STBS Consultants Limited v Dulcina Capital LLC

[2018] NZHC 2074

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-1187 [2018] NZHC 2074

IN THE MATTER OF

The restoration of a company under section

329(1)(b) of the Companies Act 1993

BETWEEN

STBS CONSULTANTS LIMITED Applicant

AND

DULCINA CAPITAL LLC First Respondent

AND

IAN TAYLOR Second Respondent

AND

LEAH TOURELEO Third Respondent

Hearing:	3 October 2018
Appearances:	I B Kwan-Parsons for Applicant
Judgment:	5 October 2018

JUDGMENT OF PAUL DAVISON J

This judgment was delivered by me on 5 October 2018 at 3:30 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Anderson Creagh Lai Ltd, Auckland

STBS CONSULTANTS LTD v DULCINA CAPITAL LLC [2018] NZHC 2074 [5 October 2018]

[1]      The applicant STBS Consultants Limited (STBS) applies for an order vesting the shares in Opportunity Limited (Opportunity) in its name.   Opportunity was incorporated on 7 February 2011.  The Registrar of Companies removed Opportunity from the register of companies on 18 July 2014.

[2]      By originating application dated 15 June 2018, STBS applied for Opportunity to be restored to the register and for an order vesting the shares of the company in its name. In a Minute issued on 20 September 2018, Associate Judge Bell made an order restoring Opportunity to the register, but declined to make a vesting order.   The Associate Judge said:1

STBS Consultants Ltd has also asked for an order vesting in it the shares of Opportunity Ltd. While an Associate Judge has jurisdiction to restore companies to the register under s 329 of the Companies Act, an associate judge does not have an equivalent jurisdiction to make such vesting orders. It is not apparent from the originating application what the legal basis is for seeking a vesting order. The matter could be addressed with a properly pleaded statement of claim showing a clear cause of action for having the shares vested in STBS Consultants Ltd. The registrar is to arrange a case management conference for further case management.

(footnotes omitted)

[3]      STBS has sealed the order made by Bell AJ restoring Opportunity to the companies register, and now applies for a vesting order to be made in its favour in respect of the shares in the company. The application is supported by affidavits sworn by STBS’s managing director and beneficial owner, Mr Theodore Harrison; and two affidavits by Nicholas Chan, a solicitor of Auckland who was engaged by Mr Harrison to investigate the circumstances of Opportunity’s removal from the register and to advise him regarding the company being restored to the register.

Background

[4]      STBS is a company incorporated in the Bahamas on 10 August 1995, and it has its registered office there.   The company was incorporated for the purpose of operating Mr Harrison’s business and commercial interests.   In January 2011 Mr Harrison engaged a New Zealand firm called GT Group to assist with the establishment of a foreign trust in New Zealand.  Pursuant to their engagement by

STBS, GT Group proceeded to incorporate Opportunity, which was registered on 7

February 2011.  The sole director of the company was the second respondent, Mr Ian Taylor of GT Group.  The sole shareholder of Opportunity was RSHRS Limited, of which Ian Taylor was a director.

[5]      On the same date as Opportunity was incorporated, Ian Taylor executed a document entitled Declaration of Beneficial Ownership in which he acknowledged and declared that RSHRS Ltd held the shares of Opportunity as a nominee for STBS. Also on 7 February 2011, another member of GT Group, Leah Toureleo, as settlor and by deed established the Security Trust (Security Trust) and appointed Opportunity as trustee of the trust with STBS as the sole beneficiary of the Security Trust. Ian Taylor signed the trust deed for Opportunity as trustee, acting in his capacity as the director of Opportunity.

[6]      Mr Harrison says in his affidavit (dated 7 June 2018) that he contacted Ian Taylor on or about 2 May 2016 and was told that Opportunity had been removed from the New Zealand Companies Register two years earlier in 2014.  Mr Harrison says that he subsequently emailed Mr Taylor on 20 September 2016 to enquire about the reason that Opportunity had been removed from the register, but received no reply. He exhibits copies of his emails to Mr Taylor of 2 May 2016 and 20 September 2016. Mr Harrison says that he has been unable to obtain an explanation from Mr Taylor as to why Opportunity had its director replaced or why the shares in Opportunity held by RSHRS Ltd had been transferred to Dulcina Capital LLC (Dulcina), a company registered in Saint Kitts and Nevis.

[7]      The relevant events are conveniently summarised and set out by Bell AJ in his

Minute of 20 September 2018. The Associate Judge said:2

Mr Taylor moved from Auckland to  Nelson, and  later  to Australia. Ms Toureleo replaced him as director of the company. She now lives in Vanuatu. The Companies Office records show that Dulcina Capital LLC, incorporated in Saint Kitts and Neves [sic], is the sole shareholder. It is not known who is behind that entity.  RSHRS Ltd was removed from the register in February

2014.  Despite inquiries by STBS Consultants Ltd there is no explanation for these changes.

[8]      Mr Kwan-Parsons for STBS says that the ownership and control of Dulcina cannot be ascertained and the location of the company in Saint Kitts and Nevis limits the ability of STBS to discover the names of the directors and shareholders of that company. He submits that as the registered owner of the Opportunity shares, Dulcina is now able to transfer all assets that Opportunity holds as trustee of the Security Trust without the knowledge of STBS or STBS having any ability to prevent it from doing so. Counsel submits that as a result of Dulcina’s ownership of the Opportunity shares, STBS is left with no effective recourse against Dulcina should it act to deprive STBS of its beneficial entitlements under both the Declaration of Beneficial Ownership and the Security Trust.

