Lindsay v Registrar of Companies
[2022] NZHC 859
•28 April 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-1825
[2022] NZHC 859
UNDER Section 329 of the Companies Act 1993 IN THE MATTER
of the restoration of O F LINDSAY & ASSOCIATES LIMITED to the New
Zealand Register
BETWEEN
ANNETTE LORRAINE LINDSAY
Applicant
AND
THE REGISTRAR OF COMPANIES
First Respondent
THE SECRETARY TO THE TREASURY
Second Respondent
Hearing: On the papers Counsel:
C Stanley and ND Moore for the Applicant and for the Public Trust as the executor of the estate of Betty Margaret Corlett GS Caro for the First Respondent
S Lulham for the Second Respondent
Judgment:
28 April 2022
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 28 April 2022 at 3.00pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Thomas Dewar Sziranyi Letts, Lower Hutt
Ministry of Business, Innovation & Employment, Auckland The Treasury, Wellington
LINDSAY v THE REGISTRAR OF COMPANIES [2022] NZHC 859 [28 April 2022]
Introduction
[1] The applicant has filed an originating application without notice for orders to restore a company, O F Lindsay & Associates Limited, to the New Zealand Companies Register. Since the application was filed matters have evolved so that the applicant no longer seeks restoration of the company.
[2] The apparent need for restoration arose during the administration of the estate of Betty Margaret Corlett (Deceased) by the Public Trust. The Public Trust discovered that the Deceased’s home at 52 Kennedy Avenue, Auckland is still registered in error in the name of the previous owner, O F Lindsay & Associates Ltd.
[3] O F Lindsay & Associates was liquidated and struck off the Companies Register in 1993.
[4] In an attempt to resolve this issue, a director of the former company, Ms Annette Lindsay agreed to the company being restored to the Register so that the transfer of the property to the Deceased’s estate could be completed. The Registrar of Companies had consented to the restoration.
[5]Following the filing of the application, orders were made including:
(a)that the originating application was to proceed on a with notice basis;
(b)the Secretary to Treasury was to be named as the second respondent and the proceeding served on her as when a company is removed from the Companies Register any assets of the company revert to the Crown.
[6] Following service of the application, a memorandum was filed on behalf of the Registrar of Companies amending their position and advising that they do not consider that the Companies Act 1993 applies to the restoration application as the company was removed from the Register in March 1993 under the previous Companies Act.
[7] The memorandum filed on behalf of the Registrar of Companies confirms that the Registrar understands the reasons for the application and does not wish to prevent resolution of those issues.
[8] The parties then conferred and a further memorandum dated 3 February 2022 was filed on behalf of the applicant. This memorandum confirms that all parties to the proceeding are in agreement that the necessary outcome is that the record of title currently in the name of O F Lindsay & Associates Ltd needs to record the Public Trust as the executor for the estate of Betty Margaret Corlett as the registered owner.
[9] The applicant’s memorandum sets out several options for achieving the outcome sought.
[10] A letter from the Secretary to the Treasury dated 3 February 2022 has been provided to the Court confirming receipt of all documents including the further memorandum on behalf of the applicant dated 3 February 2022. The letter confirms that the Crown has no objection to the property being vested in the Public Trust as executor of the estate of Betty Margaret Corlett and will abide by the decision of the Court.
[11] I now consider the options proposed by the applicant to determine the appropriate orders.
Issue
[12] The issue for determination is whether there is an available pathway for correcting the error in the Record of Title so that the Public Trust as executor can proceed with the distribution of the Deceased’s estate.
Background
[13] The Public Trust has been formally appointed as the executor pursuant to the grant of probate on 25 May 2020 (CIV-2020-485-604943).
[14] O F Lindsay & Associates Ltd sold the property to the Deceased in late 1980. An affidavit has been filed by Ms Lindsay attaching a signed copy of a memorandum of transfer recording the transfer of the property from O F Lindsay & Associates Ltd to the Deceased dated 13 December 1980. Ms Lindsay’s evidence is that the
memorandum of transfer is in accordance with an agreement for sale and purchase entered into with the Deceased as the purchaser.
