Re an application re Fiber Fresh Feeds Limited (In Receivership) [2019] NZHC 1237

Re an application re Fiber Fresh Feeds Limited (In Receivership) [2019] NZHC 1237 [29 May 2019]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-993[2019] NZHC 1237IN THE MATTER of an application under Part 19 of the HighCourt Rules 2016 and sections 239F,239ACD, and 280 of the Companies Act1993IN THE MATTER of FIBER FRESH FEEDS LIMITED (INRECEIVERSHIP)AND of an application by TONY LEONARDMAGINNESS AND JARED WAIATABOOTHApplicantsHearing: On the papersCounsel: M Kersey and L N Wilson for the ApplicantsJudgment: 29 May 2019Reasons: 31 May 2019REASONS JUDGMENT OF MUIR JSolicitors:Russell McVeagh, Auckland.Reasons judgment[1] On 29 May 2019 I granted an urgent application by the applicants on the termsof a draft order provided. I indicated my reasons would follow. They do so now.Introduction[2] The applicants, Tony Maginness and Jared Booth, are both accountants andrespectively, a director and associate director of the firm Baker Tilly Staples Rodway.They apply for orders that they may be appointed as administrators or liquidators ordeed administrators of Fiber Fresh Feeds Limited (In Receivership) (the Company),notwithstanding the provisions of ss 239F(2), 239ACD(2) and 280(1)(cb) of theCompanies Act 1993 (the Act).[3] The Company is a producer of high quality animal feeds and in particular feedsfor horses and calves. It is based in Reporoa and has approximately 45 employees.As at the date of the application it has 114 creditors.[4] On 17 May 2019 Brendon Gibson and Natalie Burrett of KordaMentha wereappointed by Cooperatieve Rabobank U.A. (Rabobank) as joint and several receiversand managers of the Company pursuant to a general security agreement dated21 October 2016.[5] The receivers have advised the applicants that either the Company orRabobank intend to now appoint administrators. Pursuant to s 239AB of the Act, theappointment of an administrator to a company in receivership does not remove thereceiver from office.[6] It is in those circumstances that Messrs Maginness and Booth now seek to actas administrators. The application is necessary, because in the two years immediatelybefore the commencement of the anticipated administration the applicants and theirfirm have had a "continuing business relationship" with the Company's securedcreditor, Rabobank.[7] In particular, Rabobank has, within that period, appointed Mr Maginness asreceiver of Pimlico Land Company Limited and Pimlico Vineyards Limited, andMr Maginness and Mr Booth as receivers in relation to one B K Pinny. Both suchreceiverships have now concluded.The law[8] The primary legislative provision that is engaged in respect of the applicationis s 280 of the Act, the purpose of which is to ensure that persons who are appointedas administrators or liquidators have sufficient independence, competency andintegrity to carry out those roles without causing risk to creditors and/or third parties.[9] This Court has consistently recognised the following principles as applying:1(a) it is appropriate to make an application under s 280 of the Act as anoriginating application under Part 19 of the High Court Rules;(b) without notice applications will be permitted where the interests ofjustice require urgency and creditors interests can fairly be protected inother ways, and also on the basis of undue delay or prejudice to theapplicants as potential administrators or liquidators;(c) where the order is made on a without notice basis, the Court usuallydirects the order and application to be served on any creditors at thesame time and in the same manner as the administrators' or liquidators'(as applicable) first report, and reserves leave to creditors to apply tovary or set aside the Court's orders within a certain period of time afterservice of those orders; and(d) the Court must have regard to the attitude of the creditors and "standback" and take into account advantages to the company, itsshareholders, creditors and other interested parties when considering1 See for example Re Joeleen Enterprises Ltd HC New Plymouth CIV-2008-443-0485, 3 October2008; Re Southbury Insurance Ltd (In Receivership) [2012] NZHC 1316; and Re Madagascar(No.1) 2013 Ltd [2014] NZHC 385.the approval of the appointment of an administrator or liquidator in theexercise of the Court's discretion under s 280.