Mortyne v Moana Supertee Pty Limited
[2018] NZHC 2671
•16 October 2018
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE
CIV 2017-488-113 [2018] NZHC 2671
BETWEEN WARWICK RICHARD MORTYNE AND
TRACY CHARLOTTE MAREE RUKE Plaintiffs
AND
MOANA SUPERTEE PTY LIMITED Defendant
Hearing: 11 October 2018 Appearances:
S B Punshon for Plaintiffs
No appearances for DefendantJudgment:
16 October 2018
JUDGMENT OF VAN BOHEMEN J
This judgment was delivered by me on 16 October 2018 at 2.00pm
Pursuant to Rule 11.5 of the High Court Rules
…………………………
Registrar/Deputy Registrar
Solicitors:
Patterson Law Ltd, Kaitaia
MORTYNE AND ANOR v MOANA SUPERTEE PTY LIMITED [2018] NZHC 2671 [16 October 2018]
[1] The plaintiffs, Warwick Mortyne and Tracey Ruke, have applied for orders:
(a)declaring that a property in Ahipara – of which the registered owner is the defendant company which has been deregistered in Australia - is held by the company on trust for the plaintiffs; and
(b) vesting the property in the plaintiffs.
[2] The central issue is whether the Court has the power to make such orders. There is also an ancillary question of whether the proceeding is validly issued since the defendant, Moana Supertee Pty Ltd, no longer exists. However, for reasons that will become apparent, it is not necessary to deal with that question.
[3] The application was filed on 13 October 2017 with an affidavit in support sworn by Mr Mortyne on 2 October 2017. I heard the application on 11 October 2018. During the hearing, I was provided with further information by Mr Mortyne and
Ms Ruke to supplement that contained in Mr Mortyne’s affidavit.
Relevant factual background
[4] Mr Mortyne, who is an Australian citizen but is resident in New Zealand, and
Ms Ruke, who is a New Zealand citizen, were once married and lived in Queensland, Australia. They established a company, Moana Supertee Pty Ltd, in Queensland for the purposes of managing their property interests. Mr Mortyne and Ms Ruke were the only two directors of the company. They were also the sole shareholders, each holding
50 per cent of the shares.
[5] In March 2011, while still resident in Australia, Mr Mortyne and Ms Ruke decided to buy the property at 3 Poseidon Way, Ahipara in New Zealand. While they used their own funds to meet the purchase price, the purchase was settled in the name of their company, Moana Supertee. Mr Mortyne and Ms Ruke also used their own funds to buy and move a relocatable house onto the property and to meet all expenses associated with the property.
[6] Subsequently, Mr Mortyne and Ms Ruke moved to New Zealand and lived in the Poseidon Way property. They did not pay rent to Moana Supertee and paid personally for the outgoings and maintenance and repair of the property.
[7] In April 2013, Mr Mortyne and Ms Ruke separated. They both continue to reside in New Zealand.
[8] On 9 April 2016, the Australian Securities and Investment Commission (ASIC) deregistered Moana Supertee apparently having reached the view that the company was no longer carrying on business. As a consequence, Moana Supertee ceased to exist and could not deal with the Poseidon Way property. Mr Mortyne and Ms Ruke only became aware of this development after the event.
[9] On 6 September 2016, Mr Mortyne and Ms Ruke concluded a Relationship Property Agreement which, among other things, provided for the sale of the Poseidon Way property and the division of the proceeds equally between them. To achieve that outcome, the Agreement provided that Mr Mortyne and Ms Ruke would apply to the Court in New Zealand for the property to be vested in them or would seek re- registration of Moana Supertee to enable the company to sell the property.
Steps taken to implement the Relationship Property Agreement
[10] On 13 October 2017, Mr Mortyne and Ms Ruke filed the current proceeding to achieve the vesting of the Poseidon Way property provided for in the Relationship Property Agreement.
[11] By minute dated 25 October 2017 in the context of an application for directions as to service, Bell AJ observed that if Moana Supertee had been a New Zealand company, the standard remedy would have been to have the company restored to the companies register. Bell AJ noted that similar arrangements appeared to apply in Australia under the Corporations Act and invited counsel for the plaintiffs to consider the matter further.
