Issued
2017
Decision
15 Dec 2017
Court
NZHC
Appeal Status
Appealed

Application for Interim Liquidator

2017 case note – Associate Judge satisfied that the interests of creditors would be safeguarded by interim liquidators being appointed, as the assets in jeopardy.

Case
The Commissioner of Inland Revenue v Chesterfields Preschools Limited & Therese Anne Sisson [2017] NZHC 3172
Legal terms
Interim liquidator

Summary

Associate Judge Matthews was satisfied that the interests of creditors would be safeguarded by interim liquidators being appointed, as the assets are in jeopardy.

Impact

The order prevents the company from dealing with the property pending the outcome of the High Court liquidation rehearing.

Facts

This follows the judgment of the Supreme Court dated 23 November 2017 which set aside the order made by the High Court in 2015 putting the company into liquidation and ordering a rehearing of the High Court liquidation.

Chesterfields Preschools Limited (“Chesterfields”) has two assets, a property at 854 Colombo Street, Christchurch and an insurance policy over a building which was previously on the land at 854 Colombo Street, Christchurch.

The Commissioner of Inland Revenue (“the Commissioner”) is the principal creditor of Chesterfields. Income tax and goods and services tax (“GST”) arrears amount to $1,088,461.15 (This figure was established as at 22 July 2008 after application of a 15 per cent penalty relief, as suggested by the Court of Appeal, and an allowance for the cancellation of some interest.). The total amount currently owing, including income tax, GST, and court costs is $1,120,566.15. The Commissioner also claims a further $570,958.92 in GST from the sale of a neighbouring property and insurance proceeds.

Decision

The application was served on all three persons named as directors of Chesterfields. However, two of them, Ms Sisson and Mr Hampton are undischarged bankrupts and are therefore disqualified from holding office as directors by s 151(2)(b) of the Companies Act 1993.

Therefore, Chesterfields had only one director, Anna Hampton, who did not take steps to oppose the application. Ms Sisson had filed an opposition to the Commissioner’s application; however, it was disregarded as she could not represent the company.

Associate Judge Matthews referred to the three factors to be considered in relation to an application under s 246 of the Companies Act 1993 identified in Robert Bryce & Co Ltd v Chicken & Food Distributors Ltd (HC Wellington M297/90, 13 August 1990) namely:

  1. Whether the company's assets are in jeopardy;
  2. Whether the status quo should be maintained;
  3. Whether the interest of creditors are safeguarded.

Ms Sisson assessed the land value at $875,000 and had been trying to negotiate the sale of the land with neighbours of the property without the consent of the liquidator. However, no registered valuation was before the court nor were the terms on which the property might be sold. These facts established prima facie that the asset was in jeopardy.

Ms Sisson had also been negotiating a mortgage over a title to the property in order to secure $109,000; this being the sum the Court of Appeal required to be paid as a condition for the termination of the liquidation. These actions also raised the prospect that the property may be in jeopardy.

While the property had a caveat on the title, this would not stop Chesterfields entering into contractual arrangements with other parties.

The evidence before the Court also supported the view that Chesterfields was insolvent. To ensure a maximum return to creditors, it was imperative the remaining assets were handled responsibly.

As the assets were in jeopardy, the Court was satisfied it was in the interests of creditors for an interim liquidator to be appointed.

s 246 Companies Act 1993