TTL’s liquidators seek your advice on the competing claims of TTL’s creditors and the legal basis on which each claim should be met from TTL’s assets. Advise TTL’s liquidators.
Waikato Farm Machinery Ltd (‘WFML’), is a well- established business, with the main base of its operations in Te Rapa, Hamilton. Its business is the importation and distribution of farm machinery such as tractors, loaders, diggers, bulldozers as well as farming equipment such as disc ploughs, rotovators, grain silos including machinery used by dairy farmers in milking sheds. The imported equipment is then sold at wholesale prices to smaller businesses in other centres in the Waikato and King Country regions, that on sell them to farmers. WFML has developed a formidable reputation as a supplier of such goods for at least two reasons. First, it imports machinery and equipment of the highest quality such as John Deere tractors from the United States and International Harvester tractors from Germany. Secondly, it has consistently stood by the goods it sells and efficiently attends to any difficulties experienced by retailers such as the repair of any defects. More importantly it is able to source replacement parts which are in high demand.
Tainui Tractors Limited (‘TTL’) has been in business, selling tractors to farmers in the Waikato. It began its business operations by raising a loan from Kiwibank. Kiwibank in turn took a security interest in the equipment and machinery items which TTL sold in the course of its business. Kiwibank subsequently registered a financing statement on the Personal Property Securities Register (‘PPSR’) on 23 August 2021. TTL has experienced high demand for the items of farm machinery that it sells. It wishes to source its supplies from WFML and has become aware that WFML is a reputable supplier. More importantly, WFML is willing to lend TTL the purchase price for goods it supplies to TTL. TTL purchases a total of 10 tractors from WFML. WFML and TTL enter into a security agreement and WFML registers a financing statement on 31 August 2021. The goods which TTL has ordered are eventually dispatched to TTL’s showroom on 5th September 2021. TTL continues to develop its reputation as a retailer of a variety of farm tractors. It however, also experiences a growing demand for much smaller tractors, machinery and equipment used by market gardeners. This demand has in part been caused by a shortage of produce for domestic consumption and the short supply of berries for export to North America. Horticultural Supplies Waikato Ltd(‘HSWL’) has the necessary equipment TTL needs to meet the demands of its customers. HSWL is willing to supply the goods TTL requires. The directors of HSWL are fully aware of the high volume of tractor sales made through TTL’s business. This has provided confidence to HSWL’s directors in TTL’s ability to repay any loans. TTL purchases a range of machinery from HSWL. HSWL and TTL proceed to enter into a security agreement. HSWL registers a financing statement on the PPSR on 1stSeptember 2021. The goods are delivered to TTL’s depot at Ngaruawahia on 3rd September 2021.
TTL’s directors conclude that their company’s business is prospering beyond their wildest expectations. The directors decide that TTL should expand its business by opening a branch in Tauranga to cater for its Bay of Plenty customers. TTL leases suitable premises with a showroom and outdoor display yard in an industrial zone in Tauranga. It needs to borrow funds to purchase stock for its Tauranga operations. TTL purchases more tractors from Bay of Plenty Farm Machinery Limited(‘BPFML’) and enters a security agreement with BPFML. The tractors are supplied to TTL’s Tauranga depot on 10 September 2021. BPFML registers its financing statement on 11 September 2021.
There is an unexpected downturn in economic activity in the Waikato and Bay of Plenty regions. This has a significant impact on TTL’s ability to make repayments on its loans. The ability of TTL to seek further funding to finance its operations is seriously limited due to its existing high indebtedness. TTL’s directors decide that the most prudent course to adopt is to place TTL in voluntary liquidation.
TTL’s liquidators seek your advice on the competing claims of TTL’s creditors and the legal basis on which each claim should be met from TTL’s assets.
Advise TTL’s liquidators.
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