareholder’s resolution on 8 May 2012 seeking to appoint Murray George Allott as liquidator.   By reason of s 241AA Companies Act the resolution does not operate at this point.

[15]     Mr Peter deposes that he believes it is in the best interest of the company and of all creditors that there be a liquidation.

The complication

[16]     One complication arises.   Mr Peter deposes that he understands that the plaintiff in this proceeding has been paid its debt.  This information appears to be supported by a notice of discontinuance submitted by the plaintiff to the Court on 8

May 2012, which would be dealt with in the ordinary course when the proceeding is

called on 15 May 2012.  At that point either another creditor might substitute or the present plaintiff will proceed with its discontinuance.

[17]     Unless a substituting creditor appears on 15 May, there will be no creditor on the record pursuing liquidation.  Accordingly the Court will not have grounds on the plaintiff’s present proceeding to make a final order of liquidation.

[18]     I am satisfied that this complication does not negate the central test under s 246(1) as to necessity or expediency in this case.   On Mr Peter’s evidence the company is clearly insolvent and unable to pay its debts.   It appears clear, as Mr Peter’s  evidence indicates,  that  liquidation  is  inevitable.    Its  assets  ought  to  be protected.

[19]   I am further satisfied that as a matter of discretion, against the factual background, interim liquidation is appropriate.

[20]     The proposed interim liquidator is known to the Court as an experienced liquidator and can be relied upon to act impartially and independently.

Orders

[21]     The orders I therefore made at 2.18 p.m. today were as follows:

(i)That  an  interim  liquidator  be  appointed  to  the  defendant company.

(ii)      That the interim liquidator be Murray George Allott.

(iii)That   the   interim   liquidator   have   the   following   specific authorities and powers:

1.  to  seize,  preserve  and  store all  assets  of  the  defendant company wherever located;

2. to seize, preserve and store all records, accounts and documents of the defendant company;

3.  to preserve the goodwill of the defendant company;

4.  to   trade   the   defendant   company   in   respect   to   the management of the existing contract or obligation for its benefit, to collect debtors including the making of demand for payment and filing of any legal proceedings arising from those demands with costs to be paid from the assets of the company;

5.  to file returns with the Inland Revenue Department during the period the interim liquidator is in office;

6.  to receive money due to the defendant company into a bank account or trust account established for the purpose and  to  disburse those  funds  in  the due exercise of the interim liquidator’s powers;

7.  to  charge  a  fee,  pay  those  monies  out  of  the  monies collected by the defendant company and to pay the same in priority to the appointment of any final liquidator;

8.  to notify any change in the registered office and address for service of the company to the Registrar of Companies;

9. to interview the directors, employees, accountants and lawyers, if necessary under oath, in order to ascertain the location of company assets and records so they may be recovered and preserved;

10. to enter into contracts and to disclaim onerous contracts in property;

11. to continue, amend or cancel insurance policy;

12. to  negotiate  the  sale  of  the  business  or  any  assets comprising the business;

13. to limit the liability of the interim liquidator to the assets of the company;

14. to indemnify the interim liquidator out of the assets of the company.

(iv)That the interim liquidator’s fees as set out in his 4 May 2012 certificate are approved subject to s 284 Companies Act 1993.

(v)      That the costs be reserved.

Associate Judge Osborne