Jackson v Wynyard Group Limited (in liquidation) [2018] NZHC 1283 (31 May 2018)

Last Updated: 25 June 2018

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-113 [2018] NZHC 1283

BETWEEN	NEALE JACKSON and GRANT ROBERT GRAHAM Applicants
AND	WYNYARD GROUP LIMITED (IN LIQUIDATION) Respondent

Hearing:	31 May 2018
Appearances:	S D A Gollin and Y J Lee for the Applicants J C Caird and J S Learner for the Respondent
Judgment:	31 May 2018

ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL

Solicitors:

MinterEllisonRuddWatts (S Gollin), Auckland, for the Applicants

Simpson Grierson (J C Caird/Julia S Learner), Auckland, for the Respondent

JACKSON and GRAHAM v WYNYARD GROUP LIMITED (IN LIQUIDATION) [2018] NZHC 1283 [31 May 2018]

[1] The liquidators of Wynyard (NZ) Ltd apply under s 284 of the Companies Act 1993 for directions whether the claim made by its holding company, Wynyard Group Ltd (also in liquidation), should be admitted. The claim is for $171,010,268.43. The liquidators say that, after paying preferential creditors and secured creditors, they hold
$851,564.00.¹ Third party creditors of Wynyard (NZ) Ltd come to $6,962,424.00. If the claim by Wynyard Group Ltd is also admitted, the total claims will come to
$177,972,693.00. The liquidators estimate that each creditor would receive a distribution of just under half a cent in the dollar. If the claim of Wynyard Group Ltd is rejected in its entirety, the distribution to unsecured creditors of Wynyard (NZ) Ltd will be approximately 12 cents in the dollar. If the claim of Wynyard Group Ltd is accepted, there will be a distribution to it which will allow it to pay all its third party creditors, said to be $423,089.00, plus an allowance for interest, and there will be a surplus available to shareholders, estimated to be $363,430.00.

[2] The liquidators say that there is also a possible intermediate position: that the claim of Wynyard Group Ltd will be admitted only for $141,323,888.00. That will turn in part on the effect of a document dated 23 February 2016 called a “support letter”. If the claim for $141,323,888.00 is accepted, they estimate that there will be a distribution to the unsecured creditors of Wynyard (NZ) Ltd of $0.0057 in the dollar. That will result in a partial distribution to the third party creditors, plus a distribution to the Wynyard Group Ltd. Its third party creditors will be paid in full and there will be surplus for shareholders. While the liquidators have sought a range of directions, the question comes down to whether the claim by Wynyard Group Ltd should be admitted—in its entirety or in part.

[3] Wynyard Group Ltd was the holding company for the Wynyard group of companies, which operated globally in developing, distributing, marketing and selling software. Its products were used for risk management, intelligence and investigations

¹ This and the following amounts are estimates that are subject to contingencies.

in the finance, government, and national infrastructure sectors. The group operated in New Zealand, Australia, Dubai, Canada, the United Kingdom and the United States.

[4] Wynyard (NZ) Ltd is a wholly-owned subsidiary of Wynyard Group Ltd. As the operating company, it owned all the intellectual property of the group, and supplied services and support to customers of its subsidiaries. It had a branch in Dubai. It had subsidiaries in the United Kingdom, Canada, Australia and the United States. Wynyard Group Ltd, the holding company, was publicly listed on the New Zealand stock exchange in July 2013. It sought funds publicly, and used them for the operations of Wynyard (NZ) Ltd and its subsidiaries.

[5] The issue is how those funds which Wynyard Group Ltd paid to Wynyard (NZ) Ltd are to be treated in the liquidation. The total payments came to $171,010,268.43. Mr Jackson, the liquidator, records these running totals:

(a) For the nine months to 31 December 2014: $47,317,536.53.

(b) For the 12 months to 31 December 2014: $76,735,674.07.

(c) For the 12 months to 31 December 2015: $131,238,271.64.

