Picklepie Limited v Attorney-General

[2022] NZHC 2148

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2022-485-467

[2022] NZHC 2148

UNDER

section 324 of the Companies Act 1993

IN THE MATTER OF

an application by Picklepie Limited to vest land

BETWEEN

PICKLEPIE LIMITED

Applicant

AND

ATTORNEY-GENERAL

Respondent

On the Papers
Judgment:	26 August 2022

JUDGMENT OF GWYN J

Application

[1]This is an application for:

(a)Leave under r 19.5 of the High Court Rules 2016 (Rules) to permit this proceeding to be commenced by originating application.

(b)For a vesting order for land pursuant to s 324(4)(a) of the Companies Act 1993.

[2]        The applicant wishes to have title to Apartment H at 6 Halleys Lane, Wellington, vested in it.

PICKLEPIE LIMITED v ATTORNEY-GENERAL [2022] NZHC 2148 [26 August 2022]

[3]        The application is supported by an affidavit from Mr Rhys Weyburne whose company Picklepie Limited owns Unit 6D at 6 Halley’s Lane, and a memorandum from Mr John Langford, counsel for the applicant.

Background

[4]        The land in question is a derelict unit title apartment. The apartment building at 6 Halleys Lane was developed in the early 1990s. It was a conversion of an existing commercial building. The developer, Daytona Developments Limited (Daytona), sold off the seven lower apartments and retained the eighth floor penthouse apartment (Unit H) as a rental investment.

[5]        At some time in the 2000s, it became apparent that the building as a whole was leaky.  That  situation  was   later   exacerbated   by   earthquake   damage.   The Body Corporate for the apartment building sought recourse from Daytona but Daytona was placed in liquidation on 7 June 2011 on the petition of Inland Revenue.

[6]        At the time Daytona was placed in liquidation it owed the Body Corporate arrears of approximately $46,707. Further arrears have since accrued. That debt has been assigned by the Body Corporate to the applicant with the knowledge and agreement of all unit owners.

[7]        Unit H was the only asset of Daytona, following the sale of a second property by mortgagee sale (at a shortfall). Unit H was subject to mortgage(s) and the mortgagee had taken possession following the liquidation order. The mortgagee was unable to make any recovery on the unit, because of its run-down state, and problems with the building generally. The mortgagee eventually discharged the mortgage(s) and “washed their hands of” the unit in July 2020.

[8]        The liquidators of Daytona issued their final report on 18 December 2015 stating that “all known assets have been disclaimed, or realised, or distributed without recovery”. Daytona was removed from the Register of Companies in January 2016. At that point, Unit H vested in the Crown, “bona vacantia”.

[9]        In late 2021, the owners of Units A-G began discussing the possibility of selling the whole building to a developer. Mr Weyburne’s evidence is that the individual apartments are unsaleable and the only way for the apartment owners to recoup some value is to sell the whole building to a developer for demolition, or complete refurbishment and earthquake strengthening. Mr Weyburne’s affidavit notes that Colliers Valuation Services describe Apartment H as impossible to remediate and in need of demolition. A Ray White Real Estate representative describes the Unit as “simply airspace and of no real value at all”.

[10]      Mr Weyburne describes the apartment owners as “trapped”  unless  Apartment H can be freed from its current state of ownership and vested in a party who can dispose of it.

[11]      A developer (Gold Coast Property Limited) has entered into contracts with each of the seven apartment owners to buy the units. The impediment to completing the sales is Apartment H.

[12]      Mr Saunders, of Christchurch, the solicitor for the developers, wrote to the Treasury on 29 October 2021, to initiate the process of having Unit H disclaimed, or released by, the Crown.

[13]      Langford Law took over the correspondence with Treasury in early 2020. In about March 2022 the Treasury sought advice from Duncan Cotterill Solicitors, Wellington. There was then protracted correspondence between Langford Law and Duncan Cotterill. Duncan Cotterill raised a concern that because the mortgagee had been in possession of Unit H at the time the company was removed from the Companies Register, there might be an arguable case that the liquidator held the property in trust for the mortgagee, as at the time the company was removed.

