IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE	
CIV-2019-404-1997
[2019] NZHC 2395	

UNDER	Part 19 of the High Court Rules and sections 286(4) and 280 of the Companies Act 1993	
IN THE MATTER	of the liquidations of the companies constituting the Stanley Tallwood Group	
EX PARTE	CRAIG ALEXANDER SANSON and JOHN HOWARD ROSS FISK
Applicants	

Hearing:	On the papers	
Appearances:	G Neil and L Hui for Applicants	
Judgment:	20 September 2019	

JUDGMENT OF LANG J
[on without notice application for orders under ss 280 and 286(4) of the Companies Act 1993]

This judgment was delivered by me on 20 September 2019 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date……………

In the matter of the STANLEY TALLWOOD GROUP [2019] NZHC 2395 [20 September 2019]

[1]	On 5 September 2019 ten companies in what has become known as the Stanley Group1 of companies were placed in liquidation by special resolution of their respective shareholders. Mr Damien Grant of Waterstone Insolvency was appointed as liquidator.

[2]	A meeting of creditors is scheduled to take place on 25 September 2019. At this meeting creditors of the companies will vote on whether to confirm Mr Grant’s appointment as liquidator or to replace him.

[3]	The applicants, Mr Craig Sanson and Mr John Fisk, are insolvency practitioners practising with the national and international business services firm PricewaterhouseCoopers (PwC). Creditors of companies in the Stanley Group have asked Messrs Sanson and Fisk to accept nomination as replacement liquidators at the creditor’s meeting. The applicants have made enquiries to determine whether they would find themselves in a position of conflict of interest if they were to be appointed as liquidators. This has resulted in them discovering that PwC has a continuing business relationship with 14 companies who are secured creditors of companies in the Stanley Group. PwC also supplies services to related entities of these creditors.

[4]	The applicants do not consider the relationship between PwC and the secured creditors would result in them being subject to a conflict of interest if they were to be appointed as replacement liquidators at the creditors meeting. In order to enable them to be considered for that position, they now seek an order under ss 280 and 286(4) of the Act that they may be appointed as liquidators of the companies if that should be the wish of the creditors.

1	Stanley Group Ltd (Stanley Group), incorporated on 23 December 2009; Stanley Construction (Auckland) Ltd (Stanley Auckland), a wholly owned subsidiary of Stanley Group; Stanley Construction (Waikato) Ltd (Stanley Waikato), a wholly owned subsidiary of Stanley Group’ Stanley Ecobuild Ltd (Stanley Ecobuild), a wholly owned subsidiary of Stanley Group Stanley Modular Ltd (Stanley Modular), a wholly owned subsidiary of Stanley Group; Tallwood Holdings Ltd (Tallwood Holdings), incorporated on 10 April 2018. The shareholders are Forest Group Ltd and Stancotwo Ltd; Tallwood Projects Ltd (Tallwood Projects), a wholly owned subsidiary of Tallwood Holdings; Tallwood Design Ltd, a wholly owned subsidiary of Tallwood Holdings; and Tallwood Assembly Ltd (Tallwood Assembly), a wholly owned subsidiary of Tallwood Holdings.

The statutory scheme

[5]	Section 280(1)(cb) of the Companies Act 1993 (the Act) provides that, unless the Court orders otherwise, no person may be appointed or act as liquidator of a company where that person or that person’s firm has, within two years before the commencement of the liquidation, had a continuing business relationship with the company or any of its secured creditors. Section 286(4) provides that, where s 280 disqualifies a person from acting as liquidator, the Court may nevertheless order that the person may be appointed to act as liquidator.

[6]	As counsel for the applicants points out, the purpose of these provisions is to ensure that persons who are appointed as liquidators have the necessary independence and integrity to carry out the role of liquidator without causing risk to creditors or third parties.

[7]	The courts have considered the application of s 280 on numerous occasions.2 Without notice applications will be appropriate where there is urgency and the interests of creditors can be protected. The Court will often direct the successful applicants to serve both the application and the order made by the Court on creditors at the same time and in the same manner as notice is given for the first creditors meeting. That may not be possible in the present case because I anticipate that creditors would have been given notice of the meeting on 25 September some time ago.

Is it appropriate to deal with the application on a without notice basis?

