Commissioner of Inland Revenue v Registrar of Companies

[2024] NZHC 3977

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-2141

[2024] NZHC 3977

UNDER

AND

section 329 of the Companies Act 1993

IN THE MATTER OF

an application to restore CITY BOND

TRANSPORT LIMITED (removed) to the NEW ZEALAND REGISTER OF COMPANIES

BETWEEN

MINISTRY FOR PRIMARY INDUSTRIES

Applicant

REGISTRAR OF COMPANIES

Respondent

Hearing:	On the papers
Appearances:	J Xulue for the Applicant
Judgment:	20 December 2024

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

[Reasons]

This judgment was delivered by me on 20 December 2024 at 12.30 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Meredith Connell, Auckland

RE CITY BOND TRANSPORT LIMITED [2024] NZHC 3977 [20 December 2024]

Introduction

[1]                 The applicant, the Ministry for Primary Industries (MPI), filed an originating application for orders to restore City Bond Transport Ltd (removed) (Company) to the Companies Register.

[2]                 An affidavit was filed in support of the application by Nigel Allan, the Northern Investigations Team Leader at MPI. Mr Allan explains the Company pleaded guilty to 19 charges under the Biosecurity Act 1993 on 27 April 2023.

[3]                 On 12 October 2023, the Registrar of Companies gave notice of an intention to remove the Company from the Register on the basis that the Registrar had reasonable grounds to believe that the Company was not carrying on business and there was no proper reason for the Company to continue in existence.

[4]                 MPI was not aware of the notice of intended removal or the objection period which lapsed on 15 November 2023. The Company was therefore removed from the Register on 16 November 2023 without any steps being taken to object.

[5]                 The 19 charges to which the Company has pleaded guilty carry a maximum penalty of a $100,000 fine. MPI submits that the offending is serious as it involves the Company breaching its obligations over a period of at least 10 months, relates to a significant quantity of uncleared goods and is in the face of previous correspondence from MPI to the Company regarding the release of uncleared goods in 2020 and 2021.

[6]                 MPI considers therefore that it is in the public interest to pursue the charges against the Company through to sentencing due to the important effect of such prosecutions on offending under the Biosecurity Act from a deterrence and denunciation perspective.

[7]                 Prior to the hearing I issued a minute, dated 27 September 2024, directing that the application for restoration was to be served on the Registrar of Companies, the director of the Company and the Secretary to the Treasury. The requirement to serve the Secretary to the Treasury is because on removal from the Register, any assets of the company revert to the Crown pursuant to s 234(1) of the Companies Act 1993.

[8]                 A joint memorandum signed on behalf of MPI and the Registrar of Companies was filed prior to the hearing confirming that the Registrar of Companies had been served and consented to the restoration of the Company. Affidavits of service had also been filed confirming service on both the director of the Company and his counsel and on the Secretary to the Treasury. The Secretary to the Treasury had acknowledged receipt of the documents but had not further communicated their position in respect of the application.

[9]                 No one appeared in opposition at the hearing on 22 November 2024. I was satisfied that it was appropriate for orders to be made so did so orally at the hearing. I now issue this judgment to set out my reasons.

Section 329 of the Companies Act 1993

[10]             An application to restore a company to the Companies Register is made pursuant to s 329 of the Companies Act. This provides:

329 Court may restore company to New Zealand register

(1)The court may, on the application of a person referred to in subsection (2), order that a company that has been removed from the New Zealand register be restored to the register if it is satisfied that,—

(a)at the time the company was removed from the register,—

(i)the company  was  carrying  on  business  or a  proper reason existed for the company to continue in existence; or

(ii)the company was a party to legal proceedings; or

(iii)the company was in receivership, or liquidation, or both; or

(iv)the applicant was a creditor, or a shareholder, or a person who had an undischarged claim against the company; or

(v)the applicant believed that a right of action existed, or intended to pursue a right of action, on behalf of the company under Part 9; or

(b)for any other reason it is just and equitable to restore the company to the New Zealand register.

(1A) In considering whether to restore a company to the register on the ground referred to in subsection (1)(a)(i) or (b), the court must have regard to the reasons for the company’s removal and whether those grounds existed at the time of removal or exist at the time of the hearing of the application.

(2)The following persons may make an application under subsection (1):

(a)any person who, at the time the company was removed from the New Zealand register,—

(i)was a shareholder or director of the company; or

(ii)was a creditor of the company; or

(iii)was a party to any legal proceedings against the company; or

(iv)had an undischarged claim against the company; or

(v)was the liquidator, or a receiver of the property of, the company:

(b)the Registrar:

(c)with the leave of the court, any other person.

