Equity Capital Investments Limited v Commissioner of Inland Revenue

[2020] NZHC 1873

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-2740

[2020] NZHC 1873

IN THE MATTER

Of an appeal under s 370 of the Companies Act 1993

BETWEEN

COMMERCIAL MANAGEMENT LIMITED

Appellant

AND

COMMISSIONER OF INLAND REVENUE

Intervener

CIV-2019-404-2742

IN THE MATTER

Of an appeal under s 370 of the Companies Act 1993

BETWEEN

EQUITY CAPITAL INVESTMENTS LIMITED

Appellant

AND

COMMISSIONER OF INLAND REVENUE

Intervener

Hearing:

16 June 2020

Further submissions on 30 June 2020

Counsel:

A Beck for Appellants

G S Caro and M Deligiannis for Intervener

Judgment:

31 July 2020

JUDGMENT OF WHATA J

This judgment was delivered by me on 31 July 2020 at 3.00 pm,

pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date: ………………………….

COMMERCIAL MANAGEMENT LIMITED v COMMISSIONER OF INLAND REVENUE [2020] NZHC 1873 [31 July 2020]

[1]    Marketing Agencies Limited (MAL) and Mountforts Pharmacy Limited (MPL) (collectively, the companies) were removed from the New Zealand register (the register), in 1998 and 2011 respectively. However, the companies were restored to that register by this Court, pursuant to s 328 of the Companies Act 1993 (the Act) on 21 September 2018 (the restoration). While restored, the companies commenced legal proceedings in the Taxation Review Authority (the Authority). Thirteen months later, the Court of Appeal set that order aside. The Registrar then removed all record of the restoration from the register, so that the records now only show the earlier removals. The appellants then applied to the Registrar, pursuant to s 328(1)(b) of the Act, to have the companies restored again because they were in legal proceedings at the time the Registrar removed all record of the High Court restoration. The Registrar does not, however, accept that the companies qualify for restoration under s 328(1)(b) because, it says, the companies were never restored in 2018 and/or removed from the register in 2019. Consequently, the Registrar’s position is that as the companies were not in legal proceedings when they were removed in 1998 and 2011, s 328(1)(b) is not engaged. The Registrar also refused to notify their application because the qualifying criteria for notification were not met.

[2]    This is an appeal against the Registrar’s refusal to restore the companies. I must resolve whether the restoration order of this Court (the resolution order) had interim legal effect pending the decision of the Court of Appeal to set aside (the appeal order). If so, I must also determine whether the Registrar was wrong to refuse to exercise its power to notify the s 328(1)(b) restoration or otherwise restore the companies.

The facts

[3]    The Court of Appeal provided a detailed account of the background. It is not disputed. The following is based on that account.

A tax avoidance scheme

[4]    The companies were involved in, along with many others, what have become known as the “Russell template” tax avoidance arrangements. Typically, such an arrangement involved a company owned by Mr Russell entering into a contract with

another company controlled by him for the provision of services. No services were provided, but the fees paid were a device to shift profits from a profitable company to another company with accrued losses in order to avoid paying income tax on the former company’s profits. This arrangement has been held to be a tax avoidance arrangement.

[5]    The GST implications of the findings that no services were in fact provided then became the subject of litigation and, in Duvall,1 this Court held the Commissioner was required to amend FB Duvall Limited’s GST assessments by deleting the amounts shown as payable by way of output tax in respect of administration fees for supplies made by that company to subsidiary companies. Mr Russell made a claim in relation to seven other companies, culminating in a settlement agreement with the Commissioner.

[6]    Mr Russell also sought to reach agreement in relation to other companies, including MAL and MPL, but the Commissioner made it clear that it would not entertain settlement discussions in relation to removed companies. This led to the 2018 application to restore.

The restoration order

[7]    The 2018 application sought to restore the companies to the register under     s 329(1)(b) of the Act on the grounds that it was just and equitable for them to be restored. The gist of this claim was that the companies had Duvall-like claims that should have been ventilated. The High Court was satisfied that the companies should be given the opportunity to have their claims tested, describing the right to do so as fundamental. An order was made restoring the companies to the register. Once the order was sealed, the companies were restored to the register and, on 21 September 2018, the Registrar advised that MAL and MPL had been restored to the register. An appeal against the High Court decision was filed on 25 September 2018.

