Lott v Tuatapere Saleyards Co Limited (in liquidation)

[2021] NZHC 1995

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CIV-2020-425-18

[2021] NZHC 1995

BETWEEN

KELVIN JOHN LOTT and LESLIE EDWARD KOLLAT
Plaintiffs

AND

TUATAPERE SALEYARDS CO LIMITED (IN LIQUIDATION)

Defendant

Hearing:	On the papers
Counsel:	S N McKenzie for Liquidator of Defendant
Judgment:	6 August 2021

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 6 August 2021 at 3.00 pm Pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

…..

LOTT and KOLLAT v TUATAPERE SALEYARDS CO LTD (In Liquidation) [2021] NZHC 1995 [6 August 2021]

[1]    Tuatapere Saleyards Co Limited (in liquidation) (the company) was incorporated on 7 September 1915. The company was put into liquidation on the just and equitable ground by this Court on 17 July 2020. The intervention of the Court was required to achieve liquidation because, as will be expanded on, the company has lost contact with almost all of its shareholders.

[2]    The company’s only assets were its saleyards which it no longer utilised as no stock sales took place in the area and thus no revenue was generated.

[3]    Since the liquidation was commenced all assets have been realised and all outstanding creditors and expenses have been paid. The company had 1,000 shares and the balance of funds held by the liquidator is not quite $37,000 less further liquidation expenses.

[4]    The difficulty faced by the liquidator is that the company’s share register has not been kept current. There is an extensive list of shareholders. A large number of shareholders are either deceased or are unable to be located.

[5]    The liquidator and the directors initially approached the Court seeking a direction that the residual funds of the company be donated to community organisations in the Tuatapere area. The thinking was that, as the company’s saleyards had been an asset for the community and funded by the community, it would be appropriate that the modest surplus be distributed to the community. The reality is the surplus will be eroded in attempting to locate the shareholders, thus rendering an exercise aimed at returning the surplus to shareholders pointless.

[6]    Attempts to hold a meeting of shareholders on 20 September 2018 were unsuccessful. Despite the meeting being publicly advertised, only four shareholders constituting 3.9 per cent of the voting rights attended. As at 4 May 2020, shareholders representing only 4.5 per cent of the total shareholding had been located.

[7]    In a Minute issued on 12 May 2021 I concluded that because the distribution of the surplus is controlled solely by the Companies Act 1993 (the Act) the Court did

not have jurisdiction to permit the liquidator to donate to the community funds that the Act required go to shareholders.

[8]    I concluded the Minute by expressing my assumption that the shareholders who had been contacted had no objection to the small amount they would otherwise receive being donated to the community. I noted that if those shareholders disagreed with what was proposed that objection should be brought to the Court’s attention.     I proposed that, while it was a matter for the liquidator and the directors, one possibility was for the company to be temporarily taken out of liquidation, given all creditors had been paid. It would then be for the directors to make a decision to donate the funds to the community. Upon that step being taken, the company could then be placed in liquidation on the basis that it had no assets and was removed from the Companies Register.

[9]    The directors wish to adopt that course and have taken up the invitation to apply for termination of the liquidation to enable them to donate the funds to the community.

[10]   Counsel for the liquidator confirms that the liquidator, directors and those shareholders able to be located have discussed the proposed donations and are all agreement with the approach.

[11]   Under s 250(1) of the Act, the Court may at any time after the appointment of a liquidator of a company, if it is satisfied that it is just and equitable to do so, make an order terminating liquidation of the company. Such s 250(2) application may be made by the liquidator or the directors. The liquidators and the directors join in this application.

[12]   In this case, as I have said, all creditors have been paid. The practical point is that termination of the liquidation will not cause any real prejudice to shareholders. If the liquidator was obliged to locate every shareholder or their descendants, the money would soon be expended in tracing the large number of shareholders. Some sense of the scale of that exercise is evident from the fact that a publicly advertised meeting

produced shareholders representing only a small percentage of the overall shareholding.

[13]   In the unusual circumstances of this case, I am satisfied that it is just and equitable that the liquidation of the company be terminated and I so order.

[14]   However, I emphasise the particularly unusual circumstances of this case. The company was incorporated over 100 years ago. The share register is out of date. To trace the shareholders or their descendants would exhaust the modest amount available. The community will benefit from the funds which otherwise would be expended in the futile exercise of locating shareholders only to pay them nothing.

[15]   I do not have sufficient knowledge of local community matters to approve the proposed recipient of the funds, that  is, 50 per cent to the Tuatapere Lions Club,    25 per cent to the Waiau Valley Area School, and 25 per cent to the Hauroko Valley Primary School. At face value, such recipients seem appropriate but ultimately, such is a decision for the directors.

[16]   Leave is reserved for the directors to apply for the company to be placed back into liquidation following the disbursal of the surplus funds. I am prepared to treat Mr Iain Nellies’ consent to act as liquidator as continuing to apply given the memorandum filed by his counsel contemplates the company will be returned to liquidation once the funds have been distributed in the community. Such application is to be made within 20 working days of this judgment and may be made by way of memorandum. I dispense with the need for advertising of that application.

[17]   There will be a telephone conference with me on 28 October 2021 at 4.30 pm to monitor progress. If the application to return the company to liquidation is made in the meantime, that conference will be vacated.

Associate Judge Lester

Solicitors:

Preston Russell Law, Invercargill