(d) On 22 February 2016, the day before the “support letter”:
$141,323,887.87.

(e) Between 23 February 2016, the date of the “support letter”, and the company going into voluntary administration, there were payments of
$29,686,390.56.

[6] The companies made losses and eventually had to stop business. On 25 October 2016, Wynyard Group Ltd and Wynyard (NZ) Ltd went into voluntary administration under Part 15A of the Companies Act. The boards of each company appointed Mr Neale Jackson and Mr Grant Robert Graham as administrators. There were watershed meetings for both companies on 8 February 2017. Mr Jackson says that the claim of Wynyard Group Ltd was admitted in the administration of Wynyard (NZ) Ltd but Wynyard Group Ltd did not vote in the resolutions of 8 February 2017.
The creditors of both companies passed resolutions for the companies to go into liquidation under s 241(2)(d) of the Companies Act. Messrs Jackson and Graham were appointed liquidators.

[7] Mr Jackson resigned as liquidator of Wynyard Group Ltd in December 2017. Mr Brendan Gibson of the same insolvency practice was appointed liquidator of Wynyard Group Ltd in his place. Mr Jackson has continued throughout as the liquidator of Wynyard (NZ) Ltd. Mr Graham continues as liquidator of both companies but he has not taken an active part in either liquidation. Notwithstanding that apparent conflict of interest, I am satisfied that in the matters affecting this proceeding the liquidators of the two companies have acted independently. They have instructed lawyers from different firms.

[8] Mr Jackson’s affidavit shows that the Wynyard (NZ) Ltd liquidators have investigated the merits of the claim by Wynyard Group Ltd. His affidavit shows enquiries were made to obtain information. In some cases, people were unable to cast any useful light on the question. The liquidators have clearly had access to the company records, directors and former employees of Wynyard (NZ) Ltd and Wynyard Group Ltd. They have co-operated and assisted in the enquiries. There is no suggestion that there are any gaps in the information supplied.

[9] The liquidators of Wynyard (NZ) Ltd applied to the court for directions because there are competing views as to how the payments made by Wynyard Group Ltd are to be treated in the liquidation. It was proper to apply for directions, given the relationship between the companies and that unrelated third parties will be affected by the decision. Having applied for directions, the liquidators have presented arguments for rejecting the claim by Wynyard Group Ltd. Their role is like that of liquidators who have rejected a claim and respond to an application for review of their decision under s 284(1) of the Companies Act. That role was described by Brennan and Dawson JJ in the High Court of Australia in Tanning Research Laboratories Ltd v O’Brien:²

In such a proceeding, a liquidator who defends his decision to reject a proof of debt is no longer acting in a quasi-judicial capacity; he is cast in the role of

² Tanning Research Laboratories Ltd v O’Brien (1990) 169 CLR 332 at 341.

an adversary, defending the assets available for distribution against a liability which, according to the view he formed when acting quasi-judicially, is not legally enforceable. The liquidator may defend those assets against the creditor’s claim on any ground on which the company might have defended the claim had it been sued by the creditor.

[10] The evidence has come from:

(a) Mr Jackson, liquidator;

(b) Mr Murray Page, one of the directors of Wynyard (NZ) Ltd, chief financial officer of the group and, as such, attended all board meetings of Wynyard Group Ltd;

(c) Mr Craig Richardson, chief executive officer of the Wynyard group of companies, and a director of both Wynyard Group Ltd and Wynyard (NZ) Ltd;

(d) Dr Murray Horne, a director of Wynyard Group Ltd, chair of the board and a member of the Audit and Risk Committee, a sub-committee of the board, responsible for overseeing the accounting risk and audit services of the Wynyard Group;

(e) Ms Susan Peterson, the chair of the Audit and Risk sub-committee, an independent director of Wynyard Group Ltd but not a director of Wynyard (NZ) Ltd; and

(f) Mr Prior, an audit partner at PwC: the auditors of the Wynyard group of companies.