1      FB Duvall Ltd v Commissioner of Inland Revenue (1997) 18 NZTC 13,410 (HC).

The Authority commences proceedings

[8]    On 19 and 22 March 2019, MPL and MAL respectively commenced proceedings before the Authority under the Tax Administration Act 1994. The MPL notice of claim alleges that $3,219,154.82 was wrongly paid to the Commissioner, relying on, among other things, the Duvall decision. To explain the delay, it is also claimed that the Commissioner’s settlement of disputes, pursuant to the Duvall decision, only became evident in 2018. MAL’s claim, alleging $219,782.42 was wrongly paid, mirrors the MPL notice.

The appeal order

[9]    The Court of Appeal disagreed with this Court’s assessment. That Court was critical of the absence of relevant information, noting that “for this reason alone we consider that the High Court should have declined to restore the companies”.2 The Court also did not agree that there was public interest in the removed companies being permitted to pursue their proposed claims against the Commissioner. Most relevantly, the Court said:3

[68] There are significant hurdles in the way of a successful claim by the removed companies for GST refunds, if they are restored to the register. Those companies would not have any current right to object to their GST assessments for the relevant periods under Part 4A of the Tax Administration Act 1994: the time for making such objections has long expired. They would need to apply for the Commissioner’s approval to make a late objection under s 89K. The Commissioner could only grant that approval in relation to the removed companies if exceptional circumstances had prevented those companies from making their objections in a timely way, and those companies had taken steps to make the objection as soon as reasonably practicable after becoming aware of that failure. The prospect of the removed companies making out those grounds seem slight. The removed companies might in the alternative ask the Commissioner to exercise the Commissioner’s power to correct an assessment under s 113 of the Tax Administration Act. But that discretion will not be exercised where to do so would circumvent the normal disputes process. So even on a preliminary assessment that focuses solely on the process for making a late objection, and does not go into the merits of any such objection, the prospect of a successful claim by the removed companies for a GST reassessment and refund seems poor.

[10]And further:4

2      Commissioner of Inland Revenue v Commercial Management Ltd [2019] NZCA 479 at [65].

3 At [68].

4 At [71].

[71]  If the position in relation to the proposed tax claims were less clear  cut, then the approach adopted by the Associate Judge of leaving the merits of those claims to be resolved through the disputes process might have been appropriate. But in this case, the position is clear. Either restoring the removed companies to the register will be pointless because they will not be able to obtain any benefit from belatedly seeking a reassessment of their GST liabilities, or it will achieve a positively undesirable and unjust outcome. Either way, it is not just and equitable to restore the removed companies to the register in order to enable them to pursue the claims that the applicants have identified as the sole rationale for their restoration.

[11]The Court then made the following order:5

The order the removed companies be restored to the Companies Register is set aside.

“Removal” and application to restore

[12]   On 10 October 2019, upon receipt of the decision of the Court of Appeal but in advance of a sealed order, the Registrar deleted reference to the record of the restoration order. The literal effect of this is that the register now has no record of the companies having been restored. The companies claim that this action amounted to a removal of the companies from the register.

[13]   On 22 November 2019, MAL and MPL applied to the Registrar to restore the companies to the register, using the online application process. The Registrar responded:

The company was removed from the New Zealand register on 23 April 1998. The company was not a party to legal proceedings then. As you know, the Court of Appeal recently set aside the order of the High Court that the company be restored to the New Zealand register. Therefore the company was not “removed” for the purposes of Part 17 of the Companies Act 1993 following the Court of Appeal judgment. The correct position is that the restoration order was quashed so the New Zealand register records that the company was removed on 23 April 1998.

For the above reasons the Registrar of Companies will not be giving public notice under section 328(3) of the Companies Act 1993. In terms of section 328(1), the Registrar is not satisfied that the company was party to legal proceedings at the time of its removal.

5 At [75].

The scheme

[14]   The scheme of the Act, as it relates to the removal and restoration of companies, was also thoroughly addressed by the Court of Appeal. The following is based on that Court’s analysis too.

