Hennah v Registrar of Companies

[2020] NZHC 1232

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-1624

[2020] NZHC 1232

IN THE MATTER OF

SECTION 329 OF THE COMPANIES ACT 1993

AND

IN THE MATTER OF G M HENNAH LIMITED

BETWEEN

GEOFFREY MAURICE HENNAH

Applicant

AND

THE REGISTRAR OF COMPANIES

Respondent

Hearing:

25 May 2020

Appearances:

E L Smith for Applicant

B J Upton & L B Harrison for Westpac New Zealand Limited & Westpac Banking Corporation

Judgment:

4 June 2020

JUDGMENT OF PAUL DAVISON J

This judgment was delivered by me on 4 June 2020 at 4:00 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Tailored Legal Solutions Ltd, Dargaville Simpson Grierson, Auckland

HENNAH v THE REGISTRAR OF COMPANIES [2020] NZHC 1232 [4 June 2020]

Introduction

[1]    Geoffrey Maurice Hennah (the applicant), applies for an order pursuant to     s 329(1)(b) of the Companies Act 1993 (the Act) restoring G M Hennah Limited (the company) to the New Zealand register of companies. The company, which had been incorporated under the Act on 23 December 1986, was removed from the register by the Registrar of Companies on 21 March 2014. The applicant also seeks an order pursuant to s 329(4) appointing him as a director of the company.

[2]    The applicant was the sole director of the company and also a trustee of its principal shareholder, the Beauly Trust. He seeks restoration of the company to the register so that it may pursue claims against the company’s former bank Westpac New Zealand Limited and Westpac Corporation (Westpac), alleging that Westpac engaged in misleading and deceptive conduct in the course of selling and managing the financial products known as Interest Rate Swaps, which agreement the company had entered into with Westpac in 2008.

[3]    Both the Registrar of Companies (the Registrar) and the Secretary to the Treasury (the Treasury) have been served with the application and neither oppose it. However the application is opposed by Westpac, which was granted leave to appear and be heard on the application, after it too was served with the application in accordance with an order of the Court.1

Background

[4]    Following its incorporation in December 1986, the company traded in farming and rural commercial activities. In 2006 the company entered into a lease to purchase arrangement in relation to a 400 hectare dairy farm situated at Berry Road, Te Pohue, in Hawkes Bay. The purchase agreement provided for the company to pay a deposit of $905,000 upon taking possession, and thereafter pay an annual rental of $300,000 for a term of five years, with the balance of the purchase price of $5,000,000 to be paid in June 2012. In addition to purchasing the farm property the company also agreed to purchase the vendor’s herd of 700 dairy cows for $709,000 plus GST.

1      Minute of Associate Judge Sargisson (6 September 2019), and Minute of Associate Judge Smith (14 February 2020, para [5] corrected by subsequent Minute (17 February 2020).

[5]    In early 2008 the company approached Westpac to seek finance for development work to be undertaken on the farm, and to purchase additional livestock to increase production. In response to the company’s application, on 9 April 2008 Westpac made a proposal to provide the company with funding totalling $7.4 million to cover the cost of completing the purchase of the farm, funds for farm development, purchase of some additional livestock, and to refinance some asset finance held by the company. The Westpac loans included $7 million for a term of 15 years with the initial five years being on an interest only basis. The remaining $400,00 was to be advanced pursuant to an overdraft facility. The loans were to be secured by first mortgages registered on the titles to the farm property, a general security agreement over the company and guarantees provided by the Beauly Trust and by the applicant himself personally.

[6]    Westpac then followed the initial loan offer with a further proposal entitled, “Interest rate risk management strategy” in which it made two alternative proposals for the provision of loan finance. The first proposal involved the application of a combination of fixed interest and floating interest rates allocated to the loan finance during the term of the loan. The second proposal was described as a “Participating Swap” and incorporating “some interest rate insurance” in respect of which an insurance premium was payable. This Westpac proposal stated that it provided the borrower with the ability to participate in lower interest rates on 50 per cent of the debt from the second year of borrowing onwards. The proposal stated:

This structure, which is approximately 0.28% more expensive than a straight 3 year fixed rate, not only provides you with certainty, but also provides you with flexibility when rates start to fall.

[7]    The company, Beauly Trust, and the applicant accepted Westpac’s second loan finance proposal and executed the loan documents in late April 2008. The applicant says that the swap trade pursuant to the Westpac financing arrangement took place on 2 May 2008.

