Anz National Bank Ltd v Sheahan and Lock Hc Ak

• Jurisdiction: New Zealand
• Judge: Heath J
• Judgment Date: 15 November 2012
• Neutral Citation: [2012] NZHC 3037
• Docket Number: CIV 2011-404-7665 CIV 2011-404-1623 CIV 2011-404-1626 CIV 2011-404-1619
• Court: High Court
• Date: 15 November 2012

UNDER Sections 284 and 286 of the Companies Act 1993

In The Matter of Ex Ced Foods (Formerly Cedenco Foods) (In Liquidation) And Cedenco Ohakune (In Liquidation)

Between

ANZ National Bank Ltd

First Applicant

and

Kate Elizabeth Dekker

Second Applicant

and

John Sheahan and Ian Russell Lock

Respondents

And Under Sections 266 and 284 of the Companies Act 1993

In the Matter of Ex Ced Foods (Formerly Cedenco Foods) (In Liquidation) And Cedenco Ohakune (In Liquidation)

Between

John Sheahan and Ian Russell Lock

Applicants

and

ANZ National Bank Ltd and Kate Elizabeth Dekker

Respondents

And Under the Insolvency (Cross Border) Act 2006

In the Matter of the Liquidations of Ss Farms Australia Pty Ltd, Cedenco Jv Australia Pty Ltd and Sk Foods Australia Pty Ltd

Between

John Sheahan and Ian Russell Lock

Applicants

and

ANZ National Bank Ltd and Kate Elizabeth Dekker

Respondents

[2012] NZHC 3037

CIV 2011-404-7665

CIV 2011-404-6585

CIV 2011-404-1623

CIV 2011-404-1626

CIV 2011-404-1619

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

Application by liquidators under s261 Companies Act 1993 (“CA”) (power to obtain documents and information) and s266 CA (powers of Court — compel compliance with request of liquidator) by New Zealand liquidators to compel NZ companies' bank and bank officer to provide documents and attend an examination — application under the Insolvency (Cross-border) Act 2006 by Australian liquidators to require bank officer to attend for examination and produce documents, together with a declaration liquidators were entitled to use a transcript of an earlier examination held before the NZ liquidators — application by bank that NZ liquidators were prohibited from using any information obtained in NZ liquidations for any foreign purpose — NZ and Australian group of companies placed into liquidation — Australian liquidators appointed to act in both liquidations — liquidators sought access to internal records of the bank relating to the loans — whether NZ liquidators should pay remuneration and legal expenses in respect of their compliance under s261(5) CA (remuneration) — whether the Court had jurisdiction under s266 CA to order an examination when a company had surplus assets — whether the liquidators were entitled to indemnity costs.

Counsel:

D Chisholm and K R Phelan for Messrs Sheahan and Lock

M J Tingey and D J Friar for ANZ National Bank Ltd and Ms Dekker

This judgment was delivered by me on 15 November 2012 at 3.00pm pursuant

to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Judgment of Heath J

Contents

Introduction	[1]
Background	[6]
Examination and production of documents
(a) The applications	[18]
(b) Ms Dekker's July 2011 examination	[22]
(c) Competing submissions	[26]
(d) Analysis
(i) The scheme	[32]
(ii) Production of documents's 266(1)	[37]
(iii) Examination's 266(1)	[39]
(iv) Examination's 266(2)(a)	[43]
Section 261 — remuneration and expenses
(a) The application	[69]
(b) The Court's powers to order remuneration and expenses	[75]
(c) Is the bank entitled to indemnity costs?	[86]
(d) Alleged misconduct by New Zealand liquidators	[93]
The Australian liquidators' application to examine Ms Dekker	[98]
Alleged misuse of transcript of Ms Dekker's first examination
(a) Introductory comments	[115]
(b) Jurisdiction	[122]
(c) Was the transcript misused?	[140]
(d) Should retrospective approval for the use of the transcript be given to the Australian liquidators?	[156]
Costs	[158]
Result	[159]

Introduction

1 Ex Ced Foods (formerly Cedenco Foods) and Cedenco Ohakune are both unlimited New Zealand companies, presently in liquidation. The liquidators are two Australian insolvency practitioners, Messrs Sheahan and Lock. They are based in Adelaide. Each company was put into liquidation by special resolution of the companies' shareholders on 6 May 2010. At that time, both were in receivership.

2 Cedenco JV Australia Pty Ltd, SK Foods Australia Pty Ltd and SS Farms Australia Pty Ltd are Australian companies, of which Mr Sheahan and Mr Lock are also liquidators. Those companies were put into liquidation by resolution of creditors who attended a meeting convened on 11 August 2010, under the Australian voluntary administration legislation. 1 At the time of that meeting, both companies were in receivership.