[15]   Part 17 of the Companies Act sets out the circumstances in which a company may be removed from and restored to the register. The grounds for removal by the Registrar are enumerated at s 318. They include (in short):

(a)non-compliance with essential requirements for a company;6

(b)the company is an amalgamating company;7

(c)the Registrar has reasonable grounds to believe that the company is not carrying on business and there is no proper reason for the company to continue in existence;8

(d)the company has failed to respond to requirements for inspection;9

(e)the Registrar has reasonable grounds to believe that the directors or shareholders have failed to comply with specified reporting requirements or have provided inaccurate information;10

(f)the company is in liquidation and no liquidator is acting, or specified documents have not been provided to the Registrar within six months after the liquidation;11

(g)an authorised shareholder, director or other person requests that the company be removed;12

6      Companies Act 1993, s 318(1)(aaa) & (ba).

7      Section 318(1)(a).

8      Section 318(1)(b)

9      Section 318(1)(ba).

10     Section 318(1)(bb), (bc) & (bd).

11     Section 318(1)(c)(i) & (ii).

12     Section 318(1)(d).

(h)on receipt of reports by a liquidator of completion of liquidation or notice of intention to remove a company;13 and

(i)failure to pay prescribed fees.14

[16]   Section 318(4) also provides the Registrar must only remove a company from the register on the grounds that the company is not carrying on business, and there is no proper reason for it to carry on business if notice of the intention to remove in accordance with s 319 has been given; or the company has not satisfied the Registrar that it is carrying on business, or that a proper reason exists for the company to continue in existence; and the Registrar is satisfied that either no person has objected to the removal under s 321, or if an objection to the removal has been received, that  s 322 still allows for removal.15

[17]   Section 321 allows for objection and sets out the grounds on which an objection can be made, including that the company is carrying on business, or there is a proper reason for it to continue in existence; that the company is party to legal proceedings; or that for any reason it would not be just and equitable to remove the company from the register. The Registrar may then decide, pursuant to s 322, not to proceed with the removal, or advise the objector that the removal will proceed unless they apply to the Court under s 323 for an order that the company not be removed from the register.16 The Court is empowered to order against the removal of a company on certain grounds, including that there exists a right of action on behalf of the company and that it would not be “just and equitable” to remove the company.17

[18]   Sections 328 and 329 provide for restoration to the register by the Registrar and the Court respectively. Section 328(1)(b) of the Act states:

328     Registrar may restore company to New Zealand register

(1) Subject to this section, the Registrar  must, on  the application of a  person referred to in subsection (2), and may, on his or her own motion, restore a company that has been removed from the New

13     Section 318(1)(e).

14     Section 318(1)(f).

15     Section 318(4).

16     Section 322.

17     Section 321(d)-(f).

Zealand register to the register if he or she is satisfied that, at the time the company was removed from the register,—

…

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

[19]As noted by the Court of Appeal:18

[29] … 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.

[20]   I return to the mechanics of ss 328 and 329 below. For present purposes, it is sufficient to recall what the Court of Appeal said about these provisions:

[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.

[21]   As the Court of Appeal also noted, s 330 provides a company is restored to the register when a notice to that effect, signed by the Registrar, is registered under the Act and that a company restored to the register is deemed to have continued in existence as if it had not been removed. The effect of restoration is that, once restored, there can be no challenge to the validity of actions taken by the company or those dealing with it during the period the company was removed.19

18     Commissioner of Inland Revenue v Commercial Management Ltd, above n 2.

19     Clark v Libra Developments Ltd [2007] NZLR 709 at [203].

Removal and restoration in practice

[22]   Mr Caro helpfully explained the process normally adopted by the Registrar for the removal and restoration of companies under Part 17. A summary of his explanation is as follows.

[23]   When the Registrar removes a company, the “Company Status field” is changed from “Registered” to “Removed”. That field also records the period when the company was on the register. In addition, the certificate of incorporation records when the company was incorporated and when it was removed. The inclusion of the removal on the certificate of incorporation is the notice required by s 317 of the Act.

[24]   For the removal of a company, there is no sealed order of the Court for the Registrar to register. That is because the Court does not have any power under Part 17 to order the removal of a company.

[25]   For a restoration by the Registrar under s 328, the Company Status field is changed from “Removed” to “Registered”. That field also records the period when the company was removed from the register and the period from incorporation to when the company was removed. A notice stating the company is restored is then registered in accordance with s 330(1).

[26]   For a restoration ordered by the Court under s 329, again, the Company Status field is changed from “Removed” to “Registered”, which also records the period when the company was removed from the register and the period from incorporation to when the company was removed. The sealed order of the Court is also registered. The Registrar treats that sealed order as a document for registration under the Act for the purposes of s 362. As with restoration under s 328, a notice stating the company is restored is registered in accordance with s 330(1).

