Whitireia Community Polytechnic v McLennan HC Auckland CIV 2010-404-3378

[2010] NZHC 1811

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-003378

UNDERPart 19 of the High Court Rules and ss 284 and 286 of the Companies Act 1993

IN THE MATTER OF     PGR Trading 2009 Ltd (In Liquidation) BETWEEN  WHITIREIA COMMUNITY

POLYTECHNIC Applicant

ANDIAIN MCLENNAN Respondent

Hearing:         8 September 2010

Appearances: N P Tetzlaff for Applicant

M C Frogley for Respondent

Judgment:      10 September 2010

JUDGMENT OF ASSOCIATE JUDGE BELL

This judgment was delivered by me on 10 September 2010 at 4:45 pm pursuant to Rule 11.5 of the High Court Rules. Registrar/Deputy Registrar

Date: ………………….

Solicitors:

Ford Sumner (J R Sumner), PO Box 25 299, Wellington

Brookfields, PO Box 240, Auckland

WHITIREIA COMMUNITY POLYTECHNIC V I MCLENNAN HC AK CIV-2010-404-003378  10 September

2010

[1]      PGR Trading 2009  Ltd  was put into liquidation on 25 January 2010  by shareholders’ resolution.  The company was incorporated on 24 February 2004.  It has previously been called Heli-flight Ltd and Heliflight Ltd.  It carried on business, amongst other things, training helicopter pilots. The liquidator appointed was Ian McLennan, an Auckland insolvency practitioner.

[2]      In  late  1989,  Whitireia  Community  Polytechnic  had  served  a  statutory demand on the company, demanding payment of $839,936.08.  The company filed an application to set aside the statutory demand but did not follow through with the application, going into voluntary liquidation instead.

[3]      The lawyers for the Polytechnic communicated with the liquidator.   They asked him to call a creditors’ meeting.  That request came within s 245(1)(b)(iii) of the Companies Act and meant that the liquidator could not dispense with calling a creditors’ meeting.   The lawyers also requested a report under s 255(2)(c) of the Companies Act.

[4]      The Polytech lodged a proof of debt for the debt it claimed on 22 February

2010.

[5]      The liquidator was generally uncommunicative with the Polytechnic and its lawyers.  He did not say whether he accepted or rejected the proof of debt.  He did not call a creditors’ meeting.  He did not send out to creditors a report containing a statement of the company’s affairs which met the requirements of s 255(2)(c) of the Companies Act.

[6]      On 30 May 2010, the Polytechnic’s lawyers gave notice that the Polytechnic would apply to the High Court for the liquidator’s failures to call a meeting of creditors.

[7]      The Polytechnic   filed  its application on 8 June 2010.   That application sought these orders:

a)        That Mr McLennan be removed as liquidator;

b)That Henry David Levin and Vivien Judith Madson-Ries be appointed liquidators.

[8]      In the alternative, that Mr McLennan call a meeting of creditors within 15 working  days  and  that  he  provide  notice  of  the  meeting  of  creditors  and  all documents required under s 255 to the creditors within five working days of the date of the order.

[9]      On 9 June, Associate Judge Christiansen gave leave to the Polytechnic   to seek directions under s 284.

[10]     The Polytechnic   has given the five working days’ notice required under s 286(2) before filing its application for relief under s 286.

[11]     The matter was first called before me on 11 August 2010.  I adjourned the proceeding  to  8  September  2010  to  allow  Mr  McLennan  to  call  a  meeting  of creditors.

[12]     A meeting of creditors was held on 16 August 2010.   At that meeting, the creditors voted in favour of appointing Henry David Levin and Vivien Judith Madsen-Ries as liquidators.

[13]     The  Polytechnic     has  now  amended  its  application  and  seeks  orders approving the appointment of Henry David Levin and Vivien Judith Madsen-Ries as liquidators and seeks costs on the application.  If the Court does not approve Henry David Levin and Vivien Judith Madsen-Ries, the Polytechnic proposes Dennis Parsons   And   Katherine   Kenealy,   insolvency   practitioners   of   Hamilton,   as liquidators.

[14]     Ian McLennan raises these points:

a)       Mr Levin and Ms Madsen-Ries should not be appointed because they are  disqualified  under  s  280(1)  of the  Companies  Act,  unless  the Court orders otherwise.

b)Whitireia  Community  Polytechnic  has  not  established  that  it  is  a creditor of PGR Trading 2009 Ltd and therefore it did not have standing to bring the original application.

