Tupangaia v Taakoka Island Villas Limited HC Napier CIV 2007-441-598
[2008] NZHC 2508
•15 August 2008
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
CIV 2007-441-598
IN THE MATTER OF the Insolvency Act 1967
ANDIN THE MATTER OF the bankruptcy of RUTA TEREORA TUPANGAIA
BETWEEN RUTA TEREORA TUPANGAIA Judgment Debtor
ANDTAAKOKA ISLAND VILLAS LIMITED Judgment Creditor
Hearing: 24 July 2008
Memoranda Filed: By the Judgment Creditor 4 August 2008, 10 and
12 August 2008 and further affidavit 4 August 2008By the Judgment Debtor - 29 July 2008, 10 and 13 August 2008 and further affidavit 7 August 2008
By the Official Assignee - 5 August 2008
Counsel: P. Tupangaia for the judgment debtor
B. W. Morley for the judgment creditor
D.M. Kerr for the Official Assignee
Judgment: 15 August 2008 at 3.15 pm
JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL
This judgment was delivered by Associate Judge Gendall on 15 August 2008 at
3.15 p.m. pursuant to r 540(4) of the High Court Rules 1985.
Solicitors: Hesketh Henry, Solicitors, Private Bag 92093, Auckland
Elvidge & Partners, Solicitors, PO Box 609, Napier
RT TUPANGAIA V TAAKOKA ISLAND VILLAS LIMITED HC NAP CIV 2007-441-598 15 August 2008
[1] On 15 November 2007 the judgment debtor was adjudicated bankrupt in the
Napier High Court on the petition of the judgment creditor relating to a debt of
$136,782.48.
[2] On 30 June 2008 the judgment debtor applied for an annulment of this adjudication. The application indicated that it was made in reliance on s. 119(1)(a) Insolvency Act 1967.
[3] The grounds set out in the application for annulment were listed as:
“(a) that Taakoka Island Villas Ltd the petitioning creditor was struck off the company register in the Cook Islands on 27 May 2006;
(b) as a struck off company Taakoka Island Villas Ltd has no legal status and does not exist;
(c) at the time that Taakoka Island Villas Ltd petitioned the New Zealand High Court to adjudicate myself bankrupt on 15 November 2007 the petitioning creditor was struck off the company register and had no standing to make such petition, and this was an abuse of the processes of the Court;
(d) because Taakoka Island Villas Ltd had no standing to petition my bankruptcy on 15 November 2007 when the High Court adjudged me bankrupt the order was a nullity;
(e) Taakoka Island Villas Ltd has applied to the High Court in the Cook Islands to be reinstated to the company register, however, this does not alter the fact that the bankruptcy order as it currently stands is a nullity and should be annulled, and
(f) At the date of this application Taakoka Island Villas Ltd remains struck off the company register.
[4] On 23 July 2008 the judgment creditor filed its notice of opposition to the annulment application.
[5] Section 119(1) Insolvency Act 1967 (which is now effectively encompassed in s. 309(1) Insolvency Act 2006) provides:
“119 When Court may annul adjudication
(1) In any of the following cases the Court may be order, on the application of the Assignee or any person interested, annul the adjudication -
(a) Where the Court is of the opinion that the order of adjudication should not have been made:
(b) Where the Court is satisfied that the debts of the bankrupt have been fully paid or satisfied:
(c) Where the Court is of the opinion that the liability of the bankrupt to pay his or her debts should be revived because since the date of adjudication there has been a substantial change in the financial circumstances of the bankrupt:
(d) Where the Court has approved a composition under
Part 12 of this Act.”
[6] On 14 July 2008 the Official Assignee filed in this Court his report pursuant to s. 119 Insolvency Act 1967. The relevant parts of that report for present purposes are paragraphs 5 and 6 which state:
“5.If the Court is satisfied that at the relevant time(s) Taakoka Island Villas Limited in fact had no legal status or standing, then there would seem to be good grounds for granting the bankrupt’s application to have her bankruptcy annulled. If the Court is so
satisfied as to TIV Limited’s lack of legal status then the Official
Assignee does not oppose an annulment.
6. The Official Assignee has incurred costs and disbursements of
$24,015.24 in association with this bankruptcy which would have been avoided if bankruptcy proceedings had not been filed and the order of adjudication had not been made.”
[7] As I have noted s. 119(1)(a) Insolvency Act 1967 is mirrored by s. 309(1)(a) Insolvency Act 2006. On this Brookers Insolvency Law & Practice Volume 1 at para. IN309.05 addresses these provisions in the following way:
“(1) Where adjudication should not have been made
Despite the discretion it gives to the Court, subs (1)(a) should be interpreted narrowly. Generally, it will not provide grounds for interfering with a discretion exercised on a properly brought adjudication petition unless there was some defect in procedure, abuse of process, or where some material fact was not brought before the court making the adjudication order: Re Hunter, ex p CIR (2000)
19 NZTC 15,722. In that case, a charging order held by the petitioning creditor was not brought to the attention of the Court which made the adjudication order. However, Robertson J held that it could not have affected the result given the size of the creditor’s unsecured debt and the fact that there were no other creditors.”
