Wenzhou Hongliang Trading Company Limited v Registrar of Companies

[2023] NZHC 621

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-2028

[2023] NZHC 621

UNDER

the Companies Act 1993, section 329

IN THE MATTER OF

an application to restore MSM HOLDINGS NZ LIMITED (1573407) to the Register of Companies

BETWEEN

WENZHOU HONGLIANG TRADING COMPANY LIMITED

Applicant

AND

THE REGISTRAR OF COMPANIES

Respondent  Cont over

Hearing:	6 March 2023
Appearances:	W C Pyke for the Applicant
Judgment:	27 March 2023

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

This judgment was delivered by me on 27 March 2023 at 10 am, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors/Counsel
Sneddon and Associates, Auckland,

WENZHOU HONGLIANG TRADING CO Ltd v THE REGISTRAR OF COMPANIES [2023] NZHC 621

[27 March 2023]

CIV-2022-404-2118

UNDER

the Companies Act 1993 section 329

IN THE MATTER

of an application to restore MSUT

TRUSTEE LIMITED (1573389) to the
Register of Companies

BETWEEN

WENZHOU HOGLIANG TRADING CO LIMITED

Applicant

AND

The REGISTRAR OF COMPANIES

Respondent

Introduction

[1]    Wenzhou Hongliang Trading Co Ltd (WHTC) applies for orders pursuant to  s 329 of the Companies Act 1993 (the Act), restoring MSM Holdings NZ Ltd (MSM) and MSUT Trustee Ltd (MSUT) to the New Zealand Companies Register. WHTC also seeks orders under s 284 of the Act appointing a new liquidator in respect of both companies.

[2]    The applications are part of WHTC’s ongoing effort to recover debts owed to it by Wentzro Co-operation Ltd (Wentzro), by seeking recovery from interests associated with a director of Wentzro, Mr Gerald Williams, adjudicated bankrupt.

[3]    MSM and MSUT were, prior  to  liquidation,  companies  associated  with  Mr Williams. MSUT was the corporate trustee of Mr Williams’ family  trust, the  GN Williams Family Trust. Mr Williams owned one share in MSM and MSUT owned the balance. Mr Williams was, at relevant times, the sole director of MSM, and his accountant was the sole director of MSUT at liquidation.

Procedural background

[4]    On 6 October 2022, WHTC filed originating applications to restore MSM and MSUT to the Register. Mr Wei Lin provided affidavits in support of each application.

[5]    On 28 November 2022, Associate Judge Taylor granted leave to WHTC to apply for orders under s 284(1)(b) of the Act reversing the liquidator’s final reports.1

[6]    Associate Judge Taylor also ordered that the Official Assignee be served with the proceedings and that the applications in respect of MSUT and MSM be heard together. The respondent and the Official Assignee are abiding the Court’s decision.

1      Wenzhou Hongliang Trading Co Ltd v Registrar of Companies HC Auckland CIV-2022-404-2118, 28 November 2022 at [9] and Wenzhou Hongliang Trading Co Ltd v Registrar of Companies HC Auckland CIV-2022-404-2028, 28 November 2022 at [9].

Factual background

[7]    The dispute underlying these applications relates to a contract between WHTC and Wenztro for the supply of infant formula. Mr Williams was a director of Wenztro and dealt with WHTC on Wenztro’s behalf.

[8]    WHTC alleged that Wenztro supplied it with faulty goods, failed to provide substitutes and did not refund it for the amount it had paid to purchase the goods. WHTC sought summary judgment against Wenztro for breach of contract. Before that application could be heard, Wenztro was placed in liquidation by its shareholders. WHTC was, however, permitted to  continue  its  claim  against  Wenztro,  and  on 30 October 2021 WHTC obtained summary judgment against Wenztro for

$617,396.61.2

[9]    Wenztro’s liquidators, funded by WHTC, then issued proceedings against Wenztro’s directors, including Mr Williams, for breach of their director’s duties. The directors defended the proceedings but were unsuccessful. Judgment was entered against Mr Williams for approximately $900,000, inclusive of costs.3

[10]   Mr Williams did not settle the judgment debt. On 12 February 2019, Wenztro’s liquidators  assigned  their  rights  in  relation  to  the  judgment  to  WHTC.   On    23 September 2020, Mr Williams was adjudicated bankrupt.

[11]   WHTC then applied to this Court for orders under s 348 of the Property Law Act 2007, in respect of alleged dispositions of funds by Mr Williams to MSUT and MSM, intended to prejudice WHTC’s position as a creditor of Mr Williams.

