Peri Micaela Finnigan and Boris Van Delden as Liquidators of Wenztro Cooperation Ltd v Brian Robert Ellis

• Jurisdiction: New Zealand
• Judge: Duffy J
• Judgment Date: 30 October 2017
• Neutral Citation: [2017] NZCA 488
• Docket Number: CA387/2017
• Court: Court of Appeal
• Date: 30 October 2017

Between

Peri Micaela Finnigan and Boris Van Delden as Liquidators of Wenztro Co-Operation Limited

Appellants

and

Brian Robert Ellis

Respondent

[2017] NZCA 488

Court:

Harrison, Duffy and Williams JJ

CA387/2017

IN THE COURT OF APPEAL OF NEW ZEALAND

Companies, Insolvency — Appeal by liquidator against a High Court (“HC”) decision which dismissed the application that the respondent to provide information about his financial means — whether the High Court had jurisdiction under the Companies Act 1993 to order disclosure of private financial information for the purpose of establishing his judgment worthiness — novel issue

Counsel:

K J Crossland and W D Buckham for Appellants

R B Hucker and R F Selby for Respondent

• A The application for leave to adduce new evidence is declined.

• B The appeal is dismissed.

• C The appellants are ordered to pay the respondent costs for a standard appeal on a band A basis and usual disbursements.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Duffy J)

Table of Contents

Introduction	[1]
Background	[4]
Jurisdiction	[8]
Statutory provisions	[11]
Legislative history	[13]
New Zealand case law	[19]
Australian case law	[21]
English case law	[26]
Analysis	[26]
(a) Statutory interpretation	[38]
(b) Australian approach	[42]
(c) Privacy issues	[44]
(d) Jurisdiction and discretion [47] Conclusion	[48]
Discretion	[51]
Result	[52]

Introduction

1 The appellants are the liquidators of Wenztro Co-operation Ltd, formerly called Trojan Foods (NZ) Ltd. The respondent Brian Ellis is a former director of Wenztro. The liquidators have commenced legal proceedings against the respondent and other former directors of Wenztro alleging various breaches of their duties as directors. These proceedings are the sole remaining asset of the company.

2 Before they incur further litigation costs the liquidators want to ascertain the prospects of recovering any money judgment they may obtain against the former directors. Mr Ellis refused to provide the liquidators with information about his financial means. The liquidators applied to the High Court seeking orders for this disclosure. Mr Ellis successfully opposed the making of those orders.1

3 The key questions on appeal are whether the High Court has jurisdiction under the Companies Act 1993 to order Mr Ellis to disclose privately-held personal financial information about his means (private financial information) for the purpose of establishing his judgment worthiness; and if so, whether the Court should exercise that power here. The issues these questions raise are novel. They have not been addressed in New Zealand before.

Background

4 On 9 October 2012 Wenztro went into voluntary liquidation. On 4 February 2016 the present liquidators were appointed. In July 2016 the liquidators joined forces with WH Trading Ltd, a creditor of Wenztro, to commence a civil claim against Mr Ellis and the other former directors seeking recovery of approximately $773,000 or such other sum as the High Court thinks just.

5 The liquidators are concerned that Mr Ellis may have taken or will yet take steps to dissipate his assets so that any judgment they obtain against him will not bear fruit. Hence their attempt to obtain information on his financial means. First they sought to obtain information from him and to examine him themselves pursuant to s 261 of the Companies Act. He objected on the ground they were exceeding their statutory authority.

6 This prompted the liquidators to seek the High Court's assistance. Section 266 of the Companies Act gives the High Court authority to obtain information from and to examine a specified class of persons, which under s 261(2)(a) includes Mr Ellis as a former director of Wenztro. But Associate Judge Sargisson declined to make the order sought by the liquidators.2 In so doing she assumed the Court had jurisdiction to make such orders under s 266.3

7 In appealing against the Associate Judge's determination, the liquidators have applied for leave to adduce updating evidence to the effect that since the High Court hearing Mr Ellis has transferred shareholdings, ceased directorships and incorporated new companies. We accept this is fresh evidence but, for the reasons that follow, we are not satisfied it could have a material bearing on the result of the appeal.

