Pardington v Melita Properties Limited (in statutory management)

[2016] NZHC 1046

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-2862 [2016] NZHC 1046

BETWEEN

RODNEY GANE PARDINGTON

Plaintiff

AND

MELITA PROPERTIES LIMITED (IN STATUTORY MANAGEMENT)

First Defendant

GWIN CORPORATION LIMITED (IN LIQUIDATION AND IN STATUTORY MANAGEMENT)

Second Defendant

MISKIN ENTERPRISES LIMITED (IN STATUTORY MANAGEMENT)

Third Defendant

CHISMON LIMITED Fourth Defendant

NORTHFORD HOLDINGS LIMITED (IN STATUTORY MANAGEMENT) Fifth Defendant

THE MILLENNIUM CHARITABLE TRUST (IN STATUTORY MANAGEMENT)

Sixth Defendant

Hearing:	19 May 2016
Appearances:	N H Malarao for plaintiff No appearance for defendants
Judgment:	19 May 2016

JUDGMENT OF LANG J

[on application for orders placing defendants in liquidation]

This judgment was delivered by me on 19 May 2016 at 2.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

PARDINGTON v MELITA PROPERTIES LTD (IN STATUTORY MANAGEMENT) [2016] NZHC 1046 [19

May 2016]

[1]      In this proceeding the statutory manager of the six defendants seeks orders placing each in liquidation. The first to fifth defendants are companies incorporated under the Companies Act 1993, whilst the sixth defendant, The Millenium Charitable Trust (Millenium), is a charitable trust incorporated under the Charitable Trusts Act

1957.

[2]      The only parties interested in the proceeding are Mr and Mrs Garry and Wendy Crawford, who were shareholders and directors of all of the companies other than the fourth defendant, Chismon Limited (Chismon).   Mr and Mrs John and Christine Parkes are the shareholders and directors of Chismon.  Those parties have been  served,  but  have  taken  no  steps  to  oppose  the  applications.    They  have contacted the Court by email, however, to confirm they are aware of the applications. Mrs Crawford appeared at the hearing but did not wish to make submissions in relation to the orders that the statutory manager seeks.

[3]      As protector of charities, the Attorney-General has also been served with this proceeding because of the involvement of Millenium.   Counsel for the Attorney- General has filed a memorandum confirming that the Attorney-General accepts that the liquidation of Millenium appears to be justified.  For that reason the Attorney- General does not oppose Millenium being placed in liquidation.

Background

[4]      All  of  the  defendants  were  involved  in  one  way  or  another  in  the development and operation of a retirement village complex known as the Peninsula Club. The retirement village is situated at Whangaparaoa.

[5]      The contractual relationship between each of the defendants and between the defendants and the residents of the retirement village is extremely complex.  In the early 1990s, the defendants defaulted on their obligations to the residents.  A state of paralysis then ensued, and this prevented residents of the village from being able to resell their units.  As a result, Mr Pardington was appointed statutory manager of all six defendants on 20 October 1994 under the Corporations (Investigations and Management) Act 1989 (CIMA).

[6]      Since his appointment Mr Pardington has spent considerable time and money endeavouring to unravel the affairs of the defendants.  He has set out the results of his investigation in a detailed affidavit sworn in support of the current application.  It is  not  necessary to  describe his  findings  for present  purposes,  but  the  affidavit provides a convenient summary of the defendants’ affairs.   It will no doubt be an extremely valuable starting point for those tasked with continuing the administration of the defendants’ affairs from this point on.

[7]      The current position appears to be that the first defendant, Melita Properties Limited (Melita), has outstanding liabilities to the Commissioner of Inland Revenue in respect of GST amounting to approximately $464,000.  Melita is also indebted to Millennium in the sum of $1.8 million.  The second defendant, Gwin Corporation Limited, was already in receivership and liquidation when it was placed in statutory management.  It  owes  creditors  the  sum  of  $454,197.55.    Mr  Pardington  has concluded that both Melita and Gwin are insolvent.

[8]      Mr Pardington has identified several complex legal issues that will need to be determined  as  residents  leave  and  the  units  in  the  complex  are  sold  down.   A statutory manager does not have the power to deal with many of these because it is likely that insolvency principles will need to be applied.   For that reason he recommends that all defendants be placed in liquidation by the Court, and that the Official Assignee be appointed as liquidator.  The Official Assignee will then be able to determine  and distribute residual  surpluses  in accordance with the  respective entitlements of creditors and shareholders.

Jurisdiction

The companies

[9]      There is no jurisdictional barrier to all the defendants other than Gwin being placed in liquidation under the Companies Act 1993 on the ground that it is just and equitable  to  make  that  order.1    Once  such  an  order  is  made,  the  statutory

management will come to an end.2

1      Companies Act 1993, s 241(4)(d).

2      Corporations (Investigation and Management) Act 1989, s 62(2).

[10]     There is an issue with Gwin, because it was placed in liquidation under the provisions of the Companies Act 1955.  The liquidation ceases by virtue of s 61 of CIMA for the duration of the period of statutory management, but it is obviously not possible to place Gwin in liquidation on a second occasion.   For that reason Mr Malarao advises me that no order is now sought in relation to Gwin.  Instead it will be necessary for the statutory manager to seek the promulgation of an Order in Council terminating the statutory management of Gwin. At that point the liquidation of Gwin will again take effect, and  arrangements can be made for the Official Assignee to conclude the liquidation.

Millenium

[11]     As counsel for the Attorney-General reminds me, the general rule in trust law is that a trust cannot be terminated.3   Where, as here, the deed creating the trust does not contain a clause permitting the board to wind the trust up, the Court has the power under s 25 of the Charitable Trusts Act 1957 to place the trust in liquidation. It may do so where it is just and equitable to make such an order. The applicant must satisfy the Court on the balance of probabilities that it is just and equitable to make the order having regard to all relevant rights and interests.

[12]   The circumstances in which the Court may exercise this power differ significantly from  those  in  which  the  Court  will  exercise  its  power  to  place  a company in liquidation. It should not be assumed that the order will be made merely for the sake of convenience.4

Decision

[13]     There can be little doubt that the issues Mr Pardington has identified warrant a common liquidator being appointed for all defendants.   For that reason, I have concluded it is appropriate for the statutory management of the defendants now to be brought to an end, and for the affairs of the defendants other than Gwin to be placed

in the hands of a common liquidator.

3      National Anti-Vivisection Society v Inland Revenue Commissioners [1047] 2 All ER 217.

4      Congregational Christian Church of Samoa (Westmere) Trust Board v Tilaima HC Auckland

CIV 2008 404 1893, 20 December 2010 at [74]-[77] and [98].

[14]     I therefore make orders under s 241(4)(d) of the Companies Act 1993 placing all defendants  other  than Gwin  in  liquidation  on the  ground  that  it  is  just  and equitable that such orders be made.  The Official Assignee is appointed liquidator of each of those companies.

[15]     The orders are timed at 12.30 pm on 19 May 2016.

[16]     I make no order in respect of Gwin Corporation Limited.

Lang J

Solicitors:

Meredith Connell, Auckland