Commissioner of Inland Revenue v Registrar of Companies

[2024] NZHC 2543

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-346

[2024] NZHC 2543

UNDER

AND

the Companies Act 1993

IN THE MATTER

of an application to restore D & H WHANAU HOLDINGS LIMITED to the

New Zealand Companies Register

BETWEEN

THE COMMISSIONER OF INLAND REVENUE

Plaintiff

AND

REGISTRAR OF COMPANIES

Defendant

Hearing:	30 August 2024
Appearances:	C van der Merwe for the Plaintiff
Judgment:	5 September 2024

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 6 September 2024 at 4 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Inland Revenue Legal Services, Auckland

COMMISSIONER OF INLAND REVENUE v REGISTRAR OF COMPANIES [2024] NZHC 2543 [5

September 2024]

Introduction

[1]    The   Commissioner    of    Inland    Revenue    has    applied    to    restore   D & H Whanau Holdings Ltd to the New Zealand Companies Register and for liquidation of the company.

[2]    The  Registrar  of  Companies  removed  the  company  from  the   Companies Register on 10 August 2021 following the failure to file annual returns; and on the basis the company was not carrying on business and there was no proper reason for it to continue.

[3]    The application to restore the company has been filed because the Commissioner says D & H Whanau Holdings  Ltd  owes  $210,086.33  to  the  Inland Revenue Department (IRD). The Commissioner submits s 177C(2) of the Tax Administration Act 1994 prevents the Commissioner from writing off the outstanding tax and shortfall penalty imposed on 16 September 2019 except where the debt cannot be recovered in the company’s liquidation.

[4]    In my minute of 26 July 2024, I directed that the Commissioner was to bring the application for restoration and the application for liquidation separately. This was so it was more straight forward from a procedural perspective and so the director of the company before it was removed from the Register, Duahn Hira, would have an appropriate opportunity to respond.

[5]    An amended pleading was filed but it still seeks restoration and liquidation in the same proceeding. Counsel for the Commissioner acknowledged this at the hearing on 30 August 2024 and agreed to file the usual liquidation proceedings once an order was made for the company to be restored.

[6]    Although there have been issues with service of these proceedings on Mr Hira, affidavits have been filed confirming that Mr Hira received the original proceedings, and the amended proceedings were served on the nominated contact person for both the company and Mr Hira — who is Mr Hira’s cousin.

[7]    Furthermore, the company will have an opportunity to respond to the separate liquidation proceedings that the Commissioner intends to bring if the company is restored.

[8]    In addition, both the Registrar of Companies and the Secretary of Treasury have been served and are abiding the Court’s decision.

[9]    On this basis, I therefore determine the application for restoration now on an unopposed basis.

Restoration of a company — legal provisions

[10]   An application to the Court for orders that a company be restored to the Companies Register is made pursuant to s 329 of the Companies Act 1993. 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.

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

Does the Commissioner have the right to apply to restore D & H Whanau Holdings Ltd?

[12]   Section 329(1), as set out above, requires any application to be brought by a party falling within s 329(2). The Commissioner of Inland Revenue pleads that the company is indebted to Inland Revenue in the sum of $210,086.33 in respect of Goods and Services Tax  and that the debt  arose before the company was struck off on     10 August 2021 (except for further interest and penalties accruing by operation of law). An affidavit has been filed on behalf of the Commissioner verifying the matters pleaded in the statement of claim. No documents have been filed in opposition to the application or disputing this evidence.

[13]   I am therefore satisfied that the Commissioner is a creditor and that the debt arose prior to the company being removed. The Commissioner therefore has standing to bring the application pursuant to s 329(2)(a)(ii).

Should    an    order    restoring    D    &    H    Whanau    Holdings    Ltd    to    the Companies Register be made?

[14]   Section 329(1)(a)(iv) provides that the Court may restore a company if it is satisfied that at the time the company was removed from the register the applicant was a creditor. As set out above, the Commissioner’s pleading alleges that this is the case, an affidavit verifying this has been filed and there is no opposition or evidence filed disputing this.

[15]   On this basis I am satisfied that it is appropriate to restore the company pursuant to s 329(1)(a)(iv).

Further directions

[16]   When restoring a company, s 329(4) allows the Court to make such directions or orders as may be necessary or desirable for the purposes 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 Companies Register.

[17]   Section 330(2) further provides that, when a company is restored, the company is deemed to have continued in existence as if it had not been removed from the register.

[18]   Therefore, following restoration, the registered office will again be the company’s address for service. As the company was struck off in August 2021, I am concerned that the registered office may no longer be occupied. A company may instead be served by service on its director.2 Issues have arisen with service on Mr Hira but I consider that it is sensible for service of the liquidation proceedings to be directed to be effected by service on the director with leave granted to apply for orders for substituted service based on the difficulties arising in this proceeding if the Commissioner considers that appropriate.

[19]   In addition, I include a direction that the company is to bring its annual returns up to date and any other documents required to be filed by 4 October 2024.

Costs

[20]   Because of the procedural issues that have arisen, a fair outcome appears to be that costs on the restoration application ought to lie where they fall, with disbursements to be fixed by the High Court Registrar. I make this order below.

[21]   If the Commissioner still wishes to seek costs, a short memorandum may be filed seeking to vary this order.

Orders

[22]I order:

(a)D & H Whanau Holdings Ltd is restored to the Companies Register;

(b)any liquidation proceedings that follow these proceedings are to be served on the director, Mr Hira, with leave granted to apply for orders

2      Companies Act 1993, s 387(1)(a).

for substituted service based on the difficulties with service arising in this proceeding;

(c)the Commissioner’s costs in respect of the restoration application are to lie where they fall but disbursements are to be paid by the company after being fixed by the High Court Registrar; and

(d)D & H Whanau Holdings Limited is to file any outstanding annual returns and other documents required by the Companies Registrar by 4 October 2024.

Associate Judge Sussock