Sampson v Registrar of Companies
[2016] NZHC 1051
•19 May 2016
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2016-485-193 [2016] NZHC 1051
UNDER the Companies Act 1993 IN THE MATTER OF
an application to restore JFP (NZ) International Limited to the register of companies
BETWEEN
WENDY TAYLOR SAMPSON Applicant
AND
REGISTRAR OF COMPANIES First Respondent
THE SECRETARY TO THE TREASURY Second Respondent
DOUGLAS KIM FISHER Third Respondent
On the Papers Counsel:
I D Matheson for the Applicant
Judgment:
19 May 2016
JUDGMENT OF ASSOCIATE JUDGE SMITH
[1] The applicant (Ms Sampson) applies for the following orders:
(1) an order under s 329(1)(a)(iii) or s 329(1)(b) of the Companies Act
1993 (the Act) restoring JFP (NZ) International Limited (“the company”) to the register of companies;
(2)an order under s 284(1)(b) of the Act, reversing the liquidator’s final report dated 15 July 2011;
WENDY TAYLOR SAMPSON v REGISTRAR OF COMPANIES [2016] NZHC 1051 [19 May 2016]
(3)an order under s 250(1) of the Act terminating the liquidation of the company;
(4)a direction that a condition be imposed under r 7.45 that the registered office and the address for service of the company be changed by the company to the offices of RMY Legal, Powderham Chambers, 136-
138 Powderham Street, New Plymouth;
(5)a direction that a condition be imposed under r 7.45 requiring the company to appoint Karyn Jayne Johnston of 40 McFarlane Street, Oakura, Taranaki, a director of the company and that the Registrar of Companies be notified under s 159 of the Act;
(6)a direction that a condition be imposed under r 7.45 directing the company to forthwith file all outstanding annual returns and pay associated fees.
[2] The company was put into liquidation by its shareholders on 5 April 2011, and was removed from the register of companies (because it had ceased trading) on
26 August 2011. Ms Sampson was a director of the company when it was removed from the register. In her affidavit filed in support of the application, she says that the company was placed in liquidation purely to facilitate its removal from the register of companies.
[3] At the time the company was removed from the register, its shareholders were the estate of the late Marvin Lee Smith (one share) and a Nevada-registered company MLS Energy Corporation (MLS) (999 shares). Ms Sampson is the executrix of Mr Smith’s estate, and she and the other person who was a director of the company when it was removed from the register, Mr Raymond Barth, are the directors of MLS.
[4] The late Mr Smith was Ms Sampson’s step-father, and it was he who was primarily responsible for setting up the company and running its business of providing offshore drilling services in relation to oil and gas exploration and
production. When Mr Smith died in September 1995 the company’s business operations were brought to an end. By the time it was decided to put the company into liquidation and have it removed from the register, it had not traded for some time.
[5] At the time of the liquidation of the company and its later removal from the register, the company owned a royalty interest in relation to Petroleum Mining Licence 38146 (the mining licence). The company’s directors then believed that the royalty interest under the mining licence was of no value.
[6] Ms Sampson says that it is has only recently come to the attention of the directors of the company that the mining licence has been utilised in connection with the Kupe gas project, involving extraction of natural gas, LPG and light oil from the Kupe field. It appears that over time the company’s interest in the mining licence has become valuable.
[7] Ms Sampson says in her application that the royalty payments are payable to the company by Kupe Mining (No. 1) Ltd and Origin Energy Resources (Kupe) Ltd (together referred to as “Origin Energy”). She says that Origin Energy has confirmed that it will pay the accrued royalty entitlements, and will meet its ongoing obligations to pay future royalty entitlements, subject to the company being restored to the register of companies.
[8] Ms Sampson says that the general manager of Origin Energy advised in November 2015 that the value of existing royalties due to the company exceeded $10 million and could be close to $15 million, but the final figure would be subject to confirmation by Ernst & Young. She anticipates that the royalty interest will continue to provide a substantial income to the company during the lifetime of the Kupe field.
[9] At the time of the liquidation, there was cash on hand of $5,175. It was used to pay the liquidator’s fees. The only known debt was a debt of $7,898,241 owing to the parent company, MLS. There were no charges or securities in favour of third parties, and Ms Sampson says that she knows of no other third party who would be
adversely affected by the reinstatement of the company to the register. The only asset the company has is its interest in the royalties from the mining licence.