All the witnesses are financially literate and familiar with the accounting concepts at issue.

[11] Section 303 of the Companies Act provides that a debt or liability, present or future, certain or contingent, whether it is an ascertained debt or a liability for damages, may be admitted as a claim against a company in liquidation. Section 306(1) provides that the amount of a claim must be ascertained as at the date and time of
commencement of the liquidation. It follows from that that whether there is a claim must also be ascertained as at the date and time of commencement of the liquidation. It is, of course, well established that a claim will only be admitted under s 303 if it is legally enforceable.³

[12] I note these aspects:

(a) As I have noted, whether a creditor has a claim is determined as at the date of liquidation. Where a claim is subject to contingencies, the claim is valued—see s 307 of the Companies Act. When a debt is payable in the future, on liquidation the debt is accelerated because the claim is ascertained as at the date of liquidation. It need not otherwise have fallen due. The case for Wynyard Group Ltd is that it made advances which were repayable on demand. It does not say that it ever made demand for those funds. However, it is entitled to rely on s 306 to say that any loans can be treated as owing as at the date of liquidation.

(b) Under s 248(1)(e), on liquidation an alteration must not be made to the rights or liabilities of a shareholder of the company. Those are rights as shareholder. The shareholder may also have rights as a creditor. Those are to be assessed separately under ss 303–307.

(c) If the claim of Wynyard Group Ltd is admitted, it will rank equally with the claims of other unsecured creditors in the liquidation of Wynyard (NZ) Ltd. Under the Companies Act there is no rule that creditor claims by shareholders of a company must rank below claims by external creditors.

(d) For this case, the voluntary administration is no more than background. It explains how the company came to be in liquidation. While the parties’ rights may also have been affected by the voluntary administration, in that creditors’ rights were suspended while the company was in voluntary administration, for all practical purposes for

³ Government of India v Taylor [1955] AC 491 (HL) at 509.

this case the liquidation provisions of the Companies Act decide the parties’ rights and liabilities.

[13] The competing arguments go to the nature of the payments made by Wynyard Group Ltd to Wynyard (NZ) Ltd. Wynyard Group Ltd says that the payments were advances by way of loan, which were repayable. The liquidators of Wynyard (NZ) Ltd say, on the other hand, that they were not repayable at all. While they accept that the advances were initially debts which were repayable, they say that these were capable of being capitalised and, because of that, they do not give a claim under s 303 of the Companies Act. The support letter of 23 February 2016 is significant because the payments under it are to be treated separately. I will deal first with the payments made before 22 February 2016.

[14] For payments before and after the support letter, the enquiry is to ascertain the legal effect of the payments. Payments may have economic consequences but the legal effect is what counts. In Mills v Dowdall, Richardson J said:⁴

The legal principles governing the ascertainment of the true legal character of a transaction are now well settled and for recent discussions in this Court it is sufficient to refer to Re Securitibank Ltd (No 2) [1978] 2 NZLR 136; Buckley & Young Ltd v Commissioner of Inland Revenue [1978] NZCA 22; [1978] 2 NZLR 485; Marac Finance Ltd v Virtue [1981] 1 NZLR 586; and Commissioner of Inland Revenue v Smythe [1981] 1 NZLR 673. It frequently happens that the same result in a business sense can be attained by two different legal transactions. The parties are free to choose whatever lawful arrangements will suit their purposes. The true nature of their transaction can only be ascertained by careful consideration of the legal arrangements actually entered into and carried out. Not on an assessment of the broad substance of the transaction measured by the results intended and achieved; or of the overall economic consequences to the parties; or of the legal consequences which would follow from an alternative course which they could have adopted had they chosen to do so. The forms adopted cannot be dismissed as mere machinery for effecting the purposes of the parties. It is the legal character of the transaction that is actually entered into and the legal steps which are followed which are decisive. That requires consideration of the whole of the contractual arrangement and if the transaction is embodied in a series of inter-related agreements they must be considered together and one may be read to explain the others. In characterising the transaction regard is had to surrounding circumstances: not to deny or contradict the written agreement but in order to understand the setting in which it was made and to construe it against that factual background having regard to the genesis and objectively the aim of the transaction. ... A document may be brushed aside if and to the extent that it is a sham in two situations: (a) where the document does not reflect the true

