Brand v Registrar of Companies
[2018] NZHC 3148
•30 November 2018
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2015-485-000621
[2018] NZHC 3148
BETWEEN DUNCAN CLEMENT BRAND
Appellant
AND
REGISTRAR OF COMPANIES
Respondent
Hearing: 23–26 July 2018 Appearances:
M Kersey and N L Walker for Appellant R S May and T G Bain for Respondent
Judgment:
30 November 2018
JUDGMENT OF CULL J
TABLE OF CONTENTS
INTRODUCTION AND BACKGROUND 1
Factual background 6
HC partnership 8
Aorangi 13
Trust Management 15
Forresters 16
Events from 2006 17
Statutory management and subsequent events 20
Nature of the appeal 32
Grounds of appeal 34
Relevant law 36
FIRST STAGE OF INQUIRY: QUALIFYING STATUS OF COMPANIES 48
Insolvency is not a prerequisite 50
Analysis 56
Conclusion 65
SECOND STAGE OF INQUIRY: CAUSAL CONNECTION BETWEEN MISMANAGEMENT AND QUALIFYING COMPANY STATUS 69
Was there mismanagement of the three companies? 75
Findings on mismanagement of Forresters and Trust Management 76
Mr Brand’s position 78
Analysis 84
Findings of mismanagement of Aorangi 91Mr Brand’s position 93
Analysis 95
Was there a causal connection between mismanagement and statutory management? 102
BRAND v REGISTRAR OF COMPANIES [2018] NZHC 3148 [30 November 2018]
Forresters and Trust Management 104
Aorangi 108
The introduced assets 112
Serious Fraud Office interview 122
Analysis of director’s duties breaches 128
Aorangi operating in breach of the Securities Act and the Financial Reporting Act 130
Failure to maintain proper accounting records 139
Failing to exercise care, diligence and skill 143
Alleged misrepresentations to investors 153Allegation of failure to manage or supervise the affairs of Aorangi 160
Analysis 163
Conclusion 169
THIRD STAGE OF INQUIRY: DISCRETION TO PROHIBIT 170
Legal principles 177
The purpose and focus of s 385 179
The Deputy Registrar’s exercise of discretion 181
The principle error 188
Statutory purpose in imposing prohibition 192The risk to the public 194
Inconsistent findings 200
Mr Brand’s role in the companies 204
Analysis 216
Mr Brand’s role in the wind-down of Aorangi 219
Rescue culture 232
The “loan” misunderstanding 235
Section 385 provides a simple and swift process 237
Conclusion 240
FOURTH STAGE OF INQUIRY: THE TERM OF PROHIBITION 244
Breach of natural justice allegations 250SUMMARY OF CONCLUSIONS 251
Result 254
INTRODUCTION AND BACKGROUND
[1] Mr Brand appeals a decision of the Deputy Registrar of Companies under s 385 of the Companies Act 1993 (the Act) prohibiting him from being a director for four years.
[2] Mr Brand was the director of three companies, which were closely associated with the late Allan Hubbard, the former director of South Canterbury Finance Ltd (SCF). Following a complaint from an investor of one of the companies, Aorangi Securities Ltd (Aorangi), the Registrar of Companies commenced an investigation and recommended to the Securities Commission that Aorangi was being operated recklessly and fraudulently.
[3] In June 2010, Aorangi was placed in statutory management, following the Securities Commission’s recommendation to the Minister. Three months later, the two
further companies of which Mr Brand was a director were also placed under statutory management.
[4] Five years after the imposition of statutory management, the Deputy Registrar of Companies (Deputy Registrar) prohibited Mr Brand from being a director or promotor of a company, or being concerned in or taking part in the management of a company for four years (the Decision).1 Mr Brand appeals that Decision. Mr Brand submits the Decision should be set aside, or alternatively, a lesser period of prohibition should be imposed.
[5]The issues for determination in this appeal are:
(a)Did the Deputy Registrar err by finding that it was reasonable to place the companies into statutory management, thereby making them qualifying companies under s 385 of the Act?
(b)Did the Deputy Registrar err in finding that the mismanagement of the companies was a contributing factor to the qualifying status of the companies under s 385 of the Act?
(c)Did the Deputy Registrar err in exercising his discretion to impose a prohibition on Mr Brand from being a director under s 385(4)(b)(ii) of the Act?
(d)If not, was the imposition of the four year prohibition period appropriate in the circumstances?
Factual background
[6]Mr Brand is a former director of three companies:
(a)Aorangi Securities Ltd (Aorangi);
1Section 385 Companies Act 1993 – Duncan Clement Brand Final Minute of Deputy Registrar of Companies, 20 July 2015 [Decision].
(b)Forresters Nominee Company Ltd (Forresters); and
(c)Hubbard Churcher Trust Management Ltd (Trust Management).
[7] Mr Brand is a chartered accountant. He started working at Hubbard Churcher and Co (HC partnership) in November 1982. In April 1986, he became a partner of HC partnership and has continued to act as a principal of the firm for 32 years. Mr Brand was also a director of several other companies, which were related to his accounting practice or his family and friends.
HC partnership
[8] Mr Hubbard was a partner in the HC accountancy partnership and Mr Brand became a partner on 1 April 1986. At the time he entered the partnership, Aorangi and Forresters had already been incorporated.
[9] HC partnership is based in Timaru and is the largest accounting firm there, serving many local businesses in South Canterbury and the wider region. The structure and operations of HC partnership have evolved since it was formed. When Mr Brand joined, it was Hubbard Churcher and Co partnership. In 2009, when Mr Hubbard resigned, the partnership was restructured into a company, called HC Partners Ltd. In 2011, it became a limited partnership, HC partnership. In this decision, it will be referred to simply as HC partnership.
[10] Mr Hubbard was actively involved in various businesses as a director and investor, often involving HC partnership, which provided financial management advice, administration and compliance services. HC partnership has reverted to being a traditional accounting practice and has moved away from its previous involvement in the administration and secretarial roles of entities associated with Mr Hubbard. Since 2010, HC partnership has not operated or been involved with a business similar to Aorangi.
[11] HC partnership has one general partner, HC Accounting Ltd.2 HC Accounting is responsible for the management of the limited partnership. Mr Brand, because of his prohibition, cannot be a director of HC Accounting, the burden for which falls on his fellow partners. As one of the partners is ill, the partnership wants Mr Brand to return to work.
