Kemp v Registrar of Companies

[2019] NZHC 2100

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-583

[2019] NZHC 2100

BETWEEN

ALLAN SYDNEY KEMP AND JUNE PATRICIA KEMP
Applicants

AND

REGISTRAR OF COMPANIES

First Respondent

MARK RICHARDS

Second Respondent

Hearing:

8 August 2019

Counsel:

D M O’Neill for Applicants

No appearance for Respondents

Judgment:

26 August 2019

JUDGMENT OF WHATA J

This judgment was delivered by me on 26 August 2019 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.

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

Solicitors:           Nielsen Law, Hamilton

KEMP v REGISTRAR OF COMPANIES [2019] NZHC 2100 [26 August 2019]

[1]This is an application for orders by default. The orders sought are:

(a)An order restoring Papakura Wreckers 1979 Limited to the register;

(b)An order for the liquidator to comply with relevant duty;

(c)An order for the removal of liquidator; and

(d)An order for the appointment of a replacement liquidator.

[2]For reasons I can state briefly, I make the orders sought at (a), (c) and (d).

Background

[3]        The background is helpfully set out in the memoranda of counsel for the applicant. The applicants were the directors of the company and were shareholders in the company. Allan Sydney Kemp held a 75 per cent shareholding and June Patricia Kemp held a 25 per cent shareholding.

[4]        On 1 August 2013, the shareholders resolved to appoint the second respondent, Mr Richards, liquidator. The company was solvent at the time of liquidation. Mr Richards was appointed liquidator of the company from 13 November 2013.   On   27 November 2013, Mr Richards filed the only report he ever filed which was the first liquidator’s report. At the time of the company’s liquidation, the company owned assets valued at $1,777,335 according to the first liquidator’s report, with no liabilities.

[5]        Subsequent to Mr Richards being appointed liquidator, on 17 April 2014, the company’s accountant, Mr Hayes, wrote to Mr Richards setting out his concerns with a report obtained by the liquidator. Those concerns were:

(a)According to Mr Hayes, the resulting figures for retained earnings were different to those set out in the report.

(b)The assessment of imputations credits available to attach to taxable distributions being $225,148 appeared incorrect.

[6]        Mr Hayes did not receive an answer. Therefore, he wrote again on 6 May 2014 and 7 November 2014 outlining his frustration at not getting a response. In Mr Hayes’ letter of 7 November 2014, he raised the issue of monies being deducted from settlement monies paid out four months ago to cover his accountancy fees, however, he had not received any payment on account of his costs. In that letter he also raised the possibility that there were bank accounts in existence which had not been closed and settled. Further, he requested a copy of the final statement and report.

[7]        Then, six months later, Mr Richards responded with an email which said the outstanding issue was the IRD’s position on the taxable portion of the distribution and he was endeavouring to progress the issue. His email stated there were accountancy fees which were due to Mr Hayes but had never been paid.

[8]        Mr Hayes’ return letter attached an income tax account summary from the IRD which showed no return had been filed for the 2015 year. In that summary, there was a tax credit of $27,811.65. Mr Richards had not appeared to recover this tax credit and it remains to be claimed. Mr Hayes told Mr Richards that the liquidation had been running well behind schedule and he needed Mr Richards to turn his mind to the outstanding matters.

[9]        The Registrar of Companies removed the company from the register on 28 July 2015 without any final report or accounting having been attended to. On 12 May 2016, Mr Richards wrote to Mr Hayes and said his associate, Mr John Gilbert, would complete the liquidation. Mr Richards said he had enjoyed no success with the file and was finding it detrimental to his health. He mentioned he had been having troubles with MBIE, IRD, and ICANZ on separate matters.

[10]      Mr Gilbert failed to respond to Mr Hayes’ communications. So Mr Hayes made a complaint to ICANZ. The complaint was unsuccessful because ICANZ said the matter was better dealt with in this forum (the courts). On 4 October 2017, Mr Richards wrote to the company’s barrister saying he had no issue with resigning as liquidator. Mr Richards has failed to supply a final report, statements, and summaries, and his role as liquidator has been inadequate. The liquidation is incomplete and the liquidator has not ceased to hold office.

Order restoring the company to the register

[11]      As counsel submits, under s 329 of the Companies Act, the Court may order restoration of a removed company where:

(a)A shareholder applies;1 and

(b)It is satisfied that the company was in liquidation;2 or

(c)The applicant was a creditor/shareholder or a person who had an undischarged claim against the company;3 or

(d)For any other reasons it is just and equitable to restore the company.4

[12]      Given the background, it is just and equitable to restore the company. In short, it is necessary to restore the company in order to have the liquidation completed by a substituted liquidator. Furthermore, there appear to be funds to be distributed to the shareholders but that has not been done because of the liquidator’s inaction. There is also a tax credit that has not been recovered. Finally, there are accounting discrepancies which may result in further amounts being available for distribution.

Order requiring liquidator to file final report/statement/summary

[13]      The liquidator did not prepare a final report. As submitted by counsel, the liquidator is in breach of s 257 as well as his duty at s 253. However, given the full background, I propose simply to remove the present liquidator because of his failure to comply and appoint a substitute liquidator to complete the relevant steps. Strictly speaking, the formalities for such a step have not been completed. On 7 November 2014, Maurice Hayes, the company’s accountants, served notice on Mr Richards. This was followed by further correspondence on 28 May 2015 and 17 January 2017. Included in the correspondence were warnings to the liquidator that the Court’s assistance might be sought. Counsel accepts that these letters are “informal” notice.

1      Companies Act 1993, s 329(2)(a)(i).

2      Companies Act 1993, s 329(1)(a)(iii). 3   Companies Act 1993, s 329(1)(a)(iv). 4    Companies Act 1993, s 329(1)(b).

But I consider it to be sufficient in the circumstances, particularly given there is evidence Mr Richards is aware of what is happening and has consented to stepping aside. In summary, I am satisfied that it is appropriate to make formal orders removing Mr Richards as the liquidator in the circumstances of this case.

[14]      I also have a consent of the liquidators to be appointed, namely, Kenneth Peter Brown and Paul Thomas Manning, both chartered accountants and accredited insolvency petitioners of BDO Tauranga Limited. Accordingly, I make orders appointing them as joint liquidators of the defendant, Papakura Wreckers 1979 Limited.

[15]In the result, there shall be the orders as sought.

[16]      There shall be costs in favour of the plaintiff against the former liquidator on a 2B basis.