Vision Interiors Limited v Registrar of Companies [2014] NZHC 1891 (12 August 2014)

Last Updated: 20 August 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-000510 [2014] NZHC 1891

IN THE MATTER OF	Part 18 of the High Court Rules
AND
IN THE MATTER OF	Parts 16 and 17 of the Companies Act 1993
BETWEEN	VISION INTERIORS LIMITED Plaintiff
AND	THE REGISTRAR OF COMPANIES First Defendant SIMON DALTON and PAUL GRAHAM SARGISON as joint liquidators of PHVS PROJECT LIMITED (in liquidation) Second Defendants

Hearing:	31 July 2014
Appearances:	AE Hansen for Plaintiff No appearance by or on behalf of First Defendant SO McAnally and B Hojabri for the Second Defendants
Judgment:	12 August 2014

JUDGMENT OF WOOLFORD J [As to leave to commence proceedings]

This judgment was delivered by me on Tuesday, 12 August 2014 at 12.00 pm pursuant to r 11.5 of the High Court Rules.

_{Registrar/Deputy Registrar}

VISION INTERIORS LIMITED v THE REGISTRAR OF COMPANIES & Ors [2014] NZHC 1891 [12 August

2014]

Introduction

[1] Vision Interiors Limited (Vision) is a creditor of PHVS Limited (in liquidation) (PHVS). It seeks leave to apply for orders preventing the removal of PHVS from the Register of Companies, reversing the liquidator’s final report and replacing the liquidators. Vision seeks these orders because it believes that there are or may be avenues of recovery to be explored for the benefit of creditors, the costs of which could be met by it and/or newly appointed liquidators who have given their consent to act.

[2] The Registrar of Companies abides the decision of the Court. The liquidators oppose leave being granted.

Leave application

[3] Section 284 of the Companies Act 1993 provides for Court supervision of the liquidation process. Applications may be made as of right to the Court by a liquidator for directions in relation to any matter arising in connection with the liquidation. However, creditors need leave of the Court to challenge an act or decision of liquidators. The parties accept that under s 284 the Court may reverse a liquidator’s final report, but disagree as to whether there is power under that section to replace the liquidators.

[4] I accept that leave should only be granted to Vision to apply for the orders sought if it can show that it has an arguable case with a credible factual basis and that there is a reasonable likelihood that if a claim is established, the Court will disturb the act or decision in question. The Court is likely to take this step only if the act or decision is unreasonable or if it is necessary to realise a just outcome.

[5] The case was extensively argued because Vision sought not only leave, but the orders themselves when the proceedings were called in the duty Judge list on 31

July 2014. Counsel for the liquidators advised the Court, however, that they had come to Court only prepared to argue the leave application because, if leave was granted, they wanted to file further affidavit evidence annexing detailed financial and other material which supported their decision to file a final report with the Registrar

of Companies. Given the stance adopted by the liquidators, the Court is only able to consider the leave application.

Discussion

[6] After considering carefully the submissions of both Vision and the liquidators, I have reached the view that leave should be granted to Vision to make applications under s 284 Companies Act preventing the removal of PHVS from the Register of Companies, reversing the final liquidator’s report and replacing the liquidator. In granting leave, I do not purport to make any determination whether or not an order replacing the liquidators is within the Court’s power under s 284. That is a matter for the substantive hearing.

[7] I grant leave on the basis that there is an arguable case that the liquidators have acted unreasonably in filing their final report and effectively ending the liquidation. I agree with the comments of Fisher J in Re Ocean Shipping:¹

It does seem to me, however, that there is a very strong presumption that the creditors of a failed company are entitled to a full and thorough investigation of the financial history and status of the company. This is especially the case where they are prepared to fund the exercise. Orient Shipping have been denied that opportunity in the present case. It may be that at the end of the day, as Mr Bourgogne alleges, the further investigation will prove to be fruitless but for my part I would be very slow to see a creditor denied at least the opportunity.

[8] It is undisputed that at the creditor’s meeting on 6 November 2013, Vision advised the liquidators that there were multiple issues to be explored in the liquidation, which it identified for the liquidators, that it would provide further information and assist the liquidators with any further information requests and, most importantly, that it was willing and able to fund avenues for recovery.

[9] On 29 January 2014, the liquidators advised Vision that they were in a position to finalise the liquidation and were “happy to discuss”. On 4 February

2014, Vision advised the liquidators that they had queries and comments which

_{would be provided “next week”. On 7 February 2013, and without responding to the}

¹ Re Ocean Shipping Limited (in liquidation) HC Auckland M 348/96, 16 July 1996.

Vision’s e-mail dated 4 February 2014, the liquidators issued their final report and notice of removal from the Register of Companies.

[10] In affidavit evidence filed opposing the leave application, the liquidators say that intergroup company transactions were considered as part of their voidable preference analysis and the decision made not to pursue them because it would likely prove uneconomical, the putative defendants were likely to have decent defences and overall such action would not be in the interests of creditors. Similarly, action against other companies within the same group was considered and legal advice obtained and, again, a decision made that pursuing litigation would be uneconomic. Finally, the potential personal liability of PHVS directors was considered and ruled out.

[11] I accept that at a substantive hearing it is not enough to show a different liquidator or the Court might have made different decisions. However, I am dealing just with a leave application. An arguable case only of an unreasonableness needs to established. The short point is that the liquidators made a decision to finalise the liquidation within three months of the creditors’ meeting on the basis that they had considered all avenues for recovery, but determined that each was uneconomic. In making that decision however, the liquidators do not appear to have consulted in any substantial way with Vision. They do not appear to have advised Vision of the various avenues for recovery and their conclusions on each of them nor do they appear to have discussed with Vision it’s offer made at the creditors meeting on 6

November 2013 that it was willing and able to fund avenues for recovery.

[12] In summary, I am of the view that Vision has established an arguable case that the liquidator’s final report was filed prematurely and thereby unreasonably. Leave is accordingly granted for Vision to make the application for orders sought in the draft statement of claim, dated 4 March 2014.

.....................................

Woolford J