WMAH Farm Management General Partner Limited (in receivership) v Waitonui Milltrust Agricultural Holdings Farm Management Limited Partnership (in receivership)
[2024] NZHC 2375
•28 August 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-1290
[2024] NZHC 2375
UNDER
AND
part 16 of the Companies Act 1993 and sections 89-92 of the Limited Partnerships Act 2008 IN THE MATTER
of an application for liquidation
BETWEEN
WMAH FARM MANAGEMENT GENERAL PARTNER LIMITED (in
receivership) First Plaintiff
WAITONUI MILLTRUST
AGRICULTURAL HOLDINGS GENERALPARTNER LIMITED (in receivership) Second Plaintiff
AND
WAITONUI MILLTRUST
AGRICULTURAL HOLDINGS FARM MANAGEMENT LIMITED
PARTNERSHIP (in receivership)
First Defendant(Continued Overleaf)
Hearing: 2 August 2024 Appearances:
CS Morrison for the Plaintiffs
Judgment:
28 August 2024
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 28 August 2024 at 3 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Buddle Findlay, Auckland
WMAH FARM MANAGEMENT GENERAL PARTNER LTD v WAITONUI MILLTRUST AGRICULTURAL HOLDINGS FARM MANAGEMENT LIMITED PARTNERSHIP [2024] NZHC 2375 [28 August 2024]
WMAH FARM MANAGEMENT GENERAL PARTNER LIMITED (in
receivership) Second Defendant
WAITONUI MILLTRUST AGRICULTURAL HOLDINGS LIMITED
PARTNERSHIP (in receivership) Third Defendant
WAITONUI MILLTRUST AGRICULTURAL HOLDINGS GENERAL
PARTNER LIMITED (in receivership) Fourth Defendant
Introduction
[1] This is an application to liquidate four related entities in a group referred to as the Waitonui Group. The application is brought in the names of two of the entities, following the appointment of receivers, Andrew Grenfell and Kare Johnstone, to all four entities by the Bank of New Zealand on 15 April 2024. Mr Grenfell has filed an affidavit in support of the application.
[2] Two of the entities manage and operate dairy farming operations in various locations in Taupō and Oamaru and two carry on business in connection with the holding of assets of the farming entities.
[3] Mr Grenfell’s evidence is that at the time of swearing the affidavit, among other things, the Waitonui Group was indebted to the Bank of New Zealand under Loan and Overdraft Facilities for approximately $36.5 million (Debt). The Bank entered into those facilities with one of the entities, but the statement of claim pleads that by reason of interlocking guarantees set out in sch A to the statement of claim (Guarantees), the debts are owed to the Bank by the Waitonui Group as a whole.
[4]The Debt represents the remaining amounts outstanding from a larger debt of
$63 million which fell due in May 2022. Following repayments of some of the indebtedness, and a farm debt mediation agreement in October 2022, the Waitonui Group failed to repay the remaining debts and meet all of its obligations to the Bank. The Bank demanded repayment of the amount outstanding on 15 April 2024, then
$33.4 million, which went unsatisfied. Receivers were appointed the same day.
[5] Prior to the hearing of the liquidation application, the plaintiffs’ solicitors filed a certificate of unpaid debt certifying that a sum of at least $12,268,881.57 remained unpaid, being a reduced sum following further recoveries in the receivership. The receivers, through the two companies which are general partners, now seek the appointment of liquidators to the Waitonui Group.
[6] Two of the entities are companies and two are limited partnerships. I confirm that I have jurisdiction as an Associate Judge to determine applications for liquidation
of limited partnerships under s 89 of the Limited Partnership Act 2008 pursuant to s 20(2)(j) of the Senior Courts Act 2016.1
[7] I set out the details of the liquidation application below before briefly summarising the provisions in the Companies Act 1993 and the Limited Partnerships Act relevant to these liquidation applications. I then consider whether the applications to liquidate four entities can be brought together in one application before considering whether it is appropriate to appoint liquidators in the circumstances.
Details of liquidation applications
[8]The entities bringing the liquidation applications are:
(a)WMAH Farm Management General Partner Ltd (in rec) (Management GP); and
(b)Waitonui Milltrust Agricultural Holdings General Partner Ltd (in rec) (Holdings GP).