[8]    The applicant says that within a matter of days after the company had entered into the Westpac loan finance arrangements the financial markets entered a period of instability and by later in 2008 dairy prices were significantly reduced and the New Zealand economy was in steep decline. The company suffered a significant reduction

of cashflow over the next two and half years, defaulted on obligations under the Westpac loan facilities, and on 14 June 2011 Westpac acted pursuant to the terms of the General Security Agreement and placed the company in receivership.

[9]    Shortly prior to the appointment of receivers the applicant had written to Westpac to express his concerns about the loans and how they were being managed. In an email sent on 11 May 2011 he alleged that although the company had originally agreed to settle its purchase of the farm at the end of a five year period of leasing it, Westpac had insisted that the purchase was completed early so that finance could be advanced on the basis of first mortgage security. He said that when he had expressed his concerns about the swap facility arrangements, he had been assured by a Westpac staff member that the interest on the loan would work out exactly like a floating rate, and that he should not be concerned.

[10]   In October 2011 the applicant wrote to Westpac advising that he and the Beauly Trust had taken advice from a barrister regarding the establishment and management of the loans, and as to the actions of Westpac prior to it appointing the receivers. He said:

Our advice in brief is that while there are substantial grounds to take action in a number of areas of law, but the resulting cost and time involved would mean the assets would by then have been sold and the opportunity to rectify the situation and mitigate any loss would be lost.

However putting all that aside for the moment the reason for my letter is to make a genuine attempt to resolve the current situation and reduce the substantial losses we are both going to incur if the current tender and sale process is completed.

[11]   The applicant maintained further correspondence with Westpac during 2011, and in an email of 15 December 2011 set out a summary of the events leading to the establishment of the Westpac loans. He said:

The Westpac who I had approached after the takeover of the property, for seasonal finance …[o]riginally agreed to an overdraft application, but later said they would only supply the overdraft if they got the first mortgage. In other words we had to settle the purchase price four years early.

I was not happy to accept the offer because as I said to our local Westpac manager David Whillans at the time, “the maths are simple, the lease cost is

$300,000 pa, and the interest on the purchase price is going to be at least

$600,000. Plus we would not have the cash surplus under our existing lease to fund the development.

He said, “Don’t worry, the Westpac has have [sic] plenty of money and we will fund it.” He then added that if we did not settle the purchase early so Westpac could have 1st mortgage they would withdraw their overdraft offer.

…

We have since been advised by a senior, now ex Westpac employee, the main reason Westpac insisted on the changes to our commercial lease deal was firstly [that] Westpac wanted the settlement figure of $5,000,000 in the Crafar’s account to help their equity position, and secondly because of the commission the deal would earn the Westpac staff writing the deal.

Shortly after accepting Westpac’s offer we were advised by Westpac’s David Barnett to enter into a “swap rate” agreement. I again was not happy with the offer, and said to David Barnett, “ I thought this could bite us on the arse”, he assured me that “it was a very good option and it would never come out at more than the floating rate, and may well come out less. This has not been the case.

[12]In a letter sent to the CEO of Westpac dated 4 March 2012, the applicant said:

We have recorded and documented every breach of contract and interference in commercial decisions to our detriment, and we believe it leaves the Westpac in a very vulnerable position legally for the losses.

The overcharging of the interest in the swap rate deal that turned to custard is also extremely damaging for the bank and will in the full course of time become public when it is addressed by the courts.

…

We are advised that because both Westpac and [the receivers] did not follow normal commercial practises and made a serious error in [sic] judgement they are jointly liable for the losses, they have caused.

[13]   Further correspondence sent by the applicant to Westpac in which he repeated his complaints regarding Westpac’s conduct in relation to the establishment of the loans and management of the interest swap facility, were responded to with denials by Westpac of any wrongdoing or liability for the losses suffered by the company, the Beauly Trust, and the applicant’s personal interests. Other than corresponding with Westpac, the applicant took no steps at that time to pursue the allegations he had made by commencing legal proceedings.

[14]   Following the company being placed in receivership the applicant faced creditor demands pursuant to personal guarantees he had given to support the financial

obligations of the company and the Beauly Trust. He was unable to satisfy the guarantees and was adjudicated bankrupt on 25 March 2013, some 12 weeks prior to the completion of the receivership.