[12] There are various companies related to Mr Hubbard. The companies in issue in this case are those where Mr Brand was a director, namely Aorangi, Forresters and Trust Management.
Aorangi
[13] Aorangi was incorporated in 1974. Mr Brand was appointed a director of Aorangi when he became a partner of HC partnership in 1986. He continued as a director until his resignation in June 2009, just over a year before statutory management of the company was imposed. Other partners of HC partnership were also directors of Aorangi during this time. Mr Hubbard was a director of Aorangi until his death on 2 September 2011, including during the period of statutory management.
[14] At the time of Mr Brand’s appointment, Aorangi was a small contributory mortgage company, operated as part of the HC partnership accountancy practice. Aorangi expanded and diversified its investments, extending beyond first mortgage advances. Mr Hubbard primarily undertook these activities on a daily basis.
Trust Management
[15] Trust Management was incorporated in 1986 to be an independent trustee for family trusts associated with the HC partnership practice and to act as bare trustee owner of investments held on behalf of clients of Mr Hubbard. It never entered into
2HC partnership has five limited partners, all of which are registered companies in New Zealand. Unlike HC Accounting, the general partner, the limited partners cannot be involved in the management of HC partnership. The shareholders of those partner companies are trusts with corporate trustee companies. In relation to Mr Brand’s practice, DCB Accounting Ltd is the partner company; the directors of DCB are Mr Brand’s wife, Mrs Carole Brand, and his fellow HC partnership partners, Mr Copland and Mr Wolffenbuttel; DCB Trustee Ltd (as trustee of the DCB Accounting Trust) is the shareholder of DCB; and Mrs Brand is the sole director of DCB Trustee.
any financial transactions on its own account. Mr Brand was appointed as a director on its incorporation.
Forresters
[16] Forresters was incorporated in 1981 to be a nominee owner of assets held on behalf of clients of HC partnership. It also held assets as a bare trustee, and never entered into any financial transactions on its own account.
Events from 2006
[17] On 12 December 2006, the partners of HC partnership raised with Mr Hubbard the need for guarantees in respect of funds received by Mr Hubbard in the Hubbard Managed Funds (HMF) or Aorangi/Forresters. Mr Hubbard said he would ensure that partners were protected against claims, extending to his trustees in the event of his death. The concern arose because statements were issued in the firm’s name and referred to “funds with Hubbard Churcher and Co”. Mr Hubbard was in discussions to transfer the share portfolio to another fund management service. The partners recorded that investments should not be held in the name of Trust Management, as it was “supposed to be a bare trustee company, with no assets.” Mr Hubbard advised that this would also “be tidied up on transfer of the HMF portfolio.”
[18] On 22 March 2007, the HC partners discussed the operation of Aorangi, which they recorded in their partnership minutes, as appearing “to contravene ICANZ rules related to handling of client funds, and also the Securities Act and Regulations re the taking of deposits without a prospectus.” The partners unanimously resolved that they did not wish to continue ownership of Aorangi, nor take an equity position in the future reorganisation of the company, as Mr Hubbard proposed, and did not want to accept the ongoing liability in respect of the company’s past or future activities, either through ownership or directorship. Guarantees were to be sought and obtained from Mr Hubbard to include an indemnity in respect of the company’s past operations, with a view to the current directors resigning and the shares in Aorangi being sold to new owners.
[19]On 19 June 2009, Mr Brand resigned as a director of Aorangi and Forresters.
Statutory management and subsequent events
[20]The three companies were placed into statutory management in 2010.
[21] On 28 February 2010, the Securities Commission received an anonymous complaint from an Aorangi investor.
[22] On 15 March 2010, Aorangi received a letter from the Securities Commission advising of the received complaint, that Aorangi had been making offers of securities to the public but had not registered a prospectus or provided investors with an investment statement as required under the Securities Act 1978. The Securities Commission asked Aorangi to provide a full description of its lending and borrowing activities, together with other related information.
[23] On 4 June 2010, the Registrar of Companies appointed four people to conduct an investigation of Aorangi, Forresters and a number of charitable trusts.
[24] On 8 and 9 June 2010, the investigators visited Timaru and interviewed Mr Hubbard.
[25] On 18 June 2010, the Registrar reported to the Securities Commission that Aorangi was in serious financial difficulty and had been trading recklessly and fraudulently in breach of the Securities Act, Financial Reporting Act 1993, the Companies Act and possibly the Crimes Act 1961. The report ran to 489 pages, including appendices. Aorangi was placed into statutory management following a recommendation from the Securities Commission. The Commission also recommended that various charitable trusts and Mr and Mrs Hubbard personally, be placed under statutory management.
[26] On 20 June 2010, the Securities Commission recommended to the Minister that statutory management be imposed on Aorangi and Mr and Mrs Hubbard.
[27] Three months later, on 20 September 2010, Forresters and Trust Management were also placed under statutory management, after the statutory managers of Aorangi formed the view that these companies were the corporate vehicles for HMF, which
was discovered during the statutory management of Aorangi. The statutory managers of Aorangi believed HMF was an unincorporated scheme operated in Mr Hubbard’s own name and controlled by him. The scheme appeared to have received approximately $80 million from the public by way of investment, with the vast majority doing so, without clear investment instructions or giving investment authorities to Mr Hubbard. The rationale for placing Forresters and Trust Management into statutory management was to provide the statutory managers with the control they needed to protect and manage the investments in HMF.
[28] Mr and Mrs Hubbard brought judicial review proceedings regarding the imposition of statutory management on them personally. The Serious Fraud Office (SFO) conducted an investigation and announced, on 20 June 2011, that charges would be laid against Mr Hubbard. On 2 September 2011, before the judicial review hearing, Mr Hubbard died. In late 2011, the Hubbards were released from statutory management. On 18 September 2014, Aorangi was released from statutory management, as were Forresters and Trust Management on 24 December 2015. Forresters and Trust Management had no creditors, as they had not entered into transactions on their own account. Creditors of Aorangi were paid 99.037 cents on the dollar, after statutory management fees and expenses of approximately $12.7 million.3
[29] On 25 July 2013, the Ministry of Business, Innovation and Employment (MBIE) gave notice to Mr Brand that it was considering referring him to the Registrar for a prohibition decision, under s 385 of the Act. MBIE produced an undated prohibition report to the Deputy Registrar of Companies. Mr Brand disputed the extent of disclosure made by MBIE, as it had withheld several documents. That dispute had not been fully resolved by the time Mr Brand’s case was referred to the Deputy Registrar. Mr Brand filed an interlocutory application for discovery against MBIE, but it was declined in this Court on 9 December 2016.4
[30] On 9 March 2015, the Deputy Registrar issued a minute (the interim minute) noting the disclosure dispute, but recording that this was not a barrier to matters
3During this hearing, Mr Brand’s counsel confirmed that creditors were paid their capital and interest (some investors elected to capitalise interest owed) for the relevant periods on their investments.
