Ohara v Best Invest NZ Company Limited

[2019] NZHC 850

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-579

[2019] NZHC 850

BETWEEN

MIKA OHARA

First Plaintiff

TAKASHI KONISHI
Second Plaintiff

SHIRO SASAKI
Third Plaintiff

HIDETO OBA
Fourth Plaintiff

JUN IIBUCHI
Fifth Plaintiff

CHOONGKIL KIM
Sixth Plaintiff

AND

BEST INVEST NZ COMPANY LIMITED

Defendant

Hearing:

16 April 2019

Counsel:

A Manuson for plaintiffs

No appearance for defendant

Judgment:

16 April 2019

ORAL JUDGMENT OF ASSOCIATE JUDGE ANDREW

This judgment was delivered by Associate Judge Andrew on 16 April 2019 at 12.20pm

Registrar/Deputy Registrar

………………………………

Solicitors:

Prestige Lawyers Ltd, Auckland for plaintiffs

OHARA v BEST INVEST NZ COMPANY LTD [2019] NZHC 850 [16 April 2019]

Introduction

[1]                   The plaintiffs are creditors of, and investors in, the defendant company, Best Invest NZ Company Limited (the company). Mr Masatomo Ashikaga is the sole director and shareholder of the company. He passed away on 21 February 2019. The company currently has no director or shareholder. As such, the company is in breach of the requirements of s 10 of the Companies Act 1993 (the Act), which requires all companies to have a director and a shareholder.

[2]                   The plaintiffs make application pursuant to s 246 of the Act for the appointment of interim liquidators. It is contended that the company is currently not being managed by any authorised person and that this continued lack of management is likely to prejudice the rights of creditors. It is further contended that the company, as a provider of financial services, has never been registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008, as is required by s 11 of that Act.

[3]                   The application was initially made on an ex parte basis. However, in a minute of 3 April 2019, Associate Judge Bell directed that the proceedings be served at the company’s registered office, at its address for service and also on Mr Masatomo Ashikaga’s widow, Siu Tai Tsai.

Relevant legal principles

[4]Section 246(1) of the Act provides as follows:

246 Interim liquidator

(1)  If an application has been made to the Court for an order that a  company be put into liquidation, the Court may, if it is satisfied that it is necessary or expedient for the purpose of maintaining the value of assets owned or managed by the company, appoint a named person, or an Official Assignee for a named district, as interim liquidator.

[5]                   In Raph Engle Concepts Ltd v SCL Industries Ltd Partnership,1 Wylie J held that:

The words “necessary” and “expedient” are alternatives. The word “expedient” has been considered to import a low threshold of convenience or desirability. I refer to Carter Holt Harvey Ltd v Timbalock New Zealand Ltd,² where Chisholm J noted as follows:

An indication of the s 246 threshold is provided by the use in that section of the word “expedient” as an alternative to the word “necessary”. In its usual sense that word “expedient” means “fitting, suitable, desirable or convenient” thereby conveying a relatively low threshold. It is sufficient if can be satisfied that it is expedient for an interim liquidator to be appointed for the purpose of maintaining the value of the defendant’s assets.

[6]                   In Truck & Trailer Holdings Ltd v Skelly Holdings Ltd,3 Associate Judge Osborne summarised the relevant principles as follows:

[7]                   Beyond the statutory criteria it has been recognised that there are three main pre-conditions to an interim liquidation:

(i)There must be a valid winding-up application underway.

(ii)The application will in all probability succeed.

(iii)The circumstances must be not merely urgent, but also justify the appointment of an interim liquidator.

[8]The Court has recognised as three important factors:

(a)Whether the company assets are in jeopardy.

(b)Whether the status quo should be maintained.

(c)Whether the interests of creditors are safeguarded.

[9]                   These various formulations are ways of measuring whether necessity or expediency are established. They are a “litmus test”, not exhaustive.

Service of the proceedings

[7]                  In a memorandum dated 15 April 2019, counsel for the plaintiffs has addressed the question of steps taken to serve the proceedings on the company.

1      Raph Engle Concepts Ltd v SCL Industries Ltd Partnership [2013] NZHC 2732 at [28].

2      Carter Holt Harvey Ltd v Timbalock New Zealand Ltd (1997) 11 PRNZ 435 (HC).

3      Truck & Trailer Holdings Ltd v Skelly Holdings Ltd HC Christchurch CIV-2012-409-541, 11 May 2012.

[8]                  On 5 April 2019, the proceedings were served on the company’s registered office, that is Y M Chan, Chartered Accountant, Level 6, 121 Beach Road, Auckland. The affidavit of service of Mr Jerome Swan, affirmed 15 April 2019, confirms that a female employee of Y M Chan, Chartered Accountant, accepted service of the proceedings at the Beach Road address and confirmed that that address is the registered office of the company.