[9]Management GP and Holdings GP seek orders liquidating:
(a)Management GP and Holdings GP under s 241(4)(a) and (d) of the Companies Act, on the grounds that they cannot pay their debts and that it is just and equitable for them to be put into liquidation; and
(b)Waitonui Milltrust Agricultural Holdings Farm Management Limited Partnership (in rec) (Management LP) and Waitonui Milltrust Agricultural Holdings Limited Partnership (in rec) (Holdings LP) under s 90(1)(h) and (i) of the Limited Partnerships Act, on the grounds that they cannot pay their debts and that it is just and equitable for them to be put into liquidation.
1 As added to Associate Judges’ jurisdiction by s 120 of the Statutes Amendment Act 2022 on 30 November 2022.
[10] An affidavit of service has been filed providing evidence that the proceedings have been served on the directors of Management GP and Holdings GP so that the directors could oppose or be heard on the proceedings. No statement of defence or notice of appearance has been filed and there was no appearance for the directors or any party other than the plaintiffs at the hearing.
Liquidation — relevant provisions
[11] As set out above, two of the defendant entities are companies and two are limited partnerships. I briefly summarise below the relevant provisions from the Companies Act and Limited Partnerships Act relating to liquidation.
Companies Act
[12] Section 241(1) of the Companies Act provides that a company may be put into liquidation by the appointment as liquidator of a named person or the appropriate Official Assignee.
[13] Section 241(2) includes in the methods available for the appointment of liquidators, appointment by the Court on the application of certain entities. The entities listed include the company itself.
[14] Section 241(4) sets out the circumstances in which the Court may appoint a liquidator. These include where the Court is satisfied the company is unable to pay its debts or it is just and equitable that the company be put into liquidation, the two grounds relied on here.2
[15] The appointment of receivers to a company gives rise to a presumption under s 287(c) of the Companies Act that a company is unable to pay its debts.
2 Companies Act 1993, s 241(4)(a) and (d).
Limited partnerships
[16] Section 89 of the Limited Partnerships Act provides that a Court may appoint a liquidator to a limited partnership and that a general partner may make the application, as the general partners have done here.3
[17] Section 90 sets out the circumstances in which the Court may appoint a liquidator, again including the two grounds relied on in this case, that the limited partnership is unable to pay its debts,4 or that the Court considers it just and equitable that the limited partnership terminate.5
[18] Section 91 defines “inability to pay debts” as including where a creditor owed an amount exceeding $100 by the limited partnership has served on the limited partnership a demand for payment of that amount and the limited partnership has failed to pay, secure or compound the amount demanded to the satisfaction of the creditor for three weeks after the demand was served.6
[19] In addition, s 91 defines “inability to pay debts” to include where it is proved to the satisfaction of the Court that the limited partnership is unable to pay its debts, when the Court must take into account the contingent and prospective liabilities of the limited partnership.7
[20] A further ground for liquidation in s 90 is where the sole general partner is placed into liquidation.8 In this case the general partners of the two limited partnerships are the sole general partners and liquidation applications are also made in respect of those general partners. In my view this is also a relevant ground, although technically the general partners may not be liquidated prior to the limited partners because the applications have been brought together in one application.
3 Limited Partnerships Act 2008, s 89(1) and (2).
4 Section 90(1)(h).
5 Section 90(1)(i).
6 Section 91(a).
7 Section 91(d).
8 Section 90(b).
Can applications in respect of four defendant entities be filed together in one proceeding?
[21] Management GP and Holdings GP have filed these liquidation applications in a single proceeding. Counsel for the plaintiffs accept they have not identified any reasoned judgment supporting this approach. However, counsel submits that:
(a)Under r 31.1 of the High Court Rules 2016, the “rules and general practice of the High Court” apply to applications to put a company into liquidation, unless they are modified by or inconsistent with pt 31 of the High Court Rules or the Companies Act 1993.
(b)There is no apparent exclusion under pt 31 of r 4.3 which permits joinder of any persons against whom it is alleged there is a right to relief.
(c)Under r 31.25, the rules in pt 31 expressly do not limit the application of rr 10.12 and 10.13, relating to consolidation, which would permit consolidation of separate claims against the Waitonui Group if separate claims were filed given the “common question of law or fact.” This justifies including all of the relevant defendants in a single proceeding at the outset.
(d)Naming the entire Waitonui Group as defendants is consistent with the approach adopted in Financial Markets Authority v Forestlands (No. 2) Limited to Forestlands (No. 20) Limited (CIV-2018-442-16).
[22] Counsel submits that the rules in pt 31 of the High Court Rules ought to apply to applications to liquidate limited partnerships. I agree as although pt 31 only refers to “companies”, s 240(1A) of the Companies Act provides that in pt 16 of that Act (concerning liquidations) “company” includes “any other body corporate to which this Part applies under any other enactment”.