[12] By letter dated 16 May 2018, ASIC declined an application by Mr Mortyne for reinstatement of the registration of Moana Supertee on the grounds that under s 201A(1) of the Corporations Act 2001 (Commonwealth), office holders of an Australian registered company must be ordinarily resident in Australia.
[13] By minute dated 13 July 2018, Bell AJ noted that with Moana Supertee remaining deregistered and therefore no longer in existence, there appeared to be no- one holding a freehold estate in the Poseidon Way property – in which case the property appeared to have reverted to the Crown by escheat. Accordingly, the Associate Judge directed that the proceeding be served on the Crown, namely the Treasury.
[14] By email dated 26 July 2018, a senior solicitor at the Treasury advised the plaintiffs’ solicitors that the provisions of the Companies Act 1993 concerning the vesting in the Crown of property of a company removed from the register did not apply to companies such as Moana Supertee registered under overseas legislation. The Treasury solicitor recommended that the plaintiffs contact ASIC to ascertain whether ASIC considered the Poseidon Way property had vested in the Australian government.
[15] By letter dated 27 July 2018, the plaintiffs’ solicitors wrote to ASIC outlining the background to and providing copies of the current proceeding and asked whether ASIC considered the Poseidon Way property had vested in the Australian Government and, if so, whether ASIC would be prepared to disclaim the property.
[16] By letter dated 24 August 2018, ASIC confirmed to the plaintiffs’ solicitors that Moana Supertee had been deregistered on 9 April 2016 and that the property had either vested in ASIC (if non-trust property) or the Commonwealth of Australia (if the property had been held on trust at the time of deregulation). ASIC went on to advise on options available under Australian law for reinstatement of the company and for dealing with deregistered company property.
[17] With regard to the current proceeding, the ASIC letter suggested that the proceeding was already at an end insofar as it related to the deregistered defendant. However, the letter went on to state that:
… on the strict understanding that no orders are sought against, or directly affecting, ASIC/the Commonwealth, then ASIC does not oppose any orders sought by the plaintiff in the proceeding. Further, ASIC does not wish to be heard nor wishes to be joined as a party to the proceeding.
Where does title to the Poseidon Way property lie?
[18] The answer to this question has been provided to the plaintiffs’ solicitors by ASIC in its letter of 24 August 2018. In accordance with s 601AD of the Corporations Act 2001 (Commonwealth), under Australian law:
(1) A company ceases to exist on deregistration.
(1A)On deregistration, all property that the company held on trust immediately before deregistration vests in the Commonwealth. …
(2) On deregistration, all the company’s property (other than any property held by the company on trust) vests in ASIC …
[19] It follows that, whether or not the Poseidon Way property was held on trust for the plaintiffs, upon the deregistration of Moana Supertee the property vested either in the Commonwealth of Australia or in ASIC. Accordingly, this is not a case where the property is ownerless and requires the intervention of equity to fill a legal vacuum.
[20] I do not consider the letter of 24 August 2018 from ASIC to the plaintiffs’ solicitors to constitute a waiver of or disclaimer to title to the Poseidon Way property. While the statement in the letter that ASIC does not oppose any orders sought by the plaintiff in the proceeding might be read as acquiescence in the granting of the orders in the plaintiffs’ application, that statement is subject to the qualification that such orders are not sought against or directly affect ASIC or the Commonwealth. An order vesting in the plaintiffs a property currently vested in ASIC or the Commonwealth necessarily directly affects ASIC or the Commonwealth.
[21] Accordingly, the essential relief sought by the plaintiffs is outside the terms of the permission given in the ASIC letter. Even if that were not the case, I do not consider that the ASIC letter can be taken as conceding title to property that has vested in ASIC or the Commonwealth by operation of Australian law.
[22] Since the Poseidon Way property has vested in another party, it could not be considered to be held on trust by Moana Supertee and it is not open to this Court, whether by way of constructive or resulting trust or otherwise, to purport to vest it in the plaintiffs.
Do the plaintiffs have a beneficial interest in the Poseidon Way property?
[23] Even without the complication of the property being vested in ASIC or the Commonwealth of Australia, I do not consider the Court has power to grant the orders sought in the plaintiffs’ application.
[24] First, the first order sought is an order declaring that Moana Supertee holds the Poseidon Way property on a resulting or constructive trust for the plaintiffs. That is a legal impossibility since Moana Supertee does not exist.