The argument

[27]   Mr Beck submits as follows. Section 328 is clearly engaged as the companies were in fact and law restored to the register in 2018 and then “removed” by the Registrar in 2019. The order of the High Court was never stayed and the restoration

was given effect to. While on the register, the companies took legal steps, including the filing of documents with the Registrar, and the institution of proceedings before the Authority. The filing of the appeal did not prevent the High Court decision taking effect and the appeal order does not have retrospective effect. Action had to be taken to remove them. The Registrar is now attempting to pretend the companies had no legal existence in 2019 and that the proceedings commenced through the Authority are legal nullities. Thus, the fundamental issues are – whether there were properly commenced legal proceedings in train at the time of the second removal and whether those proceedings have to be completed in accordance with the law.

[28]Ms Deligiannis for the Commissioner of Inland Revenue (CIR) responds:

(a)The scheme of the Act is clear and simple – the power to restore applies in relatively straightforward cases per s 328, or where it is just and equitable per s 329:20

… 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.

(b)The Act does not envisage backdoor restoration of the type engineered by the companies in this case and the present application is simply an attempt to circumvent and/or collaterally challenge the Court of Appeal’s decision, a decision which is highly critical of the application made by the companies.

(c)The companies have appealed the wrong decision – there was no decision made by the Registrar per s 318 to “remove” – the deregistration simply followed as a matter of law from the decision of the Court of Appeal.

(d)The only decision capable of appeal, is the Registrar’s refusal to notify pursuant to s 328(3) – and that section is only triggered if the Registrar has exercised a power for removal at s 318, which it has not.

20     Commissioner of Inland Revenue v Commercial Management Ltd, above n 2, at [32].

(e)The records currently show removals in 1998 and 2011 and, as there were no proceedings affecting the companies at that time, s 328 is not engaged at all.

(f)The effect of order of the Court of Appeal is that the companies must be deemed to have never been restored and could not have filed valid legal proceedings.

(g)In any event, the attempt by the companies to restore the companies to the register is hopeless. Even if allowed to proceed, the CIR will object, the effect of which is to prohibit the restoration pending a contested hearing, with an inevitable adverse result.

(h)It is acknowledged that decisions of the Court have lawful effect until quashed,21 but decisions speak retrospectively unless they clearly can be said to change the law.22

(i)Furthermore, to the extent that third parties might be affected by actions taken by the companies in the interim (i.e. pending the Appeal outcome), they can seek to have the company restored, pursuant to     s 329, and once restored, are deemed to have been in existence per     s 330.

(j)Furthermore, the process adopted is little more than an attempt to game the tax system.

Submissions after hearing

[29]   During the course of argument, it became evident that the central issue in this case is whether the restoration order had interim legal effect. I referred the parties to A J Burr Limited,23 and invited submissions. Mr Beck submitted that A J Burr is authority for the proposition that, save in rare cases of flagrant invalidity, an

21     Siemer v Solicitor-General [2013] NZSC 68, [2013] 3 NZLR 441 (Siemer) at [191].

22     Chamberlains v Lai [2006] NZSC 70 at [143].

23     A J Burr Ltd v Blenheim Borough Council [1980] 2 NZLR 1 (CA).

administrative decision is recognised as operative unless set aside. He contends the same approach can be applied in relation to decisions of the courts, referring to R v Smith, in which it was said that, until set aside, a judgment is conclusive as to the legal consequences it decides.24

[30]   Mr Deligiannis contends that A J Burr is not apposite as it is a case dealing with the exercise of supervisory jurisdiction in an administrative decision. The restoration order was of a completely different character and, in any event, unlike the outcome in A J Burr, the impugned decision was set aside. Moreover, it is submitted that the Court of Appeal decision unmistakeably had retrospective effect, relying on the approach taken by the Court of Appeal in Gardiner.25

Assessment

[31]With the benefit of argument, I must resolve four issues:

(a)Were the companies restored to the register on 21 September 2018?

(b)Were the companies removed from the register in October 2019?

(c)Did the Registrar err by refusing to notify the application to restore?

(d)What relief, if any, should be granted?

Were the companies restored to the register on 21 September 2018?

[32]   I am satisfied that the companies were restored to the register by this Court. My reasons follow.