[15]   At the date of receivership on 14 June 2011 the total sum owed by the company and the Beauly Trust to Westpac was $9.3 million. By completion of the receivership on 13 June 2013 and following recovery from the sale of secured assets the total Westpac debt was $7.07 million. The company also had unsecured creditors totalling approximately $280,000. The applicant says that following completion of the receivership in 2013 the company did not resume trading. He says that by that time the businesses previously conducted through the company and by the Beauly Trust had been “obliterated and the ability to rebuild was virtually nil”, and furthermore his bankruptcy prevented him from acting as a director of the company.

[16]   On 21 March 2014 the Registrar removed the company from the register of companies. The applicant says that he was not notified of the Registrar’s intention to remove the company from the register, and no steps were taken on behalf of the company to oppose its removal. He says that in any event his bankrupt status meant that he was disqualified as a director of the company and had no standing to oppose the removal, and his family interests had no financial resources to do so.

The Commerce Commission investigation and settlements

[17]   In 2013 the Commerce Commission (the Commission) commenced an investigation following complaints made about interest rate swap lending promoted and undertaken by several banks, including Westpac, to customers conducting rural businesses. During 2013 – 2014, the Commission continued to receive and process complaints and in December 2014 it announced that it had reached a $19 million settlement with the ANZ Bank New Zealand Limited, and a $3.2 million settlement with ASB Bank Limited in relation to the marketing, promotion and sale of interest rate swaps to its rural customers between 2005 and 2009.

[18]   In February 2015 the Commission announced that it had reached a $2.97 million settlement with Westpac in relation to the marketing, promotion and sale of interest rate swaps to rural customers between 2005 and 2012. The applicant says that

by this time the company had been removed from the register, and the Westpac settlement offer that followed was made on terms that would offset the settlement sum against the unpaid debt that remained owing by the company at the conclusion of the receivership.

[19]The applicant was discharged from bankruptcy in April 2016.

[20]   The applicant says that while he and his co-trustees of the Beauly Trust had suspicions regarding the correctness of Westpac’s calculations of interest due under the loans, prior to the Commission’s investigation and settlement with Westpac their concerns were mere suspicions.2 He says that it was only following receipt of the Commission’s findings in 2015 that he began to understand that he and his co-trustees had been misled and deceived by Westpac representatives in relation to the loans.

[21]   The applicant explains the delay between the Commission announcing its settlement with Westpac and his commencing this application in July 2019, as due to the time engaged in the process of obtaining legal advice and assembling information necessary to bring a claim against Westpac. The applicant says that during this period he had limited financial resources, and that it was not until he was advised by his present legal counsel that any claim that he proposed to make would require the company to participate as a party to the proceedings, that he made the present application.

[22]   The applicant seeks restoration of the company to the register for the sole purpose of enabling it to pursue a claim against Westpac in relation to the interest swap loans. He says that although the company has no financial resources, he proposes to meet the costs of pursuing the claims personally.

[23]   The applicant also seeks an order that would operate to “wind the clock back” and exclude the time which has elapsed between the date on which the company was removed from the register to the date of restoration to the register, from computations of time for the purposes of limitation of actions under the Limitation Act 2010.

2      The current trustees of the Beauly Trust are the applicant, his wife Cheryl Ellen Hennah, and their accountant, Mr Warwick Grieve who was appointed in 2011 following the death of Mr Geoffrey Myles in 2010, and who had been a trustee of the Beauly Trust since 2007.

[24]   Ms Smith for the applicant says that although the unsecured creditors of the company total in excess $280,000, they are businesses that the applicant resumed business with following his discharge from bankruptcy, and with whom he is confident of being able to enter into arrangements with to withhold any recovery or enforcement action against the company pending determination of the company’s claims against Westpac.

Section 329 Companies Act 1993

[25]Section 329 of the Act provides:

Court may restore company to New Zealand register

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

1. 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; 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.

Submissions

Applicant’s submissions

[26]   Ms Smith for the applicant submits that there are good reasons for the company to have continued in existence so as to be able to pursue a claim against Westpac and she notes that neither the Registrar nor the Treasury oppose the application.

[27]   Ms Smith addressed each of the considerations referred to by the Court of Appeal in Commissioner of Inland Revenue v Commercial Management Limited 3 as being relevant to the Court’s consideration of an application under s 329 of the Act.

[28]   Ms Smith submits that as a trustee of the Beauly Trust, which is a shareholder in  the  company,   the   applicant  qualifies  to   bring  an   application  pursuant  to   s 329(1)(a)(i).

