Williamson v The Starjam Charitable Trust
[2024] NZHC 3759
•11 December 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-2929
[2024] NZHC 3759
UNDER the Charitable Trusts Act 1957 BETWEEN
MARK ARTHUR WILLIAMSON
Plaintiff
AND
THE STARJAM CHARITABLE TRUST
Defendant
Hearing: On the papers Appearances:
EB Moran and T Keenan for the Applicant
Judgment:
11 December 2024
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 11 December 2024 at 10 am pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
DLA Piper, Wellington
WILLIAMSON v THE STARJAM CHARITABLE TRUST [2024] NZHC 3759 [11 December 2024]
Introduction
[1] The plaintiff/applicant, Mark Williamson, applies without notice for an order appointing an interim liquidator to the defendant, The StarJam Charitable Trust.
[2] Mr Williamson is the Chair of the defendant trust board and has been authorised by it to bring this application by resolution dated 6 November 2024. The grounds on which the application is made are:
(a)a liquidation application has been filed in the court disclosing good grounds for putting the defendant trust into liquidation;
(b)it is likely that the application for putting the defendant trust into liquidation will succeed;
(c)there is the need for interim control of the defendant trust pending an order putting it into liquidation; and
(d)the circumstances justify the appointment of an interim liquidator because the interests of creditors must be safeguarded prior to the defendant trust being put into liquidation.
[3] Mr Williamson has filed a consent to act as liquidators by Andrew McKay and George Bannerman of BDO Auckland.
[4] I consider it is appropriate for interim liquidators to be appointed for the reasons set out below.
Legal provisions relevant to appointment of interim liquidators
[5]Section 246 of the Companies Act 1993 relevantly provides:
246 Interim liquidator
(1)If an application has been made to the court for an order that a company be put into liquidation, the court may, if it is satisfied that it is necessary or expedient for the purpose of maintaining the value of
assets owned or managed by the company, appoint a named person, or an Official Assignee for a named district, as interim liquidator.
[6]In addition, r 31.23 of the High Court Rules 2016 provides:
31.23 Power to appoint interim liquidator
(1)When a proceeding for putting a company into liquidation has been commenced under rule 31.3, the plaintiff and any person entitled to apply to the court for the appointment of a liquidator under section 241(2)(c) of the Companies Act 1993 may apply to the court for the appointment of an interim liquidator.
(2)If the court is satisfied, upon proof by affidavit, that there is sufficient ground for the appointment of an interim liquidator, it may make the appointment, and may limit the rights and powers of the interim liquidator in any manner it thinks just.
[7] In Truck & Trailer Holdings Limited v Skelly Holdings Limited Associate Judge Osborne (as his Honour then was) summarised the relevant principles as follows:1
[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:2
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.
[8]The Court has recognised as three important factors:
(a)Whether the company assets are in jeopardy.
1 Truck & Trailer Holdings Limited v Skelly Holdings Limited HC Christchurch CIV-2012-409 541, 11 May 2012 and Shen v An Ying International Finance Ltd HC Auckland CIV-2006-404-003088.
2 Carter Holt Harvey Ltd v Timbalok NZ Ltd (1997) 11 PRNZ 435 (HC) at 438; Robert Bryce & Co
Ltd v Chicken and Food Distributors Ltd (1995) 5 NZCLC 66,648 (CA).
(b)Whether the status quo should be maintained.
(c)Whether the interests of creditors are safeguarded.3
[9] These various formulations are ways of measuring whether necessity or expediency are established. They are a “litmus test”, not exhaustive.4
[8] Ordinarily, applications without notice for the appointment of an interim liquidator will not be successful unless special circumstances are demonstrated.5 I consider the circumstances here are special as Mr Williamson has brought the application as the chair of the defendant trust board in accordance with a resolution of the trust board to apply to liquidate the company and for interim liquidators to be appointed in the interim.
[9] Below I consider the three preconditions and further factors referred to by Osborne J in Truck & Trailer Holdings Ltd relevant to the appointment of interim liquidators. I add a further factor, whether the interim liquidator provisions in the Companies Act apply in respect of Charitable Trust Boards.
Precondition 1: Is there a valid winding up application?
[10] Mr Williamson has filed a liquidation proceeding in respect of the StarJam Charitable Trust contemporaneously with the application to appoint interim liquidators.
[11] Section 25 of the Charitable Trusts Act 1957 records that a charitable trust board, such as the defendant trust, may be put into liquidation by the court if the court is satisfied that it is just and equitable that the board should be put into liquidation.
[12] The parties who may apply to put a board into liquidation are set out in s 25(2) and include a member of the board. Mr Williamson confirms in his affidavit that he is the chair of the defendant trust’s board. He is therefore entitled to bring the application.
3 Robert Bryce & Co Ltd, above n 2.
4 Shen v An Ying International Finance Ltd HC Auckland CIV-2006-404-003088, 28 July 2006 at [15].
5 Keet v Hidden Valley Limited [2016] NZHC 2089 but see Worldclear Ltd v T1 Holdings Ltd [2018] NZHC 1234 at [36] and Capper v Riverside Pride Ltd [2022] NZHC 2316.