4 Brand v Registrar of Companies [2016] NZHC 2983.
proceeding further. The Deputy Registrar noted that no material was before him that had not been disclosed to Mr Brand. This decision was confirmed in a later minute (the supplementary minute).
[31] On 20 July 2015, the Deputy Registrar issued his Decision and, exercising the power under s 385 of the Act, he prohibited Mr Brand from being a director or taking part in the management of any company for four years.5 The prohibition period is due to expire in July 2019.
Nature of the appeal
[32] The Deputy Registrar’s decision was made under s 385 of the Act. It is common ground that s 370 of the Act provides for a general right of appeal to this Court.6 Section 370 provides:
370 Appeals from Registrar’s decisions
(1)A person who is aggrieved by an act or decision of the Registrar under this Act may appeal to the court within 15 working days after the date of notification of the act or decision, or within such further time as the court may allow.
(2)On hearing the appeal, the court may approve the Registrar’s act or decision or may give such directions or make such determination in the matter as the court thinks fit.
[33] The established principles from the Supreme Court’s decision in Austin, Nichols & Co Ltd v Stichting Lodestar apply.7 The appellant bears the onus of satisfying the appellate court that its decision should differ from that under appeal.8 The appellate court is entitled to its own assessment of the merits of the case. The weight which is given to the reasoning of the body below is a matter for the Court’s assessment.9
5 Decision, above n 1.
6 Mani v Registrar of Companies [2016] NZHC 3002, (2016) 11 NZCLC 98-048 at [5]; and
Davidson v Registrar of Companies [2011] 1 NZLR 542 (HC) at [84].
7 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16].
8 At [4].
9 At [5]; and Davidson, above n 6, at [84].
Grounds of appeal
[34]In broad terms, Mr Brand says the Deputy Registrar:
(a)misapplied s 385(1)(e) of the Act, by failing to assess the solvency of the companies at the time that statutory managers were appointed;
(b)misdirected himself as to the appropriate burden of proof and framework within which his decision should have been made;
(c)erroneously purported to make findings that the companies were qualifying companies for the purpose of s 385(4)(a);
(d)erred in fact and in law in finding that the companies were mismanaged at all;
(e)when exercising his discretion under s 385(4)(b), the Deputy Registrar:
(i)was exercising his discretion with a predetermined outcome in mind;
(ii)took into account irrelevant considerations and failed to take account of relevant considerations; and
(iii)failed to meet minimum standards of natural justice; and
(f)the length of the four year prohibition was unjust and inequitable.
[35] Mr Brand contends that he behaved appropriately, sought to address any risks arising in relation to Aorangi’s management and is not a risk to the public. He submits the companies were not mismanaged.
Relevant law
[36]The critical provision is s 385 of the Act, which is set out in full in Appendix
1. The definition of a qualifying company for the application of the section is contained in subss (1) and (2), although this case concerns subs (1), which provides:
385Registrar or FMA may prohibit persons from managing companies
(1)This section applies in relation to a company—
(a)that has been put into liquidation because of its inability to pay its debts as and when they became due:
(b)that has ceased to carry on business because of its inability to pay its debts as and when they became due:
(c)in respect of which execution is returned unsatisfied in whole or in part:
(d)in respect of the property of which a receiver, or a receiver and manager, has been appointed by a court or pursuant to the powers contained in an instrument, whether or not the appointment has been terminated:
(e)in respect of which, or the property of which, a person has been appointed as a receiver and manager, or a judicial manager, or a statutory manager, or as a manager, or to exercise control, under or pursuant to any enactment, whether or not the appointment has been terminated:
(f)that has entered into a compromise or arrangement with its creditors:
(g)that is in voluntary administration under Part 15A.
[37] The Registrar (or the FMA) is empowered to prohibit a person from being a director for a period not exceeding 10 years after the Registrar has given that person written notice, under s 385(3).10
[38] Before exercising the power to prohibit a person from being a director, s 385(4) provides that the Registrar must be satisfied that the person was concerned in the management of the company or companies, and the manner in which the affairs of the company were managed was wholly or partly responsible for the company’s qualifying status under s 385.
[39] The legislative history and policy of s 385 is canvassed by Miller J in Davidson v Registrar of Companies, the first appeal decision from this section of the Act.11
10 The maximum period of prohibition which applied to Mr Brand was five years, because of the time period in which his conduct occurred and when the companies were placed into statutory management. The maximum period is now 10 years, as of 1 April 2014: see Financial Markets (Repeals and Amendments) Act 2013, s 150.
11 Davidson, above n 6, at [87]–[92].
Introduced in 1988 as s 189A of the Companies Act 1955, the then-Minister of Justice, the Rt Hon Geoffrey Palmer, addressed the scheme of the new section, because of the “growing public concern about persons who use the benefits of limited-liability companies to wheel and deal for their own benefit, leaving behind unpaid creditors, and companies in financial difficulties.”12 The Registrar of Companies was empowered to prohibit a person from managing companies for a specified period, where a company is in financial difficulties and where those financial difficulties are attributable to mismanagement, when the person concerned is an officer of the company.
[40] As the Minister of Justice described it, the person concerned bears the onus of satisfying the Registrar and the Securities Commission that he or she was not responsible for the mismanagement that caused the company’s financial difficulties. The section, now s 385, was introduced following the sharemarket crash of 1987, when it had become “more apparent … that there are persons who have been directors who have demonstrated that they are not fit and proper persons to be involved in the management of companies.”13
[41] Before Davidson, there were no cases under s 385 (or its predecessor). Miller J referred, however, to the predecessor section in First City Corp Ltd v Downsview Nominees Ltd.14 There, Gault J characterised the former prohibition section as providing for:15
denial of the privilege of participating in the conduct of business under the shelter of limited liability. It is penal in nature although the disqualification should be approached with protection of the public in mind rather than punitively.
