CBL Corporation Limited v Jackson [2018] NZHC 1400 (13 June 2018)

Last Updated: 26 June 2018

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

CIV-2018-404-000361 [2018] NZHC 1400

UNDER	Section 239AZ of the Companies Act 1993
IN THE MATTER OF	CBL CORPORATION LIMITED (ADMINISTRATOR APPOINTED) a duly incorporated company having its registered office at Level 16, 45 Queen Street, Auckland
BETWEEN	NEALE JACKSON AND BRENDON GIBSON Applicants

Hearing:	On the papers
Judgment:	13 June 2018

JUDGMENT OF COURTNEY J

This judgment was delivered by Justice Courtney on 13 June 2018 at 4.30 pm

pursuant to R 11.5 of the High Court Rules Registrar / Deputy Registrar

Date ..............................

JACKSON & OR [2018] NZHC 1400 [13 June 2018]

[1] CBL Corporation Ltd (CBL) and subsidiaries in the CBL Group are in voluntary administration. A watershed meeting of CBL was held on 18 May 2018 but adjourned to be held on a date no later than 2 July 2018. The administrators have applied without notice for an order under s 239AZ(2) of the Companies Act 1993 to further adjourn the watershed meeting.

[2] The application is supported by a memorandum of counsel and an affidavit from one of the administrators, Mr Brendon Gibson. The essential ground for the application is that a restructuring proposal by two of the directors of CBL has been made and the administrators consider that it warrants careful consideration but the current timeframe would not allow that.

[3] Section 239AZ is couched broadly:

(1) The watershed meeting may be adjourned, but only to a day that is not more than 30 days after the first day on which the meeting was held.

(2) However, the court may, on the administrator’s application, order that the meeting be adjourned for more than 30 working days.

[4] There are no previous cases involving an application under s 239AZ(2). Such an application must, of course, be considered against the purpose and the other provisions of the voluntary administration regime established by Part 15A of the Companies Act. The objects of Part 15A are:¹

... to provide for the business, property, and affairs of an insolvent company, or a company that may in the future become solvent, to be administered in a way that –

(a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or

(b) if it is not possible for the company or its business to continue in existence, results in a better return for the company’s creditors and shareholders than would result from an immediate liquidation of the company.

[5] The other provisions of Part 15 make it clear that an administrator is to act as promptly as possible. In Nylex (New Zealand) Ltd (administrators appointed and in receivership) v Nylex Engineering Systems Ltd (administrators appointed and in

¹ Companies Act 1993, s 239A.

receivership) Heath J referred to the expectation that an administration will be relatively speedy.² However, he also noted, in the context of an application under s 239AT(3) to extend the convening period for a watershed meeting, that there was a need to balance the expectation of relative speed with the need to ensure that undue haste did not prejudice sensible and constructive actions directed towards the object of the voluntary administration regime, namely maximising returns for creditors.³ Section 239AT(3) is couched in similar terms to s 239AZ(2) and I accept counsel’s submission that an application under s 239AZ(2) may be regarded analogously with an application under s 239AT(3).

[6] Prior to the watershed meeting on 18 May 2018, the administrators had provided a report which identified as the only options either a resolution to appoint liquidators or a resolution that the administration end with the company being returned to the control of the directors. The administrators anticipated that a vote on these options would produce a stalemate with the result that the company would be returned to its directors. The administrators did not consider that to be in the creditors’ best interests. The watershed meeting was therefore adjourned prior to a vote with no objection from any creditor at the meeting.

[7] That same day, 18 May 2018, two creditors, which together comprised approximately 37.5 per cent of the value of CBL’s known creditor claims, obtained an order permitting them to file an application to liquidate CBL. That proceeding has been adjourned to the week beginning 2 July 2018.

[8] Since the adjournment of the watershed meeting, two CBL directors have put forward a more detailed version of an earlier restructuring proposal. It has sufficient detail to warrant careful consideration. The administrators consider that, on its face, the developed proposal may materially benefit creditors and other stakeholders. However, they consider that it would be preferable to have the proposal recorded in a deed of company arrangement for consideration at the next watershed meeting. That, however, would require significant consultation between the affected parties and

2. Nylex (New Zealand) Ltd (administrators appointed and in receivership) v Nylex Engineering Systems Ltd (administrators appointed and in receivership) HC Auckland CIV-2009-404-1217, 11 March 2009.

³ At [22].

would require the administrators to supply a supplementary report expressing their opinion on any proposed deed of company arrangement. The administrators do not consider that this could be achieved prior to 2 July 2018.

[9] The application seeks to extend the adjournment period of the watershed meeting until 17 August 2018, which would also align with the latest possible date for the holding of the watershed meeting of the subsidiaries. Mr Gibson does not consider that the adjournment of the watershed meeting would prejudice any of the company’s creditors or other stakeholders (including shareholders), all of whom may benefit from the developed proposal.

[10] I am conscious of the size and complexity of the task facing the administrators. For the purposes of this application I accept Mr Gibson’s view that the restructuring proposal could result in benefit to both creditors and shareholders but also that the complexity of the group’s affairs means that any proposal for the restructuring of the business ought not be approached hastily. There is no apparent prejudice to any party in adjourning the matter and if there is concern from any party that such a prejudice will arise, it can be accommodated by reserving leave to any interested person to vary or set aside the order.

Result

[11] The application is granted. Orders are made in accordance with paragraph 1(a)
– (f) of the interlocutory application dated 12 June 2018.










P Courtney J