Facing possible sale of ancestral land, Pessiman Te Whata attempted to use the Companies Act voluntary administration procedure not to benefit creditors but to thwart them. He was unsuccessful.
Shearing Services Kamupene Ltd is in liquidation owing Inland Revenue $4.3 million. Liquidators sued related company Tarahau Farming Ltd to recover loans made by Shearing Services between 2013 and 2016. Mr Te Whata is a director of both companies. Tarahau currently owes Shearing Services about $232,500.
Tarahau’s main asset is a dry stock farm south of Kaikohe, situated on land historically associated with Mr Te Whata’s hapu. This land is currently mortgaged to ANZ Bank. It is at risk of a forced sale by Shearing Services’ liquidators seeking to recover the $232,500 debt.
In response, Mr Te Whata unilaterally put Tarahau Farming Ltd into voluntary administration. Companies Act voluntary administration procedures provide a breathing space for businesses in financial difficulty. A short-term moratorium is imposed on creditor claims, allowing an independent administrator to take stock of company prospects.
In court, Mr Te Whata claimed he was acting under authority of his hapu’s marae which had issued orders cancelling all tax debts owed by Tarahau Farming and had further cancelled ANZ rights as secured creditor. Tarahau’s voluntary administration blocked attempts by Shearing Services liquidators to recover the $232,500 debt owed by Tarahau Farming, he said.
The Court of Appeal ruled Tarahau Farming was not in voluntary administration. Companies Act rules had not been followed; there had been no resolution by Tarahau directors as required to initiate voluntary administration and the person appointed as administrator was not qualified to act as such.
Shearing Services Kamupene Ltd v. Tarahau Farming Ltd – Court of Appeal (26.5.23)
23.079