[42] Taking this into account, Miller J considered s 385 as being both punitive and protective in character because:16
12 (21 July 1988) 490 NZPD 5284.
13 At 5284.
14First City Corp Ltd v Downsview Nominees Ltd [1989] 3 NZLR 710 (HC), as cited in Davidson, above n 6, at [89].
15 First City, above n 14, at 766.
16 Davidson, above n 6, at [91].
(a)the legislation examines mismanagement contributing to insolvency, without focusing on the conduct of any given director;
(b)causation having been established, the Registrar may prohibit anyone falling into the class of directors;
(c)prohibition is aimed not at remedying wrongs done to shareholders and creditors of the insolvent company but at protecting the public from unscrupulous or incompetent directors in future, deterring others, and setting appropriate standards of behaviour; and
(d)prohibition is an adverse consequence of an inquiry into a director’s involvement in an insolvent company and the director inevitably experiences prohibition as a punishment.
[43] Under s 385(4), in order to exercise the power of prohibition, the Registrar must be “satisfied” that prohibition is appropriate.17 The standard of proof is the balance of probabilities.18 In the second decision under s 385, Mani v Registrar of Companies, Thomas J referred to the Supreme Court’s decision in Z v Dental Complaints Assessment Committee.19 The Judge observed:20
While criminal charges are not involved, there are serious consequences of an order under s 385 which will have a significant effect on the person subject to the order. In those circumstances, and given the summary process, higher quality evidence may be necessary for the decision-maker in order to be satisfied in terms of s 385(4).
[44] The protective and punitive aspects of s 385(4) are considered further in this judgment under the third stage of the Registrar’s inquiry.21
[45] In Davidson, Miller J summarised the steps required for the Registrar’s inquiry under s 385 as follows:22
17 Davidson, above n 6, at [102]; and Mani, above n 6, at [14].
18 Mani, above n 6, at [15]–[16].
19 Z v Dental Complaints Assessment Committee [2008] NZSC 55, [2009] 1 NZLR 1 at [102].
20 Mani, above n 6, at [17].
21 At [179] of this judgment.
22 Davidson, above n 6, at [103].
a)Does the company, or do the companies where there were more than one, qualify under subsection (1);
b)Was the respondent a director or manager of the company or companies within the 5 years preceding the Registrar’s notice;
c)Where there is one qualifying company:
i)was the manner in which the company’s affairs were managed a contributing cause of its qualifying status; and if so
ii)ought the Registrar exercise the discretion to prohibit the respondent in all the circumstances;
d)Where there are two or more qualifying companies:
i)has the respondent shown that:
(i)the manner in which the affairs of the companies, or all but one of them, were managed was not a contributing cause of their qualifying status; alternatively
(ii)it would not be just and equitable to prohibit the respondent in all the circumstances; and
ii)if the respondent has not satisfied the Registrar of either of those things, ought the Registrar exercise the discretion to prohibit the respondent in all the circumstances.
e)Where prohibition is appropriate, what is the appropriate term.
[46] In this case, adapting Miller J’s steps to the facts in issue here, I propose to deal with the Deputy Registrar’s decision by examining the four stages of his inquiry:
(a)Was it reasonable that the companies were placed in statutory management, such that they qualified under s 385(1)?
(b)Was there mismanagement of the companies and if so, was it a contributing cause of the companies’ qualifying status under s 385?
(c)Did the Deputy Registrar err in the exercise of his discretion in prohibiting Mr Brand from being a director in these circumstances?
(d)If prohibition was appropriate, what was the appropriate term?
[47] I turn now to analyse the grounds of appeal under each of the above stages of inquiry under s 385 of the Act.
FIRST STAGE OF INQUIRY: QUALIFYING STATUS OF COMPANIES
[48] In both his submissions to the Deputy Registrar and initially in this proceeding, Mr Brand submitted the jurisdictional threshold under s 385(1) of the Act had not been met, because the companies were not insolvent when the statutory managers were appointed. At the commencement of the hearing, Mr Kersey, for Mr Brand, abandoned that submission and reframed Mr Brand’s appeal on the first issue of jurisdiction, to three questions: why were the companies in statutory management; was there mismanagement; and was there a causal connection between the two, in whole or in part?
[49] I propose to deal with the above questions under the four stages of inquiry, set out above. Although the insolvency qualification issue was conceded by Mr Brand, I briefly examine that issue to show why I consider his concession was appropriate.
Insolvency is not a prerequisite
[50] Section 385(1) provides for a wide range of circumstances involving company failures, of which insolvency is one. It includes a company in respect of which a statutory manager has been appointed.23
[51] A statutory manager can be appointed over the affairs of companies that are not insolvent or where there is no imminent risk of insolvency. The Corporations (Investigation and Management) Act 1989 (CIMA), under which statutory managers are appointed, has a broad ambit:
4 Application of Act
This Act applies to any corporation—
(a)that is, or may be, operating fraudulently or recklessly; or
(b)to which it is desirable that this Act should apply—
23 Companies Act 1993, s 385(1)(e).
(i)for the purpose of preserving the interests of the corporation’s members or creditors; or
(ii)for the purpose of protecting any beneficiary under any trust administered by the corporation; or
(iii)for any other reason in the public interest,—
if those members or creditors or beneficiaries or the public interest cannot be adequately protected under the Companies Act 1993 or in any other lawful way.
[52] Section 39 of that Act is also relevant, which provides for the grounds on which a corporation can be declared to be subject to statutory management. The grounds are wider than a company being insolvent. It provides:
39Grounds on which corporation can be declared to be subject to statutory management
The FMA shall not make a recommendation under section 38 in respect of a corporation unless it is satisfied on reasonable grounds—
(a)that the corporation is, or may be, a corporation to which this Act applies; and
(b)that, in the case of a corporation that is, or may be, operating fraudulently or recklessly, it is desirable that the corporation be declared to be subject to statutory management for the purpose of—
(i)limiting or preventing the risk of further deterioration of the financial affairs of the corporation; or
(ii)limiting or preventing the carrying out, or the effects of, any fraudulent act or activity; or
(iii)enabling the affairs of the corporation to be dealt with in a more orderly or expeditious way:
(c)that, in the case of a corporation referred to in section 4(b), it is desirable that the corporation be declared to be subject to statutory management for the purpose of—
(i)preserving the interests of its members or creditors or beneficiaries or the public interest; or
(ii)enabling the affairs of the corporation to be dealt with in a more orderly or expeditious way.
