Body Corporate 368533 v Registrar of Companies

[2018] NZHC 2786

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2018-485-457 [2018] NZHC 2786

UNDER

sections 329(2)(a)(ii) and 392(2)(c) of the

Companies Act 1993

IN THE MATTER

of an application for an order that Holmes Fire and Safety Limited (Removed) be restored to the Companies Register

BETWEEN

BODY CORPORATE 368533
Applicant

AND

REGISTRAR OF COMPANIES First Respondent

AND OTHERS

Second to Sixteenth Respondents

Hearing:	24 October 2018
Appearances:	Mr Graham Kohler QC for applicant No appearance by or for any respondent
Judgment:	30 October 2018

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]      The applicant, Body Corporate No. 368533, seeks an order pursuant to s 329 of the Companies Act 1993 restoring a former company, Holmes Fire and Safety Ltd (which was removed from the register in October 2014), to the register and ancillary orders.

[2]      The proceeding was commenced by originating application on 20 June 2018. On commencement, orders for directions were sought and in a minute dated 9 July

BODY CORPORATE 368533 v REGISTRAR OF COMPANIES [2018] NZHC 2786 [30 October 2018]

2018 I directed that the application be served on the respondents and on four Lloyd’s syndicates said to have been the insurers of Holmes Fire and Safety.

[3]     With one exception, there is evidence of service being effected on the respondents and the Lloyd’s syndicates (the exception is the 14th respondent who has apparently died, but whose estate is represented).   I am satisfied that all of the respondents and the Lloyd’s syndicates have received notice of this application.

[4]      Only the Lloyd’s syndicates have filed a notice of opposition.  Their notice of opposition – originally filed on 27 July 2018 but amended on 24 August 2018 – is unsupported by affidavit evidence.  No memorandum was filed and served on behalf of the Lloyd’s syndicates for the hearing, and they did not appear through counsel.

[5]      The Court also has a memorandum from a Mr James Thompson who is apparently General Counsel for Holmes Group Ltd.  Homes Group was the parent company of Holmes Structures Ltd and Holmes Fire and Safety (before it was struck from the register).  All three Holmes entities are cited as parties in the substantive proceeding. Mr Thompson’s memorandum purports to have been filed and served on behalf of Holmes Fire and Safety. Plainly it cannot have been. Mr Thompson may be speaking for the former shareholders and directors. In his memorandum he expressly says that the party or parties for whom or which he is speaking do not oppose the plaintiff’s application.  But he asks the Court to have regard to certain matters.

[6]      I regard this application as being unopposed and accordingly propose to deal with it briefly.

[7]      The background is a proceeding by the applicant, Body Corporate No. 368533, against the Napier City Council and thirty four other defendants (including the Holmes entities already mentioned and the four Lloyd’s syndicates) in relation to a multi-unit complex in Napier.  In the substantive proceeding, the applicant (there the plaintiff of course) seeks to recover damages in relation to alleged defects in the building.  The applicant purported to join Holmes Fire and Safety in September 2016. At that stage, it was unaware that the company had earlier been struck from the register.  It became

aware of this when it attempted to serve Holmes Fire and Safety, which of course it was unable to do.

[8]      Subsequently, the applicant also became aware that both Holmes Structures and Holmes Fire and Safety carried insurance through the agency of a company by the name of Dual New Zealand Ltd, the underwriters being the four Lloyd’s syndicates. It took steps to join both Dual and the four Lloyd’s syndicates, which are now, respectively, the 17th and the 32nd–35th defendants in the substantive proceeding.  I am informed that the applicant’s claim against Dual is likely to be abandoned.  Its claim against the four Lloyd’s syndicates is made pursuant to s 9 of the Law Reform Act 1936, under which provision the plaintiff asserts a direct claim against them.

[9]      However, the plaintiff perceives that in order to pursue that claim it must have

Holmes Fire and Safety restored to the register.

[10]     That then is the fundamental purpose of this application.