[29]   Counsel submits that in his two affidavits filed in support of the application, the applicant has made full and frank disclosure of the circumstances leading to the removal of the company from the register. She notes that prior to its removal, the company’s receivership had been concluded, the company had ceased trading, and the applicant’s bankruptcy had left the company without a director, and without any assets.

3      Commissioner of Inland Revenue v Commercial Management Limited [2019] NZCA 479, (2019) 29 NZTC 24-019 at [58].

Although the applicant has no direct evidence of the grounds on which the Registrar proceeded to remove the company from the register, Ms Smith submits that as the company had ceased to carry on business and had not filed annual returns, it is reasonable to conclude the removal was made pursuant to s 318(1)(b) of the Act. She submits that in these circumstances the Registrar’s removal of the company can be likened to the Registrar, “pruning dead wood”.

[30]   Ms Smith further submits that the applicant’s failure to oppose the removal can be explained by the applicant not having knowledge of the Registrar’s intention to remove the company because he did not receive notice of the Registrar’s intention to do so. She says it is also relevant to note that the applicant did not know what would be required for him to object to the proposed removal and that in any event at the time of the removal he had insufficient knowledge as to whether the company had a justifiable legal claim to make against Westpac in relation to the interest swap loans.

[31]   As regards the applicant’s four and a half year delay in bringing the application, Ms Smith submits that such a delay is not a bar to the application but a factor to be taken into account. Counsel says that the time between the applicant learning of the Commission’s findings and its settlements with the banks in 2015, and his bringing the present application was three and a half years. Furthermore, it was as a result of the Commission’s findings being published that the applicant became aware that Westpac’s actions in promoting and selling the interest swap loan products was considered by the Commission to have involved deceptive and misleading conduct. She says it is also relevant to note that the interest swap products were complex and recognition should be given to this factor as a reason why the applicant did not immediately recognise there to be a basis for the company making a claim against Westpac.

[32]   Ms Smith submits that the proposed claim against Westpac that the applicant wishes to be brought by the company has been shown to be well founded, having regard the findings of the Commission. She says that nevertheless the claim could not be commenced and the present application made before the applicant had obtained and assessed the available documentary evidence. She says that the applicant is acting in good faith in seeking to restore the company to the register to enable the claim to be

made, and that in all the circumstances it is in the interests of justice, that the company’s claims against Westpac as proposed by the applicant be brought and determined, and that the company is not denied access to justice.

[33]   As regards the opposition to the application advanced by Westpac, Ms Smith says it cannot seek to avoid the proposed litigation by seeking to prevent the restoration of the company to the register. Counsel submits that an examination of the merits of the proposed claim is not appropriate or relevant to the determination of the restoration application. She further submits that it is not appropriate to consider whether the proposed claim will be precluded by limitation issues in the context of the present application. She says that the time for any limitation defences to be raised and considered will arise after the claim has been brought and in the defendants’ pleadings in response to the claim.

Westpac submissions

[34]   Mr Upton for Westpac submits that the applicant has failed to satisfy the requirements set out in Commissioner of Inland Revenue v Commercial Management Limited, and that the evidence presented by the applicant to support restoration is insufficient to satisfy the Court of the requisite matters necessary to obtain an order.

[35]   Mr Upton submits that the applicant has not provided any evidence as to the ground on which the company was removed from the register or the reasons for its removal by the Registrar. He submits that the applicant has failed to provide a satisfactory explanation for failing to take steps to oppose the Registrar removing the company from the register, and says that the applicant’s bankruptcy would not have prevented another person being appointed as the director of the company or the trustees of the Beauly Trust taking steps to oppose the removal.

[36]   Mr Upton submits that the applicant’s claim not to have known of the existence of grounds for a claim against Westpac until the Commission’s investigation resulted in a settlement with Westpac in 2015 is doubtful, having regard to the correspondence he wrote to Westpac in 2011 and 2012 in which he made allegations that the bank was responsible for the company’s financial situation deteriorating.

[37]   Counsel submits that the over four year delay between the applicant learning of the Commission’s findings and the filing of his application cannot be justified on the basis that the applicant needed all that time to gather information and evidence and obtain legal advice. He notes that Westpac only received the applicant’s request for information regarding the loans after the current application had been filed.