[53] The CIMA legislation was introduced because, as the Minister of Justice explained, it was considered necessary because the predecessor regime could be
applied only “in extreme cases”, where “the position of the companies concerned … have deteriorated to the point at which the position is difficult or even impossible to repair.”24
[54] The two broad purposes of the CIMA legislation was to enable action to be taken earlier in instances when a company is, or may be, operating fraudulently or recklessly. The second is to enable companies to be given a decent burial when ordinary remedies are inadequate.
[55] In McDonald v Australian Guarantee Corp (New Zealand) Ltd, Wallace J reinforced that the focus of CIMA was the management of companies, not their winding-up:25
Moreover, the emphasis in Part III of the Act is on management of the corporation or corporations. That again is a reflection of the objectives of the Act: see s 41(1) which refers to the need to preserve the interests of members and creditors of the corporation and to protect the beneficiaries or the public interest. Section 41(1) also refers to the need to resolve the difficulties of the corporation and to preserve its business as far as practicable. Those preservatory and protective functions are in turn reflected in the moratorium and other provisions of Part III. There is no emphasis on the winding-up of the corporation.
Analysis
[56] I accept the Registrar’s submission that s 385(1)(e) applies to the three companies, Aorangi, Forresters and Trust Management, which were placed into statutory management in 2010. Under CIMA, statutory managers are appointed to companies that are operating recklessly, without any requirement that they are in fact operating fraudulently or are insolvent. In the case of recklessness, statutory managers may be appointed to enable the affairs of the company to be dealt with in a more orderly or expeditious way.26 It is also apparent that the provisions of CIMA will apply to a company to preserve the interests of the beneficiaries or the public interest.
24 (13 September 1988) 492 NZPD 6494.
25 McDonald v Australian Guarantee Corp (New Zealand) Ltd [1990] 1 NZLR 227 (HC) at 239.
26 Corporations (Investigation and Management) Act 1989, s 39(b)(iii).
[57] The policy consideration behind CIMA, as with the introduction of s 385 of the Act, is the protection of members, creditors, beneficiaries or the public interest, which cannot be adequately protected under the Act or in any other lawful way.27
[58] Although the three qualifying companies, Aorangi, Forresters and Trust Management were not insolvent at the time statutory management was imposed, there were concerns about Aorangi’s solvency and the way it was operated. After the appointment of statutory managers, it later became apparent that the “loans” to Mr Hubbard of $63.4 million were “introduced assets” by the Hubbards, not loans to them, although the Hubbards’ Aorangi account was credited with the assets’ value. The “introduced assets” are explained further in this judgment under the third stage of the inquiry.28 Nevertheless, it was plain from the Registrar of Companies’ report to the Securities Commission on 18 June 2010, that the Registrar believed the Hubbards were borrowing funds from Aorangi “for which there [was] scant evidence of securities.”29
[59] While Mr Brand is correct that Aorangi was not insolvent, there were sufficient concerns that Aorangi was either insolvent or was trading recklessly, to warrant the imposition of statutory management, followed by Forresters and Trust Management. The Registrar concluded that Aorangi had been trading recklessly and fraudulently in breach of the Securities Act, the Companies Act, the Financial Reporting Act, and possibly the Crimes Act. The Registrar believed that Aorangi had placed investor funds at risk and that it had immediate liquidity issues, specifically in relation to its inability to meet the “at call” expectation of investors. The investigators, commissioned under the Securities Act and CIMA, on 4 June 2010 reported to the Registrar that:30
(a)Aorangi was originally a nominee or contributory mortgage company but has transformed into a “for profit” finance company, raising funds from investors and on-lending those funds to borrowers; and
27 Section 4.
28 At [112] of this judgment.
29 Ministry of Economic Development Report from the Registrar of Companies to the Securities Commission: Aorangi Securities Ltd, Forresters Nominee Co Ltd and Associated Persons (18 June 2010) at 4.
30 At 3.
(b)Aorangi has made “loans” of approximately $134 million funded by deposits received from 407 investors.31 The majority of loans:
(i)were inadequately (if not completely) undocumented by way of term loan contracts or loan agreements;
(ii)were currently unsecured either by way of a registered mortgage over property or a General Security Agreement over the assets of a company; and
(iii)were not authorised by the instructions given by investors (and this alleged misappropriation of trust funds was to be referred to the SFO).
[60] On that basis, Aorangi and Mr and Mrs Hubbard personally were placed into statutory management on 20 June 2010. Three months later, on 20 September 2010, Forresters and Trust Management were also placed into statutory management following the statutory managers’ recommendations to do so, because:
(a)the statutory managers had de facto control of the companies but had no ongoing guarantee of controlling Trust Management in particular, because it held most of the scrip;32
(b)neither company had the benefit of a moratorium against claims by investors seeking assets out of the funds;
(c)the record-keeping for HMF, as with the other entities in statutory management, had been to a very poor standard and in the absence of relevant computer systems, there was a significant question as to the
31 The Registrar’s first report identified that there were 407 investors. It was later discovered during the wind-down of Aorangi that as at 20 July 2009 there were 500 investors in Aorangi. Both figures are referred to in this judgment.
32The First Statutory Managers’ Report to the Securities Commission dated 13 August 2010 refers to the need to independently verify the “script” recorded in the name of Trust Management. The reference in this context should be to “scrip”.
reliability of HMF’s own records, the relevant transactions of which occurred through Trust Management and Forresters;
(d)the nature of the record-keeping gave rise to the opportunity for mismanagement and there was evidence of “phantom transactions”, retrospective adjustment transactions, and incorrect statements sent to investors, presenting a misleading position to those investors;
(e)there was no evidence of any disclosure documents, in the nature of investment statements or a prospectus to investors in HMF;
(f)because of the complex intermingling of transactions and lack of accuracy in the reporting and accounting of HMF, statutory management of Forresters and Trust Management appeared to be the only option to bring the affairs of HMF under control in an orderly and expeditious way; and
(g)the business affairs of both Forresters and Trust Management was so closely connected with Mr Hubbard that the statutory managers were unable to exercise their powers effectively in relation to Mr Hubbard, particularly the protection of assets for beneficiaries and the public interest, unless they were appointed statutory managers of both Forresters and Trust Management.