[14]      Independent advice was sought on this point which was to the effect that there was no realistic basis for a constructive trust argument to be advanced.

Section 324 Companies Act 1993

[15]Section 324 of the Companies Act 1993 provides:

324     Property of company removed from register

(1)Property that, immediately before the removal of a company from the New Zealand register, had not been distributed or disclaimed, vests in the Crown with effect from the removal of the company from the register.

…

(4)Where property is vested in the Crown under this section, a person who would have been entitled to receive all or part of the property, or payment from the proceeds of its realisation, if it had been in the hands of the company immediately before the removal of the company from the New Zealand register, or any other person claiming through that person, may apply to the court for an order—

(a)vesting all or part of the property in that person; or

(b)for payment to that person by the Crown of compensation of an amount not greater than the value of the property.

(5)On an application made under subsection (4), the court may—

(a)decide any question concerning the value of the property, the entitlement of any applicant to the property or to compensation, and the apportionment of the property or compensation among 2 or more applicants; or

(b)order that the hearing of 2 or more applications be consolidated; or

(c)order that an application be treated as an application on behalf of all persons, or all members of a class of persons, with an interest in the property; or

(d)make an ancillary order.

(6)Compensation ordered to be paid under subsection (4) shall be paid out of a Crown Bank Account without further appropriation than this section.

[16]      Mr Langford, counsel for the applicant, who (as recorded in the judgment of Churchman J in Mowbray Street Holdings Ltd v Attorney-General,1) has considerable experience in these matters, addresses the requirements of s 324(4)(a) in his memorandum. Mr Langford advises that all parties who might possibly have any claim to, or interest in, Unit H have been approached. Those parties are:

1      Mowbray Street Holdings Ltd v Attorney-General [2022] NZHC 1233 at [7].

(a)The liquidators of Daytona who have had no role since January 2016. The applicant’s solicitors have corresponded with the liquidators and they are aware of the vesting application. The liquidators have not formally disclaimed Unit H but do not assert any interest or claim.

(b)The mortgagee(s). The mortgages had been discharged and the mortgagee itself had been removed from the Register. The mortgagee(s) lawyer, Mr Moody, was unable to obtain instructions from them.

(c)The Body Corporate of the apartment building, which is owed about

$165,000  in   levies.   It   supports   the   vesting   application   and Mr Weyburne’s affidavit attaches consents/resolutions of the owners of the other apartments.

(d)The Wellington City Council, which is owed about $40,000 in rates. Mr Langford notes that the Council was approached by the Body Corporate with a view to encouraging the Council to carry out a rating sale of Unit H, as a way of “freeing up” the unit. However, a rating sale must be preceded by a court judgment; such a judgment cannot be obtained against a company which has been removed from the Register of Companies.

(e)The former shareholder/director of Daytona, Mr Brodie. Mr Brodie has provided a statutory declaration to the effect that he makes no claim and seeks no interest in Unit H.

[17]      The Treasury has written a letter dated 4 August 2022. The letter states that, after considering the draft originating application and draft affidavit of Mr Weyburne in support:

Te Tai Ōhanga The Treasury currently has insufficient information to form a final view on the status of the property in question under the Companies Act 1993 and is therefore not in a position to consent to the proposed vesting. However, Te Tai Ōhanga has no objection to the orders sought as set out in the draft application provided on 7 July 2022 (with the draft annexures provided

to Te Tai Ōhanga on 3 August 2022). We do not wish to appear or be heard on this matter and will abide the decision of the Court.

Result

[18]      I am satisfied that this is an appropriate case to give leave for the application to proceed by way of originating application.

[19]      I am also satisfied that this is an appropriate case for an order under s 324(4)(a) of the Companies Act.

[20]      I make an Order vesting in the applicant the land/apartment referred to as Apartment H, 6 Halley’s Lane, being Unit H Deposited Plan 85760, and being all the land comprised in Record of Title WN53C/347.

Gwyn J

Solicitors:
Langford Law, Wellington

Copy to:

Crown Law, Wellington

David Green, The Treasury | Te Tai Ōhanga