Trust & Loyalty Security Limited v 9th Entertainment Limited

[2024] NZHC 1016

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-002144

[2024] NZHC 1016

UNDER

the Companies Act 1993

BETWEEN

TRUST & LOYALTY SECURITY LIMITED

Plaintiff

AND

9TH ENTERTAINMENT LIMITED

Defendant

Hearing:

On the papers

Appearances:

B Martelli for the Plaintiff J P Wood for the Defendant

K R Lydiard for the Former Liquidators

Judgment:

30 April 2024

COSTS JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 30 April 2024 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date.......................................

Solicitors:

Court One, Auckland

McVeagh Fleming, Auckland K R Lydiard, Auckland

TRUST & LOYALTY SECURITY LTD v 9TH ENTERTAINMENT LTD [2024] NZHC 1016 [30 April 2024]

[1]                  On 3 November 2023 at 10.09 am this Court ordered, on the plaintiff’s application, that the defendant be placed into liquidation. Garry Whimp and Benjamin Francis were appointed as liquidators.

[2]                  The sole shareholder and director of the defendant (Zhaoxia Zhang) applied urgently for a recall of the order, on the grounds that she was unaware of the statutory demand and liquidation proceedings.

[3]                  On 10 November 2023 the Court exercised its inherent jurisdiction to recall the liquidation order, because it was satisfied that there were grounds to believe that the defendant was unaware of the liquidation hearing and had been denied the opportunity to be heard. It did so even though the plaintiff had served the statutory demand and the liquidation proceedings in compliance with s 387(1)(c) of the Companies Act 1993, by leaving the documents at the defendant’s registered office and address for service. The surrounding circumstances were highly relevant, including that the plaintiff and defendant had been engaged in a dialogue to settle the debt, the defendant had made a substantial payment to the plaintiff leaving only a modest balance,       Ms Zhang had represented to the plaintiff that she would pay the balance once further information was provided, and the liquidation documents were left taped to the door of the defendant’s premises, which is located on a busy street in downtown Auckland.

[4]                  Between the time the liquidation order was made on 3 November and recalled on 10 November, Mr Whimp and Mr Francis were liquidators of the defendant company by order of the Court. They took steps to fulfil their statutory duties and obligations during this period. Mr Francis has sworn an affidavit explaining the steps the liquidators took and why; and the associated costs and expenses incurred. The liquidators have filed an affidavit from an independent insolvency practitioner, Derek Sam, who provides his opinion that it was appropriate for the liquidators to take steps as soon as they were appointed.

[5]                  I see nothing improper or unorthodox in the measures taken by the liquidators during the period of their appointment. They were required to take immediate steps to secure the assets of the company and assess its financial position. They were then

required to provide the Court with information for the purposes of the recall application. The fees and expenses were properly incurred.

[6]                  Section 278 of the Companies Act 1993 provides that the expenses and remuneration of a liquidator are payable out of the assets of the company. There is no reason why there should be any departure from this position in this case.

Result

[7]For the above reasons, I order:

(a)the defendant is to pay the liquidators’ costs and expenses on an indemnity basis as set out in the memorandum of counsel for the liquidators dated 23 November 2023;

(b)the plaintiff does not have leave to discontinue the liquidation proceeding until these costs are paid.

Associate Judge Gardiner