Jurisdiction

8 The liquidators seek orders directing Mr Ellis to provide specified information and then, if the liquidators consider it necessary, for Mr Ellis to attend

court for examination on any matter relating to his financial position. The specified information includes

• (a) personal tax returns from 2012 to 2016;

• (b) copies of personal bank statements from any account worldwide for the period from 1 January 2015 to 24 November 2016;

• (c) documents evidencing his assets (including but not limited to real estate, investments and shareholdings) owned over the value of $10,000, not taking into account monies owing in respect of the same during the relevant period;

• (d) documents evidencing personal liabilities over the value of $10,000 and in particular loan agreements, credit card statements and financial facility agreements; and

• (e) names of any trusts of which he is a beneficiary, a trustee or holds the power to appoint trustees or beneficiaries.

9 The usual information-gathering powers available to litigants (discovery and interrogatories) would not allow access to an opposing party's private financial information unless it was relevant to proof of an issue raised in the litigation. Tax information is protected by pt 4 of the Tax Administration Act 1994, which imposes obligations on officers of the Inland Revenue Department to maintain the secrecy of taxpayer information save for specified exceptions. Some of the desired information is also protected by the Privacy Act 1993, which covers private information relevant to trusts, banking records and other information held about a client or customer. However, information about real estate holdings will be available from Land Information New Zealand, shareholdings will be available from the New Zealand Companies Register, any securities Mr Ellis holds will be available from the Personal Property Securities Register, and credit rating agencies may be able to provide some impression of Mr Ellis's credit performance.

10 Without the agreement of Mr Ellis, therefore, much of the specified information cannot be obtained by means other than s 266. Moreover, it is clear that the application of s 266 sought by the liquidators would be a serious intrusion upon Mr Ellis' privacy and perhaps that of his personal and commercial associates.

Statutory provisions

11 The Companies Act relevantly provides:

266 Powers of court

• (1) The court may, on the application of the liquidator, order a person who has failed to comply with a requirement of the liquidator under section 261 to comply with that requirement.

• (2) The court may, on the application of the liquidator, order a person to whom section 261 applies to—

  • (a) attend before the court and be examined on oath or affirmation by the court or the liquidator or a barrister or solicitor acting on behalf of the liquidator on any matter relating to the business, accounts, or affairs of the company:

  • (b) produce any books, records, or documents relating to the business, accounts, or affairs of the company in that person's possession or under that person's control.

…

(Our emphasis.)

12 Therefore s 261 is also relevant; it identifies the persons to whom s 266 applies, and it provides for a separate examination procedure before the liquidator:

261 Power to obtain documents and information

…

(2) A liquidator may, from time to time, by notice in writing require—

• (a) a director or former director of the company; or

• (b) a shareholder of the company; or

• (c) a person who was involved in the promotion or formation of the company; or

• (d) a person who is, or has been, an employee of the company; or

• (e) a receiver, accountant, auditor, bank officer, or other person having knowledge of the affairs of the company; or

• (f) a person who is acting or who has at any time acted as a solicitor for the company—

to do any of the things specified in subsection (3).

(3) A person referred to in subsection (2) may be required—

• (a) to attend on the liquidator at such reasonable time or times and at such place as may be specified in the notice:

• (b) to provide the liquidator with such information about the business, accounts, or affairs of the company as the liquidator requests:

• (c) to be examined on oath or affirmation by the liquidator or by a barrister or solicitor acting on behalf of the liquidator on any matter relating to the business, accounts, or affairs of the company:

• (d) to assist in the liquidation to the best of the person's ability.

(3A) Without limiting subsection (3)(a), a person may be required to attend on the liquidator under that subsection at a meeting of creditors of the company.

…

(6A) A person who fails to comply with a notice given under this section commits an offence and is liable on conviction to the penalty set out in section 373(3).

Legislative history

13 The s 266 powers of examination have long been a feature of New Zealand company law. They were present as ss 252, 262 and 262A of the Companies Act 1955, s 214 of the Companies Act 1933, ss 210 and 211 of the Companies Act 1908, ss 210 and 211 of the Companies Act 1903 and ss 177 and 178 of the Companies Act 1882. While the language used in earlier statutes differed slightly, the effect was substantively much the same. However, the present scope of the liquidators' powers under s 261 is the product of steady extension through legislative intervention.

14 When first enacted the 1955...