Van Delden v Registrar of Companies
[2022] NZHC 2450
•27 September 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-540
[2022] NZHC 2450
UNDER the Companies Act 1993 BETWEEN
BORIS VAN DELDEN and PERI MICAELA FINNIGAN of McDONALD
VAGUE LIMITED as liquidators of
CRANSTON HOMES (AUCKLAND)LIMITED (in liquidation) Applicants
AND
REGISTRAR OF COMPANIES
First Respondent
SECRETARY TO THE TREASURY
Second RespondentBLAIR STUART CRANSTON
Third RespondentBRIAN MARTIN WHELAN
Fourth RespondentCont/…
Hearing: On the papers Appearances:
Z Mora for the Applicants
Judgment:
27 September 2022
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 27 September 2022 at 4pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
McCaw Lewis, Hamilton
VAN DELDEN and FINNIGAN v REGISTRAR OF COMPANIES [2022] NZHC 2450 [23 September 2022]
CIV-2022-404-550
UNDER the Companies Act 1993 BETWEEN
BORIS VAN DELDEN and PERI MICAELA FINNIGAN of McDONALD
VAGUE LIMITED as liquidators of HEREFORD ADMIN LIMITED (in
liquidation) Applicants
AND
REGISTRAR OF COMPANIES
First Respondent
SECRETARY TO THE TREASURY
Second RespondentBLAIR STUART CRANSTON
Third RespondentBRIAN MARTIN WHELAN
Fourth Respondent
Introduction
[1] The applicants have filed originating applications for leave to restore two companies, Cranston Homes (Auckland) Limited (in liquidation) and Hereford Admin Limited (in liquidation), to the New Zealand Companies Register and for the liquidators’ final reports for each of the companies to be reversed.
[2] Leave was granted by consent to commence by way of originating application in my minute dated 3 June 2022. In addition, a direction was made that the originating applications would be determined together and on the papers.
[3] The applications are made by the former liquidators on the basis that almost three years following removal from the Companies Register, Westpac Bank notified the former liquidators that a refund of $37,930.40 was owed to one of the companies.
[4] The former liquidators consider that the other company will be entitled to a distribution from the company receiving the refund. They therefore apply for both companies to be restored to the Register and for their final reports to be reversed to allow this distribution.
Issues
[5]The issues for determination are:
(a)Do the applications fall within s 329 of the Companies Act 1993 which provides the Court with the power to restore companies to the Register?
(b)If the companies are to be restored, should orders be made reversing the final liquidators’ reports?
(c)Are any further orders necessary?
Background
[6] Boris van Delden and Peri Micaela Finnigan were appointed joint and several liquidators of Cranston Homes (Auckland) Limited (in liquidation) (Cranston) and
Hereford Admin Limited (in liquidation) (Hereford) on 26 May 2017 by special resolutions of the shareholders.
[7] Cranston and Hereford are related companies, having the same director and shareholders.
[8] During the liquidations, the director Blair Cranston was the subject of an investigation by the Registrar of Companies in relation to the management of the companies. The liquidators provided information to the Registrar for that investigation. Mr Cranston was adjudicated bankrupt on 1 March 2018.
[9] On 2 October 2018 the liquidators filed the final reports for both companies and notices of intention to remove the companies from the Companies Register, both dated 28 September 2018. The liquidators record in their final reports that all known assets had been disclaimed or realised or distributed without realisation and all proceeds of realisation have been distributed. The companies were therefore ready for removal from the Register.
[10] As a result, on 22 November 2018 Cranston and Hereford were removed from the Companies Register.
[11] When the liquidators retired, the unpaid claims for each of the liquidations were as follows:
(a)Cranston – $3,793,938; and
(b)Hereford – $194,772.
[12] At the time of filing the final reports, the liquidators had not been notified of and had no knowledge of the possible refund from Westpac Bank.
[13] On 22 December 2021 one of the staff working for the liquidators at McDonald Vague Limited received a telephone call from Westpac Bank advising that a refund of
$37,930.40 was payable to Cranston. Following this telephone call, a confirmation
email was sent by Westpac Bank. A copy of this email is attached to the affidavits of Ms Finnigan filed together with the restoration applications.
[14] The Westpac email does not explain the reason for the refund and nor do Ms Finnigan’s affidavits. Ms Finnigan confirms however that the refund is an asset of the company and should be realised and distributed by the liquidators for the benefit of Cranston’s creditors.
[15] Ms Finnigan records in her affidavits that at the time Cranston was removed from the Register, Hereford was owed $1,121,884 as an unsecured creditor of Cranston. Ms Finnigan further records that the liquidators consider that Hereford will be entitled to a distribution from Cranston of part of the refund once the companies are restored to the Register, the final reports reversed and the refund is realised.
[16] Ms Finnigan deposes that after costs associated with the restoration applications and liquidators’ fees have been paid, there will be funds available to distribute to Cranston’s creditors.
[17] In addition, Ms Finnigan states that the liquidators know of no discretionary factors that would count against restoring the companies to the Companies Register. Ms Finnigan says that if the liquidators had known of the existence of the refund in October 2018, they would not have filed the final reports or the notices.