[8] In the present case at the outset it needs to be noted that although the judgment creditor was struck off the register of companies in the Cook Islands at the time its creditor’s petition was filed in this proceeding it had applied for reinstatement and in a judgment given by Justice Grice in the Cook Islands Supreme Court dated 23 July 2008 reinstatement was granted.
[9] This application for reinstatement of the judgment creditor was made pursuant to s. 336(7) Companies Act 1955 (New Zealand) which applies in the Cook Islands by reason of s. 2 of the Cook Islands Companies Act 1970-71.
[10] Section 336(7) Companies Act 1955 (New Zealand) states:
“Where a company has been struck off the register, the Court, on an application made by the Registrar or a member or creditor of the company before the expiration of 20 years from the publication in the Gazette of the notice aforesaid, may, if satisfied that the company was at the time of the striking off carrying on business or in operation, or otherwise that it is just that the company be restored to the register, order the name of the company to be restored to the register, and upon a sealed copy of the order being delivered to the Registrar for registration the company shall be deemed to have continued in existence as if its name had not been struck off; and the Court may by the order give such directions and make such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the name of the Company had not been struck off.”
(emphasis added)
[11] A recent and authoritative New Zealand authority on this provision is the decision of our Court of Appeal in Clark v Libra Developments Limited [2007] 2
NZLR 709. This case dealt with s. 329 and 330 of the 1993 New Zealand Companies Act of which s. 336 (7) is the antecedent. The decision in Clark confirms that this section is to receive a literal interpretation. Neither the company nor those dealing with it during the period it was struck off the register can challenge the validity of actions taking, including during the period of its removal. This is clear from paras. 182 to 203 of the Court of Appeal decision at pages 739-744.
[12] In particular at para. 203 of the judgment in Clark the Court of Appeal notes:
“[203] But Parliament recognised that because the grounds for removal in s
318 are wide and removal may follow the company’s failure – sometimes minor failure – to comply with its statutory obligations, the Court or the Registrar should have the power of restoration to the register in appropriate cases and, should that occur, it is also appropriate that the company and all those dealing with it during the period of removal should not be disadvantaged by its and their actions during the period it was off the
register. Accordingly, neither it nor they can challenge the validity of actions taken, including during the period of its removal, and the Court is given power on restoration so to adjust the rights and obligations of the company and those involved with it as to place them as nearly as possible in the same position as if it had not been removed. As mentioned in Morris and Tyman’s, the Court or the Registrar has power by restoration to the register to ensure the company and all those who have dealt with it during the removal period are placed as far as is possible in an “as you were” position. Holding that s
330(2) is to be accorded a literal interpretation also accords with the decision of this Court in Natural Selection, even though the point did not directly arise in that case, and also accords with the High Court decisions earlier reviewed.”
[13] Following the Court of Appeal decision, Mr Clark the applicant in Clark v Libra Developments Limited applied for leave to appeal that decision to the Supreme Court. On that leave application, in its decision at [2007] 2 NZLR 745 the Supreme Court affirmed the conclusion reached by the Court of Appeal on this issue as “plainly correct”. In particular the Supreme Court stated at paras. 10 and 11 of their decision:
“[10] On the issue of the removal of the company from the register, the lower Courts held that the situation was redeemed by s 330(2) of the Act, which provides:
(2) A company that is restored to the New Zealand register shall be deemed to have continued in existence as if it had not been removed from the register.
[11] Again, those Courts were plainly correct. The section means what it says, and Mr Clark’s argument fails to give effect to it.”
[14] These conclusions are also confirmed in the Laws of New Zealand – Companies at para. 480 which states:
“480. Effect of Restoration
Where a company is restored to the New Zealand register, it is deemed to have continued in existence as if it had not been removed from the Register. This provision has retroactive effect to validate all acts done in the name or on behalf of the company during the period between its dissolution and the restoration of its name to the register.”
(emphasis added)
[15] Before me Mr Tupangaia on behalf of the judgment debtor endeavoured to argue that this should not be the position in the present case and he suggested that decisions such as that in Downsview Nominees Limited v Registrar of Companies High Court, Auckland, 13 July 2006 CIV 2005-404-401 Ellen France J mean that litigation such as the present bankruptcy proceeding undertaken while a company is struck off the register is not validated when the company is reinstated.