[38]   Mr Upton submits that as the applicant had obtained legal advice from a barrister in October 2011, as was mentioned in his letter to Westpac, he was most likely advised at that time of the necessity of keeping the company on the register so as to enable it to pursue a claim against Westpac. He says that the applicant has failed to adequately explain the long delay that elapsed before making the application and that the delay is a factor telling against the making of an order to restore the company.

[39]   Mr Upton also notes that the applicant has not identified any steps required to remedy failures by the company to comply with filing requirements under the Act, and has not provided copies of the documents that would be filed by the company on restoration to remedy its prior filing failures. He further submits that the applicant has provided insufficient evidence as to how the company will fund the litigation and security for costs that will inevitably be sought.

[40]   Mr Upton says however, that should the Court make an order restoring the company to the register it should be pursuant to s 329(4) of the Act directing that the period between the removal of the company and its restoration to the register is to be excluded from limitation calculations as regards any creditors of the company whose claims were not statute barred as at the date of removal.

[41]   Westpac also opposes the applicant’s re-appointment as a director of the company in the event that the Court grants his application to restore the company.  Mr Upton says that the applicant is a discharged bankrupt who was adjudicated on the petition of a creditor other than Westpac, although no details of the petitioning creditor have been provided.

Discussion

[42]   The purpose and application of ss 328 and 329 of the Act was described by the Court of Appeal in Commercial Management as follows:

[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 the 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.

…

[58]   Section 329(1A) provides that 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 hearing of the application. It is incumbent on an applicant associated with the removed company (such as a former shareholder or director) to provide the information that the court requires in order to consider this mandatory relevant consideration. The applicant should identify:

(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.

[59]    These matters should be addressed in an affidavit accompanying the application. Relevant documents should be exhibited.

[43]   The Court of Appeal observed that information in relation to those six issues was important, as in the absence of such information “the Court is without material upon which it can make an assessment of the justice of the matter”,4 and that a failure to provide such information will generally result in the application being dismissed.5

[44]The Court of Appeal said that furthermore:

(a)the applicant should identify the steps that would need to be taken to remedy any failures to comply with filing requirements under the Companies Act, and provide copies of the documents that would be filed on restoration of the company to remedy those failures.6

(b)the application should address the financial position of the company at the time of its removal and on restoration. And where a restored company will be insolvent, there will need to be a “compelling reason” to bring it back to life, such as the discovery of overlooked rights or assets which, if realised, could be applied for the benefit of creditors of the company.7

(c)the application should identify any outstanding creditors of the company and describe its financial affairs in sufficient detail as to enable the court to determine whether any orders under s 329(4) are required.

[45]   Applying those requirements to the present case, it is clear that the applicant has failed to provide the requisite information.

Registrar’s reasons for removal of company from the register

Section 329(1A) stipulates a mandatory relevant consideration requiring the 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 time of the hearing of the application.

4      Re Ghuznee Securities Limited (1983) 1 NZCLC 95-097 (HC) at [60].

5 At [65].

6 At [61].

7 At [62].

Here the applicant has failed to provide any evidence of the ground or grounds on which the Registrar acted to remove the company from the register on 21 March 2014. The applicant invites the Court to find that that the Registrar acted to remove the company from the register pursuant to s 318(1)(b) as it was no longer carrying on business and the Registrar had concluded that there was no proper reason for the company to continue in business. While that may well have been the case, the applicant has not produced any evidence as to the ground on which the Registrar acted when removing the company from the register, and in order to address the mandatory considerations required by s 329(1A) the applicant must provide information regarding the specific reasons for the company’s removal. Without the requisite information as to the ground on which the company was removed, the Court is unable to address the issue of whether the grounds existed at the time of removal or exist presently at the time of the hearing of the application for restoration.

What steps if any the company and its controllers took to prevent removal from the register

[46]   In his first affidavit in support of the application the applicant did not address the issue of whether or not any steps were taken to oppose the company’s removal from the register.8 In his second affidavit9 the applicant says that at the time the receivership ceased he was not aware that the company had potential claims against Westpac, and as the company was not trading and had no financial resources available to continue he did not seek to challenge the proposed removal of the company. He says that by that time he had been adjudicated bankrupt and he did not have standing to object to the company’s removal.