[61] The Registrar reported that Forresters and Trust Management were originally intended as special purpose companies designed for keeping clients’ assets and monies separate, but with the intertwining or involvement of HMF, this was no longer the reality.
[62] Forresters and Trust Management were placed into statutory management in September 2010. In its report to the Deputy Registrar in 2013 MBIE, on behalf of the Registrar, summarised the concerns of the liquidators that these companies were the corporate vehicles for an otherwise unincorporated investment scheme, HMF, which
was discovered by the statutory managers in the course of their investigations into Aorangi and was operated solely by Mr Hubbard.
[63] In reviewing whether it was reasonable to place Forresters and Trust Management into statutory management, the Deputy Registrar recorded in the Decision that they were intertwined with HMF, that there was ample evidence to show that HMF operated in an unorthodox manner, and that there was mismanagement of HMF. The statutory managers, following their appointment, confirmed that the two companies were intertwined with HMF.
[64] In dealing with the submissions on the solvency of Aorangi, the Deputy Registrar in his Decision was not satisfied that Aorangi was solvent at the time the statutory managers were appointed. Despite that, he considered the Securities Commission’s recommendation to place Aorangi into statutory management was reasonable, noting that insolvency is not a necessary requirement before s 385 can be applied.
Conclusion
[65] The Deputy Registrar was correct in law, that insolvency was not a necessary requirement before s 385 could be applied to Aorangi or Forresters and Trust Management. From the investigation undertaken, albeit that it was done over two days only on 8 and 9 June 2010, there was sufficient information available to the investigators and ultimately to the Registrar, to justify the engagement of the preservatory and protective functions of CIMA, and to recommend that Aorangi be placed in statutory management, followed three months later by Forresters and Trust Management.
[66] The Registrar’s identification of the legislative and regulatory breaches by Aorangi and the extent of the loans and investments raised a genuine concern that the interests of the investors needed to be preserved and protected at the time.
[67] There was a misunderstanding by the Registrar in 2010 of the nature of all the “loans”, because $63.4 million were the introduced assets by – not loans to – Mr
Hubbard.33 However, the fact remained that Aorangi was not compliant with the regulatory legislation, there were no formal investment authorities signed by investors, and no disclosure declarations of Mr Hubbard’s conflict of interest in the entities which he controlled and into which he placed investments. It was evident in June 2010 that Mr Hubbard was the managing partner, on whom the other partners/directors relied.
[68] I consider that the Deputy Registrar’s conclusion, that it was reasonable that Aorangi was placed into statutory management at that time, was not in error. Further, as the Deputy Registrar found, it was also reasonable that Forresters and Trust Management were placed into statutory management as a result of Aorangi’s statutory management, because of the managers’ concerns that these two companies were “corporate vehicles” for HMF, with an intertwining and mixing of investors’ funds, which could not readily be identified.
SECOND STAGE OF INQUIRY: CAUSAL CONNECTION BETWEEN MISMANAGEMENT AND QUALIFYING COMPANY STATUS
[69] Having found that the first stage of the inquiry was met, namely that there was more than one company with qualifying status, I turn then to consider the second stage of the inquiry under s 385(4)(b) of the Act.
[70] At the commencement of the hearing, Mr Kersey for Mr Brand contended that the scheme of s 385 meant that Mr Brand could not be prohibited from being a company director, if the Deputy Registrar decided that only one of the companies was relevantly mismanaged. Because Aorangi was not insolvent, Mr Kersey argued that the alleged solvency of Forresters and Trust Management removed those companies from his consideration, as they were not solvent and the reason for their qualifying status was the intermingling of funds with HMF. This argument was abandoned and, I consider appropriately, as there was jurisdiction under s 385(4)(a) for the Registrar to prohibit a director based on the management of a single company. This submission and the insolvency submission were not pursued by Mr Kersey in closing.
33 Discussed further in this judgment at [112].
[71] Where there are two or more qualifying companies, s 385(4)(b) of the Act applies. It provides:
(4)The power conferred by subsection (3) may be exercised in relation to–
…
(b)any person who the Registrar or the FMA is satisfied was, within a period of 5 years before a notice was given to that person under subsection (5) (whether that period commenced before or after the commencement of this section), a director of, or concerned in, or a person who took part in, the management of, 2 or more companies to which this section applies, unless that person satisfies the Registrar or the FMA–
(i)that the manner in which the affairs of all, or all but one, of those companies were managed was not wholly or partly responsible for them being companies in relation to which this section applies; or
(ii)that it would not be just or equitable for the power to be exercised.
[72]The inquiry under s 385(4)(b) is twofold:
(a)Was there mismanagement of the companies?
(b)Was there a causal connection, in whole or in part, between mismanagement and the companies being placed into statutory management?
[73] As there are two or more qualifying companies, as here, under s 385(4)(b), there is a rebuttable presumption on Mr Brand to show that there was either no mismanagement of the companies, or that the manner in which the companies were managed was not a contributing cause of their qualifying status. If he succeeds in showing that there was no causation or causal connection, the inquiry is at an end.
[74] It is also not necessary to establish specific mismanagement by Mr Brand before s 385 can apply. It is enough, as the Deputy Registrar observed, that the mismanagement occurred when he was a director.
Was there mismanagement of the three companies?
[75] I turn to examine whether there is mismanagement of the three companies. I first examine Forresters and Trust Management together because of their intertwined relationship. Second, I examine Aorangi.
Findings on mismanagement of Forresters and Trust Management
[76] The Deputy Registrar found there was mismanagement of Forresters and Trust Management in their general set up, their operation, and from 2006 onwards when Mr Brand failed to effect change, there was continued mismanagement. Specifically, he found:
(a)Mr Brand failed to properly discharge his director’s duties by leaving Mr Hubbard and other partners to operate the companies without overview from all of the directors;
(b)the failure to have directors’ meetings was one example of creating an environment where a director could mismanage without oversight from the boards of directors;
(c)Mr Brand did not act in good faith when he relied on the advice of Mr Hubbard and Mrs Kelly, the accounts manager, as he was still required to discharge his duties as a director and not abdicate that responsibility;
(d)the failure of Mr Brand and his fellow directors to effect change from December 2006 (when they became aware of the amount of funds received by Aorangi and the numbers of investors) to 2009, when he resigned as a director from Aorangi, also amounted to mismanagement; and
(e)Mr Brand did not positively differentiate himself from Mr Hubbard such that the Deputy Registrar should not exercise his discretion to prohibit Mr Brand as a director.
