Receiver appointed to Gisborne forestry joint-venture

Tuesday, 25 February 2025

Troubled company due in Environment Court next month

A forestry joint venture operating in Gisborne has had a receiver appointed.

A company that was part of the joint venture applied to have a receiver appointed. The application was opposed by some shareholders who claimed it was a bid to avoid disclosing financial information.

Justice Geoffrey Venning said it was clear the opposing parties would never reach agreement and a receiver would determine if there had been any mismanagement and if any further steps were necessary.

A receiver has been appointed to a forestry joint venture tied up in the Environment Court for its alleged failure to remove large amounts of slash and debris from a forest in the Gisborne/Tairāwhiti area.

The receiver was appointed to Samnic Waingaromia Forest Joint Venture.

Samnic Forest prospectus from the early 1990s.

The joint venture is comprised of Samnic Forest Management Ltd (SFM) and 20 shareholder companies, set up in 1993, with investors told they would get a returns of $1.3 million on an investment of $80,000. The returns did not materialise, with some 100 investors instead losing $50,000.

SFM and its directors are due in the Environment Court next month to oppose an application by Gisborne District Council for enforcement orders that would require them to address the threat posed by forestry slash and debris left on a 940 hectare block in the hills near Tolaga Bay.

Disputes over misleading promises and attempts by some shareholders to sell the forest have been going on for years.

Scenes at Samnic Forest observed by Gisborne District Council officers during an inspection on October 14, 2024.

In September last year, SFM’s directors applied to the High Court to put the joint venture into receivership.

The company said the disgruntled shareholders had persuaded its bank to freeze its accounts and that dispute resolution was unlikely, and the appointment of a receiver was “the last resort”.

There was $600,000 in the accounts that could be distributed to shareholders after fees and receivership costs had been paid, the company said.

The 940hectare Samnic Forest is in the hills west of Tolaga Bay, in Gisborne Tairawhiti.

Shareholders representing nine of 20 shareholder companies in the joint venture opposed the application.

They said SFM had failed to convene Annual General Meetings of the joint venture as required, had failed to provide financial statements for the past three years, had charged investors excessive fees and said the deadlock was the result of the company’s own acts or omissions.

The shareholders said the joint venture was not at a stage of “last resort” and a receiver should not be appointed.

Justice Geoffrey Venning noted that while logging operations in the forest had been completed in February 2022, the final distribution of the $600,000 (less the costs of winding up) hadn’t been distributed to shareholders because some shareholders had alleged negligence against the joint venture’s auditor, meaning the final audit couldn’t be completed.

These shareholders, who opposed the receivership application, told Venning that SFM had no standing to make the application as it was not a creditor and was not insolvent.

Justice Geoffrey Venning heard an application to put the joint venture - including SFM and the shareholder companies - into receivership.

They said intervention by the court was not necessary, and any deadlock in the joint venture’s operation was caused by SFM.

Justice Venning found that SFM did have a standing to apply for receivership.

He said it was clear that the company and the shareholders would “never agree at any future meeting” and there was nothing to suggest that would change.

Venning noted that the shareholders felt strongly that there had been mismanagement and said “if that is ultimately correct, then an independent and objective receiver would be able to identify that and take whatever steps may be necessary”.

He said it was in all parties interests to bring the impasse to an end and it was appropriate to appoint a receiver.

Simon Dalton was appointed as receiver of the joint venture.

Meanwhile, SFM and its directors were due to appear in the Environment Court next month.

In August last year, SFM was fined $91,000 for offending in the 940 hectare Samnic Forest, on steep erosion-prone hills inland of Tolaga Bay. The fine was paid by the company’s insurer.

In November last year, SFM and its directors Richard Hayes, Scott Funnell and Gavin Fortune were issued abatement notices by the council for failure to remove large amounts of slash and debris from the forest, which run the risk of damaging properties, roads and bridges near Tolaga Bay.

Landowner Woodlett Investments Ltd was also issued an abatement notice.

SFM and its directors appealed the notices, saying possession and responsibility of the forest had been “handed back” to Woodlett in 2022.

The council opposed the appeal, but noted that it would be applying for enforcement orders against the company and directors, and would agree to a short stay of proceedings due to the environmental risks presented by the forest.

The abatement notices have been stayed by the Environment Court until March 31.

The council has recently applied for enforcement orders against the company and directors. This application would be heard in late March.

An enforcement order is an order made by the Environment Court to compel a person to comply with a resource consent.

Unlike an abatement notice, which requires an offender to take or stop actions within a certain time, an enforcement order is heard by the Environment Court, which can direct an offender to pay costs associated with the need to “avoid, remedy or mitigate” damage to the environment.

An earlier version of this article stated it was Samnic Forest Management Ltd that had been put into receivership. This was incorrect. It was Samnic Waingaromia Forest Joint Venture was put into receivership. (Amended 9.30am, February 25, 2025)