Accelerating the sale process and accepting a reduced price for a business in receivership during the covid-19 national lockdown did not mean receivers PwC failed to sell for the best price; they obtained the best price reasonably obtainable in the circumstances, the High Court ruled.
Lower Hutt-based artisan cheese maker Zany Zeus Ltd was tipped into receivership by Bank of New Zealand in December 2019. Michael Matsis, director and majority shareholder of Zany had guaranteed Zany’s BNZ debt to a total of two million dollars. When sued by BNZ on the guarantee he said he was not liable; if receivers had sold the business for full value he would have had nothing to pay, he said. The business was sold for $1.8 million.
PriceWaterhouseCoopers were appointed receivers. They told the High Court Zany Zeus Ltd was put up for sale in early 2020. Business interests associated with Gerald McDougall put in the best bid at $3.5 million, but this bid was subject to substantial conditions. Before any sale was concluded, government put the entire country into lockdown. This seriously affected Zany Zeus’ profitability; about 65% of its customer base was in the hospitality sector, also forced to shut down. PwC considered closing down Zany Zeus’ operations and selling off assets piecemeal; the receivers could not continue to trade the business at what would be a continuing loss during an indeterminate lockdown. Valuers assessed Zany Zeus’ assets at some $960,000 on a break-up value.
Evidence was given that PwC then again approached Mr McDougall. After some negotiations, sale of the business as a going concern was clinched at $1.8 million, with the previously negotiated conditions dropped.
Associate judge Johnston ruled Mr Mastis was liable on his BNZ guarantee of Zany Zeus’ borrowing. This figure is yet to be finalised. The manner in which receivers concluded the sale during the covid-19 lockdown complied with their legal obligation to get the best price for assets covered by the BNZ security.
BNZ v. Matsis – High Court (19.05.21)
21.082