[11]     In addition to that, the applicant seeks orders:

(a)granting  it  leave  to  commence  this  proceeding  by  originating application pursuant to pt 19 of the High Court Rules 2016;

(b)pursuant to r 5.73 of the High Court Rules, extending the time for service of the originating documentation on Holmes Fire and Safety that could not be served at the time the plaintiff attempted to join Holmes Fire and Safety because it did not exist;

(c)       a further order expressed in these terms:

Confirming that, on the restoration of Holmes Fire to the register of companies, the High Court proceedings: CIV: 2012-441-126 … are deemed to have been brought against Holmes Fire on 1 September

2016.

Leave to apply

[12]     Applications  pursuant  to  s  329  are  conventionally  brought  by  way  of originating application and I can see no reason for declining the application to do so in this case.

[13]     I make an order granting leave to the applicant to commence this proceeding pursuant to pt 19 of the High Court Rules.

Restoration

[14]   Mr Kohler QC helpfully took me through the principles that apply to applications under s 329.

[15]     Given that the application is unopposed, I do not propose to set out those principles in detail.

[16]     The applicant here relies on s 329(1)(a)(iv) and (1)(b), which confer on the Court a discretion to restore a company to the register if satisfied that at the time the company was removed the applicant was a creditor of the company or for any other reason it is just and equitable to do so.

[17]     Mr Kohler referred me to the leading case of Re Saxpack Foods Ltd1 in which Hammond J identified the key principles to be applied under the Companies Act 1955 and Associate  Judge  Bell’s  judgment  in  Wellington  City  Council  v  Registrar  of Companies2.

[18]     In   relation   to   s   329(1)(a)(iv)   the   essential   issue   was   identified   by Associate Judge Bell in Wellington City Council v Registrar of Companies in the following terms:3

An application to restore a company to the register is not the occasion for a thorough examination of the merits of the applicant’s claim. The process is a relatively summary one.  The cases show that the merits of claims are rarely

1      Re Saxpack Foods Ltd [1994] 1 NZLR 605 (HC).

2      Wellington City Council v Registrar of Companies [2015] NZHC 572, [2015] 3 NZLR 411 at

[97]–[98].

3      At [104] (footnote omitted).

subject to in depth scrutiny.  In some cases the courts check that claims will

not be statute barred.  That aside, as long as the applicant appears to have a genuine case (as opposed to one that is frivolous, vexatious or without merit), which it is pursuing in good faith, the courts have not required an applicant to prove more.

[19]    The plaintiff’s claim against Holmes Fire and Safety, and through it its underwriters, is not without its complications.

[20]     Obviously, there are the issues that will arise between the plaintiff and Holmes Fire and Safety as to whether the former is able to make out its allegations of negligence and link any negligence to recoverable losses.  Even if the plaintiff were able to establish a valid claim against Holmes Fire and Safety, it will also have to establish that that company had a claim against its underwriters before it can obtain any advantage from s 9 of the Law Reform Act.

[21]     The first limb of the claim raises a number of difficult factual, technical and legal issues (as all such claims do), including whether the claim is time barred.  The second limb raises equally difficult issues as to whether the policy responds. It would be inappropriate for me to enter into a discussion of the merits of those issues in this judgment.

[22]     I am, however, satisfied that the plaintiff can at least establish a genuine case that is not entirely lacking in merit and certainly is not frivolous or vexatious, and that it is pursuing that claim in good faith.

[23]     Turning to s 329(1)(b), Mr Kohler referred me to three of the principles that emerged out of Re Saxpack Foods Ltd, namely:

The countervailing public and private disadvantages to the applicant in the public must be identified and assessed.

The length of time which has elapsed since the striking off is a relevant factor. The usual judicial principle is that a party must act timeously upon becoming possessed of the necessary knowledge that an application for restoration could or should be made. This is the normal equity principle.

An order can be made on terms.

[24]     In  relation  to  these  points  Mr  Kohler  submitted  that  the  restoration  of Holmes Fire and Safety was consistent with the remedial intention of s 9 of the Law Reform Act, which he submitted, correctly, was intended to provide a means of protection for those who have claims against an insured by providing for direct recovery of insurance proceeds.

[25]     Mr  Kohler  summarised  the  argument  advanced  for  the  plaintiff  under s 329(1)(b) in the following terms:

Restoration of Holmes is consistent with the purpose of s 9 of the LRA.