[9]                  I accept the submission of the plaintiffs that service was carried out in accordance with the requirements of s 387 of the Act.

[10]              Mr Swan’s affidavit states that service could not be effected on the company at the address for service that appears on the Companies Office website, that is, Icon Accounting Service Limited, 5 Short Street, Newmarket. The process server says he attempted service at this address, but Icon Accounting Service Limited could not be located. However, Ms Cherkashina appeared today on behalf of Icon Accounting Service Limited, a petitioning creditor with its own application for liquidation of the company.

[11]              Mr Swan also attempted to serve Ms Tsai at her known residential address, but without success. Mr Swan was informed by a person who identified himself as an occupant of Ms Tsai’s known residential address that Ms Tsai had left approximately a month ago. Mr Swan sought further information from this person, but none was provided.

[12]I turn now to address the merits of the application.

Should the Court appoint interim liquidators?

[13]              I find, for the reasons submitted by the plaintiffs, that the grounds for the appointment of interim liquidators under s 246 of the Act have been made out.

[14]              The plaintiffs have filed a statement of claim applying to place the company into liquidation. I accept that there is a strong likelihood that a liquidation order would be granted on one or more of the following grounds:

(a)that the company does not comply with s 10 of the Act and there appears to be little likelihood in the reasonably foreseeable future that those requirements will be met; and

(b)that it is just and equitable that the company be put into liquidation.

[15]              It appears on the evidence available to me that the company is currently not being managed by any authorised person and that this continued lack of management is likely to prejudice the rights of its creditors. It is obviously also of concern to the Court that the company is not registered as a financial service provider, as required under the Financial Service Providers (Registration and Dispute Resolution) Act.

[16]              Counsel for the plaintiffs further submits that the company has rights against third parties which need to be managed. These include rights against RPV SPV Two Limited, which was due to pay funds to the company on 4 April 2019. There are obvious concerns if there are no authorised personnel from the company who can manage such rights.

[17]              The plaintiffs further advise that there are two notices on the Companies Office website relating to the company. The first states that the company:

… is now overdue in its obligation to file an annual return. If the annual return is not filed immediately the Registrar will initiate action to remove the company from the Register.

[18]The second notice states that:

The Registrar intends to remove the company under s 318 of the Act … if you object to its removal, you may wish to contact the company in the first instance or lodge your objection before … 17 May 2019.

[19]              These notices reinforce the view that the absence of management of the company may not be a temporary one.

[20]              Counsel for the plaintiffs has made enquiries in relation to whether probate or letters of administration have been granted in relation to Mr Ashikaga’s estate. The evidence from the plaintiffs suggests there are grounds to believe that Ms Tsai (who is Mr Ashikaga’s widow but is neither a director nor a shareholder of the company) may

have access to the company’s accounts and documents. I am satisfied that it is likely that Ms Tsai is aware of these liquidation proceedings and that the evidence demonstrates, at least to a reasonably arguable case standard, that she has no sense of obligation over the company’s affairs. The evidence before me also suggests that she is attempting to avoid service of the proceedings.

[21]              The evidence of the process server also suggests that Ms Tsai may be aware that there are liquidation proceedings  in  relation  to  another  company  of  which Mr Ashikaga was sole director and shareholder, namely East Wind Limited.

[22]              In their statement of claim seeking to place the company into liquidation, the plaintiffs have referred to large sums of money that they have invested with the company. The principal sums advanced plus distributions are due to be paid to the plaintiffs during the remaining months of 2019. The company is already in default of some of its obligations to the plaintiffs.

[23]              I conclude that the plaintiffs have established that the company assets are potentially in jeopardy and that it is in the interests of creditors that liquidators be appointed now, to safeguard their interests. The status quo, namely a lack of management with no prospect of any change, cannot be maintained.

Result

[24]              I accordingly grant the application under s 246 for the appointment of interim liquidators.

[25]              I appoint, on an interim basis, Mr Timothy Wilson Downs and Mr Malcolm Russell Moore as liquidators of the company. The terms and conditions of their appointment (an interim one) and their rates of remuneration are as set out in their consent to act dated 4 April 2019.

[26]I adjourn the substantive liquidation proceedings until 24 May 2019 at

11.45 am. This will allow for advertising and other procedural matters to be attended to.

[27]              I also adjourn the associated liquidation proceeding, Icon Accounting Service Ltd v Best Invest NZ Company Ltd (CIV-2019-404-632) to the same time and date, namely 24 May 2019 at 11.45 am.

[28]My orders are timed at 12.20pm on 16 April 2019.

Associate Judge Andrew