[33]First, as stated by Cooke J (as he then was) in A J Burr:26

When a decision of an administrative authority is affected by some defect or irregularity and the consequence has to be determined, the tendency now increasingly evident in administrative law is to avoid technical and apparently

24     R v Smith [2003] 3 NZLR 617 (CA) at [46].

25     Chief Executive of the Department of Corrections v Gardiner [2017] NZCA 608, [2018] 2 NZLR 712 [Gardiner] at [22].

26     A J Burr Ltd v Blenheim Borough Council, above n 23, at 4.

exact (yet deceptively so) terms such as void, voidable, nullity, ultra vires. Weight is given rather to the seriousness of the error and all the circumstances of the case. Except perhaps in comparatively rare cases of flagrant invalidity, the decision in question is recognised as operative unless set aside. The determination by the Court whether to set the decision aside or not is acknowledged to depend less on clear and absolute rules than on overall evaluation; the discretionary nature of judicial remedies is taken into account.

[34]   In AJ Burr, a decision by a local authority to grant a permit to establish a butcher shop was challenged. The relief sought was that the consent be ignored rather than set aside, though Cooke J preferred to examine the issues on the basis of invalidity. In rejecting the existence of stark categories such as mandatory, directory, void, voidable, nullity and purely regulatory, Cooke J drew on English authority to the effect that:27

“in deciding a particular case what is the legal consequence of non-compliance with a statutory requirement view in light a concrete state of facts and a continuing chain of events, the Court may be faced with, not so much a stark choice of possibilities, but a spectrum of alternatives in which one compartment or description fades into another”.

[35]   The significance of this, for present purposes, is that administrative decisions, particularly those around which people and communities organise their daily lives, are to be treated as legally operative unless and until they are set aside. It is true that once an unlawful administrative act is quashed, it will normally be deprived of any legal effect at all where rights and liberties have been affected by it.28 But the decision is not necessarily to be treated as if it was always a legal nullity. Rather, it may be retrospectively invalidated. This is what Fisher J called “retrospective invalidation” in Martin v Ryan.29 However, in every case it will be necessary to examine the particular statutory context, the decision and the events following that decision to determine the full legal consequences of invalidity.30

[36]   Second, while Cooke J was speaking of an administrative statutory power of decision, it would be odd to afford less recognition to a judicial decision to trigger a

27     At 5.

28     Boddington v British Transport Police [1999] 2 AC 143 at 210.

29     Martin v Ryan (1990) 6 FRNZ 187 (HC) at 215-216. See also GDS Taylor (assisted by JK Gorman)

Judicial Review: A New Zealand Perspective (2nd ed, LexisNexis, Wellington, 2010) at 445-446.

30     R v Wicks [1998] AC 92; Quietlynn Ltd v Plymouth City Council [1988] QB 114.

statutory power, in this case, to restore a company to the register.31 Furthermore, to the extent a different approach is required, greater recognition should be afforded to judicial orders. As the majority noted in Siemer:32

The constitutional position with court orders is different from that of a collateral challenge to an executive or administrative action, and a different approach is required. The common law rule against collateral challenge to court orders is itself premised on the centrality of the rule of law. The special need in our society for compliance with judicial orders is the constitutional reason for treating disobedience of courts orders differently from breach of subordinate legislation or administrative directive.

[37]   While the Court was there dealing with collateral challenges to court orders in the context of contempt, the point of principle is clear - the rule of law demands (absent any clear statutory directive to the contrary) that if the Court has a power to make an order of the relevant kind, it has enforceable legal effect until set aside. The Court of Appeal put it this way in Smith:33

Unless a judgment of a Court is set aside on further appeal or otherwise set aside or amended according to the law, it is conclusive as to the legal consequences it decides. If that were not so, the principle of legality would be undermined. The record of the Court of Appeal dismissing the appellant’s appeal is accordingly conclusive as to the disposition of the appeal until set aside or amended. The suggestions that the determination can be ignored without it being formally set aside and that the appeal can be heard despite the record of its dismissal are contrary to principle.

[38]   The Court there was dealing with final appellate judgments refusing leave to appeal, subsequently found to be fundamentally flawed for procedural unfairness. The Court dismissed the argument that the appellate judgments were nullities and concluded that those judgments had first to be set aside before a fresh appeal could be heard. While the analogy is a relatively weak one, they were there dealing with “final” judgments, the underlying principle remains apposite – a judgment, until properly set aside, is conclusive as to the legal consequences determined by it.34

31     See Siemer v Solicitor-General, above n 21 at [50] per Elias CJ (in dissent) in terms of the comparable reviewability of judicial and administrative action.