[77] The Deputy Registrar found that there was ample evidence to demonstrate that HMF operated in an unorthodox manner and there was mismanagement of it. Although this was not a company or entity in which Mr Brand was involved, the Registrar found mismanagement applied equally to Forresters and Trust Management, because they were intertwined with HMF such “that mismanagement infected them all.”34 This mismanagement, including mixing funds, a mismatch between reported and actual investments, and unreliable records, was the reason for the appointment of statutory managers.
Mr Brand’s position
[78] Mr Brand submits that there was no mismanagement of Forresters and Trust Management and the Deputy Registrar has misunderstood the nature and operations of those companies. Trust Management was established to act as an independent trustee for the HC partnership clients’ family trusts. As such, it was a bare trustee owner of assets held on trust for the partnership’s clients. As an independent trustee company, Trust Management did not incur any liabilities of its own and did not have any assets of its own. No financial accounts were prepared for Trust Management, as it did not undertake any transactions in its own right. As assets were held on bare trust, Mr Brand submits, it would be illogical for financial accounts to be prepared.
[79] Mr Brand explained that Forresters was established to act as a nominee owner of assets held on behalf of the partnership clients. Similar to Trust Management, he says, it was a company established to hold assets as bare trustee and did not enter into financial transactions on its own account. Further, many accounting and legal partnerships established such companies to enable their clients to have their assets held in the name of such companies, as nominee owner of the clients’ assets. He submits both the Forresters and Trust Management companies were administered and governed in the same way.
[80] Mr Brand challenges the Deputy Registrar’s assertion that Mr Hubbard’s investment management entity, HMF, which he undertook for his clients, infected both Forresters and Trust Management. Mr Brand submits this finding was a consequence
34 Decision, above n 1, at [85].
of the Deputy Registrar’s misunderstanding of the nature and purpose of both companies.
[81] Mr Brand says that both companies were independent trustee companies and their only connection with HMF was that they provided independent trustee services from time to time for Mr Hubbard’s clients, who came within “the HMF umbrella”. This in turn, Mr Brand says, led to the Deputy Registrar wrongly finding that HMF was mismanaged because there was a mismatch between reported investments and actual investments; unreliable records as to individual shareholders; and a mixing of funds.
[82] Mr Brand says HMF was not a legal entity, but was a shorthand description for the investment management that Mr Hubbard undertook for a number of his clients. Mr Hubbard traded as HMF. With some exceptions, investors provided funds to HMF for investment, without signed authorities. The funds were placed in the Forresters bank account. In the majority of cases, Mr Hubbard had total discretion over the investment of the funds.
[83] Mr Brand submits that it was incorrect and overly simplistic to draw an inference that either of the companies were mismanaged on the basis that there was mismanagement in HMF or the various operating companies/partnerships that were owned by the two companies.
Analysis
[84] The reference by the Deputy Registrar to unreliable records and a mismatch between reported investments and actual investments was drawn from Chisholm J’s decision in Re Forresters Nominee Co Ltd.35 This decision concerned directions to the statutory managers of Forresters and Trust Management as to the appropriate method of distributing assets among the investors.
[85] Chisholm J described the way in which Mr Hubbard began managing investments for a small number of his clients leading to what was described as HMF
35 Re Forresters Nominee Co Ltd [2012] NZHC 1216.
being an umbrella entity without any legal framework. The Judge noted that at the time of the statutory managers’ appointment to Aorangi initially, the statutory managers discovered the existence of HMF and their appointment was extended to include Forresters and Trust Management. After reviewing the alternative methods for distribution of assets, Chisholm J concluded that HMF operated as a pooled investment fund, not a personalised investment fund. In referring to previous cases on distributions to investors in similar cases, Chisholm J said this:
[90] Finally, there does not seem to be any proper basis for distinguishing this case from the cases discussed earlier. Like most of those cases, this case involves a mismatch between reported investments and actual investments; unreliable records as to individual shareholdings; and a mixing of funds …
[86] I am unable to accept Mr Brand’s submission that it was incorrect for the Deputy Registrar to draw an inference that either of the companies were mismanaged because there was mismanagement in either HMF or the various operating companies or partnerships that were owned by Forresters or Trust Management. It was open to the Deputy Registrar to find that both companies were relevantly mismanaged, because their placement into statutory management was necessary to address the deep concerns with the business of HMF.
[87] It is correct that the day-to-day administration for each of these entities was handled by Mr Hubbard, as a partner of the HC partnership. The directors of Trust Management were also partners of HC partnership, and documents executed by Trust Management were required to be signed by two of the directors.
[88] However, in Mr Hubbard’s management of the companies, he received funds from his clients and other members of the community for investment in HMF, without investment authorisations. Further, there were no disclosures of personal interest by Mr Hubbard, when those funds were being placed into entities in which he had substantial interests and/or control.
[89] I uphold the Registrar’s submission that the mismanagement of HMF involved Forresters and Trust Management demonstrably, because:
(a)HMF maintained numerous holder accounts with the relevant registries in the name of Forresters, or variations on this, and investments were transferred from holder accounts into the name of Trust Management, with funds related to HMF being transferred through both companies;
(b)investors provided funds to HMF for investment without specific instructions and payments were made to Forresters;
(c)Mr Hubbard bought investments in bulk, allocated them to investors by way of journal entry and charged management fees at his own discretion;
(d)there were fundamental problems with reconciling investments with assets and the statutory managers concluded that there was a deficit of around $31 million;
(e)the activities meant there was a failure to protect identifiable trust property, keep proper records and ensure proper financial statements were prepared; and
(f)in reality, the companies were intertwined with HMF. The records were unreliable and HMF was effectively run through Forresters and Trust Management.
[90] I consider the Deputy Registrar’s conclusion that there was mismanagement of these two companies, because Forresters and Trust Management were intertwined with HMF such that mismanagement affected them all, was justified. The Deputy Registrar was also justified in relying both on the statutory manager’s findings that the two companies were intertwined with HMF and on Chisholm J’s determination that “this case involves a mismatch between reported and actual investments, unreliable records as to individual shareholding; and a mixing of funds.”36
36 Re Forresters, above n 35, at [90].
Findings of mismanagement of Aorangi
[91] Aorangi was a small contributory mortgage company, which became an investment entity throughout the early 2000s. It predominantly serviced Mr Hubbard’s clients and friends in the local community and over time it began to operate as a finance company, raising funds from investors and on-lending to borrowers.37
[92] The Deputy Registrar found there was mismanagement of Aorangi, which led it to being placed in statutory management. The Deputy Registrar’s reasons were:
(a)Aorangi was operating in breach of the Securities Act and Financial Reporting Act. It issued debt securities to the public without preparing an investment statement or prospectus, without appointing a trustee, and failed to prepare and file audited accounts. This meant investors were deprived of statutory protection and independent review of Mr Hubbard’s management.