[15] Unfortunately, it appears that the Record of Title for the property was never updated and the property has remained registered in the name of O F Lindsay & Associates Ltd ever since. Ms Lindsay confirms that she was not aware of this until the Public Trust contacted her after discovering the issue.
[16] No party disputes that it is an error that the Deceased is not recorded as the legal owner on the title.
[17] As set out above, this application was brought as an originating application to restore the company, O F Lindsay & Associates Ltd to the Companies Register. It appears that there may be difficulties with this approach because the company was removed from the register in March 1993 under the Companies Act 1955 (1955 Act). Section 399 of the Companies Act 1993 provides that the 1955 Act continues to apply in respect to restoration and bona vacantia issues. The appropriate path for restoration then depends on the method by which the company was removed in March 1993. It appears, however, that method is not known and is not readily discoverable.
[18] Counsel for the applicant also acts for the Public Trust and now requests that the Court considers the options available and then, relying on its powers under r 1.9 of the High Court Rules 2016, amends the application and makes orders in accordance with the Court’s preferred option.
[19]The options proposed are:
(a)a declaratory order confirming that an institutional constructive trust was created at the time Betty Margaret Corlett paid consideration for and settled the purchase of the property and subsequently an order removing the appointed liquidator of the company as trustee of the constructive trust and appointing Public Trust as executor as replacement trustee pursuant to ss 112 and 114(1) of the Trusts Act 2019; or
(b)in the first alternative, an order vesting the property in the Public Trust as executor pursuant to s 324(4)(a) of the Companies Act 1993; or
(c)in the second alternative, the Court relies on its inherent jurisdiction to vest the property in the Public Trust as executor in the absence of any other applicable rules or legislation.
Option 1: Declaration of constructive trust and removal and appointment of constructive trustee under the Trusts Act 2019
[20] The first option requires firstly a declaration confirming the existence of a constructive trust and then, secondly, orders removing and replacing the trustee.
Is there a constructive trust?
[21]As the Court of Appeal held in Bevan v Smith1:
The “institutional” constructive trust in favour of a purchaser pending completion of a sale and purchase transaction is well established: Cope, Constructive Trusts (1992) 899 and 904, Official Assignee v Johnston [1974] 1 NZLR 79. As stated by Cope, it rests on the equitable doctrine of conversion which looks upon that as ought to be done. Thus the purchaser under a specifically enforceable contract is treated in equity as the owner of the property and the vendor as constructive trustee. From the time the contract becomes specifically enforceable, the purchaser is entitled to all benefits of a capital nature which accrue to the actual subject matter of the contract whereas the vendor is entitled to retain such benefits which are unconnected with the subject matter.
[22] Ms Lindsay in her affidavit dated 8 September 2021 confirms that on 13 December 1980 a memorandum of transfer was signed in order to transfer the property to Ms Corlett in accordance with a sale and purchase agreement entered into between Ms Corlett and O F Lindsay & Associates Ltd. Ms Lindsay attests that she was not aware until the Public Trust commenced administration of the estate that the Record of Title was never updated and the property has remained registered in the name of the liquidated and now removed company. The memorandum of transfer is attached to Ms Lindsay’s affidavit and confirms that Ms Corlett paid $55,000 for the land and that the transfer of the fee simple estate was agreed to on 13 December 1980.
1 Bevan v Smith [1994] 3 NZLR 648 (CA) at 659.
[23] There appears no question that the beneficial interest in the property was held by Ms Corlett and now her estate. The company therefore holds the property as constructive trustee (rather than the appointed liquidator as suggested by the applicant). The Court could therefore declare that an institutional constructive trust was created at the latest at the time Ms Corlett paid consideration for and settled the purchase of the property.
Can orders be made replacing the constructive trustee?
[24] When the company was removed from the Companies Register in March 1993, the provisions of the Companies Act 1955 would have applied rather than the Companies Act 1993.2 Section 337(1) of the 1955 Act provides that any property that had not been distributed or disclaimed prior to the company’s removal is deemed to be bona vacantia and vests in the Crown. However, s 337(2) expressly excludes property held by the former company “on trust” for any person. The property would not, therefore, have vested in the Crown.