[8]	In an affidavit filed in support of the application Mr Sanson deposes that he understands the Stanley Group has approximately 624 creditors. Given the short period of time within which the creditors’ meeting is to be held he believes it would be impracticable to serve the proceeding on all creditors and then have the matter

2	Icon Digital Entertainment Ltd v Westpac New Zealand Ltd HC Auckland CIV-2007-404-7124, 20 November 2007; McCloy and Fatupaito v Titan Foundation Ltd HC Auckland CIV-2008-404- 2243, 23 April 2008; Re D & F Contracting Ltd HC Auckland CIV-2008-404-5443, 22 September 2008; Re Joeleen Enterprises Ltd HC New Plymouth CIV-2008-443-0485, 3 October 2008; Waterson v ACCTAX NZ Ltd HC Auckland CIV-2008-404-8386, 23 December 2008; Re Huntleigh Downs Ltd HC Wellington CIV-2009-404-485-1498, 11 August 2009; Re Rapson Holdings HC Auckland CIV-2010-404-2319, 26 April 2010; The Commissioner of Inland Revenue v Wire by Design Ltd [2012] NZHC 857; Re Southbury Insurance Ltd [2012] NZHC 1316; and Re Madagascar (No. 1) 2013 Ltd [2014] NZHC 385; Re Pumpkin Patch Ltd [2017] NZHC 228.

determined by the Court with their input prior to the meeting. The applicants therefore contend the Court should determine the application on a without notice basis.

[9]	The key issue for present purposes is whether, in the circumstances of the present case as they are currently known, there is a risk that the independence required of the applicants in the event of their appointment as liquidators of the Stanley Group will be compromised by the existing and ongoing business relationship between PwC and the secured creditors.

[10]	I am satisfied that, provided notice of the Court’s decision is given to the present liquidator and the creditors forthwith, it is appropriate to deal with the application on a without notice basis. I reach this view for two reasons. The first arises out of the fact that there are now effectively only two working days before the creditors meeting. I consider it would be impracticable to require the applicants to serve all creditors with the proceeding in sufficient time for them to respond and still leave time for the Court to issue a decision prior to 25 September 2019.

[11]	More importantly, the companies’ creditors will make the ultimate decision as to who the liquidator(s) of the companies should be. They have the ability to explore any issues that they perceive to arise out of the relationship between PwC and the companies’ secured creditors at the creditors meeting. If the creditors consider Messrs Sanson and Fisk may be compromised by that relationship they have the ability to vote against their appointment as liquidators.

Decision

[12]	As Mr Sanson deposes, PwC is a large firm that provides a wide range of business services to a multitude of individuals and corporate entities in this country. It has over 100 partners and more than 1000 employees operating out of seven offices throughout New Zealand. It is therefore not surprising that it provides ongoing advisory and business services to entities who are secured creditors of the Stanley Group. It would be surprising if any business services firm of similar size did not.

[13]	Importantly, however, PwC has not acted for, or provided advice to, any of the companies in the Stanley Group or to the directors or shareholders of those companies.

Furthermore, no services provided by PwC to the secured creditors have related in any way to the companies in the Stanley Group or the directors of those companies.

[14]	Mr Sanson also deposes that he and Mr Fisk will ensure that no member of PwC who has been involved in providing business services to the secured creditors will be involved in the liquidation of the companies should they be appointed liquidators.

[15]	Finally, I accept that both Mr Fisk and Mr Sanson have the requisite experience and qualifications to assume the role as liquidators of the companies in the Stanley Group. They have the ability to recognise the circumstances in which a conflict of interest may arise.

[16]	On the basis of the material placed before the Court I therefore do not consider the existing relationship between PwC and the companies’ secured creditors risks any compromise of their independence or integrity if they were to be appointed as liquidators of the companies in the Stanley Group.

Result

[17]	I make an order granting leave for the proceeding to be commenced by way of originating application.

[18]	I make an order under ss 280 and 286(4) of the Act that Messrs Sanson and Fisk may be appointed to act as joint and several liquidators of the companies listed in the schedule to the originating application. They are to provide the current liquidator with a copy of the proceeding and the Court’s orders forthwith. They should liaise with the liquidator as to whether it should be the applicants or the liquidators who advises creditors of the orders the Court has made and provides them with access to documents filed in this proceeding.

[19]	I reserve the issue of costs at this stage. Should it be necessary I will hear submissions from any affected parties on the issue of whether their fees and expenses in relation to the present application should be regarded as an expense they have incurred in carrying out their duties as liquidators of the company.

Lang J

Solicitors:
Crown Solicitor, Auckland