(b)Aorangi failed to register as a broker under the Securities Act (Contributory Mortgage) Regulations 1988, which would have required an audit of the company. An audit might have exposed that the company lacked robust practices. The Deputy Registrar accepted, however, that this breach was not the sole reason for Aorangi being placed into statutory management but was part of the matrix of factors.
(c)Aorangi was not run on good governance principles and the directors failed to obtain an independent legal opinion as part of the process of monitoring and reviewing Aorangi’s activities.
(d)Until July 2009 investors were misled as to the nature of their investments. Mr Brand and the other directors should not have let Mr Hubbard control investments into entities in which Mr Hubbard had a controlling interest.
37 A full description of Aorangi is at [13]–[14] of this judgment.
(e)The directors, including Mr Brand, inappropriately relied on a fellow director, Mr Hubbard, and had little knowledge of Aorangi’s activities. For example, short-term deposits were placed with finance companies related to Mr Hubbard, rather than with a registered bank. This decision was made by Mr Hubbard, with no input from Mr Brand or the other Aorangi directors.
(f)Ultimately, Mr Brand and the other directors failed to manage or supervise the affairs of Aorangi for the period prior to 2007.
Mr Brand’s position
[93] Mr Brand submits that the directors did not mismanage Aorangi, because Aorangi was “carefully monitored and managed” at partners’ meetings of the HC partnership, particularly given that the partners were all directors of Aorangi.
[94] Mr Brand submits there were appropriate methods for record keeping and the directors formed a view that a prospectus was not required to operate Aorangi. Mr Brand resigned in June 2009, at the point where he felt it was necessary to do so.
Analysis
[95] Aorangi operated without a prospectus, as required by the Securities Act and the Financial Reporting Act.38 The directors, including Mr Brand, considered that Aorangi did not need to issue a prospectus because the borrowing and lending came within the exemptions to the Securities Act.39 Mr Hubbard assured the directors, that the persons involved were family members or friends of Mr Hubbard and were not members of the public, so no prospectus was required.
[96] Although Mr Brand was a director of Aorangi from 1991 to 2009, he was unaware of the amount of the investment fund. Mr Brand relied on Mr Hubbard’s assurances that Aorangi was not in breach of the Securities Act. Because Mr Hubbard
38 Securities Act 1978, s 33 (now repealed as of 1 December 2014 by s 4(1)(a) of the Financial Markets (Repeals and Amendments) Act 2013); and Financial Reporting Act 1993, ss 4 and 18 (now repealed as of 1 April 2014 by s 54 of the Financial Reporting Act 2013).
39 Securities Act 1978, ss 3(2)(a) and 5(2CBA).
was an astute accountant and managing partner of Aorangi, Mr Brand and the other partners/directors allowed him to continue in his role and accepted his opinion, until 12 December 2006, when they asked Mr Hubbard to form a separate nominee company for his managed funds clients, HMF.
[97] From the Registrar’s and investigators’ 2010 reports, it was evident that Aorangi was operating as a substantial investment company, without complying with the Securities Act, the Regulations and the Financial Reporting Act. It was a company run principally by Mr Hubbard, with his fellow directors/partners accepting his assurances, that Aorangi was being properly managed and was not in breach of any of the legislative compliance requirements.
(f)that has entered into a compromise or arrangement with its creditors:
(g)that is in voluntary administration under Part 15A.
(2)This section also applies in relation to a company the liquidation of which has been completed whether or not the company has been removed from the New Zealand register.
(3)The Registrar or the FMA may, by notice in writing given to a person, prohibit that person from being a director or promoter of a company, or being concerned in, or taking part, whether directly or indirectly, in the management of, a company during such period not exceeding 10 years after the date of the notice as is specified in the notice. Every notice shall be published in the Gazette.
(4)The power conferred by subsection (3) may be exercised in relation to—
(a)any person who the Registrar or the FMA is satisfied was, within a period of 5 years before a notice was given to that person under subsection (5) (whether that period commenced before or after the commencement of this section), a director
of, or concerned in, or a person who took part in, the management of, a company in relation to which this section applies if the Registrar or the FMA is also satisfied that the manner in which the affairs of it were managed was wholly or partly responsible for the company being a company in relation to which this section applies; or
(b)any person who the Registrar or the FMA is satisfied was, within a period of 5 years before a notice was given to that person under subsection (5) (whether that period commenced before or after the commencement of this section), a director of, or concerned in, or a person who took part in, the management of, 2 or more companies to which this section applies, unless that person satisfies the Registrar or the FMA—
(i)that the manner in which the affairs of all, or all but one, of those companies were managed was not wholly or partly responsible for them being companies in relation to which this section applies; or
(ii)that it would not be just or equitable for the power to be exercised.
(5)The Registrar or the FMA must not exercise the power conferred by subsection (3) unless—
(a)not less than 10 working days’ notice of the fact that the Registrar or the FMA intends to consider the exercise of it is given to the person; and
(b)the Registrar or the FMA considers any representations made by the person.
(6)No person to whom a notice under subsection (3) applies shall be a director or promoter of a company, or be concerned or take part (whether directly or indirectly) in the management of a company.
(7)Where a person to whom the Registrar or the FMA has issued a notice under subsection (3) appeals against the issue of the notice under this Act or otherwise seeks judicial review of the notice, the notice remains in full force and effect pending the determination of the appeal or review, as the case may be.
(8)The Registrar or the FMA may, by notice in writing to a person to whom a notice under subsection (3) has been given,—
(a)revoke that notice; or
(b)exempt that person from the notice in relation to a specified company or companies.
Every such notice shall be published in the Gazette.
(9)Every person to whom a notice under subsection (3) is given who fails to comply with the notice commits an offence and is liable on conviction to the penalties set out in section 373(4).
(10)In this section, company includes an overseas company that carries on business in New Zealand.
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