⁴ Mills v Dowdall [1983] NZLR 154 (CA) at 159–160.

agreement between the parties in which case the cloak is removed and recognition given to their common intentions ... and (b) where the document was bona fide in inception but the parties have departed from their initial agreement while leaving the original documentation to stand unaltered.

[15] As a matter of general principle, shareholders can provide funding to a company by a capital advance (that would mean that the shareholder would have an increased equity share) or the shareholder can make a loan advance which gives rise to a debt obligation. That debt obligation may be secured or unsecured, and it may or may not carry an obligation to pay interest. It is a question of fact whether the shareholder advance is capital or a loan. Both sides accept that the payments were to provide operating funds for Wynyard (New Zealand) Ltd. No one suggests any other purpose.

[16] In other contexts, the courts have sometimes recognised that where payments are made there is an initial presumption that the payments are by way of loan. Chitty on Contracts says:⁵

If money is proved, or admitted, to be paid by A to B, then in the absence of any circumstances suggesting a presumption of advancement, there is prima facie an obligation to repay the money; accordingly if B claims the money was intended as a gift, the onus is on him to prove this fact.

The authority cited is Seldon v Davidson, where the payment was made in a non- commercial setting. Wynyard Group Ltd did not suggest that there is any presumption in favour of its case, but the analogy is nevertheless apt. In a commercial context it is common to see directors and shareholders putting money in on the basis that the funds are to be repaid.

[17] For evidence resisting the claim, Mr Page, a director of Wynyard (NZ) Ltd and former chief financial officer for the entire group, says that it was always anticipated that in the medium term the business would be cash negative and would require funding. The trading operations at Wynyard (NZ) Ltd and its subsidiaries were therefore funded by Wynyard Group Ltd from capital which it had raised. He says that funds were provided to Wynyard (NZ) Ltd from time to time as required, and to

5. Eva Lomnicka “Credit and Security” in H G Beale (ed) Chitty on Contracts (32nd ed, Thomson Reuters (Professional) UK, London, 2015) Vol 2 at 39–264; citing Seldon v Davidson [1968] 1 WLR 1083 (CA).

provide funding to subsidiaries. The need for funding and its provision were determined and processed by the finance team, which he led. As between Wynyard (NZ) Ltd and its subsidiaries, advances were documented and recorded as “market support payments”. This was done formally, for tax reasons, because of the need to comply with transfer pricing regimes. On the other hand, the advances by Wynyard Group Ltd to Wynyard (NZ) Ltd were not documented. He says that there was no need to do so as these companies were part of the same tax group and therefore transfer pricing issues did not arise. Little attention was given to how the funding by Wynyard Group Ltd to Wynyard (NZ) Ltd was to be described. He acknowledges that it was recorded in the financial statements for Wynyard Group Ltd for the years ending December 2013 and December 2014 as loans. But he says it was commonly understood that they were “market support payments”, not loans. Although it was not discussed at board meetings, his understanding (as chief financial officer) was that these advances would eventually be capitalised.

[18] Mr Richardson, the former chief executive officer, says that funds raised by Wynyard Group Ltd were held in its bank account and drawn down periodically by Wynyard (NZ) Ltd in accordance with forecast needs. The advances were not subject to any specific terms or formal documentation. He does not recall any discussion between the Wynyard Group Ltd and Wynyard (NZ) Ltd regarding repayment of the advances provided by Wynyard Group.