[15]     Henry David Levin and Vivien Judith Madsen-Ries have disclosed that their firm, Deloitte, has a continuing business relationship with creditors who have registered security interests on the Personal Property Securities Register:  the Bank of New Zealand and Airwork Holdings Ltd.  Deloitte provides taxation and general advice to both companies.

[16]     Mr Levin and Ms Madsen-Ries are experienced and competent liquidators.  I am confident that they would be able to act professionally as liquidators notwithstanding that Deloitte does have a continuing business relationship with two secured creditors.

[17]     I also take into account that this issue was raised with creditors at the meeting on 16 August 2010 and creditors voted in favour of their appointment.

[18]     The other matter that requires consideration is that Henry David Levin and Vivien Judith Madsen-Ries are also liquidators of Contract Training (2002) Ltd (In Liquidation).   That company was formerly called Heli-Flight (NZ) Ltd.   That company went into liquidation in March 2008.  It had apparently not been trading since 2006/early 2007.  Heli-Flight (NZ) Ltd has the same director and shareholders as PGR Trading 2009 Ltd.   It appears that a number of people who had formerly dealt with Heli-Flight (NZ) Ltd later dealt with Heliflight Ltd (now PGR Trading

2009 Ltd).

[19]     I  accept  that  a  separation  between  Contract  Training  (2002)  Ltd  (In Liquidation), formerly Heliflight NZ Ltd, and  PGR Trading 2009  Ltd, formerly Heliflight  Ltd,  can  be  maintained.    There may therefore be  efficiencies  for  the liquidation of PGR Trading 2009 Ltd if it has the same liquidators as Contract Training (2002) Ltd.  Accordingly, I approve the appointment of Henry David Levin and Vivien Judith Madsen-Ries as liquidators of PGR Trading 2009 Ltd (In Liquidation) under s 280 of the Companies Act.

[20]   Mr McLennan refers to the Polytechnic’s contract between Whitireia Community Polytechnic and Heliflight NZ Ltd.  The contract is dated 19 July 2006. Clearly, this is one of those cases where the contract with Heliflight NZ Ltd ceased on the company going into liquidation, if not earlier, but the Polytechnic  carried on dealing with PGR Trading 2009 Ltd under its former name, Heliflight Ltd.  Certainly the affidavit sworn by Mr McKay, director of Heliflight Ltd, indicates that it continued to trade with the Polytechnic  in terms of that contract.

[21]     Mr McLennan also says that the agreement is stated to be a partnership.

[22]     The agreement contains these words:

The main objectors of this partnership are to:

2.1Provide training programmes which meet the needs of students, the requirements of the Civil Aviation Authority (CAA) and the requirements of Whitireia’s Quality Management System (QMS).

2.2Encourage future developments in the partnership and other strategic opportunities.

[23]     These  words  and  other  language  in  the  agreement  are  redolent  of  other contracts in the education sector.  They usually reflect the fact that lawyers have no input into the drafting of these contracts.  The contract is, in fact, one under which the Heliflight company provides helicopter training in return for payments.  In other words, it is nothing more than a contract for the provision of services.  There is no partnership in the legal sense.

[24]     I accept that Whitireia Community Polytechnic is a creditor.  Its proof of debt shows that payments were made for students to receive tuition but they did not receive tuition.  It has made a claim for over-payment.  I say no more than that.  The proof of debt may require further examination by the liquidators but on the information provided, I see no reason for the liquidators not to treat Whitireia Community Polytechnic for present purposes as a creditor of PGR Trading 2009 Ltd.

[25]     Accordingly, the Polytechnic  had standing as creditor to file a proof of debt, to receive notices under s 255 of the Companies Act, and to apply to the Court under ss 284 and 286 of the Companies Act.

[26]     The  outcome  vindicates  the  position  taken  by  the  Polytechnic.    It  was justified  in  making  its  application.     Mr  McLennan’s  lawyers  had  written  a Calderbank letter to the Polytechnic  on 6 August 2010 offering payment of $6000 in settlement.  That was on the basis that Mr McLennan remain in office as liquidator. The outcome is more adverse to Mr McLennan than his Calderbank offer. Accordingly, the Polytechnic is entitled to costs on a 2B scale, plus disbursements.  I make these orders:

a)       I approve the appointment of Henry David Levin and Vivien Judith Madsen-Ries as liquidators of PGR Trading 2009 Ltd under s 280(1) of the Companies Act 1993;

b)        The respondent will pay the applicant’s costs of this application on a

2B scale, together with disbursement as approved by the Registrar.

R M Bell

Associate Judge