[47]   However, in her written submissions Ms Smith says that the Registrar’s notice of proposed removal would have been sent to the registered office of the company which at the time was the receivers’ address. She submits that the applicant is “adamant” that he did not receive notice from the Registrar of the intention to remove the company from the register. Whether or not the applicant received a notice from the Registrar of the proposed removal of the company, he does not assert that he had

8      Affidavit of Geoffrey Maurice Hennah (sworn 18 July 2019).

9      Second affidavit of Geoffrey Maurice Hennah (sworn 8 November 2019).

no knowledge of the proposed removal. In his sworn affidavit the applicant sets out the reasons why he did not object to the removal and he makes no claim of not knowing about the proposed removal prior to it taking place. His explanation for not taking any steps to object to removal at the time can only be read as confirming that he was aware of the proposed removal at the time, and for the reasons mentioned he and his co- trustees of the Beauly Trust decided not to take steps to oppose the removal.

[48]   I accordingly find that the applicant together with his co-trustees made a decision not to oppose removal of the company from the register as the company was insolvent and no longer trading. At that time, although the applicant had previously expressed his concerns about the representations made to him by Westpac prior to the company entering into the interest swap loans, and in his correspondence with Westpac had claimed that what he had been told about the interest payable was not correct, he of course did not know what the Commission was to determine the following year, regarding the interest swap products sold by the banks to their rural customers.

What 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?

[49]   Accordingly, what changed following the company being removed from the register in March 2014, was the publication of the outcome of the Commission’s investigation into the interest swap lending undertaken by Westpac. The applicant considered the Commission’s findings provided strong support for his assertions regarding the representations which had been made by Westpac to him regarding the interest swap lending to the company. The Commission’s findings were consistent with the concerns previously expressed by the applicant to Westpac prior to the removal of the company from the register, and provided cogent material that could be used to support a civil claim being brought against Westpac. Had the Commission’s findings been known to the applicant at the time that the Registrar was proposing to remove the company that information would have justified the applicant opposing removal to enable a civil claim to be commenced against Westpac. Furthermore, once the Commission’s findings were published in 2015, those findings would have justified the applicant changing the stance he had previously adopted of not opposing the removal.

The explanation for any delay between the time when the reason for seeking restoration was first identified, and the making of the application.

[50]   The publication of the Commission’s findings in February 2015 provided grounds on which the applicant could make an application for restoration of the company to the register so as to enable it to commence a civil claim against Westpac for the benefit of the unsecured creditors and shareholders of the company. However, the applicant did not bring an application until July 2019, over four years later.

[51]   The applicant has not explained the reasons for the delay other than by saying that the time was occupied by a process of gathering evidence to assess the merits of possible causes of action before commencing steps to proceed with a claim and seeking restoration of the company. The applicant says that it was not until he met with his current counsel that he had the opportunity to understand the bank’s interest swap loan documents that had been entered into by the company. He says that his current counsel was the first legal adviser to advise him that restoration of the company to the register would be necessary in order to investigate possible claims and thereafter commence proceedings. The applicant says that as a lay person, he did not know that an application for restoration of the company would be required to enable a civil claim against Westpac to be commenced.

[52]   In my view the four years and five months’ delay in bringing the application has not been adequately explained or justified by the applicant in his affidavits and exhibited documents. Any assessment of whether the company and its associated parties had a claim against Westpac could have been undertaken over a period of several months, and there is nothing to indicate that there were any unusual aspects of this matter which would warrant an investigation extending over several years. Accordingly while an unjustified delay of over four years does not itself present an insurmountable barrier, it is nevertheless a factor to be taken into account and is one which reduces the strength of his application.

The applicant should identify the steps that would need to be taken to remedy any failures to comply with filing requirements under the Companies Act, and provide copies of the documents that would be filed on restoration of the company to remedy those failures

[53]   The applicant has not provided any evidence addressing the steps that would need to be taken to remedy the company’s failures to comply with filing requirements under the Act during the period prior to and since removal from the register.

The application should address the financial position of the company at the time of its removal and on restoration. And where a restored company will be insolvent, there will need to be a “compelling reason” to bring it back to life, such as the discovery of overlooked rights or assets which, if realised, could be applied for the benefit of creditors of the company.

[54]   The applicant has produced the receivers’ reports, including the final receivers’ report dated 13 June 2013, which contain details of the company’s financial position as at that date. As the company did not trade following termination of the receivership its financial position would not have materially changed by the date of removal on 21 March 2014. The final receivers’ report states that the total outstanding debt owing to Westpac following the realisation of secured assets of the company and the Beauly Trust was $7.07 million. The receivers’ report states that the company has unsecured creditors of approximately $282,000.