32 Above at [208].

33     R v Smith, above n 24, at [46]; see also Attorney General v Howard (2010) 20 PRNZ 593 (CA).

34 See also: Isaacs v Robertson [1985] AC 97 (PC), wherein it is noted that an order made by a court of unlimited jurisdiction must be obeyed unless and until it has been set aside by the court; Siemer v Solicitor-General, above n 21 dealing with orders for contempt, at [191] ff, but, while not directly relevant to this case, consider also the comments of Elias CJ (in dissent) at [8], [75] as to the potential limits of this principle.

[39]   Third, the decision to restore a company was based on a complex evaluative judgment. Whatever the ultimate view of the Court of Appeal, the decision to restore was not so flawed on its face that it might be said to be a nullity from inception and should never have been relied upon by the companies.

[40]   Fourth, the interim legal effect of the restoration order is exemplified by the absence of any automatic stay provision in the Act and the power of the Court to stay the order.35 It is true the companies always faced the risk that the decision would be reversed and that this may have had adverse retrospective consequences for them. But the decisions made by them, including the decision to commence proceedings based on the restoration order, were plainly lawful and efficacious at that time. Had Parliament intended they have no interim legal effect at all, it would be expected to have made such intentions express.

[41]   Fifth, the observations made in Gardiner are not apposite. The Court of Appeal there was dealing with the implications of a Supreme Court decision on an imprisonment term calculated in accordance with the Court of Appeal decision in Taylor,36 which was binding at the time the decision was issued, but the law on calculation was later changed by the Supreme Court in separate proceedings, in Booth.37 This meant Mr Gardiner spent longer in prison than he should have done. He, thereby, pursued a cause of action in false imprisonment. The Chief Executive of Corrections argued that it would be unfair to apply the law retrospectively (as changed by Booth) to Mr Gardiner’s case, given that Corrections had relied on the Court of Appeal decision in Taylor. Therefore, the issue in Gardiner was whether the decision about the law, as explained  in  Booth,  had  retrospective  effect  so  as  to  affirm  Mr Gardiner’s right to sue for false imprisonment. The Court of Appeal found that the Supreme Court decision did have retrospective effect. The reasons for this outcome were succinctly expressed by Miller J as follows:

[13] Judges adjudicate disputes between parties, finding what happened in the past and deciding what consequences ought to follow in law. Were they to decide that the law they make would not apply retrospectively, they would be legislating for the future while deciding the case before them on a different basis. If the rationale for changing the law with non-retrospective effect is that

35     See High Court Rules 2016, r 15.1.

36     Taylor v Superintendent of Auckland Prison [2003] 3 NZLR 752 (CA).

37     Booth v R [2016] NZSC 127, [2017] 1 NZLR 223; also referred to as Marino.

people had transacted with one another in reliance on the former law, the court’s decision should also presumably be limited to transactions entered after the date of the judgment rather than cases decided after that date. Courts may not be fully informed about the social effects and policy considerations that inform such choices.

[42]   But the appellate decision in the present case did not involve changing the law said to exist at the time of the first decision. No issue of retrospectivity of that kind arises in this case. Rather, the Court of Appeal was simply performing its usual corrective function, with the result that the restoration order was set aside. The appeal order has effect insofar as it supplants the decision by this Court. But, in the absence of any express orders by the Court of Appeal as to whether the appeal order has broader legal consequences, including effectively invalidating the steps by the companies, taken in good faith and in reliance on the restoration order, those consequences need to be worked out. As noted by Cooke J in AJ Burr, this needs to be done in light of a concrete state of facts and a continuing chain of events.

[43]   Turning to the facts, the record of the register was physically altered to record the restoration order and the companies commenced their proceedings. These are not theoretical steps or legal fictions. They are steps taken in reliance on the restoration order. That order, upon which the first step was based, has been subsequently set aside. But the Court of Appeal makes no mention of the implication of its judgment for the second step. Indeed, it appears that Court declined to make any comment about it in a minute issued after judgment. In the absence of any clear ruling or orders to the contrary, the proper course would have been to maintain the “record’ of the restoration order on the register.