[25] In Re Body Corporate 2069203 Ellis J made an order pursuant to s 52 of the Trustee Act 1956 vesting all legal and beneficial rights and interests of two companies which had been removed from the Register in another company. Section 52 of the now repealed Trustee Act expressly provided a power to the Court to vest trust property where a corporate trustee that is entitled to any interest in land and has ceased to carry on business is in liquidation or has been dissolved. There does not seem to be an equivalent provision in the Trusts Act 2019.
[26] The transitional provisions of the Trusts Act do not appear to allow an application to be made under the Trustee Act. This is not therefore an available option.
[27] Section 5(2)(b) of the Trusts Act states that a court may, where necessary or appropriate, apply the provisions of the Act to a constructive trust governed by New Zealand law.
2 Section 399(1) of the Companies Act 1993.
3 Re Body Corporate 206920 [2015] NZHC 320.
[28] Furthermore, s 8(1) provides that the inherent jurisdiction of the Court to supervise and intervene in the administration of a trust is not affected by the Act except to the extent that the Act provides otherwise. Section 8(2) continues that, despite s 8(1), the Court must have regard to the purpose and principles of the Act when exercising its inherent jurisdiction.
[29] Sections 112 to 114 of the Trusts Act provide for the removal and appointment of trustees. Section 112 provides that:
Whenever it is necessary or desirable to remove a trustee and it is difficult or impracticable to do so without the assistance of the court, the court may make an order removing a trustee.
[30]Section 113 then states:
(1) If a trustee retires or is removed or dies while in office and it is necessary (because the trustee was a sole trustee or because the terms of the trust require it) to replace the trustee, a person with the power to appoint trustees must appoint a replacement trustee.
…
(3) The appointment of a trustee to replace a trustee who has been removed takes effect only when the removal takes effect under section 107(2) or (3), 108(2), or 112.
[31]Section 114 provides:
(1)Whenever it is necessary or desirable to appoint a new trustee and it is difficult or impracticable to do so without the assistance of the court, the court may make an order appointing a new trustee.
(2)However, this section does not empower the court to appoint an executor or administrator.
(3)If the court proposes to appoint Public Trust as the replacement trustee, the court must, before making the appointment, give Public Trust an opportunity to be heard on the matter.
(4)If the court (except on application by a supervisor within the meaning of section 6(1) of the Financial Markets Conduct Act 2013) appoints Public Trust as the replacement trustee, Public Trust—
(a)must accept the appointment; and
(b)may charge fees for acting as trustee.
[32] These sections make it clear that a court may replace a trustee when it is necessary or desirable to do so and it is difficult or impracticable without the assistance of the Court.
[33] All parties are agreed that it is necessary and desirable to remove the trustee by making an order under s 112 as the trustee, being a corporate trustee which has been liquidated and removed from the Companies Register, can no longer perform its duties. And further, that it is necessary and desirable to appoint the Public Trust as executor as the replacement trustee under s 114.
[34] Adopting this approach would mean that the Public Trust would then need to determine how to deal with the property. Two options for doing so are referred to in the applicant’s memorandum.
[35] The first relies on ss 116 and 117 of the Trusts Act which would automatically vest the property in the replacement trustee once appointed. The Public Trust, as executor, would then deal with a transfer or sale and distribute to the named beneficiaries under the Deceased’s will.
[36] The second option is for the Public Trust to wind up the constructive trust with the unanimous consent of the beneficiaries under the Deceased’s will pursuant to s 121 of the Trusts Act 2019.
[37]Both of the above options appear to be available but are slightly convoluted.
[38] Whether declaring a constructive trust and removing and appointing the trustee is appropriate will depend on whether there is an alternative option for correcting the error.
Option 2: Could a declaration be made instead vesting the property in the Public Trust as executor pursuant to s 324(4)(a) of the Companies Act 1993?
[39] Section 324(2) precludes s 324 being relied upon in relation to property held by a former company on trust for another person.
