Background
McDonald Vague partners have been appointed receivers on a number of major appointments, including the recent receivership of Tawera Land Company Limited "TLC". This is an entity owning millions of dollars of farmland associated with bankrupt businessman Ken Thurston.
Mr Thurston (formerly a director of 14 other companies) had a rocky financial period which reached its climax in October 2010 when he was adjudicated bankrupt. Since then a number of his companies have failed.
TLC owned and operated significant land holdings in the Manawatu and Taumarunui regions comprising 15,000 acres. Over the past six months, our Agri-Business team has managed the farming operations which include a dairy farm as well as sheep and beef farms.
One significant event was the successful sale of the Manawatu land blocks to Landcorp Farming Limited who intend to continue the sheep and beef farming operations. Since the start of the receivership McDonald Vague has realised approximately $27 million worth of property for the secured creditor.
Receivership issues
As is the case with many receiverships, we have managed our way through a thorny path of issues including:
- Livestock disputes as regards ownership and security interests therein
- A dispute over neighbouring claims to an airstrip
- Employee claims to pre-receivership wages and holiday pay
- Asset disputes, in particular the right of family members to funds they advanced towards the purchase of a company stocktruck and trailer. There was no loan document drawn up, no security document had been completed and no financing statement had been registered over the truck and trailer. The financial accounts of the company remained incomplete and so were not of any assistance in helping to determine the true owner
- Four subdivision projects partially completed at the date of appointment
- A contractual dispute with a neighbour in which the neighbour had purchased a small block of land from TLC and claimed that as a condition of sale, TLC were required to complete boundary fencing, which had not been done
- A contractual dispute with another neighbour who purchased a farm house. It was alleged that as a condition of the sale TLC were required to install a separate power supply to the property, which had not been done
- The rights of a metal contractor to enforce his three year contract with TLC for metal extraction
- The rights of contractors to barley crops they had planted
The most important point arising from many of these disputes was that the contracts were invariably made with TLC and not the Receivers. The obligation on the Receivers was to either adopt the contracts (if of ongoing value) or novate them. In the majority of the situations listed above, we (as receivers) made it clear that we would not adopt the contracts and therefore no liability attached to the Receivers.
PPSR and creditors
A key issue we continually encountered was the failure of other parties to safeguard their financial position by registering a security interest on the Personal Property Securities Register (PPSR) over financial advances they had made to TLC (for example: the stock truck and trailer, and the crops sown by contractors). Because no PPSR registration was made, all potential security interests given to these parties became subordinate to the interests of the registered secured creditor(s).
In this particular receivership it is highly unlikely that there will be any funds available to pay unsecured creditors. The above mentioned parties that advanced funds to TLC will now miss out altogether when some of them could have been in a position to receive something. This shows the importance of always ensuring that whenever funds are loaned to another entity, a proper loan agreement is drawn up, signed and a security interest registered on the PPSR. This may take more time at the beginning of an agreement, but in the event of a receivership, liquidation or other financial dispute it will have been time well spent.
Boris van Delden was the appointed Receiver on this appointment. For more information on McDonald Vague's Agri-Business expertise please visit the Agri-Business page.
DISCLAIMER
This article is intended to provide general information and should not be construed as advice of any kind. Parties who require clarification on issues raised in this article should take their own advice.