Grainger v Orion New Zealand Limited

[2023] NZHC 2239

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2023-409-42

[2023] NZHC 2239

BETWEEN

ROSS ARTHUR GRAINGER and VIRGINIA KATE LANGMUIR
First Plaintiffs

SHANE CUNNINGHAM COAKLEY and JOANNE ELIZABETH BLAKE
Second Plaintiffs

CHRISTOPHER JOHN ROYDS, as trustee of the MP FAMILY TRUST

Third Plaintiff

IAN HARTLEY DUFF and GLENYS GRACE DUFF
Fourth Defendnats

EARLY VALLEY FARM LIMITED
Fifth Plaintiff

continued….

Hearing:

11 December 2023 (By telephone)

Counsel:

R W Rose for Plaintiffs

T C Weston KC and R J H Scott for First Defendant W Palmer for Second Defendant

Judgment:

18 December 2023

JUDGMENT OF ASSOCIATE JUDGE LESTER

(Striking out of Twelfth Plaintiff)

GRAINGER v ORION NEW ZEALAND LIMITED [2023] NZHC 2239 [18 December 2023]

ANDANN LOUISE VAN ASCH, DANIEL GERRIT VAN ASCH and PAUL HENRY DRURY VAN ASCH, as

trustees of the ESTATE OF GD VAN ASCH

Sixth Plaintiffs

AND              CORYSTON FARM LIMITED

Seventh Plaintiff

ANDPETER CHRISTOPHER EASTGATE and ROBYN MARGARET

JAMIESON, as trustees of the ESTATE OF HELEN MARY GRAHAM

Eighth Plaintiffs

AND              IAN TERENCE FORRESTER

Ninth Plaintiff [Discontinued]

AND              LANSDOWNE VALLEY LIMITED

Tenth Plaintiff

AND              McVICAR HOLDINGS LIMITED

Eleventh Plaintiff [Discontinued]

AND              AF SCOTT FORESTRY LIMITED

Twelfth Plaintiff

AND              ORION NEW ZEALAND LIMITED

First Defendant

ANDLEISURE INVESTMENTS NZ LIMITED PARTNERSHIP

Second Defendant

[1]    When this proceeding was commenced on 8 February 2023, the twelfth plaintiff, AF Scott Forestry Limited (Scott Forestry) did not exist, it having been removed from the Companies Register on 7 November 2022 for failing to file annual returns.

[2]    Mr Weston KC, counsel for the defendants, promptly raised the fact with counsel for the plaintiffs, that Scott Forestry was no longer a registered company. Given the Court was advised as early as 2 May 2023 that instructions had been given to make an application to restore Scott Forestry to the Companies Register, the Court

was prepared to adopt a pragmatic approach to the status of Scott Forestry and commented in a Minute of 30 May 2023:

An application to have the twelfth plaintiff restored to the Companies Office Register is being completed. If that application is successful then the company is treated as if it had always existed.1 To that end I did not see any advantage in the twelfth plaintiff getting out of step with the other parties.   It will be    a different story if it is clear that the company will not be restored in short order, but I record at Mr Weston’s request, his client’s concerns in that regard and that it wishes to be able to raise that issue again. Restoration is a matter that should be dealt with as a matter of urgency.

[3]    The  next  Minute  referring  to   the   status   of   Scott   Forestry   is   dated 10 August 2023. At that stage, Scott Forestry had still not been restored to the Companies Register. Mr Weston submitted there had been adequate time for Scott Forestry to be restored to the Register and he sought what amounted to an unless order that unless Scott Forestry had not been restored to the Register by 10 December 2023 that its claim be struck out. Mr Rose, counsel for the plaintiffs, advised that KPMG had been instructed to restore Scott Forestry to the Register and  he  said  that  KPMG understood the urgency.

[4]    It will not have gone unmissed that the Court was told at the beginning of May 2023 that instructions to restore Scott Forestry to the Companies Register had been given. As it turns out, the application to restore was not actually filed until sometime after 15 August 2023 (and perhaps not until 25 August 2023), according to the timeline provided by the plaintiffs.

[5]    The Minute of 10 August 2023 records Mr Rose’s confidence that Scott Forestry would be re-registered prior to 10 December 2023 but that he did not want that to be a “drop dead” date.

[6]I recorded in the Minute of 10 August 2023:

Against the possibility that something unpredictable prevents the restoration of the twelfth plaintiff to the Register, there will be a telephone conference with me at 4:00pm on Monday 11 December 2023 with one hour allocated. An hour is allocated because if Mr Rose is unable to convince Mr Weston KC, counsel for the first defendant, that all reasonable steps have been taken to restore the twelfth plaintiff to the Register, then I will deal with an oral

1      Companies Act 1993 s 330(2).

application from Mr Weston to strike out the twelfth plaintiff at that telephone conference. Mr Rose will need to have filed evidence demonstrating that all reasonable steps to restore the company had been taken, but for reasons beyond his control, the company could not be restored. If the evidence does not  get  to  that  level  then  the  twelfth  plaintiff  will  be  struck  out  on   11 December 2023.