[10] Ms Sampson says that she and Mr Barth wish to resume control of the company, although it will not trade: it will only exist to receive the outstanding royalties and future royalties. She accepts that if the orders sought are made the company will need to file annual returns for each year it was not on the register of companies. She says that there will also be “potential tax issues”, and accountants will be instructed to deal with these issues.
[11] Mr Barth has provided an affidavit in which he confirms that Ms Sampson’s affidavit is true and correct, and states his support for the application. He also confirms, in his capacity as a director of MLS, that MLS supports the application.
[12] The application has been served on the Registrar of Companies and on the Secretary to the Treasury. It has also been served on the liquidator, Mr Fisher. Memoranda have been provided by all of the respondents advising that they do not oppose Ms Sampson’s applications, and will abide by the decision of the Court.
[13] The Registrar has pointed out that if the company is restored to the register it will need to have a New-Zealand-based director, as Ms Sampson and Mr Barth are resident in Texas, United States of America.1 A New Zealand resident, Ms Karyn Jayne Johnston, has signed a consent to be appointed as a director of the company.
[14] Ms Sampson proposes that the registered office and address for service of the company will be the offices of RMY Legal, RMY Legal, Powderham Chambers,
136-138 Powderham Street, New Plymouth 4310.
[15] By Minute dated 26 April 2016 I granted leave for the proceeding to be commenced by originating application, and for Ms Sampson to apply for the order under s 284(1)(b) reversing the liquidator’s final report dated 15 July 2011. In the Minute, I noted that the one substantial creditor of the company, the parent company
MLS, supports the application. However Ms Sampson’s supporting affidavit did appear to raise the possibility that the Commissioner of Inland Revenue might also be a creditor. I noted that in the ordinary course an order terminating a liquidation would not be made unless all creditors had been paid in full (or satisfactory arrangements made for them to be paid, or they had consented to the application). I
referred in that regard to Re Bell Block Lumber Ltd (in liq).2
[16] I indicated in my 26 April Minute that I was satisfied that grounds existed for the restoration of the company to the register under s 329, but that I would require further information before considering the application to terminate the liquidation under s 250. I invited counsel to consider the question of a possible tax liability further, and file such further memoranda and/or affidavits as were considered appropriate.
[17] The applications was originally listed for first call on 3 May 2016. However it was removed from the list for that day when it became clear that it would not be opposed, and that the application could be dealt with on the papers. However I sought from counsel further advice on the question of whether the Commissioner of Inland Revenue was or may have been a creditor of the company (before its removal from the register) on account of any royalty income the company may have earned before that date.
[18] Mr Matheson has since filed a detailed memorandum addressing that issue, which I have considered.
Discussion and orders
[19] As a director of the company, Ms Sampson has standing to apply for the orders sought under ss 329 and s 250.3 I have granted her leave to apply for the order under s 284(1)(b) of the Act (reversing the liquidator’s final report), in the same capacity.
[20] I am satisfied that it is appropriate to make the orders reversing the liquidator’s final report under s 284(1)(b) of the Act, and restoring the company to the New Zealand register under s 329(1)(a)(iii) and s 329(1)(b) of the Act. The company was in liquidation when it was removed from the register,4 and the prospective claim for royalties payable in respect of the mining licence provides a sufficient ground for restoring the company to the register under the “just and
equitable” grounds for restoration set out in s 329(1)(b) of the Act. There appears to be a substantial asset which was overlooked at the time the company was removed from the register, and I agree that justice and equity require that the company should be restored so that it and its shareholders can obtain the benefit of that asset. The order restoring the company to the register will be conditional on the company filing all outstanding annual returns with the Registrar of Companies and paying any outstanding fees which may be due to the Registrar.
[21] Turning to the application under s 250 of the Act for an order terminating the liquidation, I am satisfied on reading Mr Matheson’s further memorandum that it is appropriate to make the termination order sought.
[22] Mr Matheson provided with this memorandum a copy of a report on the Kupe field which shows that production from the field began in December 2009. Following a commissioning period, permanent production was declared on
22 March 2010. When the company was placed in liquidation, then, there would only have been a little over one year’s production from the field which could have produced royalties for the company. By the time the company was removed from the register on 26 August 2011, there would have been about eighteen month’s worth of potential royalties payable to the company. Mr Matheson estimates that, at best, royalty income would have been about $3 million to $4 million by August 2011.