(3)Before the court makes an order restoring a company to the New Zealand register under this section, it may require any provisions of this Act or any regulations made under this Act, being provisions with which the company had failed to comply before it was removed from the register, to be complied with.

(4)The court may give such directions or make such orders as may be necessary or desirable for the purpose of placing the company and any other persons as nearly as possible in the same position as if the company had not been removed from the New Zealand register.

[11]             As the Court of Appeal held in Commissioner of Inland Revenue v Commercial Management Ltd:1

… the provisions concerning removal of a company from the register are designed to ensure that a company is only removed if there is no good reason for it to continue in existence. The controllers of the company and other interested persons are given the opportunity to object to removal for a range of reasons. But there can be cases where a company is removed from the register as a result of an error or oversight, or where circumstances change and it becomes apparent with the benefit of hindsight that there were good reasons for the company to continue in existence. In such cases, a company can be restored to the register.

Does the applicant have a right to apply to restore the Company to the Companies Register?

[12]             Section 329(1) requires any application to be brought by a party falling within s 329(2).

1      Commissioner of Inland Revenue v Commercial Management Ltd [2019] NZCA 479 at [29].

[13]             At the time the company was removed, MPI had brought the prosecution and obtained guilty pleas but the Company had not yet been sentenced. MPI is therefore an entity which was a party to a proceeding against the Company at the time the Company was removed from the Companies Register.

[14]             As a result, I am satisfied that MPI has standing to apply to restore the Company pursuant to s 329(2)(a)(iii).

Should an order restoring the Company to the Companies Register be made?

[15]             Unlike s 328, s 329(1)(a)(i) allows the Court to restore a company either where it was carrying on business or a proper reason existed for the company to continue in existence. It is not a two-limbed test.

[16]             I am satisfied that at the time the Company was removed from the Register there was a proper reason for the Company to continue in existence, namely to enable the criminal proceeding against the Company to continue through to the sentencing stage.

[17]             The Company was removed because the Registrar had reason to believe it was no longer carrying on business presumably for failure to file its annual return, with the Companies Register recording that the last annual return filed by the Company was filed on 5 September 2022.

[18]             The Company pleaded guilty to 19 charges under the Biosecurity Act less than six months prior to notice being given of the intention to remove it from the Register. No sentencing date for the Company had been set at the date of this application to restore. Mr Allen records in his affidavit for MPI that the director and his co‑defendants are scheduled for a jury trial on 31 March 2025 and it is likely that the Company will be sentenced along with the co-defendants depending on the outcome of that trial.

[19]             In John Hammonds & Co Ltd v Registrar of Companies, Hammond J went so far as to say “[c]ases in which this Court declines to restore a company to the register, for the purpose of proceedings, will be quite unusual.”2

[20]In addition, in Re Pranfield Holdings Ltd, Durie J stated:3

… the principle must be that the somewhat peremptory power of the Registrar to remove deadwood from the corporate scene, will not prevail against the rights of those so removed, or of others with whom they have dealt, to reinstate the company to pursue remedies provided by substantive law, unless it is plain that the proceeding, if successful, will still be nugatory. This principle puts grand notions of access to law ahead of mere rules for administrative ease.

[21]             Given the criminal prosecution, I am satisfied that a proper reason existed at the time the Company was removed for the Company to continue in existence.

Should any ancillary orders be made?

[22]             Section 329(3) provides that before making a restoration order, the Court may require the company to comply with any provisions of the Companies Act with which the company had failed to comply before it was removed.

[23]             The Company appears to have been removed following the failure to file annual returns. When a company is restored to the Companies Register, it continues in existence as if it was never removed.4 I therefore include a direction that the Company is to file annual returns for any years missed and to comply with any other filing requirements by the end of February 2025.

Result

[24]             As ordered orally at the hearing on 22 November 2024, the application to restore City Bond Transport Ltd to the Companies Register is granted.

2      John Hammonds & Co Ltd v Registrar of Companies [1999] 3 NZLR 690 (HC) at [57].

3      Re Pranfield Holdings Ltd (2001) 9 NZCLC 262,577 at [20].

4      Companies Act 1993, s 330(2).

[25]             The Company is to file any outstanding annual returns and comply with any other  filing  requirements  to  bring   the   Companies   Register   up   to   date   by 28 February 2025.

Associate Judge Sussock