[23] Section 92 of the Limited Partnerships Act provides that pt 16 applies to the liquidation of limited partnerships with such modifications as may be necessary and
with certain exceptions relating to the procedure for commencement,9 the meaning of liability to pay debts,10 the power of a liquidator to ensure liability of shareholders,11 and the distribution of surplus assets.12 Alternative provisions in the Limited Partnerships Act cover the exceptions.
[24] Therefore, although pt 31 does not provide that “company” is as defined in pt 16 of the Companies Act, pt 31 should apply to limited partnerships by analogy, as r 1.6 of the High Court Rules allows for cases not provided for.
[25] Part 31 of the High Court Rules requires the statement of claim for a liquidation application to be in Form C1 and the notice of proceeding in Form C3.13 Both forms refer to “the defendant company” in the singular. This contrasts with the form for a notice of proceeding in a general proceeding, Form G2, which is required to be addressed to “the defendant/defendants* and any other person directed to be served”. At the end of Form G2, it directs besides the asterisk “[s]elect one.”
[26] I do not, therefore, consider that r 4.3 of the High Court Rules, which allows claims to be brought against multiple defendants, assists here as there is a specific form for a statement of claim in liquidations that refers to a single defendant company. Furthermore the required form for the notice of proceeding for liquidations does not provide the option of multiple defendant companies unlike the parallel form for general proceedings.
[27] I accept that in the Forestlands matter it appears one proceeding was filed but the orders appear to have been made orally and there is no readily available record of whether this issue was considered.
[28] Rule 31.25 of the High Court Rules provides that if two or more proceedings have been commenced in respect of the same defendant the Court may order those proceedings to be consolidated, with r 31.25(2) expressly providing that nothing in
9 Companies Act 1993, s 241(1)–(4).
10 Section 287.
11 Section 268.
12 Section 313.
13 High Court Rules 2016, rr 31.3(1) and 31.5(1)–(2).
this rule limits the provisions of the consolidation rules, rr 10.12 and 10.13 of the High Court Rules. However, this does not allow one application to be filed against multiple defendants, instead permitting that once separate applications have been filed an application can be made to consolidate.
[29] Rule 31.22 of the High Court Rules expressly limits bringing interlocutory applications in liquidation proceedings prior to the hearing date specified in the notice of proceeding, except for certain applications. An application for consolidation is not one of the permitted applications.
[30] From a practical perspective, I do not consider that it would be workable if a single application could ordinarily be made in respect of multiple defendant companies or limited partnerships as has been done here.
[31] However, I am prepared to treat the application as if an oral application for consolidation had been made at the hearing because the application has been served on the directors and the proceeding advertised and there has been no opposition filed or appearance entered. It would not be in accordance with the objective of the rules to secure the just, speedy and inexpensive determination of a proceeding to require the application to be refiled as separate applications. I therefore rely on the powers in r 1.5 of the High Court Rules to make a retrospective order consolidating the applications under r 10.12.
Should orders be made appointing liquidators to the two companies that are general partners?
[32]As set out above, a company can apply to put itself into liquidation.14
[33] Furthermore, I am satisfied it is appropriate for the receivers to bring the applications in the name of the companies because, as recorded in Private Receivers in New Zealand:15
A receiver has power under the general law to bring an application for liquidation in the name of the company in circumstances where the making of
14 Companies Act 1993, s 241(2)(c)(i).
15 P Blanchard and M Gedye Private Receivers of Companies in New Zealand (3rd ed, LexisNexis, Wellington, 2008) at [10.29].
a liquidation order would protect or preserve the assets of the company. The power is incidental or conducive to the power to take possession of the assets.
(footnotes excluded)
[34] Mr Grenfell confirms on behalf of the receivers that they consider it necessary and appropriate to appoint liquidators over each of the Waitonui Group entities in order to protect and preserve the assets of the defendant companies and the positions of the defendants’ creditors. The two companies which are the general partners, Management GP and Holdings GP, are therefore properly the plaintiffs in these proceedings.
[35] The receivers have confirmed by affidavit that the proceedings were served on the two directors of the general partners on 18 June 2024 together with a copy of the memorandum of counsel filed and the consent to act as liquidators. Neither director has taken any steps in the proceeding and neither appeared at the hearing.