[19] I am satisfied that the liquidators have examined all records which could cast light on the matter. That includes financial statements that were prepared and approved for the years ending 31 December 2013, 31 December 2014 and 31 December 2015. There were no financial statements for the year ending 31 December 2016. The evidence includes minutes of the Asset and Risk Committee, letters of representation by officers of the company to the board and appropriate board resolutions, as well as letters and the auditors’ reports, which gave a clean sheet to the accounts for the three years.

[20] I explored with Mr Gollin what capitalising entailed. He acknowledged that, before any capitalising of the advances, there was a creditor/debtor relationship—that is, the payments initially established that Wynyard (NZ) Ltd was a debtor of Wynyard
Group Ltd. By capitalising, there would no longer be a creditor/debtor relationship. Instead, Wynyard Group Ltd would hold more capital in Wynyard (NZ) Ltd. As to the mechanics of capitalising, as Wynyard (NZ) Ltd is a wholly-owned subsidiary of Wynyard Group Ltd, and as the question of third parties buying shares in Wynyard (NZ) Ltd was unlikely to arise, it may not have been necessary to have a share issue. Mr Gollin proposed that converting debt to equity could be accomplished by a change in the balance sheet and a board resolution.

[21] I am dealing here with the position before the support letter of 23 February 2016. The arrangements made in that letter are somewhat different. Any change from debt to equity would require agreement between Wynyard Group Ltd and Wynyard (NZ) Ltd. On the face of it neither side had the right to require unilaterally that debt be converted to equity. As a minimum, some formal steps would have to be taken to show that change. It is common ground that at no stage up until the companies went into voluntary administration were any steps taken for debt to be converted to equity.

[22] Mr Page implicitly recognises that the advances were loans, when he states that he understood, for his part, that advances would be capitalised. In saying that, he acknowledged that the advances were not capital when they were made.

[23] Most importantly, the financial statements for the years ending 31 December 2013 and 31 December 2014 show that the advances were treated as loans in the financial statements for the group. As chief financial officer, Mr Page had executive responsibility for preparing the financial statements and presenting them to the committee and the board for approval. That was done with some formality. There were representation letters which were acted on. The representation letters stated that related party transactions had been appropriately accounted for and disclosed in the accounts. The auditors, likewise, gave certificates in which they expressly said that related party transactions had been appropriately recorded.

[24] The balance sheet, that is the consolidated statement of position of Wynyard Group Ltd in the 2013 financial statements, records in the current assets a receivable from a subsidiary of $47,316,000.00 and records, separately, an investment in subsidiaries of $12,698,000.00. The only subsidiary was Wynyard (NZ) Ltd. The
notes to the accounts confirm that the advance was to Wynyard (NZ) Ltd, was repayable on demand and does not incur interest. There is a similar reference in note 18 under the heading “Related party transactions”.

[25] The same applies to the 2014 accounts. The consolidated statement of financial position shows a receivable from subsidiary of $76,736,000.00. A separate investment in the subsidiaries came to $12,698,000.00 and the notes to the financial statements are to similar effect.

[26] It is appropriate to look to the financial statements to find whether the payments made by the holding company to its subsidiary were capital or debt. The statements were obviously prepared by people with appropriate qualifications and experience in preparing financial statements. There was a vetting process, not only by the board but also by auditors. No reason was given why the court should not accept the financial statements as reflecting accurately what they stated.

[27] That takes the matters only up to 2014. The financial statements for the year ending 31 December 2015 are different. There was a change in the law which relieved Wynyard Group Ltd from including in its group financial statements separate parent company accounts.⁶ When I raised the matter with Mr Caird, he relied on the proof of claim which Wynyard Group Ltd lodged with the liquidators for Wynyard (NZ) Ltd. Attached to the claim was a ledger entry headed “Balance Sheet End of October 2017”. It contains entries under the heading “Intercompany accounts” and shows a sum of
$171,010,268.43 as having been advanced to Wynyard Group Ltd. I regard that as neutral in helping me decide whether that is debt or equity. Nevertheless, as the company had consistently treated the advances as repayable on demand in the 2013 and 2014 accounts, it is reasonable to assume that they would have been treated the same way if they had been recorded in the 2015 accounts and any accounts for the year ending 31 December 2016 (if they had been prepared). Apart from the support letter of 23 February 2016 (which I will come to), no one has suggested that there is any reason for treating the advances made in 2015 and early 2016 differently from the advances made in 2013 and 2014.