The underwriters saw fit to insure a company that had already ceased trading and been removed from the Companies register. They clearly intended that a claim could be made against Holmes Fire notwithstanding its removal and willingly assumed the risk of a claim being made against a removed company. In doing so, they presumably contemplated that restoration was possible.

The disadvantage to  the Body Corporate could be the inability to  have recourse to the insurance proceeds.   The competing disadvantage to the Underwriters is the obligation to pay the insurance proceeds.  However the Underwrites assumed the risks associated with insurance of Holmes Fire and presumably received fair payment of such risk.  Put simply, the Underwriters chose to insure a removed company and they should not avoid the consequent liability on the grounds that the company was removed.

The Underwriters were possessed with all information relevant to the claim in August 2016.  There is no disadvantage to the Underwriters because of any delay in restoration of Holmes Fire.

Dual and/or the Underwriters deferred providing information to the Body Corporate as to the availability of insurance proceeds until March 2018, despite requests for information from 2016.

When the Body Corporate became aware that there was a responding policy it took steps in a timely manner to apply for restoration of Holmes Fire.

[26]     Broadly, I accept that argument and conclude that the merits of the situation justify an order for restoration on just and equitable grounds.

[27]     In the absence of opposition, on those broad bases, I am prepared to make the order pursuant to s 329 of the Companies Act restoring the company formerly known as Holmes Fire and Safety Ltd to the register.

The two remaining ancillary orders

[28]     I can see no legitimate objection to an order pursuant to r 5.73 extending the time to serve the originating documentation on Holmes Fire and Safety.

[29]     The underwriters, and for that matter all of the other parties to the substantive proceeding have been aware of the plaintiff’s intention to make this application for an order restoring the company to the register since it purported to join Homes Fire and Safety as a party in September 2016.   It is impossible to imagine that the former shareholders and directors of Holmes Fire and Safety were not also aware of this well before this application was commenced and the papers served on them.

[30]     Accordingly, as sought by the plaintiff, I will make an order extending the time for service on the restored company for one month from the date of this judgment.

[31]     The  order  sought  by  the  plaintiff  to  the  effect  that,  on  restoration  of Holmes Fire and Safety to the register, the proceeding will be deemed to have been brought against the company on 1 September 2016 (the date on which the plaintiff gave notice of proceedings purporting to join the company in the substantive proceeding) is another matter.

[32]     Mr Kohler submitted that s 330 of the Act ought to have that effect because subs (2) of that section provides that:

A company that is restored to the New Zealand register shall be deemed to have continued in existence as if it had not been removed from the register.

[33]     He said that this ancillary order was sought out of an abundance of caution to prevent the argument arising that the filing of proceedings against Holmes Fire and Safety was ineffective because the company had been struck off.

[34]     He went on to refer me to a number of authorities in which orders of that sort had been made pursuant to s 329(4).  Mr Kohler accepted that those cases all arose in different circumstances from the present.

[35]     In this case, the Court is dealing with the discrete issue of the restoration of the company to the register. It is clear that when the substantive case proceeds to trial the claim against Homes Fire and Safety will be met with an argument that it is time barred.  As I see it the plaintiff’s claim against Holmes Fire and Safety is either time barred or it is not. It seems to me that that issue is not one that I should, in this satellite proceeding, seek to pre-empt. In other words, the view I take is that it is a matter that should be resolved one way or another in the context of the substantive trial.

[36]     For that reason, I decline to make this ancillary order.

Costs

[37]     As  Mr  Kohler  said  in argument,  the  plaintiff was  required to  make  this application for its own purposes. There was no substantive opposition.

[38]     In those circumstances, I do not regard it as appropriate to make any costs orders against any of the other parties.

Conclusion

[39]     In summary then:

(a)I grant the applicant leave to commence this proceeding by originating application under pt 19 of the High Court Rules;

(b)      I make an order pursuant to s 329 of the Companies Act 1993 restoring

Holmes Fire and Safety Ltd to the register;

(c)I make an order extending the time in which the plaintiff is to serve Holmes Fire and Safety Ltd for one month from the date of this judgment;

(d)      There will be no order as to costs.

Associate Judge Johnston