[9]      Counsel submits that the transfer of the Opportunity shares to Dulcina has resulted in STBS being effectively deprived of its interest in the shares and company. Mr Kwan-Parsons submits that now that Opportunity has been restored to the register, without an order vesting the Opportunity shares in its name, STBS is unable to ensure that Opportunity will act lawfully as trustee of the Security Trust, as was intended, and comply with the terms of the trust.

The Court’s power to make a vesting order in relation to shares

[10]     Section 59(1) of the Trustee Act 1956 allows the Court to make vesting orders in relation to stock and things in action, stock being defined in s 2(1) as including shares:

59 Vesting orders as to stock and things in action

(1) Subject to the provisions of subsections (2), (3), and (4), in any of the following cases, namely—

(a)where the court appoints or has appointed a trustee, or where a trustee has been appointed out of court under any statutory or express power:

(b)where a trustee entitled, whether by way of mortgage or otherwise, alone or jointly with another person to stock or to a thing in action—

(i)     is under disability; or

(ii)     is out of the jurisdiction of the court; or

(iii)    cannot be found; or

(iv)    being a corporation, has ceased to carry on business or is in liquidation or has been dissolved; or

(v)neglects or refuses to transfer stock or receive the dividends or income thereof, or to sue for or recover a thing in action, according to the direction of the person absolutely entitled thereto for 28 days next after a request in writing has been made to him by the person so entitled; or

(vi)neglects or refuses to transfer stock or receive the dividends or income thereof, or to sue for or recover a thing in action for

28 days next after an order of the court for that purpose has been served on him:

(c)where it is uncertain who was the survivor of 2 or more trustees entitled to stock or to a thing in action:

(d)where it is uncertain whether a trustee entitled alone or jointly with another person to stock or to a thing in action is alive or dead:

(e)where there  is  no  personal representative of  a  deceased person entitled to stock or to a thing in action or where it is uncertain who is the personal representative of a deceased person who is entitled to stock or to a thing in action:

(f)where stock is standing in the name of a deceased person whose personal representative is under disability:

(g)where stock or a thing in action is vested in a trustee whether by way of mortgage or otherwise and it appears to the court to be expedient—

the court may make an order vesting the right to transfer or call for a transfer of stock, or to receive the dividends or income thereof, or to sue for or recover the thing in action in any person as the court may appoint.

[11]     Section 59 is in similar terms to s 52 of the Trustee Act, which deals with vesting orders in relation to land. Broadly speaking, both ss 52 and 59 are intended to allow the Court to make vesting orders where new trustees are appointed, or where there is some impediment to the trustee dealing with trust assets as they are required by law to do, for example by reason of a disability or death, an outright refusal by the trustee, or the trustee being outside the jurisdiction or unable to be found.

[12]     STBS relies on s 59(1)(g), which is something of a catch-all provision at the end of s 59(1).  It simply requires that stock or a thing in action is vested in a trustee and the Court considers it “expedient” to make a vesting order.  Section 59(1)(g) is therefore potentially broad in its application. However, the meaning of “expedient” to

they demonstrate about the intended scope of s 59(1).

[13]     I am satisfied that the present case falls within the intended scope of s 59(1). STBS says it is the beneficial owner of the shares in Opportunity, meaning that Dulcina, to which the shares have been transferred, holds those shares on trust for STBS.  It says it cannot have any confidence that Dulcina as trustee will act lawfully and in accordance with STBS’s beneficial entitlement to the shares. In essence this is because it has been unable to obtain any explanation from Mr Taylor of RSHRS as to why the shares in Opportunity were transferred to Dulcina; nor has it been able to contact any representative of Dulcina, largely by reason of Dulcina being incorporated in Saints Kitts and Nevis.

[14]     I have reviewed the supporting documentation and am satisfied that it is expedient to make a vesting order under s 59(1)(g).  The effect of such an order is to restore STBS to a position which enables it to be confident that its interests are being properly protected, managed and dealt with. Prior to the unexplained transfer of the shares to Dulcina, RSHRS held the Opportunity shares on trust for STBS as their beneficial owner. A vesting order giving STBS the right to transfer the Opportunity shares will thereby enable it to either retain the shares in its own name or make any arrangements regarding the appointment of a new trustee to hold the shares on its behalf as it considers necessary. Even if it later transpires that the transfer by RSHRS to Dulcina was bona fide, given that there is no explanation for the transfer or any ability to contact Dulcina, I consider that on the information presently before the Court, it is prudent and appropriate to make a vesting order

Result

[15]     I make an order pursuant to s 59(1)(g) of the Trustee Act vesting in STBS Consultants Ltd the right to transfer the shares in Opportunity Ltd either to itself or such other person or entity as it chooses.

Paul Davison  J