BANK OF NEW ZEALAND v GOBA HOLDINGS LIMITED (in voluntary administration) [2013] NZHC 2567

BANK OF NEW ZEALAND v GOBA HOLDINGS LIMITED (in voluntary administration) [2013] NZHC 2567 [2 October 2013]IN THE HIGH COURT OF NEW ZEALANDPALMERSTON NORTH REGISTRYCIV-2013-454-000406[2013] NZHC 2567BETWEEN BANK OF NEW ZEALANDPlaintiffAND GOBA HOLDINGS LIMITED (involuntary administration)DefendantHearing: 2 October 2013Appearances: P Drummond for PlaintiffNo appearance for DefendantJudgment: 2 October 2013JUDGMENT OF ASSOCIATE JUDGE OSBORNEputting company into liquidationBackground[1] On 15 October 2012 the defendant company (Goba) was put into voluntary administration. By resolution of its Board of Directors, Graeme Leslie Hercock was appointed voluntary administrator pursuant to s 239(1) Companies Act 1993. Mr Hercock remains in office as voluntary administrator.[2] Goba had previously executed a contract to guarantee in favour of the plaintiff (the Bank). The affidavit of Trevor Stratford, a manager of the Bank, verifies that the guaranteed indebtedness in August 2013 was $355,208.55.[3] It appears from correspondence written by Mr Hercock that the crystallisation of the debt owed to the Bank threw into question Goba's ability to trade. Mr Hercock advised the Bank in April 2013 that the only practical outcome, if Goba was to continue trading, was for the Bank to forego exercising the guarantee againstGoba. Mr Hercock suggested:The Bank should resolve to take a loss.[4] In the event, the voluntary administrator did not recognise the Bank as a creditor to whom payments should be made in the administration. Payments had been made to other creditors. From records obtained by Mr Stratford, it appears that between October 2012 and April 2013 the administrator paid the following:1. Priority creditors a total sum of $8,100;2. Secured creditors a total of $113,632;3. Unsecured creditors a total of $51,346, noted as being "20 cents in the dollar".[5] While the Bank's solicitors have pointed out to the administrator that, even without crystallisation of its debt, the recipient of a guarantee is a creditor of the guarantor within the definitions in the Companies Act, that has not led to any payment to the Bank.Winding up – the jurisdiction[6] Section 239ABU of the Act is a special provision providing for the appointment of a liquidator to a company in administration. It provides:239ABU When liquidator may be appointed to company in administrationA liquidator may be appointed to a company in administration—(a) by the Court, on an application for the appointment of a liquidator under section 241(2)(c); or(b) by resolution of the creditors at the watershed meeting or at a meeting convened under section 239ADF to consider the termination of the deed of company arrangement.[7] The power to appoint a liquidator under the section referred to in s 239 ABU, namely s 241(2)(c) includes where an application is made by a creditor (including any contingent or prospective creditor): s 241(2)(c)(iv).[8] The Court's jurisdiction to appoint a liquidator, on such an application, arisesif the Court is satisfied of any of the four limbs of s 241(4). Those limbs include where the company is unable to pay its debts (s 241(4)(a)) and if it is just and equitable that the company be put into liquidation (s 241(4)(d)).This application[9] The Bank in its statement of claim relied on the jurisdiction under both s 241(4)(a) and s 241(4)(d).[10] A manager of the Bank provided the required verifying evidence, parts of which I have summarised.Discussion[11] The plaintiff was entitled to apply as a creditor.[12] Counsel has certified that the debt remains owing.[13] I am satisfied on the evidence of Mr Stratford both that the defendant company is unable to pay its debts and that it is just and equitable that the company be put into liquidation. The desire of the plaintiff, as deposed by Mr Stratford, to ensure that all unsecured creditors are treated equally is a proper objective – if it cannot be obtained other than through the liquidation of the company, then the "just and equitable" winding up jurisdiction is appropriate.Orders[14] I order:(a) There is an order putting the defendant into liquidation;(b) The liquidator appointed is the Official Assignee;(c) The defendant is to pay the plaintiff's reasonable costs anddisbursements of and incidental to this proceeding on a solicitor/clientbasis, with leave reserved to the plaintiff and the liquidator to file memoranda if any issue arises as to the amount of the costs;(d) This order is made at 10.19 am.Associate Judge OsborneSolicitors:J Toebes, Wellington