Hunt v Bare Metal Limited [2020] NZHC 2357 (10 September 2020)

Last Updated: 15 September 2020

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2020-409-412 [2020] NZHC 2357

UNDER	the Companies Act 1993
AND
IN THE MATTER	of an application for putting a company into liquidation
BETWEEN	JOHN LOVETT HUNT Plaintiff
AND	BARE METAL LIMITED Defendant

Hearing:	Determined on the papers
Counsel:	H D P van Schreven for Plaintiff
Judgment:	10 September 2020

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 10 September 2020 at 2.30pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 10 September 2020

HUNT v BARE METAL LIMITED [2020] NZHC 2357 [10 September 2020]

• [1] This application, for the appointment of an interim liquidator, is unusual in that it is being used as a means to maintain the value of the defendant company’s assets until the new shareholder in the company is able to take control of the company.

Background

• [2] The plaintiff, John Hunt (John), is the brother of the late Walter William Hunt (Walter), who died on 13 August 2020. Walter was the sole director and shareholder of Bare Metal Ltd (the company).

• [3] The company was incorporated in 2013, but it seems the business that it owned had operated from the same site for the last 30 years or so. The evidence is it appears there is no formal lease relating to the site. John’s evidence is he understands the rent for the site is paid through to the end of September 2020.

• [4] John brings this application on the basis that he is a creditor of the company as he is owed a modest sum for expenses he has incurred on behalf of the company since Walter’s death. As John is a creditor, he has standing under s 241(2)(iv) of the Companies Act 1993 (the Act), to seek liquidation.

• [5] The substantive liquidation application is brought in reliance on s 241(4)(c) of the Act which provides:

(4) The court may appoint a liquidator if it is satisfied that –

...

(c) the companies does not comply with section 10 [of the Act].

• [6] Section 10 of the Act provides:

10 Essential requirements

A company must have—

(a) a name; and

(b) 1 or more shares; and

(c) 1 or more shareholders, having limited or unlimited liability for the obligations of the company; and

(d) 1 or more directors, of whom at least 1 must—

(i) live in New Zealand; or

(ii) live in an enforcement country and be a director of a body corporate that is incorporated in that enforcement country under a law that is equivalent to this Act.

• [7] With the death of the company’s sole director, the requirements of s 241(4)(c) of the Act are met.

• [8] The application to appoint an interim liquidator is made under s 246(1) of the Act which provides:

246 Interim liquidator

(1) If an application has been made to the court for an order that a company be put into liquidation, the court may, if it is satisfied that it is necessary or expedient for the purpose of maintaining the value of assets owned or managed by the company, appoint a named person, or an Official Assignee for a named district, as interim liquidator.

(2) It is clear from the evidence filed that the appointment of an interim liquidator is necessary to maintain the value of the assets owned by the company. Indeed, the whole purpose of the application is to preserve the business operated by the company. It is envisaged that the company’s occupation of the site, from which the business has traded over an extended period, will be formalised, permitting the business to be sold for the ultimate beneficiary of Walter’s estate (Walter’s widow). Walter’s widow is herself unwell and hence Walter’s brother, John, stepping into the fray to preserve the business.

• [9] The evidence is that the business is a going concern and it appears to be solvent.

• [10] Mr Murray Allott, the proposed interim liquidator, has filed a consent to act.

• [11] It might be thought that the executor of Walter’s estate could vote the shares now vested in the executor to appoint a new director. However, probate has not been obtained and, with the need for urgency, this application has been brought. I accept this was an appropriate response.

• [12] The reality is to appoint a new director, that person would have to satisfy themselves that it was appropriate to take on the role with all its duties and obligations.
• [13] I am satisfied it is appropriate to appoint Murray George Allott of Christchurch, licensed insolvency practitioner, as interim liquidator of Bare Metal Ltd, and I direct he is so appointed.

• [14] The application also seeks a declaration that Mr Allott have the powers listed in the application under s 246(2) of the Act, which provides:

Subject to subsection (3), an interim liquidator has the rights and powers of a liquidator to the extent necessary or desirable to maintain the value of assets owned or managed by the company.

• [15] Section 246(3) of the Act provides: “The court may limit the rights and powers of an interim liquidator in such manner as it thinks fit”.

• [16] I am not persuaded it is necessary for the purposes of this application for me to supplement the interim liquidator’s powers. Further, it is not immediately apparent to me from s 246 of the Act, what jurisdiction I would be exercising in doing so.

• [17] Section 246(2) of the Act is of sufficient breadth to allow the interim liquidator to step in and preserve the position.

• [18] I appreciate the present intention is to preserve the goodwill of the business in order that the business can be sold. However, I have a concern that Walter’s widow does not appear to have been served, although I suspect she has been kept informed of this application. As she will ultimately benefit from the sale of the business, her interests need to be taken into account. Equally, I do not wish to place unnecessary barriers in the way of a pragmatic resolution.

• [19] Accordingly, I decline to make the orders sought at para 1(b) of the application dated 3 September 2020. As I have said above, s 246(2) of the Act is sufficiently wide to address most of the matters listed in para 1(b) of the application.

• [20] I make an interim order dispensing with the advertising of the application, given the intention is to preserve the goodwill of the business. If the interim liquidator’s inquiries show that the company is insolvent, advertising may need to be revisited.
• [21] I reserve leave for John to, by memorandum, seek further orders; such memorandum to be referred to me in the first instance. Should there be a renewed request for increased powers to the interim liquidator, counsel are to address the jurisdiction allowing that to occur. The practical answer may be that if the interim liquidator gets the business to the point where it can be sold, which seems to be the intention, then Walter’s widow could request the interim liquidator’s appointment be brought to an end, appoint herself as a director, and complete the sale of the business. I am sure there are other ways in which the issue could be approached.

Associate Judge Lester

Solicitors:

Clark Boyce, Christchurch