Doe v Registrar of Companies
[2021] NZHC 2654
•6 October 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-1107
[2021] NZHC 2654
UNDER Section 329 of the Companies Act 1993 IN THE MATTER
of an application to restore a company to the Register of Companies
BETWEEN
KIERAN EDWARD DOE
Applicant
AND
REGISTRAR OF COMPANIES
Respondent
Hearing: On the papers Counsel:
J Donkin for the Applicant G Caro for the Respondent
Judgment:
6 October 2021
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 6 October 2021 at 2.30pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors/Counsel:
Burton Partners, Auckland
Registrar of Companies, Auckland
J Donkin, Quay Chambers, Auckland
DOE v REGISTRAR OF COMPANIES [2021] NZHC 2654 [6 October 2021]
Introduction
[1] This is an application to restore Spirax Ltd (“Spirax”) to the Register of Companies pursuant to s 329(1)(b) of the Companies Act 1993. It is brought by its former director and shareholder, Mr Kieran Edward Doe.
[2] Mr Doe seeks to restore Spirax so it can take advantage of an opportunity to purchase a property back from Waka Kotahi New Zealand Transport Agency (“NZTA”). The property was previously acquired by NZTA for the purposes of a road widening project but it is no longer required for that purpose.
[3] Mr Doe has filed an affidavit in support of the application dated 16 June 2021 together with an affidavit from Mr Kenneth O’Shea, an accountant at Lockhart O’Shea Ltd, the accountancy firm engaged by the applicant to provide accountancy services to Spirax.
Relevant Legal Provisions and Principles
[4] The Companies Act provides for the removal and the restoration of companies to the Companies Register. As the Court of Appeal states in Commissioner of Inland Revenue v Commercial Management Ltd:1
… the provisions concerning removal of a company 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.
[5] Section 328 provides for the circumstances in which the Registrar may restore a company to the Register. This application does not fit within the circumstances provided for in that section and therefore must be made to the Court under s 329. Section 329 provides:
1 Commissioner of Inland Revenue v Commercial Management Ltd [2019] NZCA 479 at [29].
329 Court may restore company to New Zealand register
(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,—
(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 of this Act; 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.
[6] The Court of Appeal in Commissioner of Inland Revenue v Commercial Management Ltd distinguished s 329 from the s 328 process as follows:2
[32] Section 328 contemplates a relatively simple and uncontroversial restoration process where it is apparent that the company should not have been removed from the register having regard to circumstances at the time of that removal, and where no one objects to that restoration. Section 329 enables a wider range of grounds to be invoked, including the broad “just and equitable” ground. It is available in cases where restoration is opposed. In circumstances where s 329 is invoked, and in particular where the “just and equitable” ground is relied on, an evaluative judgment is required. Responsibility for making that judgment is conferred on the court rather than on the Registrar. As is apparent from the structure of these provisions, s 329 is aimed at more complex cases where restoration may or may not be appropriate. A s 329 application is not simply a mechanical procedural hurdle to be overcome before arriving at an inevitable destination.
[7] The Court of Appeal listed six matters that must be addressed in an application following the amendment to the Act inserting s 329(1A). This new subsection requires a court to have regard to the reasons for the company’s removal and whether those grounds existed at the time of removal or exist at the hearing of the application. The six matters that are required to be addressed in response to this subsection are: 3
(a)the ground on which the company was removed;
(b)whether that ground was in fact satisfied at the time of the company’s removal;
(c)the position in relation to that ground at the time of the restoration application;
(d)what steps if any the company and its controllers took to prevent removal from the Register. If no steps were taken, the reason for the failure to do so needs to be explained;
(e)what if anything has changed since the time the company was removed from the Register, which would justify the controllers of the company changing their position on the appropriateness of the company continuing in existence; and
(f)the explanation for any delay between the time when the reason for seeking restoration was first identified, and the making of the application.