[12]   In November 2021, Lang J found that in a series of transactions  in  September 2017 and October 2018, Mr Williams diverted money to the GN Williams Family Trust and MSM in order to diminish his own estate and defeat his creditors.4 Lang J made orders under s 348 requiring MSM to pay $375,425 to the Official

2      Wenzhou Hongliang Trading Co Ltd v Wenztro Co-operation Ltd HC Auckland CIV-2012-404- 5130, 31 October 2012.

3      Finnigan v Ellis [2018] NZHC 1146.

4      Wenzhou Hongliang Trading Co Ltd v MSUT Trustee Ltd [2021] NZHC 3052 at [35]–[40].

Assignee, and for MSUT and MSM to pay $124,575 to the Official Assignee.5 The judgment was sealed on 11 November 2021. MSUT and MSM were ordered to pay WHTC $33,638.50 in costs.

[13]   MSM and MSUT were placed into voluntary liquidation on 15 November 2021 and 15 February 2022 respectively. Mr Thomas Rodewald was appointed as the sole liquidator of both companies. WHTC made a claim as a creditor in each liquidation.

Discussion

[14]   A creditor has standing to apply to the Court under s 329 of the Act to restore a company to the Register.6 WHTC is a creditor of MSUT and MSM by virtue of Lang J’s orders for costs.

[15]   The grounds for a restoration order are set out in s 329(1). WHTC relies on the ground in s 329(1)(a)(iv), namely that it is an undischarged creditor of the two companies.

[16]   Where an applicant can establish grounds for restoration, the Court retains a residual discretion regarding whether restoration should be ordered. That discretion has been described as a “negative discretion”; unless there are some discretionary factors that point against restoration, an order should be made.7

[17]   I accept that this is an appropriate case to order restoration. WHTC wishes to pursue a genuine claim in good faith. WHTC has pointed to transactions between third parties and MSM and/or MSUT, prior to the liquidation of MSM and MSUT, which a liquidator may be able to successfully challenge to return funds to MSM and MSUT. That would then enable:

(a)MSM and MSUT to pay their debts to the Official Assignee;

5      At [42]–[43].

6      Companies Act 1993, s 329(2)(a)(ii)

7      100 Investments Ltd v Registrar of Companies [2020] NZHC 880 at [31] citing Re Salamanca Investments Ltd [2015] NZHC 572, [2015] 3 NZLR 411.

(b)the Official Assignee to pay Mr William’s judgment debt to Wenztro; and

(c)Wenztro to pay its debt to WHTC.

[18]   In Registrar of Companies v Body Corporate 307730, the Court of Appeal clarified the procedure applicable to the restoration of a liquidated company.8 The liquidator’s final report must be reversed under s 284(1)(b) of the Act before a company is restored to the Register.9 This is necessary because if a final report remains in place, the Registrar is statutorily obliged to remove the company from the Register as soon as it is restored.10

[19]   Reversing the final report has the effect of abrogating the completion of the liquidation.11 When the company is then restored to the Register, the liquidation is reinstated and the previous liquidator resumes their office.12

[20]   WHTC advises that Mr Rodewald does not wish to continue as liquidator of MSUT and MSM if they are restored. WHTC seeks the appointment of Mr Dennis Parsons as a replacement liquidator of both companies under s 241(2)(c)(iv) of the Act. Mr Parsons has filed affidavits consenting to his appointment, and Mr Parsons qualifies for appointment under s 280 of the Act.

Result

[21]I make the following sequential orders:

(a)The liquidator’s final report on the liquidation of MSM Holdings NZ Ltd is reversed.

(b)The liquidator’s final report on the liquidation of MSUT Trustee Ltd is reversed.

8      Registrar of Companies v Body Corporate 307730 [2013] NZCA 659, [2014] 2 NZLR 623.

9 At [26].

10     See Companies Act 1993, s 318(1)(e).

11     Registrar of Companies v Body Corporate, above n 8, at [16] citing Re Ocean Shipping Ltd HC Auckland M348/96, 16 July 1996.

12     Registrar of Companies v Body Corporate, above n 8, at [16].

(c)MSM Holdings NZ Ltd and MSUT Trustee Ltd are restored to the Register.

(d)Mr Dennis Parsons is appointed as liquidator of MSM Holdings NZ Ltd and MSUT Trustee Ltd.

(e)There is no order as to costs.

Associate Judge Brittain