[7]    At the telephone conference on 11 December 2023, Mr Weston formally made his oral application to strike out. I was not able to deal with the application at that telephone conference as materials filed by Mr Rose had unfortunately not made their way to the file.

[8]    I am satisfied that reasonable steps were not taken to restore Scott Forestry to the Companies Register and its claim is struck out. I now give my reasons for concluding that reasonable steps were not taken.

[9]    The plaintiffs have known, at the very latest from 22 March 2023, when the first defendant denied in its statement of defence that Scott Forestry was an incorporated company and it had been removed from the Register. The plaintiffs have simply moved too slowly to achieve restoration to the Companies Register.

[10] That fact is compounded by the Court being told in early May 2023 that instructions to restore Scott Forestry to the Companies Register had already been given but the application was not in fact made until some time after 15 August 2023. The comments set out at [6] above (from my Minute of 10 August 2023) assumed that an application had already been made or was imminent.

[11]   The application to restore Scott Forestry was declined by the Registrar on    27 September 2023. The application to the Registrar was made under s 328(1A) of the Companies Act 1993 (the Act) which provides:

The Registrar may, on the application of a person referred to in subsection (2), or on his or her own motion, restore a company that has been removed from the register to the register if the Registrar is satisfied that the company was carrying on business at the time of its removal and there is a proper reason for the company to continue in existence.

(emphasis added)

[12]   This is a two-limbed test and to have a company restored an applicant must meet both limbs.

[13]   The Registrar of Companies advised KPMG that the application to restore was declined because the Registrar was not satisfied that Scott Forestry was “carrying on business” at the time it was removed.

[14]   It is quite clear to me that the application should never have been brought pursuant to s 328(1A) f the Act.   An application has now been made to this Court   (6 December 2023) to seek orders for Scott Forestry to be restored to the Register. That step, in my view, has simply come too late.

[15]   I say the application to have Scott Forestry restored on the basis of s 328(1A) of the Act should never have been made because KPMG knew or ought to have known, because it prepared the documents, that on 17 November 2021 a director of Scott Forestry signed a business cessation form with the Inland Revenue Department (IRD) confirming  Scott  Forestry  had  ceased  trading  on  30 November 2020.  Then  on  8 December 2021, the shareholders of Scott Forestry signed a shareholders resolution agreeing and resolving that Scott Forestry had ceased to carry on business.

[16]   On 24 December 2021, KPMG received approval from the IRD to remove Scott Forestry from the Companies Register.

[17]   It seems the shareholders preferred to allow Scott Forestry to be removed from the Companies Register for not filing an annual return, to avoid any further fees.

[18]   It is clear that for an extended period, Scott Forestry had essentially been defunct with there being correspondence between the directors and KPMG as to the mechanics of having Scott Forestry removed from the Register.

[19] How KPMG could then in August 2023 make an application to the Registrar to have the company restored to the Register on the basis that it was carrying on business on 7 November 2022, when it was removed from the Register, is not explained. I was express in the Minute of 10 August 2023 quoted at [6] above that

evidence demonstrating that all reasonable steps to restore Scott Forestry had been taken, had to be filed. There is no evidence as to why the application to the Registrar was made on a basis that KPMG knew or ought to have known, that it could not succeed because KPMG was aware (or ought to have been aware) Scott Forestry ceased to trade at the end of 2021 as KPMG prepared the resolutions referred to above, and communicated with the IRD on the basis that Scott Forestry had ceased trading.

[20]   On 12 December 2023, Mr Rose provided the Court with a copy of the application filed to restore Scott Forestry to the Register. One of the grounds for restoration in the application is that on 3 February 2020, as Scott Forestry no longer operated its forests “… the shareholders of the Company instructed KPMG to liquidate it as a solvent entity”.

[21]   In any event, the application to restore Scott Forestry has simply drifted. Again, keeping in mind the Court was told on 2 May 2023 that instructions to restore Scott Forestry had been given, nothing seems to have happened until 15 August 2023 and even then the application to the Registrar proceeded at a leisurely pace. Even when the Registrar refused the application to restore on 27 September 2023, and the urgency of the situation must have been apparent, the application to this Court was not filed until 6 December 2023.

[22]   I accept that two of the deponents in support of the application to this Court are based in the United States but the application to the Registrar from the outset did not have a reasonable basis. The application to the Registrar should never have been made indeed, could not have been made, in reliance on s 328(1A) of the Act given the material prepared by KPMG.

[23]   Accordingly, the twelfth plaintiff is struck out from this proceeding. Indeed, technically, it has never been a party to the proceeding because it was not on the Register when this proceeding was filed, but there having being a failure to take reasonable steps to restore the company to the Register, it is now, as I have said, formally struck out.

[24]Costs are reserved.

Associate Judge Lester

Solicitors:

Keegan Alexander, Auckland (for Plaintiffs) Kennedys, Auckland (for First Defendant)

Buddle Findlay, Christchurch (for Second Defendant) Copy to counsel:

T Weston KC, Barrister, Tai Tapu (for First Defendant)