Meco Property Limited v Wroxton Finance Limited

[2019] NZHC 2259

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2019-409-410

[2019] NZHC 2259

UNDER

The Companies Act 1993

IN THE MATTER OF

an application under s 185 of the Property Law Act

BETWEEN

MECO PROPERTY LIMITED

Applicant

AND

WROXTON FINANCE LIMITED AND CURZON CAPITAL LIMITED

Respondents

Hearing:	9 September 2019
Appearances:	B G Walker for the Applicant G Riach for the Respondents
Date of Minute:	10 September 2019

JUDGMENT OF MANDER J

This judgment was delivered by me on 10 September at 3.15 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:     .

MECO PROPERTY LIMITED v WROXTON FINANCE LIMITED [2019] NZHC 2259 [10 September 2019]

[1]                  The applicant, Meco Property Ltd (Meco), was previously the registered proprietor of a property at Parkhouse Road, Christchurch (the property). The respondent companies, as joint mortgagees, held a registered mortgage over the property. They exercised their powers as mortgagees and conducted a mortgagee sale of the property. The mortgagee sale resulted in a surplus of funds which are now held in the respondents’ solicitor’s trust account.

[2]                  Meco has brought an application for disbursement of the surplus funds in the amount of $370,988.91. Under s 185(1)(f) of the Property Law Act 2007 any surplus funds must be paid to a mortgagor following payment of the mortgage debt and related obligations. Meco’s application was called before me in the Judge’s list.

[3]                  The respondents advised that they abide the decision of the Court regarding the surplus funds and have reached agreement with the applicant about costs. Directions for service have earlier been made by Associate Judge Lester in respect of three other entities, namely, a person associated with Meco, Wei Xing, her solicitor Shirllay Sun, and the Secretary of the Treasury.1 Their involvement in this matter will become apparent shortly. Those directions have been complied with and service effected. Apart from the Treasury which has advised that it does not wish to be heard and will abide the Court’s ruling, neither Ms Xing nor Ms Sun have filed notices of appearances or sought to be heard.

[4]                  Having heard from counsel for the parties and read the respective affidavits of Mr John Edilson, a director of one of the respondents who is also authorised to provide evidence on behalf of the other mortgagee company, and the affidavit of Mr Jingzhong Chen on behalf of Meco, I made an order that the surplus funds held by the respondent be paid to Meco. These are the reasons for that decision.

[5]                  Meco’s application became necessary because a company called MMH Investment Ltd (MMH) registered a caveat on the property’s certificate of title. The caveat recorded that it was lodged in respect of an agreement to mortgage between Meco as mortgagor and MMH as mortgagee. That caveat was automatically removed after the mortgagee sale upon transfer of the title to the purchaser. However, a

1      Meco Property Ltd v Wroxton Finance Ltd HC Christchurch CIV-2019-409-410, 7 August 2019.

complication arises from MMH having been removed from the Register of Companies (the Register) for failure to file returns.

[6]                  The respondents consider that with MMH having been removed from the Register they cannot be confident that MMH’s claim against Meco, previously supported by the caveat, will not be pursued in the future. Mr Edilson deposed that the respondents had received legal advice they had to be cognisant of the claimed agreement to mortgage before disbursing the funds. The respondents were not willing to accept advice from Ms Xing in her capacity as the previous sole director and shareholder of the now struck off company that MMH accepted that it does not have a claim to the surplus. The respondents are concerned that, should the company be restored to the Register and it be later placed into liquidation, a liquidator may take a different view about the respondents’ liability to make payment in respect of the agreement to mortgage.

[7]                  The respondents have not therefore been prepared to pay the surplus to Meco unless MMH gave a valid discharge in respect of its claimed interest in the property which was not possible without MMH being restored to the Register. In the alternative, until an order was obtained from the Court to the effect that it was satisfied that the respondents should make payment to Meco.

[8]                  I have read Mr Chen’s affidavit as to why the caveat was registered against the certificate of title in the first place. I accept the submission of Meco’s counsel that based on that uncontradicted evidence, Ms Xing, who was a former director and minority shareholder of Meco, had no authority to offer the property as security for obligations she owed to MMH, being a company of which she was the sole director and shareholder. Both Ms Xing and Ms Sun have confirmed in correspondence to Meco that MMH does not have a claim to the surplus money and would not have such a claim even if restored to the Register.

[9]                  Being satisfied that no other party has any claim to the funds, Meco’s application was granted and an order made that the amount of $370,988.91 held by the respondents’ solicitors be paid to Meco. In accordance with the agreement reached

between the parties, the respondents’ costs were ordered to be paid by Meco from that sum.

Solicitors:

Trollope & Co Lawyers, Christchurch Harmans, Christchurch