WESTPAC NZ LTD V LIBERTY INVESTMENTS HOLDINGS (NZ) LTD HC AK CIV 2007-404-00618

WESTPAC NZ LTD V LIBERTY INVESTMENTS HOLDINGS (NZ) LTD HC AK CIV 2007-404-00618 3 July 2007IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2007-404-00618UNDER THE COMPANIES ACT 1993 BETWEEN WESTPAC NEW ZEALAND LIMITED Plaintiff AND LIBERTY INVESTMENTS HOLDINGS (NZ) LIMITED Defendant Hearing: 21 June 2007 Appearances: M A Chisholm for defendant/applicant Judgment: 3 July 2007 at 4pmJUDGMENT OF ASSOCIATE JUDGE D H ABBOTTThis judgment was delivered by me on 3 July 2007 at 4 p.m. pursuant to Rule 540(4) of the High Court Rules. Registrar/ Deputy RegistrarSolicitors:Simpson Grierson, Auckland (M Van Ryn) Walters Law, Auckland Price Waterhouse Coopers, Auckland Commissioner of Inland Revenue, Manukau City[1] The defendant Liberty Investments Holdings (NZ) Limited was placed in liquidation by order of this Court made on 24 May 2007, on the application of the plaintiff, Westpac New Zealand Limited. Colin Thomas McCloy and Vivian Judith Fatupaito were appointed liquidators. [2] By application dated 18 June 2007 the directors of the defendant company have applied for an order pursuant to Section 250 of the Companies Act 1993 terminating the liquidation. That application was heard before me on 21 June 2007. Counsel appeared for the directors. There were no other appearances. Counsel informed me that the application was not opposed by the liquidators, but an affidavit confirming that had been delayed. I adjourned the application to 19 July 2007, but with a direction that the file be referred back to me on earlier filing of an affidavit by the liquidators confirming that they did not oppose the application and that all creditors had either been paid or arrangements were in place for that to occur. I informed counsel that if that affidavit was filed ahead of the adjourned hearing I would determine the application on the papers. [3] Vivian Fatupaito, one of the liquidators, has filed an affidavit setting out the steps taken in the liquidation and advising that she has no objection to the termination as all external liabilities are discharged or a compromise of them has been agreed. [4] I am satisfied by the matters set out in Ms Fatupaito's affidavit, confirming the affidavits originally filed in support of the application, that this is an appropriate case for the order sought.Grounds of application[5] The application is brought under Section 250 of the Companies Act 1993. Under that section the Court has a discretion to make an order terminating the liquidation of a company if it is satisfied that it is just and equitable to do so. An application may be brought by a number of persons, including a director.[6] In the ordinary course, the Court will have to be satisfied on the following matters before exercising its discretion to terminate: a) All creditors have been paid in full, or satisfactory provision had been made for them to be paid, or they have consented; b) The liquidators' costs have been paid or secured, and c) The shareholders have given their consent or would be in a no worse position than if the liquidation had proceeded to its conclusion: d) Re Bell Block Lumber Limited [in liquidation] (1992) 5 PRNZ 642. [7] A further consideration may be whether termination is in the public interest:Canterbury Squid Company Ltd v Southwest Fishery Ltd High Court Wanganui M 31/93, 24 August 1993, Gallen J (an application for permanent stay). The timing of the application may also be a factor: Canterbury Squid Company Ltd v Southwest Fishery Ltd.Discussion of grounds[8] The present application has been brought by the two directors. It is clear from the affidavit evidence filed that the liquidation order was a consequence of inexperience, or even naievity, on the part of the director with day to day responsibilility for the runnning of the company. As soon as he learnt of the liquidation, the more experienced director approached both the liquidators and the creditors of the company with a view to settling all its external obligations from independent funding. In light of the director's intention to seek a termination of the liquidation, the liquidators have continued to trade the company, at a modest profit. [9] In her affidavit, Ms Fatupaito confirms:a) The debt to the plaintiff creditor has been settled in full, including costs awarded on the liquidation, and the liquidators have no opposition; b) Security holders have confirmed that there are no outstanding amounts due as at the date of liquidation, and they do not intend to realise their securities; c) All unsecured creditors have confirmed they have either been paid in full or have agreed to a compromise; d) All trade creditors (with whom the liquidators have continued to deal) have confirmed that all pre liquidation debts have been paid; e) Continuing employees of the business have agreed to defer the claims for holiday pay until such time as they take holidays, and the director responsible for running the business has given a personal undertaking to pay holiday pay entitlements of nine other employees (who have since left employment or are away on holiday and could not be reached to secure their agreement); f) In excess of two-thirds of the liquidators' fees have been paid, and the senior director has given a personal undertaking to meet most of the balance within ten days of an order terminating the liquidation (with the balance to come from trading surplus currently held by the liquidators). [10] I am satisfied that the pre-requisites to an order have been met. All creditors have either been paid their full debt, or a reasonable compromise reached, and none is still pursuing any claim. The liquidators' costs have either been paid or will be paid under an arrangement acceptable to the liquidators. The senior director, who is also the majority shareholder, supports the application. I infer that the minority shareholder also supports it, but in any event, that party cannot be any worse off than if the liquidation proceeded to its conclusion.[11] In light of the fact that the liquidators do not object (after they have been running the business for a month), and the evidence given by the directors as to arrangements made for the future financial management of the company, I am satisfied that there is no public interest factor militating against the order.Decision[12] I make an order terminating the liquidation of the defendant pursuant to Section 250 of the Companies Act 1993. ________________________Associate Judge D H Abbott