6. The changes followed from the Financial Reporting Act 2013, replacing the Financial Reporting Act 1993.

[28] The position I have reached is that the $141,323,887.87 advanced up to 22 February 2016 was debt. While there was an expectation, at least on the part of Mr Page, that it would be capitalised, no steps were taken to capitalise that before the support letter of 23 February 2016. On 22 February 2016, Wynyard Group Ltd was a creditor of Wynyard (NZ) Ltd for $141,323,887.87.

[29] On 23 February 2016, Wynyard Group Ltd and Wynyard (NZ) Ltd signed a letter which was headed “Letter Regarding Future Financial Support”. Mr Page has explained the background. Around February 2016, it was proposed that Wynyard (NZ) Ltd would enter into a NZ$10m facility agreement with the Skipton Building Society, which was already a shareholder of Wynyard Group Ltd. Skipton Building Society was to provide bridging finance in case Wynyard (NZ) Ltd required it while funds were being raised by a rights issue which Wynyard Group Ltd was undertaking. This was the first time that Wynyard (NZ) Ltd had obtained external funding. Wynyard (NZ) Ltd’s asssets were to form security for the Skipton loan. These matters triggered a need to clarify the position regarding advances by Wynyard Group Ltd to Wynyard (NZ) Ltd. Mr Page instructed lawyers to draft a letter of support. Various versions of the drafts were put in evidence. As is standard when construing legal documents, it is unnecessary to consider the drafts.⁷

[30] For this case, the important provisions in the letter are clauses 4, 5, 6 and 7:

4. WNZL requires ongoing funding in order to satisfy its day-to-day working capital requirements. To provide comfort that funding is immediately available to meet such obligations, in the immediate and near term, WNZL has negotiated a standby liquidity bridge facility of up to NZ$10million to be put in place between Skipton Building Society (as lender) and WNZL (as borrower and WGL (as guarantor) (the “Skipton Facility”). It is WNZL’s expectation that the Skipton Facility not be drawn down, provided that the Rights Issue Proceeds are made available by WGL to WNZL in sufficient time to meet relevant working capital obligations that become due and payable and cannot be funded from WNZL from its own cash resources.

5. Ongoing Financial Support

5.1 Prior to incurring an obligation to repay the Skipton Facility (if utilised) and prior to incurring operating expenses generally which may not be able to be funded from the cash reserves of WNZL

7. See Lord Wilberforce in Prenn v Simonds [1971] 1 WLR 1381 (HL) and Lord Hoffmann’s third principle in Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; [1998] 1 WLR 896 (HL) at 912–913.

(“Working Capital Liabilities”) the board of directors of WNZL seeks an assurance from WGL that WGL will provide to WNZL financial support, as and when required by WNZL, to meet such Working Capital Liabilities.

5.2 WGL hereby agrees to provide to WNZL financial support, as and when required, to meet all Working Capital Liabilities. In particular WGL agrees and undertakes to immediately make available to WNZL all Rights Issue Proceeds as and when such Rights Issue Proceeds are received by WGL and WNZL agrees to apply such Rights Issue Proceeds upon receipt first to repay any outstanding amounts under the Skipton Facility as contractually required and secondly, to meet any ongoing Working Capital Liabilities.

6. Capitalisation

WGL and WNZL agree that all amounts advanced by WGL to WNZL under and in accordance with the terms of this letter, shall be capitalised upon request by WNZL.

7. Interest

The amounts advanced by WGL to WNZL under this letter, for so long as those amounts remain outstanding, shall be interest free.

