Auckland Maritime Investment Limited (in liquidation)

[2014] NZHC 2317

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV-2014-404-002289

[2014] NZHC 2317

UNDER

Sections 253, 257(2), 276(1) and 284(1) of the Companies Act 1993

IN THE MATTER OF

the liquidation of Auckland Maritime Investment Limited (in liq)

BETWEEN

JEFFREY PHILIP MELTZER and LLOYD JAMES HAYWARD

Applicants

On the papers
Counsel:	CA Murphy for applicants
Judgment:	23 September 2014

JUDGMENT OF ASSOCIATE JUDGE BELL

Re Auckland Maritime Investment Ltd (in liq) [2014] NZHC 2317 [23 September 2014]

Solicitors:           Gregory Simon Law, Auckland

[1]The liquidators apply for decisions on two matters:

(a)how they should distribute the funds they hold to shareholders; and

(b)approval of their remuneration.

The liquidators applied without notice, but advised the Maritime Union of New Zealand, the majority shareholder, on a Pickwick basis. The union has taken no steps. I am satisfied in the circumstances of this case that further notice is not required. Any notice would have to go to shareholders, but it is the difficulty in identifying shareholders that has required the application.

Directions as to distribution

[2]        Auckland Maritime Investment Ltd was originally a savings and investment society under the Industrial and Provident Societies Act 1908 for what is now the Maritime Union. It was re-incorporated under the Companies Act 1993 in 1999. It ceased trading around 2002. When its liquidation was ordered in February this year, it held about $97,000 in a bank account. There are no creditors. The liquidators seek directions how they should distribute the funds among shareholders, after payment of their remuneration and expenses. They are uncertain who the shareholders are and how to trace them.

[3]        The company’s predecessor, the Auckland Maritime Investment Society Ltd, passed a special resolution for the incorporation of the company. That provided for these classes of shares:

(a)100,000 ordinary class “A” shares issued and allotted to the Auckland Branch of the Waterfront Workers Union;

(b)55,920 ordinary class “A” shares issued and allotted to the existing 932 “A” shareholders; and

(c)28,080 redeemable preference shares issued and allotted to the existing “B” shareholders.

[4]        Under the constitution, only class A shareholders are entitled to an equal share of the surplus assets. The 100,000 shares allotted to the Waterfront Workers Union are now held by the Maritime Union, following an amalgamation of the waterfront workers’ and the seafarers’ unions. It holds about 64 per cent of the “A” shares.

[5]        The liquidators’ difficulty is with the 932 “A” shareholders. They cannot find them all. They advertised in newspapers in the four main centres, but got responses from only about 169 shareholders. The Maritime Union gave the liquidators a list, but there are not 932 names on it. The liquidators point out that if they were to undertake nationwide searches for the missing “A” shareholders, they would use up all the funds. As it stands, apart from the Maritime Union, any other “A” shareholder will receive less than $30 per share. The exercise could be entirely self-defeating.

[6]        In giving directions to the liquidators, the Court’s role is to say how they may carry out their functions. Except where the Companies Act expressly gives the Court the power to relieve the liquidators from carrying out certain tasks, the Court cannot exempt the liquidators from fulfilling their duties. In particular, the Court cannot alter or extinguish the shareholders’ rights.

[7]        The standard way to identify shareholders is through the share register kept under s 87 of the Companies Act. That must state:1

…with respect to each class of shares,—

(a)  the names, alphabetically arranged, and the latest known address of each person who is, or has within the last 10 years been, a shareholder; and

(b)  the number of shares of that class held by each shareholder within the last 10 years; and

(c)  the date of any—

(i)  issue of shares to; or

(ii)  repurchase or redemption of shares from; or

(iii)  transfer of shares by or to—

each shareholder within the last 10 years, and in relation to the transfer, the name of the person to or from whom the shares were transferred.

1      Companies Act 1993, s 87(2).

The entry of a person’s name in the register as the holder of a share is prima facie evidence that they have legal title to that share.2 Liquidators may treat the registered holder of a share as the only person entitled to receive a distribution for that share.3

[8]        There is not enough evidence for me to say that the list provided by the Maritime Union is the share register required under the Companies Act. The liquidators may need to make more inquiries. I allow for both possibilities – the list either is, or is not, the register.