[13] Furthermore, Mr Williamson explains in his affidavit that this application has been brought in accordance with the resolution by the defendant board on 6 November 2024 as set out in paragraph 11.3 of the statement of claim that:
The defendant forthwith cease trading and apply to the Court for liquidation of the defendant;
Pending liquidation of the defendant, the trustees:
• Take steps to preserve the cash and other assets of the defendant for the benefit of creditors and other claimants according to their priorities;
• Not incur any further liabilities beyond ordinary course accrual of employee entitlements and any lease obligations;
• Pending liquidation of the defendant, administration of the assets and liabilities of the defendant be forthwith handed to George Bannerman and Andrew McKay, insolvency practitioners of BDO;
• Mark Williamson (as acting chair of the defendant or his delegate named in writing by him), be authorised to take all necessary further acts on behalf of the trustees to give effect to the above resolutions.
[14] This precondition, that a valid winding up application has been made, is therefore satisfied.
Precondition 2: Will the liquidation proceedings in all probability succeed?
[15] The liquidation proceeding is brought following the resolution set out above. As a result, the defendant board will not oppose the application.
[16] In his affidavit, Mr Williamson verifies the allegations in the statement of claim including the pleading at paragraph 10 in relation to the financial position of the defendant trust that despite efforts to increase revenue and decrease expenditure, the defendant trust is unable to meet its financial obligations. I am therefore satisfied that the liquidation proceedings will in all probability succeed.
Precondition 3: Are the circumstances urgent, and do they justify the appointment of an interim liquidator?
[17] Appointing interim liquidators has been described as a drastic remedy.6 Mr Williamson’s affidavit however makes it clear that the board has considered this and resolved that it is the board’s best option in the circumstances. Mr Williamson explains that the board needs to safeguard the assets that it does have for the purpose of paying its creditors. In addition, he deposes that the trustees of the defendant board are voluntary and require urgent support from interim liquidators to ensure an orderly distribution of its assets to creditors in circumstances where the trustees themselves are unable to provide those services.
[18] The trustees have taken professional advice from the intended liquidators and also from an insolvency partner at DLA Piper New Zealand and those advisors have concurred with the proposed approach. This third precondition is therefore met as well.
Are the board’s assets in jeopardy?
[19] Mr Williamson’s affidavit makes it clear that the trustees of the defendant trust do not consider they are in a position to adequately protect the company assets in the period leading up to the hearing of the liquidation application which has been allocated a first call on 14 February 2025. I am satisfied that the board’s assets are sufficiently in jeopardy to support the appointment of interim liquidators.
Should the status quo be maintained from the evidence filed?
[20] It appears necessary and expedient for the status quo to be maintained in the interim so that when permanent liquidators are appointed their job is not compromised by the failure to safeguard the assets in the meantime. This factor, therefore, also supports the appointment of interim liquidators.
6 Best Invest NZ Company Ltd (in interim liq) v Japan Business Consulting Ltd [2019] NZHC 1037 at [11].
Will the interests of creditors be safeguarded?
[21] Again, it is clear from the evidence filed that the interests of creditors would best be safeguarded by the appointment of interim liquidators.
Do the interim liquidator provisions of the Companies Act apply in respect of Charitable Trust Boards?
[22]Section 25(4) of the Charitable Trusts Act provides:
(4) Subject to this Act and to any regulations made under this Act, Parts 16 and 17 of the Companies Act 1993 shall apply, with such modifications as may be necessary,—
(a)to the application for the appointment of a liquidator as if the application was an application under section 241(2)(c) of that Act; and
(b)to the liquidation as if the liquidator had been appointed under section 241(2)(c) of that Act.
[23] The appointment of an interim liquidator does not strictly fall within either s (4)(a), the application to place the company into liquidation, or s (4)(b), the liquidation itself but taking a purposive approach I consider that the interim liquidator provisions in s 246 of the Companies Act ought to apply. There appears to be no reason for the power to apply for and appoint interim liquidators not to be available where the circumstances warrant it.
Consent to act
[24] Andrew McKay and George Bannerman have consented to act as joint and several liquidators of the defendant trust. They have not expressly recorded that they consent to act as interim liquidators but it is clear from Mr Williamson’s affidavit that this is intended.
[25] I include directions for the interim liquidators to prepare a report for the court prior to the first call of the liquidation proceedings on 14 February 2025. In addition, I make the usual orders for interim liquidators granting them the rights and powers of a liquidator to the extent necessary or desirable to maintain the value of assets owned or managed by the trust board. Leave is reserved to apply to vary these orders if necessary.
Orders
[26]I order:
(a)Andrew McKay and George Bannerman are appointed as interim liquidators of the StarJam Charitable Trust from 2 pm on 11 December 2024;
(b)the interim liquidators have the rights and powers of liquidators to the extent necessary or desirable to maintain the value of assets owned or managed by the defendant as provided for in s 246(2) of the Companies Act including:
(i)to the extent necessary:
1. to get in and preserve all the assets of the defendant trust and meet or continue all expenses necessary to preserve the value of the defendant trust’s assets; and
2. to obtain the books and records of the defendant trust from its officers and any other person.
(ii)the interim liquidators may examine on oath as provided for in ss 261, 265 and 266 of the Companies Act.
(c)the interim liquidators are to prepare a report for the Court by
10 February 2025 including the following information:
(i)a summary of the assets of the defendant trust;
(ii)a summary of the liabilities of the defendant trust, including estimates in respect of contingent liabilities; and
(iii)whether the interim liquidator considers an order for liquidation desirable, and if so, why.
(d)the interim liquidators are given leave to apply to the Court to vary these orders or for further directions on three working days’ notice; and
(e)the costs of the interim liquidators and the plaintiff/applicant are reserved for determination following the conclusion of this liquidation proceeding.
Associate Judge Sussock
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