Commissioner of Inland Revenue v LivingSpace Properties Limited (in liquidation and receivership)
[2019] NZHC 366
•7 March 2019
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV 2010-409-002323
[2019] NZHC 366
UNDER The Companies Act 1993 IN THE MATTER
AND
of the liquidation of Livingspace Properties Limited
IN THE MATTER
of an application by Ms Kristina Louise
Buxton & Ors pursuant to Section 284 of the Companies Act 1993
BETWEEN
THE COMMISSIONER OF INLAND REVENUE
Applicant
AND
LIVINGSPACE PROPERTIES LIMITED
(In Liquidation and Receivership) Respondent
Hearing: 27 February 2019 Appearances:
G Neil and H Jones for Mr Robert Walker, liquidator of Livingspace Properties Ltd (In Liq)
J Moss and H Weston for K L Buxton, D Henderson, RFD Finance Ltd, FTG Securities Ltd, Castle Operations Ltd and Tay Operations Ltd, the Applicants (in the Section 284 Application)
Judgment:
7 March 2019
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by me on 7 March 2019 at 3.00 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
THE COMMISSIONER OF INLAND REVENUE v LIVINGSPACE PROPERTIES LIMITED (In Liquidation
and Receivership) [2019] NZHC 366 [7 March 2019]
Introduction
[1] This is a liquidation proceeding in relation to the company Livingspace Properties Ltd (in liq and in rec) (LPL). Mr Robert Walker is the liquidator. The defendant company was placed into liquidation in 2010 when Mr David Henderson was one of its directors.
[2] On 29 May 2018, Associate Judge Osborne made orders under s 266 of the Companies Act 1993 (the Act) requiring Ms Christina Buxton, a director of RFD Finance Ltd (RFD) and the wife of Mr Henderson, to produce documents and records relating to the business or affairs of the defendant company.
[3] On 12 October 2018, the liquidator filed an application (by memorandum) seeking directions for what he says are Ms Buxton’s non-compliance with the s 266 orders made by Associate Judge Osborne. Ms Buxton then filed an application for orders for removal of Mr Walker as the liquidator and for a stay of the proceedings.
[4] The liquidator now applies for orders striking out Ms Buxton’s amended application for orders for removal under s 284 insofar as it seeks leave for Ms Buxton and others (together the applicants) to apply for the removal of Mr Walker as the liquidator of Castle Street Ventures Ltd (in liq) (Castle), Tay Ventures Ltd (in liq and in rec) (Tay) and Lichfield Ventures Ltd (in liq) (Lichfield). Those three companies, all in liquidation, are said to be related to the defendant company, LPL, but are not parties to this proceeding.
[5] The liquidator contends that Ms Buxton’s applications are frivolous, vexatious or otherwise an abuse of the process of the Court.1 He seeks an order striking out the objectionable parts of the amended application with a direction that the applicants, if they so elect, file separate applications under s 284 in each of the separate liquidation proceedings.
1 See High Court Rules 2016, r 15.1.
Relevant legal principles
[6] Rule 31.35 of the High Court Rules 2016 applies to applications in respect of liquidated companies. It relevantly provides:
31.35 Procedure in respect of miscellaneous applications
(1)Subpart 2 of Part 7, relating to interlocutory applications, applies to applications to the court in respect of—
…
(b)a company in respect of which a liquidator has been appointed under section 241(2)(c) of the Companies Act 1993.
(2)Subclause (1) is subject to subclauses (3) and (4).
(3)An application specified in subclause (1) must have the same heading as the heading on the application for putting the company into liquidation.
(4)Subclause (1) does not apply to—
(a)an application under rule 31.36; or
(b)an application to which Part 18 or 19 applies.
[7] In Mulholland v Levin, the Court held that r 31.35 of the High Court Rules applies to applications for orders under s 284 of the Act.2 Venning J stated:3
The plaintiff’s application for an order assigning the third party claim against the solicitor to the directors is, in fact, an application by the directors for directions in relation to a matter arising in connection with the liquidation, and/or reversing or modifying a decision of the liquidators. The decision in issue is the liquidators’ refusal to assign the claim without imposing the non- consolidation condition. As such it must be treated as an application under s 284 of the Companies Act 1993 (the Act) and r 31.35(1)(b) of the High Court Rules applies. The application should have been filed in the course of the original liquidation proceedings, just as Lang J directed on 16 May 2012. However … I grant leave to bring this aspect of the application by way of originating application.
[8] Rule 15.1 of the High Court Rules allows the Court to strike out all or part of a pleading. It provides:
2 Mulholland v Levin [2012] NZHC 1790.
3 At [22].
15.1 Dismissing or staying all or part of proceeding
(1)The Court may strike out all or part of a pleading if it—
(a)discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b)is likely to cause prejudice or delay; or
(c)is frivolous or vexatious; or
(d)is otherwise an abuse of the process of the court.
(2)If the court strikes out a statement of claim or a counterclaim under subclause (1), it may by the same or a subsequent order dismiss the proceeding or the counterclaim.
(3)Instead of striking out all or part of a pleading under subclause (1), the Court may stay all or part of the proceeding on such conditions as are considered just.
(4)This rule does not affect the court’s inherent jurisdiction.
The amended application of Ms Buxton
[9] By the amended application of 15 January 2019, Ms Buxton seeks orders as follows:
(a)Joining Mr Henderson, RFD, FTG Securities Ltd, Castle Operations Ltd and Tay Operations Ltd as defendants to this proceeding; and
(b)If the orders sought at [9(a)] above are granted, the applicants (Ms Buxton, Mr Henderson, RFD, FTG Securities Ltd, Castle Operations Ltd and Tay Operations Ltd) seek orders from the Court:
(i)granting leave to bring an application, pursuant to s 284, removing Mr Walker as liquidator of LPL, Castle, Tay and Lichfield; and
(ii)staying any further steps in the enforcement of judgment obtained by Mr Walker for orders under s 266 of the Act.
