Department of Internal Affairs v OTT Trading Group Limited

[2020] NZHC 3073

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-001739

[2020] NZHC 3073

UNDER

The Companies Act 1993 and the Court’s inherent jurisdiction

BETWEEN

DEPARTMENT OF INTERNAL AFFAIRS

Plaintiff

AND

OTT TRADING GROUP LIMITED

Defendant

Hearing:

6 November 2020

Appearances:

L Wilson for Plaintiff

No appearance for Defendant

Judgment:

20 November 2020

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by Associate Judge Andrew on 20 November 2020 at 4.30 pm

pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar

Date……………………….

DEPARTMENT OF INTERNAL AFFAIRS v OTT TRADING GROUP LTD [2020] NZHC 3073 [20 November 2020]

Introduction

[1]        These are uncontested liquidation proceedings. On 6 November 2020, I made orders placing the defendant company into liquidation, appointed the Official Assignee as liquidator and awarded costs on a 2B basis plus disbursements in favour of the plaintiff.

[2]        The plaintiff, the Department of Internal Affairs (the Department), filed a memorandum immediately prior to the hearing addressing the issue of its standing to make the application for liquidation. This judgment briefly addresses the issue of standing. Because the issue was not argued before me (I have heard no submissions adopting a contrary view), I do not consider it appropriate to embark on any detailed analysis of the submissions of the Department. Having said that, I acknowledge that they are comprehensive and very helpful.

The issue

[3]        The Department’s liquidation application relates to the recovery of a costs award made in a proceeding the Department brought against the defendant company (OTT) and a related entity, under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009. In the proceedings the Department sought and obtained against OTT a pecuniary penalty (which is payable to the Crown, and not recoverable by the Department), an injunction and costs (which are payable to the Department and said to be recoverable by it).

[4]        The issue of the Department’s standing primarily turns on the proper interpretation of s 308(c) of the Companies Act 1993. The combined effect of ss 241, 303(2), 303(3) and the definition of “creditor” in s 240 of the 1993 Act, is that the Department in a liquidation may not recover costs ordered to be paid in relation to a monetary penalty. A degree of ambiguity in the legislation arises from the fact that the relief the Department sought in the proceedings was not limited to a monetary penalty. It also related to an injunction. And, if the Department only sought an injunction of the proceeding, it cannot be disputed that costs could be admitted in a liquidation.

Decision

[5]        I accept the submission of the Department that costs which are properly due as a result of the imposition of an injunction, even if a monetary penalty is also awarded in the same proceeding, are admissible claims under s 303 of the 1993 Act. That is because, properly interpreted, s 308(c) does not constrain the recovery of costs in a liquidation to all causes of action to which those costs relate. So long as the costs relate to a cause of action not captured by s 308, they may be admitted in a liquidation. That means that where such a debt is owed by a company to the Department, the Department is a “creditor” and for the purposes of s 240 of the 1993 Act, and has standing under s 241(2)(iv) to apply to put it into liquidation.

Associate Judge P J Andrew