[36] I am satisfied on the evidence filed that Management GP and Holdings GP are liable for the remaining debt under the Guarantees. Mr Grenfell’s evidence is that at the date of his affidavit there were “material deficiencies of each defendant’s assets when viewed against the known liabilities of each of the Waitonui Group’s entities”. Mr Grenfell considered there would be a shortfall to both secured and unsecured creditors given (among other things) the level of the Waitonui Group’s indebtedness to the Bank.
[37] The plaintiffs’ solicitors have confirmed by certificate filed on the day prior to the hearing, 31 July 2024, that $12,268,881.57 of the Debt remained outstanding.
[38] Furthermore, the appointment of the receivers in April 2024 gives rise to a presumption that the companies are unable to pay their debts. That presumption has not been rebutted by the filing of any evidence in this proceeding, in opposition or otherwise.
[39] I am therefore satisfied that liquidators ought to be appointed to Management GP and Holdings GP on the basis that they are both unable to pay their debts and it is just and equitable that they be placed into liquidation.
Should liquidators be appointed to the two limited partnerships?
[40] The applications to appoint liquidators to the two limited partnerships, Management LP and Holdings LP, are made by the two general partners, Management GP and Holdings GP. This is expressly allowed by s 89(2) of the Limited Partnerships Act.
[41] I am satisfied that Management LP and Holdings LP are both liable for the remaining debt under the Guarantees and that Holdings LP is liable under the Customised Average Rate Loan Facility Agreement.
[42] Mr Grenfell has given evidence that the Bank has made demand for the outstanding debt from Management LP and Holdings LP and it has not been paid, secured or compounded to the satisfaction of the Bank within three weeks. In terms of s 91(a) of the Limited Partnership Act, I am therefore satisfied that Management LP and Holdings LP are unable to pay their debts. Furthermore, the solicitors for the plaintiffs have certified that approximately $12 million remains unpaid.
[43] It is appropriate therefore for liquidators to be appointed to the limited partnerships as well.
[44] This is reinforced by s 90(1)(b) of the Limited Partnerships Act as it provides that the Court can appoint liquidators where the general partner has been put into liquidation — as I have determined is appropriate above.
Liquidators’ consent to act
[45] A consent to act has been filed on behalf of the proposed liquidators dated 31 May 2024. The consent sets out the rates of remuneration of the liquidators and staff working under their supervision and control ranging from $165 for support staff through to $550 to $625 per hour for liquidators/directors. I am satisfied those hourly rates are appropriate but make the usual order below that the liquidators are to apply at the conclusion of the liquidations for approval of their overall remuneration.
Costs
[46]The plaintiffs seek costs of $2,868 on a 2B basis and disbursements of
$1,950.84 for filing, service, advertising and sealing fees (the latter in anticipation). I consider the costs are appropriately sought and include these in the orders below. The disbursements sought are inclusive rather than exclusive of GST16. There is no basis set out in the memorandum for why the plaintiffs will not be able to recover GST and so an adjustment needs to be made reducing the disbursements awarded from the GST inclusive amount claimed of $1950.84 to $1,696.43.17
Orders
[47]I order:
(a)A retrospective order is made consolidating these four liquidation applications.
(b)The following companies and limited partnerships are put into liquidation:
(i)Waitonui Milltrust Agricultural Holdings Farm Management Limited Partnership (in rec);
(ii)WMAH Farm Management General Partner Ltd (in rec);
(iii)Waitonui Milltrust Agricultural Holdings Limited Partnership (in rec); and
(iv)Waitonui Milltrust Agricultural Holdings General Partner Ltd (in rec).
16 Although the memorandum records the disbursements are exclusive of GST they do not appear to be, see High Court Fees Regulations 2013, reg 24 and invoices attached.
17 New Zealand Venue and Event Management Ltd v Worldwide NZ LLC [2016] NZCA 282, (2016) 23 PRNZ 260 at [17].
(c)Tony Leonard Maginness and Jared Waiata Booth are appointed jointly and severally as liquidators.
(d)The rates of remuneration of the liquidators and staff working under their supervision and control are fixed at the rates set out in the liquidators’ consent dated 31 May 2024.
(e)The liquidators are to apply at the conclusion of the liquidation for approval of their overall remuneration.
(f)Costs and disbursements on a 2B basis are to be paid to the plaintiffs in the amount of $2,868 in costs plus disbursements of $1,696.43 as sought by memorandum dated 31 July 2024 adjusted to exclude GST from disbursements.
(g)The orders are timed at 4pm on 28 August 2024.
Associate Judge Sussock
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