[55]   If restored the company would be insolvent. While the applicant says that he will personally meet the company’s costs of pursuing the proposed claim against Westpac if it is restored, no information is given as to the applicant’s financial means and ability to do so.

[56]   The possibility of the company having an available claim against Westpac was known to the applicant well prior to the removal of the company, as is apparent from his correspondence with Westpac in 2011 and 2012. The publication of the Commission’s report in February 2015 provided support for the applicant’s allegations of wrongdoing by Westpac in the manner in which it had promoted and represented

the interest swap loans, but those were matters he was already well aware of and could have pursued on behalf of the company in 2011.

[57]   While the applicant’s intention that the company commence proceedings against Westpac could justify restoration, in the absence of detailed information as to how the restored company would be funded to conduct the proceedings, and how the interests of the unsecured creditors would be addressed and resolved, there is much uncertainty as to how the restored company could function and prosecute a claim in an efficient manner that would not involve further delays. I also agree with Mr Upton’s submission that the applicant has failed to address the issue of how the company would be able to provide security for costs given the inevitability of an application for security being made by Westpac.

The application should identify any outstanding creditors of the company and describe its financial affairs in sufficient detail as to enable the court to determine whether any orders under s 329(4) are required

[58]   The applicant has not presented any evidence listing the unsecured creditors and the amounts owed to them as at the date of the company’s removal, and has not explained how the interests of the unsecured creditors would be dealt with following restoration.

Conclusion

[59]   In Commercial Management the Court of Appeal said that there had been an almost complete absence of relevant information, and that the information provided as to why one of the companies in that case had been removed was “sketchy”. The Court of Appeal observed that the applicant’s failure to provide the requisite information was alone a reason why the application ought to have been declined.10

[60]   Here too, the applicant has failed to provide the requisite information to enable the Court to give proper consideration to the application. The applicant has failed to provide information to enable the Court to address the mandatory considerations

10     Commissioner of Inland Revenue v Commercial Management Limited, above n 3, at [64] and [65].

required by s 329(1A), and has also failed to identify the filing requirements that would be required to be remedied upon restoration to the register.

[61]   The applicant has also failed to provide sufficient detailed information regarding the financial position of the company, how it would deal with the unsecured creditors, and its ability to fund the proposed legal proceedings against Westpac following restoration.

[62]   While the delay in bringing the application is not an insurmountable obstacle, the inadequate explanation of the reasons for the delay would tell against the Court exercising its discretion to grant the application.

[63]   However more fundamentally, without the requisite information the Court is placed in a position of being unable to give proper consideration as to whether it would be just and equitable to restore the company to the register.

[64]   Although the applicant has identified a claim that could be made by the company against Westpac as a reason why it would be necessary to restore the company to enable the claim to be made, in the absence of the requisite information that is necessary to enable the Court to give fully informed consideration to the issues arising and consequences of an order for restoration of the company, I find that the applicant has failed to satisfy the Court that it would be just and equitable to restore the company to the register.

[65]For those reasons, I shall decline the application.

Result

[66]   The application for an order for the restoration of G M Hennah Limited to the Register of Companies is dismissed.

[67]   The application for an order for the appointment of the applicant, Geoffrey Maurice Hennah, as a director of G M Hennah Limited following the company’s restoration to the register, is declined and dismissed.

Costs

[68]   Westpac was served with the application in accordance with an order of the Court. Westpac’s opposition to the application was directed at issues relating to the inadequacy of the information presented by the applicant in support of the application, and it did not seek to argue the merits of the proposed claim against it that the applicant wishes the company to make. Accordingly, the approach adopted by Westpac and its counsel was in substance akin to that of a contradictor to the arguments and submissions advanced by the applicant, by way of submissions directed at identifying the inadequacies of the information relied on by the applicant to support his application.

[69]   In dismissing the application by reason of the incomplete and inadequate information relied on by the applicant, the Court has upheld the principal submissions made on behalf of Westpac. I accordingly consider that Westpac is entitled to costs to be calculated on a scale 2B basis.

[70]   I direct that Westpac is to file and serve a costs memorandum setting out its claim for costs and disbursements within five working days from the date of delivery of this judgment. The applicant is to file and serve a costs memorandum in reply within five working days following service of Westpac’s costs memorandum.

[71]   The costs memoranda are not to exceed three pages in length (excluding the title page) apart from any annexures.

[72]   Following the filing of the parties’ costs memoranda, I shall determine an order for costs on the papers.

Paul Davison J