[44]   It follows from these points that the deletion of the record of restoration altogether, which does not appear to have any express statutory basis, is impugnable in law. In fairness to the Registrar, the statutory scheme does not expressly provide for consequential removal on the setting aside of a High Court order. Apparently, this is the first time it has happened. But the proper course would have been to change the “Company Status field” from “Registered” to “Removed”, to record the period when the company was on the register and include the removal on the certificate of incorporation. That would have been consistent with the normal practice, as described by Mr Caro, and better served the purpose and function of the register as an accurate

record of a company’s status over time. The full legal effect of that record of removal, if contentious, would then be a matter to be worked out, not by executive fiat, but by judicial process where the full legal consequences of the appeal order could be assessed.38

Were the companies removed from the register in October 2019?

[45]   Yes. The Court of Appeal set aside the restoration order. Indisputably, from that point, that order had no legal effect. The Registrar then, without having obtained a sealed order of the Court, or any express statutory authority, deleted all reference to the restoration order, effectively removing it from the history of the register. Evidently then, in law and fact, the record of the companies’ restoration was removed. I am satisfied that this, prima facie, constituted removal for the purposes of the Act.

Did the Registrar err in refusing to notify the application to restore?

[46]   No. I agree with the CIR that the notification provisions at s 328 are clearly linked to specified grounds of removal. That provision states:

(3)Before the Registrar restores a company to the New Zealand register under this section,—

(a)in the case of a company that was removed from the New Zealand register under section 318(1) (aaa), (b), (ba), (bb), (bc), (bd), or (c), the Registrar must give public notice setting out—

(i)the name of the company; and

(ii)the name and address of the applicant; and

(iii)the section under, and the grounds on which, the application is made or the Registrar proposes to act, as the case may be; and

(iv)the date by which an objection to restoring the company to the register must be delivered to the Registrar, not being less than 20 working days after the date of the notice:

(b)in the case of a company that was removed from the New Zealand register under paragraph (d) or paragraph (e) of section 318(1), the person who made the application under subsection (1) must give public notice setting out—

(i)the name of the company; and

38     See discussion in Martin above n29 at 216ff.

(ii)the person’s name and address; and

(iii)the section under, and the grounds on which, the application is made; and

(v)the date by which an objection to restoring the company to the register must be delivered to the Registrar, not being less than 20 working days after the date of the notice.

[47]   The relevant grounds are summarised above at [15] and [16]. None of them are engaged in this case. While this appears to be a technical point, it reveals the substantive problem with the companies’ choice of process. As submitted by the CIR, s 328 is directed to uncontroversial applications for restoration. The companies’ application is plainly controversial engaging, as it does, complex questions as to the effect of the restoration order and the subsequent appeal order. The Registrar was right to resist the use of the s 328 process by the companies in this way. The correct process, though clearly unattractive to the companies, was a direct application to the Court, pursuant to s 329(1)(a)(ii).

What relief, if any, should be granted?

[48]   I have found that the Registrar was wrong to delete all references to the restoration order from the register and proceeded on an erroneous basis that the companies had not been restored in September 2018 or removed in November 2019. But that does not mean that the companies now may rely on the interim restoration to require the Registrar to take steps to restore them, pursuant to s 328. On the contrary, there is now no proper basis upon which the companies can pray in aid of the restoration order to trigger the process of restoration under s 328 of the Act. I come to this view as a matter of legality which, as Lord Steyn asseverated in Simms, demands both procedural and substantive fairness.39

[49]   Procedurally, the first decision to restore was invalid. It has no ongoing force at law and cannot now give rise to actionable rights. The companies’ ongoing insistence that the restoration order remains effective in this way is plainly a collateral attack on the judgment of the Court of Appeal. In addition, as noted, s 328 is not designed for controversial applications.

39     R v Secretary of State for the Home Department, Ex parte Simms [1999] UKHL 33.

[50]   Substantively, there is plainly no unfairness to the companies in refusing them the opportunity to seek restoration, pursuant to s 328. The object of the application is to continue litigating matters which the Court of Appeal has made clear have no prospect of success. It was also an exercise in futility, given there was no prospect of the application advancing beyond the notification stage. An objection by the CIR would have inevitably followed and there was no prospect of a successful appeal on the merits.

Result

[51]   The appeal is dismissed. I am satisfied that the refusal to notify the applications was lawful. Furthermore, while the Registrar was wrong to delete all reference to the High Court restoration order, there is no proper basis upon which the companies may use the s 328 process to achieve restoration. The attempt to do so was a collateral attack on the judgment of the Court of Appeal. It was also, as mentioned, an exercise in futility.

[52]   Submissions on costs may be filed, no more than three pages in length, within five working days.