2 At [32].
3 At [58].
[8] The Court of Appeal then referred to three further matters that are required to be identified to allow the Court to determine whether it is “just and equitable” for a company to be restored to the Register:
(a)the steps that would need to be taken to remedy any failures to comply with filing requirements under the Companies Act (with copies of any documents that need to be filed provided) and if any orders under s 329(3) would be appropriate;4
(b)the financial position of the company both at the time of the removal and the time of restoration;5 and
(c)any outstanding creditors of the company and a sufficient description of its financial affairs for the court to be able to form a view on whether any orders should be made under s 329(4).6
[9] Section 330 relates to the mechanics of restoration, providing that a company is restored to the Register once a notice signed by the Registrar is registered under the Act (s 330(1)) and that once restored a company is “deemed to have continued in existence as if it had not been removed from the Register” (s 330(2)).
Can Mr Doe apply to restore the company?
[10] The applicant in this case is Mr Doe who was the former director and shareholder of Spirax. Directors and shareholders at the time a company was removed are two of the categories that s 329(2) provides may apply for registration. Mr Doe’s application therefore meets this requirement.
Is it just and equitable that Spirax is restored to the Register?
[11] This application is made pursuant to s 329(1)(b) on the basis that it is “just and equitable to restore” Spirax to the Register.
[12] I therefore consider the factors that Commissioner of Inland Revenue v Commercial Management Ltd requires to be addressed.7
4 At [61].
5 At [62].
6 At [63].
7 Commissioner of Inland Revenue v Commercial Management Ltd, above n 1.
Grounds on which Spirax was removed
[13] Mr Doe and Mr O’Shea’s affidavits both describe the background for the removal of Spirax from the Companies Register. Spirax operated as a property trading company and was in the business of buying and selling residential properties. Mr Doe deposes that he is in the business of property development and Spirax was one of the entities through which he undertook that business.
[14] On 13 January 2016, the Crown entered into an agreement with one of Mr Doe’s other companies, JK Mitchell Ltd, whereby the Crown agreed to acquire a property in Bluebird Crescent, Unsworth Heights, from JK Mitchell Ltd (or nominee) under the Public Works Act 1981 to allow for improvements to the state highway network.
[15] JK Mitchell Ltd nominated Spirax to complete the transaction with the Crown. On 22 August 2016 JK Mitchell Ltd transferred the property to Spirax which then immediately transferred the property to the Crown.
[16] After the transfer of the property to the Crown, Spirax did not engage in any further property transactions or developments. Mr Doe deposes that had the Crown not exercised its power to acquire the property, it is likely that a planned townhouse development would have proceeded and Spirax would have been used for that development. As that could no longer happen, Mr Doe decided that it would be best to wind-up Spirax as there was no reason for it to continue in existence at that stage.
[17] On 9 June 2018 Mr Doe therefore passed a resolution to commence the winding-up of the company and appointed Lockhart O’Shea Ltd to perform the required tasks to achieve this.
[18] On 10 September 2018 Mr Doe passed a resolution to remove the company from the Register pursuant to s 318 of the Companies Act 1993. Copies of the director’s resolution and shareholder’s resolution are attached to the affidavit of Mr O’Shea.
[19] On 19 September 2019 Mr Doe applied for Spirax to be removed from the Register and the application was actioned on 9 November 2019.
[20] At the date of removal, as confirmed in both affidavits, Spirax had no creditors or debtors and was solvent. It was also completely up to date with all of its filings. Since being removed, Spirax has not traded.
[21] The grounds on which Spirax was removed are therefore that it was no longer trading and it was unnecessary for it to continue in existence.
Was that ground satisfied at the time of the company’s removal?
[22] Yes, the company was properly removed from the Companies Register at the time.
Position in relation to that ground
[23] It is clear from the evidence filed that the circumstances at the time the company was removed supported its removal from the Register.
Steps taken to prevent removal or reason for the failure
[24] It was intended that the company was removed from the Register and the appropriate steps were taken by Mr Doe.
What changes, if any, have there been to affect the appropriateness of the company continuing in existence?