[16] I do not accept this contention. Downsview is a decision of the High Court and predated Clark. And the decision of the Court of Appeal in Clark clearly covers the position here. This is confirmed too by the comment in Laws of New Zealand – Companies noted at para. [14] above. And, in any event, the decision in Downsview dealt with a different issue which was whether a number of companies (15 of 19) should be restored to the register, and any comments made relating to effects after reinstatement are obiter.
[17] In addition, before me counsel for the judgment creditor suggested that the original steps taken by the Registrar of Companies in the Cook Islands to strike off the judgment creditor were not properly taken and thus the striking off was a nullity. Without having to decide this issue, it is clear to me that in any event the decision of Justice Grice on 23 July 2008 to reinstate the judgment creditor company, clearly has retrospective effect and the company is to be regarded as if it had never been struck off. The fact that the judgment debtor (as she says) has now sought leave to appeal
this decision in the Cook Islands makes no difference. The judgment creditor was reinstated and this has been confirmed on behalf of the Registrar in the email from T. Matenga annexed as Exhibit “B” to the 29 July 2008 affidavit of L.L. Rokoika filed by the judgment creditor.
[18] Here, as I understand it the original reason proffered in the Cook Islands for striking off the judgment creditor was the commonly seen situation involving a failure to file a number of annual returns and pay annual licence fees. This has now been remedied. Justice Grice in her 23 July 2008 decision found at para. 27 that the company was clearly in operation at the time it was struck off but in any event it was otherwise just that the company be returned to the register. This was particularly in order that it could pursue litigation which was underway she said for the preservation of its assets.
[19] S. 336 (7) in effect contains a legal fiction created by the Companies Act
1955 whereby a reinstated company is “deemed to have continued in existence as if its name had not been struck off”. That is what has occurred here. Affidavit evidence is before the Court that a sealed copy of the order of Justice Grice was delivered to the Registrar for registration on 23 July 2008 (Cook Islands time). Although the judgment debtor has endeavoured to make something of the timing of this notification, in my view there is nothing in this argument. As I have noted above, in any event it is clear that reinstatement has occurred and for all purposes the company is “deemed to have continued in existence as if its name had not been struck off”.
[20] My earlier comments also note that it is clear from the decision in Clark v Libra Developments Limited that these words in s.336(7) must receive a literal interpretation. Neither the judgment creditor company nor those dealing with it during the period it was struck off the Registrar can challenge the validity of actions it has taken including actions during the period of its removal.
[21] That is precisely what the judgment debtor endeavours to do here. It is not appropriate.
[22] In my view, it is clear that the issue of the bankruptcy notice and filing of the creditor’s petition were properly carried out and it cannot be said here that there was any defect in procedure or abuse of process. Nor, given the confirmation provided to the Court on behalf of the judgment creditor that it was quite unaware earlier at the relevant times that it had been struck off, was there any significantly material fact not brought to the notice of the Court making the adjudication order at the time. And, in any event, as has already been noted, S.336(7) Companies Act 1955 has retroactive effect and validates all acts of the judgment creditor undertaken here at the operative times.
[23] For all these reasons I reject the contention advanced by the judgment debtor that s. 119(1)(a) Insolvency Act 1967 applies here and the original order for adjudication should not have been made.
[24] And, in any event, if I had reached a different conclusion and the annulment sought had been granted here, now the judgment creditor has been reinstated it could simply recommence bankruptcy proceedings against the judgment debtor. In my view this would be pointless and an enormously expensive exercise. And, after all the judgment debt remains outstanding and, as I understand it, no part has been paid by the judgment debtor.
[25] Further, although this was not fully argued before me, there is no suggestion before the Court that the judgment debtor is able to pay her debts. On this, I would note in passing that in the Official Assignee’s 14 July 2008 report the judgment debtor has liabilities totalling approximately $140,000.00 and the Official Assignee’s costs to date total another $24,015.24. There are no details of the value of her assets, although at para. 3 of his report the Official Assignee states:
“3.Early in the administration of the bankruptcy the bankrupt advised that she thought she would be able to raise sufficient funds from her interest in the Cook Islands to enable her to pay her debts in full to put her in a position to be able to apply for the annulment of her bankruptcy adjudication.”
Clearly that has not occurred.
[26] The annulment application before the Court does not rely upon s. 119(1)(b) or s. 309(1)(b) Insolvency Act 2006 on the basis that the bankrupt has satisfied her debts. But, even if the application had been advanced on this basis, given the absence of any material before the Court to confirm this, it would also presently fail.
Conclusion
[27] For the reasons outlined above the judgment debtor’s application for an annulment fails.
[28] Costs are reserved. If they may be in issue here the parties can file appropriate memoranda sequentially and I will decide the issue on the material before the Court.
‘Associate Judge D.I. Gendall’
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