[23] Against that, Mr Matheson advises his understanding that there were tax losses potentially available to the company as at 26 August 2011, of $7,603,189.49. If those losses were applied against the estimated royalty income as at
26 August 2011, there would have been no tax payable and the Commissioner of
Inland Revenue would not have been a creditor.
[24] Mr Matheson advises that the company has engaged a tax barrister and a chartered accountant to assist the company to meet its accounting and tax obligations if and when it is reinstated. He advises that preliminary advice has been received which includes a recommendation to make some sort of “voluntary disclosure” in relation to royalty income to the Commissioner. He submits that, if the Court considered it appropriate, it could impose, as a condition of any termination order, immediate tax registration by the company.
[25] In the ordinary run of cases, the Court will only exercise its discretion to order a termination of a liquidation if:5
(1)all the creditors have been paid in full or satisfactory provision has been made for them to be paid, or they have consented; and
(2) the liquidator’s costs have been paid or secured; and
(3)the shareholders have given their consent or would be in no worse position than if the liquidation had proceeded to its conclusion.
[26] In Acrow v Jourdan Developments Ltd,6 Associate Judge Gendall (as he then was) considered that advice that the Commissioner of Inland Revenue was issuing an assessment against the company (but had not filed any proof of debt) did not bar a termination order, since no debt to the Commissioner could then be said to exist.
[27] Applying the Bell Block considerations in this case, I note that the liquidator’s costs have been paid, and that the company’s shareholders have consented to the application. Also, the shareholders will be in no worse position if a termination order is made than they would be in if the (restored) company remained in liquidation.
[28] On the authority of the Acrow case, it appears that the Commissioner of
Inland Revenue may not have been a creditor at the date of the liquidation order.
[29] I am satisfied that in the circumstances described by Ms Sampson in her evidence, and by counsel in his memorandum dated 2 May 2016, that it is just and equitable to make an order terminating the liquidation of the company once it has been restored to the register. The shareholders have consented to the application, the liquidator’s fees have been paid, and the only known creditor (MLS) has also consented.
[30] On the information provided by Mr Matheson it appears that there may be no tax liability in respect of the period prior to the company’s liquidation and subsequent removal from the register, but I make no finding on that. It is enough to note that the prospects of the company now receiving any royalty income (and thus providing an asset from which any tax obligations which might exist can be met) appear to be dependent on the company being restored to the register. And if that order is made there seems to be little point in leaving the company in liquidation, with ongoing liquidator’s fees being incurred, when the shareholders and the only known creditor (MLS) wish to have the liquidation terminated. On the question of a possible tax liability, I am satisfied that the issue can be sufficiently dealt with by imposing the condition proposed (in the alternative) by Mr Matheson, namely that the company register immediately for New Zealand income tax.
[31] The other conditions proposed by Ms Sampson, relating to the appointment of a New Zealand resident director and the notification of a new registered office, are in my view appropriate.
[32] I make the following orders:
(1)that the company, JFP (NZ) International Limited, is restored to the register of companies;
(2)that the final liquidator’s report dated 15 July 2011 is reversed under s 284(1)(b) of the Act;
(3)that the liquidation of the company is terminated under s 250(1) of the Act with effect on the same day as, and immediately following, the making of the orders at (1) and (2) above;
(4) the above orders are made subject to the following conditions:
(i) the registered office of the company and its address for service
is to be changed to “RMY Legal, Solicitors, 136-138
Powderham Street, New Plymouth 4310”, and notice of such change is to be given to the Registrar of Companies pursuant to s 193(2) of the Act;
(ii)Karyn Jayne Johnston of 40 McFarlane Street, Oakura, Taranaki, is to be appointed a director of the company, and notice of that appointment given to the Registrar of Companies pursuant to s 159 of the Act;
(iii)the company is to forthwith file all outstanding annual returns and pay any associated fees, pursuant to s 214 of the Act;
(iv)the company is to register immediately for New Zealand tax purposes;
(v)a sealed copy of this order is to be served on the First, Second and Third respondents;
(5)leave is reserved to apply by memorandum to vary the foregoing orders, or for further direction, in the event of any difficulty arising in implementing the orders.
Associate Judge Smith
Solicitors:
RMY Legal, New Plymouth for the applicant
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