Legal principles
[18]Section 329(1) of the Companies Act provides:
329 Court may restore company to New Zealand register
(1)The court may, on the application of a person referred to in subsection (2), order that a company that has been removed from the New Zealand register be restored to the register if it is satisfied that,—
(a)at the time the company was removed from the register,—
(i)the company was carrying on business or a proper reason existed for the company to continue in existence; or
(ii)the company was a party to legal proceedings; or
(iii)the company was in receivership, or liquidation, or both; or
(iv)the applicant was a creditor, or a shareholder, or a person who had an undischarged claim against the company; or
(v)the applicant believed that a right of action existed, or intended to pursue a right of action, on behalf of the company under Part 9; or
(b)for any other reason it is just and equitable to restore the company to the New Zealand register.
[19] Mr van Delden and Ms Finnigan are entitled to bring the applications as they are persons referred to in s 329(2)(a)(v), being the liquidators of the companies at the time the companies were removed.
[20] The applications do not set out which of the grounds in s 329(1) are relied on. As it is not clear that there was a right to a refund from Westpac at the time the companies were removed from the Register, s 329(1)(b) appears to be the appropriate ground. This ground does not rely on the right to the refund existing at the time of removal but rather that it is just and equitable “for any other reason”.
[21] Section 329(1A) requires a Court when considering whether to restore a company to the Register on the grounds referred to in s 329(1)(a)(i) or (b) to have regard to the reasons for the company’s removal and whether those grounds existed at the time of removal or exist at the time of the hearing of the application.
Is it just and equitable for the companies to be restored to the Register?
[22] In deciding whether it is just and equitable to restore the companies, I am first required by s 329(1A) to consider the reasons for removal.
[23] These reasons are recorded in the final reports as being that the liquidators had completed their investigations and they had not revealed any further matters that could be pursued for the benefit of creditors.
[24] It appears from the affidavits of Ms Finnigan and the final reports filed that if the liquidators had known about the refund due from Westpac, the liquidations would
have continued until receipt of the refund and the companies would not have been removed from the Register when they were.
[25] The liquidators have confirmed that if the companies are restored, after the costs of the restoration application and the liquidators’ fees have been paid, there will be funds available to distribute to Cranston’s creditors. In these circumstances it is just and equitable for the companies to be restored to the Companies Register.
Should orders be made pursuant to s 284 of the Companies Act reversing the liquidators’ final reports?
[26] In Registrar of Companies v Body Corporate 307730 the Court of Appeal held that where a company is in liquidation prior to removal, if the liquidators’ final report is not reversed at the time a company is restored, the Companies Registrar would be required to remove the company once it is restored by operation of s 318(1)(e).1 The Court of Appeal held further:2
The filing of a final report is an act of a liquidator and therefore the reversing of a final report is within the scope of the s 284 power. As noted in Re Ocean Shipping Ltd, reversing the final report has the effect of abrogating the completion of the liquidation. Thus, the combined effect of a restoration and a reversal order is that the company is restored to the Register still in liquidation and the former liquidator resumes office. The liquidation is reinstated.
[27] Where an order restoring a company that was in liquidation prior to removal is made, an order reversing the liquidators’ final report therefore can and ought to be made under s 284(1)(b).
[28] Standing to apply for orders under s 284(1)(b) is granted to “liquidators”. Technically Mr van Delden and Ms Finnigan are no longer liquidators but s 284(2) provides that the powers given in s 284(1) may be exercised “whether or not the liquidator has ceased to act as liquidator when the application or the order is made”.
1 Registrar of Companies v Body Corporate 307730 [2013] NZCA 659, [2014] 2 NZLR 623 at [19]; and see discussion in Williams v Registrar of Companies [2015] NZHC 3217 at [14] – [22].
2 At [16].
[29] Mr van Delden and Ms Finnigan therefore have standing to apply and so I grant the orders sought reversing the final reports of the liquidators for each of the companies below.
Are any further orders necessary?
[30] Section 330(2) of the Companies Act provides that a company restored to the Register “shall be deemed to have continued in existence as if it had not been removed from the register”.
[31] Section 255(2)(d) of the Companies Act requires liquidators to file six-monthly reports during the continuation of the liquidation. Failure to do so is an offence.3
[32] It has not been raised by the liquidators in this case, and does not appear to have been raised in other cases, but technically it appears that the liquidators may be in breach of this requirement once the companies are restored and the final reports reversed.
[33] As a precaution and in the interests of preserving the refund assets for the benefit of creditors, I make orders pursuant to s 255(4)(a) exempting the liquidators from the requirement to file six-monthly reports for Cranston and Hereford between September 2018 and September 2022.
[34] As a further precaution, I reserve leave to the liquidators to apply for further directions if necessary.
Result
[35]I order:
(a)Cranston Homes (Auckland) Limited (in liquidation) and Hereford Admin Limited (in liquidation) are to be restored to the New Zealand Companies Register pursuant to s 329 of the Companies Act.
3 Companies Act 1993, s 255(3A).
(b)The final reports for each company completed by the liquidators, Boris van Delden and Peri Finnigan, and dated 28 September 2018 are reversed pursuant to s 284(1)(b) of the Companies Act.
(c)The liquidators are exempted pursuant to s 255(4)(a) of the Companies Act from the requirement to file six-monthly reports on the liquidation as required in s 255(2)(d) between September 2018 and September 2022.
(d)Leave is reserved to apply for further directions if necessary.
Associate Judge Sussock
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