Larking (Zenith Clyne Corporation Limited)

[2023] NZHC 1033

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-718

[2023] NZHC 1033

IN THE MATTER

UNDER

of an application without notice for orders of appointment of directors of ZENITH CLYNE CORPORATION LIMITED

Plaintiff

the Companies Act 1993 and Part 18 of the High Court Rules 2016

IN THE MATTER

Of an application by KIM LARKING and IVAN MIDDLEMOST

Applicants

Hearing:	(On the papers)
Counsel:	M J Bell-Booth
Judgment:	3 May 2023

JUDGMENT OF ASSOCIATE JUDGE LESTER

This Judgment was delivered by me on 3 May 2023 at 1.00pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

RE LARKING (ZENITH CLYNE CORPORATION LTD) [2023] NZHC 1033 [3 May 2023]

[1]                 Kim Larking (Kim) and Ivan Middlemost (Ivan) are the property managers for Adelaide Larking (Adelaide).

[2]                 Adelaide is the sole living director and shareholder of Zenith Clyne Corporation Limited (the company).

[3]                 Adelaide’s late husband, Denis Larking (Denis) is presently recorded on the Companies Office Register as a director and a 50 per cent shareholder with Adelaide.1

[4]Kim is the adult son of Adelaide and Denis. Ivan is an independent accountant.

[5]                 The evidence is that in November 2022, Adelaide was declared incompetent due to dementia, meaning she lacks capacity to fulfil her role as company director. Adelaide is in residential care. With Denis having passed away at the start of 2022, the company has no directors able to manage its affairs.

[6]                 Denis died intestate and was married to Adelaide at the time of his death. Denis and Adelaide have four children; Kim, Shane, Cindy and Jennifer.

[7]                 Kim and Ivan have applied for Letters of Administration without Will to be appointed executors and administrators of Denis’ estate, however, that process will take some time to complete.

[8]                 The company owns properties in Thames but the company cannot deal with them at the moment, given the company is without competent directors.

[9] The evidence is that the Thames properties are in a rundown state and require substantial maintenance and repair. The properties are subject to a Dangerous & Insanitary Building Notice under the Building Act 2004 and the Thames Coromandel District Council (the Council) is threatening enforcement action.

1      The Companies Office Register spells Denis’ name with two n’s (Dennis) but the evidence is that this is an error.

[10]              Those circumstances have led Kim and Ivan, on behalf of Adelaide, to apply to the Court to be appointed directors of the company in order to permit the company’s assets to be properly managed.

[11]              Kim and Ivan have produced to the Court an order of the Family Court at Waihi confirming Kim and Ivan’s appointment as property managers for Adelaide pursuant to s 31 of the Protection of Personal Property Rights Act 1988. As noted at the moment, the affairs of the company are in a state of limbo. The properties cannot be sold because the company is unable to execute documents appointing agents for sale, or conveyancing documents to complete a sale, even if a buyer was found without the assistance of a real estate agent. The Larking family do not have the resources to repair the Thames properties.

[12]              The company has no Constitution and accordingly, Kim and Ivan have applied to the Court pursuant to s 154 of the Companies Act 1993 which provides:

154     Court may appoint directors

(1)If—

(a)there are no directors of a company, or the number of directors is less than the quorum required for a meeting of the board; and

(b)it is not possible or practicable to appoint directors in accordance with the company’s constitution,—

a shareholder or creditor of the company may apply to the court to appoint 1 or more persons as directors of the company, and the court may make an appointment if it considers that it is in the interests of the company to do so.

(2)An appointment may be made on such terms and conditions as the court thinks fit.

[13]              Pursuant to s 20(2) of the Senior Courts Act 2016, an Associate Judge has jurisdiction to make orders under s 154.

[14]              In my view, this is a clear situation for the Court to order the appointment of directors under s 154 of the Companies Act 1993. The company’s assets are deteriorating simply through the passage of time. Because the Larking family does

not have the ability to fund maintenance works, this makes the properties further at risk because of the Dangerous Building Notice from the Council.

[15]              The evidence is that the company is solvent and that there is no money owing under the mortgage registered against the properties.

[16]              As to the issue of standing of Kim and Ivan to make this application, they do so as property managers of Adelaide’s 50 per cent shareholding. I am satisfied that the applicants have a proper basis for making this application given doing so will protect not only the company’s interests but also Adelaide’s interests along with those of Denis’ estate as shareholders.

[17]              The preservation of the value of the properties is ultimately in the interests of the Larking family as a whole.

[18]              Kim and Ivan wish, if they are appointed directors of the company, to consider obtaining finance, undertaking remedial work and to rent, lease or sell the properties.

Directions as to service

[19]              Kim and Ivan do not suggest that the proceedings should be served on any party, submitting there are no persons or classes of people with an interest in the subject matter of the proceeding which may be prejudiced by the relief sought.

[20]              As matters stand, Denis’ estate holds 50 per cent of the company. Action taken to properly manage the company’s assets will benefit Denis’ estate. However, substantial distributions of value out of the company to Adelaide only, would prejudice Denis’ estate.

[21]              The joint affidavit of Kim and Ivan advises that three of Denis and Adelaide’s four children are in agreement with the present application. Written consents from two of the children are produced; Kim being the third. The remaining child is on notice and has not raised any objection.

[22]              I agree that all of the children of Adelaide and Denis, together with Adelaide, have a commonality of purpose in preserving the value of the property but where there may be claims against Denis’ estate, I am concerned to avoid the risk of the value of Denis’ shares being adversely affected. I have no reason to believe that there is such a possibility, however, absent consent from all children and/or knowledge of whether there is a unanimity in respect of Denis’ estate, that is, whether any of Denis’ children intend to bring a claim against his estate, I will be imposing a condition pursuant to  s 154(2) of the Companies Act aimed at preserving the value of Denis’ shares.

Orders

[23]              There is an order that this application need not be served. A copy of this Judgment is to be sent to Denis and Adelaide’s children.

[24]              There is an order appointing  Kim  Larking  (of  Auckland,  trustee)  and  Ivan Middlemost (of Auckland, accountant), as directors of Zenith Clyne Corporation Ltd. As directors, they will have all the powers, obligations and duties of a director as if they had been appointed by the shareholders.

[25]              The order is subject to the condition that the directors, in exercising their powers, not take any steps that adversely affect the value of the shares held in the estate of the late Denis Clyno Larking.

[26]Leave is reserved to seek a variation of this condition should the need arise.

[27]              By way of clarification, the directors borrowing funds to enhance the value of the Thames properties would not breach the condition as the funds raised would be used to enhance the company’s assets. Nor would a sale of the properties, assuming the sale proceeds were distributed equally or applied to the improvement of company assets. However, a distribution of company funds by way of dividend to Adelaide only, would have an adverse effect on Denis’ shares.

[28]              As I have said, leave is reserved for the condition to be revisited and is likely to become redundant if Kim and Ivan are appointed administrators of Denis’ estate.

Costs

[29]No order as to costs is sought and accordingly none is made.

Associate Judge Lester

Solicitors:
Ponsonby Law Limited, Auckland