[10] The applicants oppose the liquidator’s strike-out applications on the basis that the companies Castle, Tay and Lichfield are so closely connected that it is appropriate
and efficient for a claim against the conduct of the liquidator of those companies (or Mr Walker) to be determined collectively rather than independently. The applicants made the application for leave under s 284 on that basis.
[11] The applicants say they have also applied for a joinder of Castle, Tay and Lichfield. If the joinder application is successful, it is claimed that the Court will have jurisdiction to make orders in relation to those companies.
[12] In his affidavit filed in support of the notice of opposition, Mr Henderson states that the defendant, LPL, operated a combination of businesses known as “Livingspace” from three premises that were owned by Castle (in Dunedin), Tay (in Invercargill) and Lichfield (in Christchurch). Those companies, together with LPL, were companies that operated and were managed as a collective group with a common purpose of maintaining the “Livingspace” business.
Analysis and decision
[13] I accept the submission of the liquidator that r 31.35 of the High Court Rules applies to Ms Buxton’s (and the others’) application for orders under s 284 of the Act. While their application has been properly filed in respect of the orders that are sought in this proceeding in relation to LPL, I find that it has been improperly filed in respect of the orders that are sought in relation to Castle, Tay and Lichfield.
[14] Rule 31.35 of the High Court Rules requires that application to the Court in respect of “a company in respect of which the liquidator has been appointed under s 241(2)(c) Companies Act 1993 … must have the same heading as the heading on the application for putting the company into liquidation”.
[15] I accept that Mr Walker has been appointed liquidator of all four companies, namely LPL, Castle, Tay and Lichfield. However, in accordance with r 31.35, I find the applications to the Court in respect of them must be brought in the respective liquidation proceedings of the particular company in respect of which removal is sought. Each liquidation proceeding is separate and distinct and relates to a particular and different entity. I agree with the submission of the liquidator that the High Court
Rules do not permit a liquidation interlocutory application to be filed in a different proceeding to that which it relates.
[16] In this case Ms Buxton (and the others) have sought orders in respect of Castle, Tay and Lichfield in the liquidation proceeding of LPL. That is in breach of r 31.35.
[17] I also accept the liquidator’s submission that this is not simply a technical issue which might, as the applicants contend, be resolved to allow an amendment in this proceeding in accordance with r 1.2. While all four companies might be interrelated, the question of whether Mr Walker should be removed must be considered in relation to each particular company. The evidence in relation to each company might well be different, and if there is sufficient commonality such that it makes it sensible to hear all matters together, then the applicants can make an application for consolidation.
[18] In their notice of opposition, Ms Buxton and the others have put forward as a ground for opposing the orders sought that the liquidator’s interlocutory application seeking orders under s 266 was brought against Ms Buxton as a non-party in this proceeding. However, I find that such ground is not a legitimate basis for opposing the orders sought. The liquidator’s application under s 266 was made in this liquidation proceeding and in respect of LPL. The liquidator sought orders that Ms Buxton appear before the court for examination on oath or affirmation on any matters relating to the business, accounts, and affairs of LPL, and that she produce originals or copies of all books, records and documents relating to the business, accounts or affairs of LPL in her possession or control. The liquidator’s s 266 application was properly brought in accordance with r 31.35 as an interlocutory application in the liquidation proceeding of LPL.
[19] The liquidator has challenged the standing of the applicants, contending that they are not “entitled persons” in terms of s 284 (as defined in s 2) of the Act. That is an issue yet to be determined. However, it is clear that there is a statutory intention to limit the parties who may make an application for leave to bring proceedings to remove a liquidator. In my view, it will be necessary to assess the question of standing in relation to each particular company. This reinforces the need for separate applications in respect of each company.
[20] For all these reasons I conclude that the application to strike out should be granted and that the applicants be required to bring separate proceedings in respect of each company. The applications, insofar as they seek leave for the removal of Mr Walker as the liquidator of Castle, Tay and Lichfield, disclose no reasonably arguable case appropriate to the nature of the pleading and are frivolous in the sense that they trifle with the Court’s processes.4
[21] I note that the requirement to re-file is consistent with the approach taken in Mulholland v Levin. Whether the applicants are prepared to treat this LPL liquidation proceeding as a test case for Mr Walker’s removal, without the complication of further proceedings (as the liquidator suggests they should), is a matter for them to determine.
Result
[22]I make the following orders:
(a)The applicants’ amended notice of application (dated 15 January 2019) is struck out, insofar as it seeks:
(i)leave for Ms Buxton and others to apply for the removal of Mr Walker as the liquidator of Castle Street Ventures Ltd (in liq), Tay Ventures Ltd (in liq and in rec) and Lichfield Ventures Ltd (in liq) under s 284(1) of the Companies Act 1993; and
(ii)an order removing Mr Walker as the liquidator of Castle Street Ventures Ltd (in liq), Tay Ventures Ltd (in liq and in rec) and Lichfield Ventures Ltd (in liq) under s 284(1) of the Companies Act 1993.
(b)I direct that the applicants, if they wish to challenge Mr Walker’s role as liquidator in relation to Castle Street Ventures Ltd (in liq), Tay Ventures Ltd (in liq and in rec) and Lichfield Ventures Ltd (in liq), are required to file separate applications for leave to apply for the removal
4 See Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679 at [89].
of Mr Walker and for the removal of Mr Walker in each of the particular liquidation proceedings to which his appointment relates.
[23] I reserve the question of costs and will determine that issue following my decision on the question of the admissibility of the evidence of Mr Kerryn Downey.
Associate Judge P J Andrew
2