[31] There is a question whether the letter was to apply only to funding that Wynyard Group Ltd was to provide to Wynyard (NZ) Ltd after the letter, or whether it would have retrospective effect. I accept Mr Caird’s submission that that it was prospective only. The letter is headed “Letter regarding future financial support”. Clause 5.1 begins:

Prior to incurring an obligation to repay the Skipton facility ... and prior to incurring ... expenses generally ...

which indicates that it was to operate prospectively only. The context was to cover the position where the company may be exposed to claims by an external creditor. Mr Caird suggested that the directors’ duties under s 136 of the Companies Act provide a reason for the directors in Wynyard (NZ) Ltd to obtain that letter as a way of showing that they had addressed their responsibilities reasonably in obtaining credit.

[32] Mr Gollin proposed that the capitalisation provision, “advanced ... under and in accordance with the terms of this letter” indicated that the letter applied to advances already made. He drew a distinction with clause 7 which refers to “amounts advanced by WGL under this letter”, but not “in accordance with”. I decline to draw that rather refined distinction. “Under and in accordance with” may be tautologous, but that
tautology can be tolerated. It does not mandate the strained interpretation of the letter as applying to past advances.

[33] Clause 6, dealing with capitalisation, reinforces the point that until capitalisation the advances were debt, not equity. Support for that can be seen in clause 7, which states that there will be no interest on those advances. That is more consistent with the funds being advanced by way of loan than equity. Accordingly, the letter can apply only to the advances made after 23 February 2016.

[34] Again, the letter recognises that those advances were initially by way of loan. It recognises that they could be capitalised, and it provides a mechanism—Wynyard (NZ) Ltd could require the advances to be capitalised. That was different from the position of the earlier advances which would require both parties to agree on capitalisation. But Wynyard (NZ) Ltd never exercised its right before voluntary administration or before liquidation for the debt to be capitalised.

[35] Mr Gollin submitted that the right to have debt capitalised was enough to defeat the claim that the $29,686,390.56 was debt for the liquidation of Wynyard (NZ) Ltd. His argument was that if Wynyard Group Ltd had sued before liquidation, Wynyard (NZ) Ltd could have defeated the proceeding by capitalising the debt and that, upon that capitalisation, the debt claim would have failed.

[36] With respect, that entails speculation as to steps that might have been taken if there had been a proceeding. The rights of the parties are to be determined at the time of the issue of the proceeding, not steps that might have been taken after the issue of the proceeding to defeat the claim. The defeasibility which Mr Gollin relies on turns on Wynyard (NZ) Ltd taking active steps to see that the claim is defeated: not because the claim was not enforceable when it is lodged, but because other steps taken subsequently can provide a defence. I come back to the point that the status of the debt is to be determined at the date of liquidation. At that date, no steps had been taken to capitalise the debt. That meant that, at the date of liquidation, Wynyard Group Ltd was a creditor for all the sums that it had advanced, both before and after 23 February 2016.
[37] In response to the liquidators’ application, I give these directions:

(a) On its proper construction, the letter of 23 February 2016 gave Wynyard (NZ) Ltd the right to capitalise advances made after the date of that letter, but that did not apply to advances made before the date of the letter. The right to capitalise was never exercised.

(b) The amounts advanced by Wynyard Group Ltd to Wynyard (NZ) Ltd, both before and after 23 February 2016, were repayable upon demand.

(c) The claim submitted by Wynyard Group Ltd for $171,010,268.43 is to be admitted in whole under s 303 of the Companies Act.

[38] Costs are not sought on the application. In case there is any doubt about it, I record that the liquidators of Wynyard (NZ) Ltd acted properly in seeking directions. They are entitled to recover their costs on this proceeding from the assets of Wynyard (NZ) Ltd. Equally the liquidators of Wynyard Group Ltd have properly taken part in this proceeding and are entitled to recover their costs of the proceeding from the assets of Wynyard Group Ltd.

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Associate Judge R M Bell