3 On 20 May 2011, this Court recognised the three Australian liquidations as “foreign main proceedings”. 2 On 17 June 2011, orders were made by the Federal Court of Australia recognising the two New Zealand liquidations as “foreign main proceedings” in Australia. 3 Both applications were made on a without notice basis.

4 Unfortunately, the evidence suggests an occasional tendency, on the part of the liquidators and their advisers, to conflate their discrete roles as liquidators of the Australian and New Zealand companies, respectively. As will become apparent, it is important to differentiate between the capacities in which Messrs Lock and Sheahan acted at particular times. To avoid any confusion, I refer to them as the New Zealand liquidators and the Australian liquidators, respectively.

5 The applications with which I am dealing are brought, respectively, by Messrs Sheahan and Lock (as liquidators of the New Zealand and Australian companies), ANZ National Bank Ltd (ANZ NZ) (the New Zealand companies' banker) and a bank officer employed by ANZ NZ, Ms Dekker. They are:

• (a) An application by the New Zealand liquidators 4 to compel ANZ NZ and Ms Dekker to provide specified documents and to attend an examination before them at which all questions relating to the business, accounts or affairs of the New Zealand companies must be answered. In the alternative, orders are sought requiring the scheduled documents 5 to be delivered to the New Zealand liquidators and for Ms Dekker to attend before the Court for examination. Directions are also sought from the Court as to the costs to which

  ANZ NZ and Ms Dekker are entitled in complying with obligations imposed under either s 261 or s 266 of the Companies Act 1993 (the 1993 Act).

• (b) An application by the Australian liquidators 6 for an order that Ms Dekker be required to attend for examination and produce documents on matters relating to the Australian companies. This application is made under the Insolvency (Cross-border) Act 2006 (the Cross-border Act). They also seek a declaration as to their entitlement to use a transcript of an earlier examination of Ms Dekker that was held before the New Zealand liquidators, under s 261(3)(c) of the 1993 Act.

• (c) An application by ANZ NZ 7 for a declaration that the New Zealand liquidators are prohibited from using any documents or information obtained in the Cedenco NZ liquidations (including the transcript of Ms Dekker's examination before them) for any purpose foreign to those liquidations. 8 It also seeks orders requiring the New Zealand liquidators to pay to ANZ NZ and Ms Dekker reasonable remuneration and expenses (including legal fees, calculated on an indemnity basis) in respect of their compliance with obligations under s 261 of the 1993 Act.

Background

6 The Australian and New Zealand companies were part of (what has been called) the Cedenco group of companies. 9 Although there are two in liquidation in New Zealand and three in Australia, the parties are agreed that, for the purposes of the present applications, no material difference in treatment arises as between the two New Zealand companies (on the one hand) and the Australian companies (on the other). For that reason, unless the context requires otherwise, I shall refer generically to the New Zealand companies as Cedenco NZ and to the Australian entities as Cedenco Australia.

7 The Cedenco NZ companies are owned by SK Foods International Ltd. That too is a New Zealand company. There is a dispute as to ownership of shares in SK Foods International. The competing claimants are a group of companies in the United States, beneficially owned by a Mr Salyer, and the Bank of Montreal.

8 Cedenco JV Australia is owned by SK Foods Australia. SK Foods Australia and SS Farms Australia are owned by entities in the United States. There is a dispute about ownership of the shares in those companies. The competing claimants are SK Foods LP 10 and entities associated with Mr Salyer.

9 Cedenco NZ and Cedenco Australia carried on business as food processors and distributors. The work was seasonal in nature. The companies produced fruit and vegetable powders, purées, pastes and the like. The nature of the banking facilities extended to each of the companies reflected that. The major sources of finance were ANZ NZ and ANZ Banking Group Ltd (ANZ Australia) respectively. To secure the amounts owing by Cedenco NZ to the banks, ANZ NZ took a debenture over the assets of Cedenco Foods on 24 February 2000 and a general security agreement over the undertaking of Cedenco Ohakune, on 1 November 2005.

10 By 2008, it became clear that the Cedenco NZ companies were facing financial difficulties. Korda Mentha, a firm of chartered accountants in New Zealand, were appointed by Cedenco NZ as investigating accountants for that company, at the urgings of ANZ NZ. At this time, the person with carriage of the ANZ NZ's relationship with Cedenco NZ was Ms Dekker. While she is based in New Zealand, Ms Dekker was also “relationship manager” for ANZ Australia, in respect of the Cedenco Australia companies.

11 During 2009, ANZ NZ required Cedenco NZ to arrange for Cedenco Australia to cross-guarantee their indebtedness. It is clear that, if Cedenco Australia had declined to do so, ANZ NZ would have withdrawn its financial accommodation to Cedenco NZ and called up an indisputable debt then owing. On 31 July 2009, a...