Watson & Son Limited Partnership

[2017] NZHC 2416

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-2231 [2017] NZHC 2416

IN THE MATTER

of Part 19 of the High Court Rules and ss

239F, 239ACD, 280 and 286(4) of the
Companies Act 1993

AND

IN THE MATTER

of an application concerning WATSON & SON LIMITED PARTNERSHIP

AND

WATSON & SON GP LIMITED

IN THE MATTER

of an application by BRENDON JAMES GIBSON and GRANT ROBERT GRAHAM

Applicants

Hearing:	On the papers
Appearances:	G W Hall / A L Harlowe for Applicants
Judgment:	3 October 2017

JUDGMENT OF LANG J

This judgment was delivered by me on 3 October 2017 at 3 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

IN THE MATTER OF WATSON & SON LTD [2017] NZHC 2416 [3 October 2017]

[1]      In this proceeding Mr Gibson and Mr Graham seek an order that they be permitted  to  act  as  administrators,  deed  administrators  and  liquidators  of  the following entities:

(a)       Watson & Son Limited Partnership and its general partner, Watson & Son GP Limited;

(b)      Manukamed Limited Partnership, and its general partner, Manukamed

GP Limited; and

(c)       Manukamed  Holdings  Limited  Partnership  and  its  general  partner

Manukamed Holdings GP Limited

(the partnership entities).

[2]      The Bank of New Zealand (the bank) holds a first ranking charge over all of the property owned by the partnership entities.  It seeks to appoint the applicants in the first instance as administrators because the entities are now in default in their obligations to the bank  and are likely to  encounter further issues with working capital during October 2017.   In addition, issues have arisen in respect of the effectiveness of their governance.

[3]      The  applicants  and  their  accounting  firm,  KordaMentha,  have  had  a continuing business relationship with the bank during the past two years.  For that reason, and in the absence of the orders sought, s 281(c)(b) of the Companies Act

1993 (the Act) would prevent them from acting as administrators, deed administrators, or liquidators.  This arises from the fact that the bank has appointed partners of KordaMentha as receivers of five companies in the last two years, and it also holds appointments as an independent firm of accountants in respect of three of the bank’s customers at the request of the bank.  The firm has also had an association with the bank in respect of numerous receiverships and other matters going back in time beyond the last two years.  KordaMentha has never, however, provided services

of any kind to the partnership entities or the directors and shareholders of the general partners.

[4]      The  applicants  also  seek  permission  to  act  as  deed  administrators  and liquidators because they view those outcomes as being possible once creditors hold a watershed meeting under s 239T of the Act.

[5]      The  partnership  entities  operate  an  apiary  business  that  relies  on  honey produced by a very large number of beehives in different parts of the country.  The applicants are justifiably concerned that if creditors have notice of the impending administration they may seek to uplift property owned by the partnership entities. There would also be further delay if all creditors were required to be served.   I therefore accept that the applicants are justified in proceeding on a without notice basis seeking orders as a matter of urgency.

[6]      The purpose of s 280 of the Act is to ensure that persons who are appointed to roles such as administrators, deed administrators and liquidators have sufficient independence, competence and integrity to carry out those roles without causing risk to creditors or third parties. 1  As a result, an important consideration will be whether there is a risk that the persons who seek to be appointed in those roles have the necessary independence, professionalism and ability to carry out their tasks.  Part of

the enquiry the Court is required to undertake will be to ascertain whether earlier association with either the company or creditors might compromise those attributes. In this context the interests of creditors are important.2

[7]      The applicants have confirmed that they are aware of their obligations to act independently and professionally in their roles if appointed as administrators, deed administrators or liquidators.  They do not consider that their firm’s current and past engagements by the bank will in any way impair the manner in which they carry out their roles in relation to the partnership entities.  They point out that they are also subject to the rules of professional conduct for chartered accountants.  In addition,

Mr Graham says that the number of accounting firms with the necessary resources

1      Re Nicholas Jermyn Ltd [2016] NZHC 933 at [9].

2 At [10].

and expertise to undertake such a large and complex administration is likely to be limited.  All such entities are likely to be in a similar position so far as previous association with the bank is concerned.   He says that two such firms are also prevented from acting as administrators by virtue of the fact that they have provided services directly to the partnership entities.

[8]      Both applicants are well known in the insolvency field and have developed considerable expertise over many years in both financial consulting and insolvency practice.  They have acted on numerous occasions as administrators, receivers and liquidators.   I do not consider there can be any reason to doubt their objectivity, professionalism and ability to act in an independent manner notwithstanding their earlier and current associations with the bank.

[9]      I therefore consider there is no discernible risk that the applicants will be compromised by their previous and present association with the bank in the event that they are appointed as administrators, deed administrators or liquidators. Furthermore, the creditors can be informed of the orders the Court has made and will have the opportunity to revisit the appropriateness of their continued appointment at the watershed meeting of creditors.

[10]     I am therefore satisfied that the application should be granted, and that it is appropriate to make the other procedural directions that the applicants seek.  As a result, I make orders in terms of the originating application dated 2 October 2017.

The Registrar may now seal the draft orders that have been filed with the application.

Lang J

Solicitors:

Buddle Findlay, Auckland