Commissioner of Inland Revenue v Registrar of Companies

[2019] NZHC 2347

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-1644

[2019] NZHC 2347

UNDER

the Companies Act 1993 section 329 and Part 19 of the High Court Rules

IN THE MATTER OF

YOGI TRUSTEE LIMITED

BETWEEN

COMMISSIONER OF INLAND REVENUE

Applicant

AND

REGISTRAR OF COMPANIES

First Respondent

SECRETARY TO THE TREASURY
Second Respondent

PAUL NIGEL WEBB

Third Respondent

Called	13 September 2019 at 11:45am
Appearances:	Oscar Upperton for the Applicant No appearance for the Respondents
Judgment:	13 September 2019
Reasons:	17 September 2019

REASONS FOR JUDGMENT OF ASSOCIATE JUDGE R M BELL

Solicitors:

Reasons for judgment were delivered by me on 17 September 2019 at 4:00pm

pursuant to Rule 11.5 of the High Court Rules.

…………………………………

Deputy Registrar

Crown Law (Harry Ebersohn/Oscar Upperton), Wellington, for the Applicant

COMMISSIONER OF INLAND REVENUE v REGISTRAR OF COMPANIES [2019] NZHC 2347 [13

September 2019]

[1]    When the Commissioner of Inland Revenue’s application to restore Yogi Trustee Company Limited to the register was called on 13 September 2019, I granted the application. I now give reasons for my decision.

[2]    Yogi Trustee Company Ltd was incorporated on 26 March 2002. It was removed from the register on 15 December 2017. Mr Paul Webb, the third respondent, was the director of the company. Yogi Trustee Company Ltd is the corporate trustee of the Yogi Trust. The company is the registered proprietor of a property in Arney Road, Remuera, Auckland. The company’s sole shareholder is Mr Andrew Tauber. The Commissioner believes that Mr Tauber holds  the  shares  on  trust  either  for Mr Webb or for others associated with Mr Webb. Mr Webb and Mr Tauber are associates. They operated through a group of companies called the Hong Group. For some years the Commissioner has pursued the Honk Group, Mr Webb and Mr Tauber for non-payment of taxes. There has been considerable litigation. On 26 November 2018, the Commissioner obtained judgment against Mr Webb in the District Court for

$26,304,198.48.1

[3]    Earlier this year, the Commissioner began a proceeding against Mr Webb, Yogi Trustee Company Ltd and other defendants, CIV-2019-404-806. In that proceeding, she seeks orders declaring that the Yogi Trust is illusory, that trust powers and discretions given to Mr Webb under the trust deed are his property and assets held under the trust can properly be treated as his assets, and an order setting aside a lease to Mr Webb’s current partner. That proceeding was started after Yogi Trustee Company Ltd had been removed from the register.

[4]    For the application to restore Yogi Trustee Company Ltd to the register, the Commissioner relies on an earlier proceeding, CIV-2013-404-901. In that originating application the Commissioner sought a freezing order under Part 32 of the High Court Rules 2016. The respondents were Mr Webb and Yogi Trustee Company Ltd.

1      Commissioner of Inland Revenue v Webb [2018] NZDC 24228.

A freezing order was made on 20 February 2013. On 6 March 2013, Woolford J directed that the freezing order should continue pending further order of the court. Keane J made a similar order on 17 April 2013. In May this year, the Commissioner applied for orders to vary the freezing order. Woolford J granted the variation on 2 May 2019.

[5]    For the restoration application, the Commissioner relies on these grounds under s 329 of the Companies Act 1993:

329 (1) The court may, on the application of a person referred to in subsection (2) of this section, 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, -

…

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

…

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

[6]    The Commissioner has served the proceeding on the Registrar of Companies and the Secretary to the Treasury. They have indicated that they do not oppose. The Commissioner has also served Mr Webb. He has taken no steps to oppose.

[7]    The Commissioner has made out the ground under s 329(1)(a)(ii). The freezing order proceeding is the relevant proceeding. While the Commissioner had obtained final orders, the proceeding remained on foot in that there were binding orders which continued to apply and were enforceable. For those orders to be enforceable against Yogi Trustee Company Ltd, the company must continue to exist. I see no need to read down s 329(1)(a)(ii) to apply only to proceedings that have not yet reached a final judgment. The same considerations for keeping the company in existence apply both before judgment and afterwards when the company is required to comply with the court’s judgments and orders.

[8]    I am also satisfied that under s 329(1)(a)(iv) the Commissioner had an undischarged claim against the Yogi Trustee Company Ltd when it was removed from the register. The Commissioner does not say that Yogi Trustee Coy Ltd owed her taxes directly (although there are grounds for suspecting that that may be the case). Instead,

the Commissioner says that she has a claim to the assets of Yogi Trustee Company Ltd as a way of discharging Mr Webb’s debt under the District Court judgment. Admittedly the Commissioner had not obtained judgment against Mr Webb when Yogi Trustee Company Ltd was removed from the register, but the District Court judgment is for unpaid taxes going back many years. In short, both Mr Webb’s liability for taxes, and the Commissioner’s claim that assets held by Yogi Trustee Company Ltd can be treated as his property and can be applied against his liability under the District Court judgment, give the Commissioner an undischarged claim against Yogi Trustee Company Ltd. The case meets the low threshold of showing a genuine case.2

[9]    My finding that the Commissioner has an undischarged claim against Yogi Trustee Company Ltd under s 329(1)(a)(iv) also means that the Commissioner has satisfied the requirement for standing under s 329(2)(a)(iii):

(a)(2)      The following persons may make an application under subsection (1) of this section:

(a)Any person who, at the time the company was removed from the New Zealand register:-

…

(iv)had an undischarged claim against the company…

[10]   There are no reasons counting against the company not being restored to the register.

[11]   Under s 324 of the Companies Act, the property of any company removed from the register vests in the Crown. Superficially, it might be thought that that suits the Commissioner as the Crown already has the benefit of the Arney Road property. That, however, would be short-term thinking. I suppose that the Crown does not, as a matter of practice, appropriate for its own purposes assets vested in it under s 324 of the Companies Act. Section 324 may operate as no more than a default interim measure: the asset vests in the Crown until the company is restored or the court makes vesting orders under s 324(4). Moreover, a bank has a mortgage registered against the title to the Arney Road property.   Clear rulings are required as to the extent to which assets

2      Re Salamanca Investments Ltd [2015] NZHC 572, [2015] 3 NZLR 411 at [104].

held in the name of the company can be applied in partial discharge of Mr Webb’s indebtedness to the Commissioner. For that, the company needs to be restored to the register.

[12]   I see good reason for Yogi Trustee Company Ltd to be restored to the register, even if the Commissioner had not made out the grounds under s 329(1)(a)(ii) and (iv). If required, I would have restored the company under the just and equitable ground in s 329(1)(b).  Further, if  the Commissioner did not have standing under  s  329(2)(a), I would have granted leave under s 329(2)(c). Yogi Trustee Company Ltd owns property in New Zealand. It is unacceptable for property to be left in the nominal title of a body which has ceased to exist. Restoration to the register is required so that the property can be dealt with.

……………………………….

Associate Judge R M Bell