Watts v Featherston Resources Limited

[2018] NZHC 328

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-0077

[2018] NZHC 328

UNDER

Section 241 of the Companies Act 1993

IN THE MATTER

of the liquidation of Featherston Resources Limited

BETWEEN

CHRISTOPHER WATTS

Plaintiff

AND

FEATHERSTON RESOURCES LIMITED

Defendant

Hearing:

2 March 2018

Appearances:

Mr J James for the plaintiff

Ms C Murphy and Mr T Cooley for the defendant

Judgment:

6 March 2018

ORAL JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]                   Before the Court today is a proceeding to wind up the defendant company by Christopher Watts who I understand to have been a former shareholder and director. The application is not made on the conventional grounds of failure to pay a statutory demand but rather on the more unusual basis that the company has been operating in persistent breach of various obligations and that it is just and equitable that it be wound up.

[2]                   It turns out that the company has, throughout the relevant period of time, been, and is still, the subject of a deed of company arrangement to which the plaintiff is a party.

WATTS v FEATHERSTON RESOURCES LIMITED [2018] NZHC 328 [6 March 2018]

[3]                   Section 239 ACU of the Companies Act 1993 is therefore engaged. It provides that no one who is bound by a deed of company arrangement may, while that deed of company arrangement remains extant, apply for an order winding up the company.

[4]                   It is common ground that, at the time that the plaintiff issued this proceeding, he was indeed bound by the deed of company arrangement which remains in force.

[5]                   Before me today Mr James sought an adjournment of this winding up proceeding. Essentially, his contention was that it should be adjourned in order to enable his client to commence altogether different proceedings which would be directed at bringing the deed of company arrangement and the administration of the company under that deed to an end, the inference being that, if and when that occurred, Mr Watts would be able to breathe life into this proceeding and continue with his attempt to wind the company up.

[6]                   In my judgment that would be an inappropriate approach to take. As submitted on the company’s behalf by Ms Murphy, and on behalf of the administrators by Mr Cooley, this case comes down to one of standing. As a result of s 239 ACU, Mr Watts had no standing to commence this proceeding. Indeed, more than that, there was a statutory provision which positively prohibited him from doing so.

[7]                   Mr James’ rejoinder to that argument is that Mr Watts did not know that the company was still in administration under the deed at the time he commenced this proceeding, because the administrators under the deed had not filed and served certain reports and other material. Mr Cooley bluntly accepts that the administrators have not done everything that they were required to do under the statute within the times there provided. But, as he submits, Mr Watts has been involved with this company for a number of years as a former shareholder and director, and can be assumed to have kept abreast of what was going on. Quite apart from that, the register will have included material about the company’s status, so that Mr Watts had constructive notice of the ongoing deed of company arrangement.

[8]                   In those circumstances, in my judgment, it would be inappropriate to adjourn this proceeding and I decline to do so.

[9]                   The substantive proceeding to wind up the company is dismissed for the reasons I have identified.

[10]               That leaves the question of costs. Naturally Ms Murphy on behalf of the company and Mr Cooley on behalf of the administrators, both seek costs. They do so on the usual 2B basis, and that is appropriate. The nature of the case would not sustain any more than a 2B calculation of costs.

[11]               On Mr Watts’ behalf, Mr James resists costs orders, again on the basis of the actions of the administrators. In effect he says that we would not be here but for the administrators having failed in their responsibilities.

[12]               There is something in that point. However, the counterpoint put to me forcefully by Ms Murphy and Mr Cooley is compelling. I am told from the bar (without objection from Mr James) that as soon as proceedings were threatened, or at least as soon as they were commenced, Mr Watts or his advisors were directed to s 239 ACU and his lack of standing, and that this was ignored. Affirmative defences were pleaded once again drawing attention to the provision. There has been no response to the pleading of that affirmative defence (which, technically at least, means that it is admitted). I am also told that there has been ongoing correspondence in an attempt to persuade Mr Watts to abandon this attempt to wind the company up in circumstances where he is unable to do so, all to no avail. In my judgment, the company and the administrators are entitled to costs. They will have their costs on a 2B basis plus disbursements in each case as fixed by the Registrar.

Associate Judge Johnston

Solicitors:

Anthony Harper, Auckland for the plaintiff Brookfields, Auckland for the defendant