[25] Secondly, even if the proposed order was expressed in the past tense, namely that Moana Supertee held the Poseidon Way property on a resulting or constructive trust for the plaintiffs, that would require the plaintiffs to establish that they had a beneficial interest in the Poseidon Way property.
[26] The plaintiffs do not assert that the Poseidon Way property was acquired by Moana Supertee subject to an explicit or implicit understanding that it would be held on trust for the plaintiffs. Rather, the statement of claim and the submissions of the plaintiffs’ counsel assert that because Moana Supertee has been deregistered and because the company has no debtors or creditors and no liabilities, and because the plaintiffs were the sole former directors of the company, a resulting or constructive trust exists or should be declared by the court to exist.
[27] That submission overlooks the basic principle of company law that directors of a company have no beneficial interest in a company, let alone the assets of the company. It is the shareholders that own the company while directors direct and supervise the management of the company’s business.
[28] Furthermore, the rights and powers of shareholders are in relation to the shares of the company and not in relation to the company’s assets. Under New Zealand law,
those rights include the right to a share in dividends authorised by the board and the right to share in the distribution of the surplus assets of the company.1
[29] However, a shareholders’ ownership interest in the company does not extend to a legal or equitable interest in the assets of a company, even where the shareholder is the sole or majority shareholder in the company. As Lord Buckmaster said in Macaura v Northern Assurance Co Ltd,2 in a passage cited with approval by the Court of Appeal in Mahon v The Station at Waitiri Ltd:3
Now, no shareholder has any right to any item of property owned by the company, for he has no legal or equitable estate therein.
[30] It follows that, under long-standing principles of company law, the plaintiffs have no beneficial interest in the Poseidon Way property, even if they had a contingent claim to a distribution of the property if the property was unsold at the dissolution of the company.
[31] I recognise that this is a disappointing result for the plaintiffs but it is the consequence of their decision to use their company to purchase the Poseidon Way property. As the Court of Appeal said in Mahon v The Station at Waitiri Ltd:4
If a commercial party chooses to hold an entity through a company, then that is the choice that they have made and by which they must be bound. A party cannot utilise an incorporated structure for the benefits it brings them and then disavow the necessary legal consequences of the use of that structure when it suits.
[32] While the plaintiffs might say they are not commercial parties and while the interest held though the company is land rather than another legal entity, the same principles and consequences apply.
Where to from here?
[33] Notwithstanding the above, there appears to be a path forward that is consistent with Australian and New Zealand law and respects company law principles common
1 Companies Act 1993, s 36.
2 Macaura v Northern Assurance Co Ltd [1925] AC 619 (HL) at 625-626.
3 Mahon v The Station at Waitiri Ltd [2017] NZCA 387, (2017) 18 NZCPR 760 at [33].
4 Mahon v The Station at Waitiri Ltd [2017] NZCA 387, (2017) 18 NZCPR 760 at [37].
to both jurisdictions. That is for the plaintiffs to apply to ASIC for a distribution of the Poseidon Way property to them in accordance with s 601AF of the Corporations Act 2001 (Commonwealth). Under that section, to which ASIC referred in its letter of 24 August 2018, ASIC may do an act on behalf of a deregistered company if ASIC is satisfied that the company would be bound to do the act if the company still existed.
[34] While it is not for this Court to comment on Australian law, it is likely that if the company had not been taken off the Australian register, as the only directors and shareholders and in the absence of any liabilities on the part of Moana Supertee, the plaintiffs could have required the company to distribute to them the property or the proceeds of sale if the property had been sold as part of a winding up process.
[35] Of course, ASIC is not bound to do the requested act. ASIC might reasonably be expected, however, to take notice of the fact that the plaintiffs were the sole directors and shareholders of Moana Supertee and – according to the information provided to the Court – the property was the company’s sole asset and there were no creditors and no other liabilities for the company to meet. It is also likely to be relevant to ASIC’s decision that the plaintiffs had provided the funds for the company to acquire the property and had met all outgoings and the costs of maintenance and repair.
[36] ASIC may also take notice of this decision that this Court has found that it does not have the power to make the orders sought in the plaintiffs’ application.
Result
[37] The application is dismissed.
[38] Leave is reserved to apply in the event the plaintiffs are unable to secure a satisfactory resolution of the issue through an application to ASIC.
G J van Bohemen J