[9]        After their inquiries, if the liquidators believe in good faith and on reasonable grounds (for example, as a result of reliable information given by the Maritime Union) that the list is the share register, they may treat the list as the register and distribute the funds to those named in it. They will not be required to hold funds back for those not named in the register. The liquidators will be entitled to go by the shareholders’ addresses in the register. It might happen that distribution cheques sent to addresses for those named in the list are not honoured and go stale. The liquidators will not need to make further inquiries to find those shareholders. If there are surplus funds, they should be dealt with under s 316 of the Companies Act – paid into the Liquidation Surplus Account at the appropriate time.

[10]      On the other hand, if the liquidators are not satisfied that the list is the register (for example, because they are concerned that it may have been kept for some other purpose), they will need to distribute on the basis that there is no register. In that event they should assume that as well as the Maritime Union there are 932 class “A” shareholders, but that they cannot trace them all. They should distribute to those shareholders that they can identify at the time of distribution, in the proportion that they would receive should all 932 shareholders be paid out, but they are not required to make further inquiries to trace unidentified shareholders. Surplus funds will go into the Liquidation Surplus Account under s 316.

[11]      The liquidators ask to be exempted from complying with ss 253, 257 and 313 of the Companies Act.

2      Companies Act, s 89(1).

3      Companies Act, s 89(2).

[12]      Section 257 requires reporting to creditors, shareholders and the Registrar but gives the Court power to exempt. There should be no exemption from filing with the Registrar under s 257(1)(b). The matters to be disclosed under s 257(1)(a) should be a matter of public record. Moreover, the Registrar could not properly remove the company from the register unless satisfied as to the matters to be reported. There is no need to report to creditors as there are none. The liquidators are probably concerned only with reporting to shareholders, although they did not limit their application to that. They should report to shareholders whose names and addresses they know. Those are the shareholders they will have identified to make distributions. They are not required to report to shareholders whom they have not identified. Only to that extent do I exempt the liquidators under s 257(2).

[13]      Under s 253(b) the liquidators are under a duty to distribute surplus assets in accordance with s 313(4) in a reasonable and efficient manner. For this company, under s 313(4) the liquidators must distribute surplus assets to class “A” shareholders in accordance with the constitution. The Companies Act does not have any provision exempting the liquidators from complying with these requirements and I am not aware of any power to exempt. The directions I have given above are to enable the liquidators to carry out their duties, not to relieve them from complying.

[14]      I trust that what I have set out above should be sufficient, but I reserve leave to apply further if required.

Remuneration

[15]      The liquidators seek approval of their rates, retrospective approval of their remuneration for their work so far and prospective approval of their remuneration for the rest of the liquidation.

[16]      The rates they want approved are $400 plus GST per hour for a principal/contractor and $185 plus GST per hour for junior/administrative staff. Those rates of remuneration are appropriate for this insolvency practice and for the liquidation of this company.

[17]      The liquidators have provided time records of work carried out so far. To date, those charges, for approximately 36 hours’ work, come to $12,473.47 plus GST. Expenses come to $2,343.46. I am satisfied that the work has been carried out at the appropriate level of delegation, that it was properly required for the liquidation and that the time spent is reasonable. In particular I note that there have been some unusual difficulties in identifying and tracing shareholders. I approve the remuneration for work carried out until now.

[18]      The liquidators have also provided an estimate, including contingencies, for their further work in the liquidation and have made an allowance for expenses, including legal fees on this application. They propose that their overall remuneration, including expenses, be fixed at $35,717.78 and ask for it to be approved now. If approved, that would result in a distribution of $26.55 per share.

[19]      While the Court gives prospective approval of rates of remuneration, prospective approval of overall remuneration is not standard. I have not been given enough information to assess how reliable the liquidators’ estimate is. Their allowance for a contingency sum suggests that there could well be some leeway in the estimate. Furthermore, the directions I have given above may require the liquidators to go about matters differently from what they expected. For these reasons I do not give prospective approval of their remuneration for further work at this stage. Once the liquidators are about to complete the liquidation under s 249, they should file a memorandum and an affidavit setting out the further work carried out, the amounts claimed for it and an estimate for finishing off.

[20]      As with the directions as to distribution, leave is reserved to apply further if required.

Associate Judge R M Bell