[40] As there is no question that the company held the property as constructive trustee for the purchaser, this option cannot be relied on. This issue arises before the complexities of the application of the 1955 and 1993 Companies Acts are considered.
Vesting the property under s 324(4)(a) of the Companies Act 1993 is not, therefore, an option.
Option 3: Is the Court able to rely on its inherent jurisdiction to vest the property in the Public Trust?
[41] This may be an alternative option, but where the Trusts Act provides a mechanism for applying that Act to the situation and the orders sought are consistent with the provisions of that Act it seems more appropriate to apply the Trusts Act.
Any further options?
[42] I have considered further options including relying on the power in s 16 of the Land Transfer Act 2017 to direct the Registrar to alter the record of title to reflect the correct owner. The power provided by s 16 is only available however in proceedings under that Act. Furthermore, it is not an option that has been considered by the parties.
Conclusion on options available
[43] Although the removal and appointment of a trustee requires further steps once completed, the constructive trust option appears the most appropriate course in the circumstances.
Is a new application required to be filed?
[44] Rule 1.9(2) of the High Court Rules 2016 provides the Court with a wide discretion to make “any amendments to any pleading or the procedure in the proceeding that are necessary for determining the real controversy between the parties”. Rule 1.9(3) further allows the Court to make amendments on any terms the Court thinks just. Counsel for the applicant submits that in the circumstances of this case, amendments ought to be allowed rather than requiring a new application to be filed (and that the filing fee already paid ought to be sufficient to cover the cost of determining the amended application).
[45] Ordinarily where a party is asking the Court to rely on r 1.9(2) it provides a draft amended pleading. That has not been done in this case presumably because the applicant presented several options for proceeding.
[46] Part 18 of the High Court Rules applies to proceedings in which the sole relief claimed is under the Trusts Act 2019, rather than the originating application procedure under part 19. However, r 19.5 provides the Court with the power to permit any proceeding not mentioned in rules 19.2 to 19.4 to be commenced by way of originating application.
[47] In the circumstances I consider that it is in the interests of justice to allow the application to be brought by originating application and for the application to be amended to:
(a)seek a declaration that a constructive trust arose at the time the Deceased paid consideration for and settled the purchase of the property;
(b)seek orders removing the company as constructive trustee and appointing the Public Trust as executor as replacement trustee pursuant to ss 112 and 114(1) of the Trusts Act 2019; and
(c)seek an order reserving leave to the parties to revert to the Court by way of memorandum if further directions are required.
[48] This will allow the real controversy between the parties to be determined in accordance with the objective of the High Court Rules to secure the just, speedy, and inexpensive determination of the proceeding.4
Conclusion
[49] I conclude that it is appropriate to apply the provisions of the Trusts Act to the constructive trust arising in this case. Those provisions confer a remedial function on
4 High Court Rules 2016, r 1.2.
the Court and apply in this case as it is necessary and desirable to replace the trustee and it is difficult to do so without the assistance of the Court.
[50] There is one final matter in relation to the Public Trust. Section 114(3) of the Trusts Act requires the Court to give the Public Trust an opportunity to be heard prior to appointing the Public Trust as the replacement trustee.
[51] In the memorandum filed on 3 February 2022, counsel for the applicant records that they also act for the Public Trust. I make the orders below on the basis that the Public Trust has been given an opportunity to be heard on the matter. I allow a period of five days before the orders may be sealed to allow the Public Trust to file a memorandum if it considers that it requires a further opportunity to be heard.
Result
[52]I order:
(a)that an institutional constructive trust arose at the latest on 13 December 1980 with O F Lindsay & Associates Ltd being the constructive trustee in favour of the Deceased, Ms Betty Margaret Corlett, as beneficiary;
(b)O F Lindsay & Associates Ltd is removed as trustee of the constructive trust;
(c)the Public Trust as executor of the Deceased’s estate is appointed as replacement trustee;
(d)leave is reserved to apply for further directions by memorandum, including if the Public Trust wishes to be heard.
[53] The above orders are not to take effect (and may not be sealed) until 5 working days following this judgment if no further memorandum is filed or otherwise until further order of the Court.
Associate Judge Sussock
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