[10] In Re Joeleen Enterprises Ltd, Associate Judge Abbott stated at [18] that:The critical issue in considering whether the danger of conflict of interestsexists due to a continuing business relationship (however that might bedefined) is whether there is a risk that the applicant's independence and abilityto carry out her or his task professionally and effectively would becompromised in the particular circumstances of the case.Without notice originating application[11] By reference to paragraph [9(a)] above, I am satisfied that the proceeding isappropriately commenced by way of originating application under Part 19 of the HighCourt Rules. I am also satisfied, on the basis of Mr Maginness' supporting affidavit,that it is appropriate for the application to proceed on a without notice basis. TheCompany currently has 114 creditors, service on which would, I accept, be timeconsuming and onerous given the urgency of the application. Because it is myintention to reserve leave to any creditor to apply to vary or set aside my orders (inaddition to the rights that creditors will have at the watershed meeting), I am alsosatisfied that their interests can be fairly protected despite the absence of notice.Are the substantive orders appropriate?[12] The application is necessary because of the continuing business relationshippreviously identified. However, the applicants:(a) have not provided professional services to the Company, its directors,shareholders or any related entity; and(b) have not advised Rabobank in respect of the Company or its securityover the company.[13] The applicants are known to the Court as competent and reputable practitionersfor insolvency and restructuring work. They also have extensive experience in thehorticultural and agricultural business sector which will, in my view, enable them toadminister the proposed appointment efficiently and in the best interests of allcreditors of the Company. Both are CA ANZ accredited insolvency practitionerscognisant of the integrity, objectivity, independence, and due care and skill whichdischarge of their obligations requires.2[14] They do not consider the fact of their previous engagement by Rabobank to inany way impair the probity of the appointment, which is an assurance I am preparedto accept, subject to any further information which may become available in thecontext of any subsequent challenge. I also accept as a relevant consideration thatRabobank is an organisation with such a significant commercial presence in NewZealand that many other accountancy firms with the expertise to conduct theadministration of the Company will similarly have continuing business relationshipswith the Bank which require an application under s 280 of the Act.[15] I also note:(a) That within the "convening period" defined in s 239AT(2) of the Act,3administrators are required to hold a watershed meeting of creditors atwhich an alternative administrator, deed administrator or liquidatorcould be appointed; and(b) my intended reservation of the right to apply to vary or set aside myorders.[16] I accordingly consider the substantive orders sought by the applicants areappropriate.Subsidiary orders[17] The applicants propose that advice of the application and a copy of the Court'sorders be served on all creditors of the company by:2 CA ANZ accredited insolvency practitioners are subject to the same standards as a CA ANZmember including the NZICA Code of Ethics and the Rules for New Zealand InsolvencyPractitioners.3 This is stipulated as 20 working days after the date on which the administrator is appointed.Paragraph [24] of Mr Maginness' affidavit incorrectly refers to 25 working days.(a) writing to creditors as soon as practicable after the appointment ofadministrators takes place, at the same time as statutory notices underss 239AO or 243(2) of the Act are issued summoning a creditorsmeeting, or under s 245 of the Act dispensing with a meeting ofcreditors; and(b) posting a copy of the application and orders on the Baker Tilly StaplesRodway website.These proposals are orthodox and accepted.[18] They also seek orders that any notices required to be sent (pursuant to s 15A ofthe Act), be permitted to be sent by email where an email address has been providedor, if a creditor has not provided such an email address, by post. Again, the proposalis unobjectionable.Further appointment as liquidators or deed administrators[19] At the watershed meeting to which I have referred, the applicants maypotentially be appointed as liquidators or deed administrators. In that event they wouldrequire the leave of the Court before assuming such a role. I consider it appropriatethat the order granting leave under s 280 of the Act for appointment as administratorsalso cover potential appointments as liquidators or deed administrators at such ameeting.[20] I note the commitment of the applicants to advise the Court if any furtherconflict arises in terms of s 280 of the Act between the date of their appointment andthe watershed meeting.__________________________Muir J