[25] The circumstances have now changed as on 15 March 2021 WSP NZ Ltd (“WSP”), on behalf of NZTA, gave notice that the property would be offered back to Spirax as it was surplus to the Crown’s requirements. A copy of this letter is annexed to Mr Doe’s affidavit.
[26] Mr Doe gave a copy of the WSP letter to Lockhart O’Shea Ltd. On 8 April 2021, Lockhart O’Shea Ltd applied to the Registrar of Companies to restore Spirax under s 328(1)(b) of the Companies Act. This was not accepted by the Registrar as
the application did not fall within s 328. The Registrar suggested that application be made under s 329.
[27] It is appropriate for the company to be restored so that it may accept the Crown’s buy-back offer. As recorded in Mr Doe’s affidavit, this is a major change in circumstances which warrants the restoration of the company and its continuing existence.
Explanation for any delay between the time and the need for restoration was first identified
[28] This application has been made relatively expeditiously following the receipt of notice from the Crown that the property was surplus to requirements so there is no concern with delay.
Summary on reasons for removal
[29] From the above six factors it is clear that the reasons for removal were justified at the time but there has now been a major change in circumstances that supports the restoration of the company to the Register.
Further factors relevant to “just and equitable” ground
[30] As set out above, the Court of Appeal listed three further factors that are to be addressed in determining whether it is just and equitable to restore a company to the Register. I now deal with those factors.
What steps, if any, need to be taken to remedy any failure to comply with filing requirements under the Companies Act?
[31] The company has not failed to comply with any filing requirements as it was appropriately removed from the Register following cessation of its business and there was no continuing need for it to remain in existence.
What was the financial position of the company both at the time of the removal and at the time of restoration?
[32] The affidavits filed in support of this application confirm that Spirax had no creditors or debtors and was solvent when it was removed from the Companies Register. Mr O’Shea confirmed that in its final financial statement for the year ended
31 March 2017 Spirax reported a loss of $21,734 which was allocated to the shareholder as a loss from a Look Through Company. A copy of the financial statement is annexed to Mr O’Shea’s affidavit.
[33] Spirax has not traded since it was removed from the Register and so has no creditors or any other parties that will need to be addressed if the company is restored.
[34] Mr O’Shea records that Spirax currently has no assets or liabilities. Upon restoration it will receive a loan from its shareholder to assist with the re-purchase of the property from the Crown.
[35] Mr Doe deposes that he initially acquired the property because he wanted to undertake a residential property development on the site. Now that the property is surplus to the Crown’s requirements, Spirax is intending to pursue the development that was originally intended.
Are there any outstanding creditors and are there any matters in relation to the financial affairs of the company that are relevant to restoration?
[36] As recorded above, there are no outstanding creditors for Spirax and there are no other matters that need to be taken into account in relation to the financial affairs of the company.
Registrar of Companies
[37]The proceedings were served on the Registrar of Companies on 9 July 2021.
[38] The Registrar of Companies considered the application and supporting affidavits and has consented to the restoration of Spirax to the Register of Companies. The Registrar confirmed in a joint memorandum filed with the applicant that they are
unaware of any failure by Spirax to comply with any provisions of the Companies Act or any regulations made under the Companies Act at the time it was removed from the Register in terms of s 329(3).
Secretary to the Treasury
[39] A direction was made by Associate Judge Andrew by minute dated 22 July 2021 that the application was to be served on the Secretary to the Treasury. Following service, a representative confirmed that the Secretary had no objection to the restoration, did not wish to be heard by the Court and would abide the Court’s decision.
Conclusion
[40] In all of the circumstances, I consider that it is just and equitable for Spirax to be restored to the Register. I therefore make orders below as sought together with the necessary grant of leave and an administrative order in case it is necessary.
Orders
[41]I order that:
(a)this proceeding may be brought by way of originating application;
(b)Spirax Ltd is restored to the New Zealand Register of Companies;
(c)Spirax Ltd is to comply with any requirements of the Companies Registrar in respect of the restoration.
Associate Judge Sussock
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