Commerce Commission v Appenture Marketing Limited (in liqidation)

[2017] NZHC 1515

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2017-404-001173 [2017] NZHC 1515

UNDER

s 248(1)(c) of the Companies Act 1993

BETWEEN

COMMERCE COMMISSION Applicant

AND

APPENTURE MARKETING LIMITED (IN LIQUIDATION)

Respondent

Hearing:	3 July 2017
Appearances:	A McClintock for Applicant No appearance for Respondent
Judgment:	3 July 2017

ORAL JUDGMENT OF VENNING J

Solicitors:           Meredith Connell, Auckland

Copy to:            Liquidator

Respondent

COMMERCE COMMISSION v APPENTURE MARKETING LIMITED (IN LIQUIDATION) [2017] NZHC

1515 [3 July 2017]

[1]      The  Commerce  Commission  applies  for  leave  to  continue  a  prosecution against Appenture Marketing Limited (Appenture), that company having gone into liquidation.  The liquidator does not consent to the application but in a letter of 11

May the liquidator Mr Kamal confirms he does not oppose the application.

[2]      The prosecution is under s 17 of the Credit Contracts and Consumer Finance

Act 2003 (CCCFA) and s 13 of the Fair Trading Act 1986 (FTA).

[3]      Appenture operated as a mobile trader business in Auckland and throughout most of the North Island.  The Commission opened an investigation into it in March

2016 as a result of systematic issues identified in the mobile trader industry through an earlier investigation.   The Commission requested contracts from Appenture in order to assess its compliance with its obligations under the CCCFA and the FTA. As a result of the review of those the Commission considers that contracts supplied by Appenture evidenced breaches of both Acts.   The Commission considers Appenture has breached the CCCFA through failure to provide adequate disclosure when entering into consumer credit contracts and has breached the FTA through false and/or misleading representations in relation to the existence of rights.

[4]      A prosecution was taken.   Appenture engaged with the prosecution to the extent that not guilty pleas were entered.   Appenture was then subsequently and during the course of the proceedings placed into liquidation on 27 April 2017.  As noted the Commission was then in correspondence with the liquidator and following the liquidator’s advice of 11 May this application was filed on 9 June.

[5]      Section 248 of the Companies Act 1993 applies:

248     Effect of commencement of liquidation

(1)       With  effect  from  the  commencement  of  the  liquidation  of  a company,—

(a)       the liquidator has custody and control of the company’s

assets:

(b)       the directors remain in office but cease to have powers, functions, or duties other than those required or permitted to be exercised by this Part:

(c)       unless the liquidator agrees or the court orders otherwise, a person must not—

(i)        commence  or  continue  legal  proceedings  against the company or in relation to its property; or

(ii)       exercise  or  enforce,  or  continue  to  exercise  or enforce, a right or remedy over or against property of the company:

(d)       unless the court orders otherwise, a share in the company must not be transferred:

(e)       an alteration must not be made to the rights or liabilities of a shareholder of the company:

(f)        a   shareholder   must   not   exercise   a   power   under   the constitution of the company or this Act except for the purposes of this Part:

(g)       the constitution of the company must not be altered.

(2)       Subsection (1) does not affect the right of a secured creditor, subject to section 305, to take possession of, and realise or otherwise deal with, property of the company over which that creditor has a charge.

(3)       This section is subject to section 139J(1) to (3) of the Reserve Bank of New Zealand Act 1989.

[6]       In  the  present  case  the  relevant  factors  (which  have  been  identified  in previous cases)1 are:

·the importance of the prosecution.  The prosecution is by a regulatory agency involving the enforcement of public rights;

·         the seriousness of the offending.  It affects vulnerable consumers;

·potential  delay  to  the  liquidation  or  winding  up  of  the  company caused by the continuation of the criminal proceedings.  The applicant has not unreasonably delayed in making this application.  I also note

that the prosecution will effectively proceed by way of formal proof.

1   Commerce Commission v Wild Nature Limited (in liq) [2014] NZHC 2861; and Worksafe v

Riverland Advenuters Limited (in liq) [2014] NZHC 1350.

·whether there is any alternative to continuing a prosecution against the  company  which  would  achieve  the  same  result.     As  Ms McClintock noted, in this case it is not possible to bring a direct prosecution against the director absent alleging party liability under s 66 of the Crimes Act 1961;

·the point of the prosecution.  Ms McClintock has made the point that there is a real value in the prosecution in that a successful prosecution may lead to a refund of moneys already paid to Appenture.   In the event the company is not able to fund any refunds at least it will prevent  the  debts  being  on-sold  to  other  creditors.     Further  a conviction would achieve the principles of deterrence and denunciation, even if ultimately a fine is not able to be imposed due to the financial position of Appenture.

Result/orders

[7]      Having regard to the factors I have referred to above in the circumstances of this case and noting Mr Kamal’s, the liquidator’s position, I am satisfied that the requirements of s 248 of the Companies Act are made out.  Leave is granted to the

Commerce Commission to continue with the prosecution of Appenture.

Venning J