BANK OF NEW ZEALAND V CRISFORD TRUSTEE LIMITED (1689149) (STRUCK OFF) HC AK CIV-2012-404-6135

BANK OF NEW ZEALAND V CRISFORD TRUSTEE LIMITED (1689149) (STRUCK OFF) HC AK CIV- 2012-404-6135 [8 November 2012]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2012-404-6135[2012] NZHC 2945UNDER s 329 of the Companies Act 1993BETWEEN BANK OF NEW ZEALANDApplicantAND CRISFORD TRUSTEE LIMITED(1689149) (STRUCK OFF)RespondentHearing: 1 November 2012Counsel: Mr Barker for ApplicantMr C R Pidgeon QC for RespondentsJudgment: 8 November 2012JUDGMENT OF ASSOCIATE JUDGE DOOGUEThis judgment was delivered by me on8.11.12 at 4.30 pm, pursuant toRule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateCounsel:Buddle Findlay, P O Box 2694, Wellington –scott.barker@buddlefindlay.comC R Pidgeon QC, P O Box 105294, Auckland – colpidge@xtra.co.nz[1] This case concerns an application to restore to the register the respondent company. There is no argument that the company was struck off. That occurred on 21 January 2009. For the purposes of this application the company is referred to as "Company A". There is no argument that at the time that the company was struck off it owed money to the BNZ bank. That came about because the company was thetrustee of the John Crisford Family Trust ("the Trust") which had borrowed moneyfrom the BNZ which was secured over the property owned by the trust. There is no argument that Company A was the borrower and that it was the entity which gave security by way of mortgage over its land for the borrowing. At the time when the company was struck off the debt and the supporting security were still in place. Themortgage securing the debt has never been discharged from Company A's land. Thedirectors of Company A were Mr Crisford and his wife. After the company had been struck off, Mr Crisford was appointed trustee to October 2012.[2] At the time when Company A was struck off it was indebted to the BNZ for approximately $0.75 million.[3] After Company A was struck off, Mr Crisford arranged for the incorporation of another company in June 2009, with the identical name to Company A. This occurred at the behest of Mr Crisford and his wife.[4] In December 2010 Mr Crisford and his wife arranged for the loan which was owing to the BNZ by Company A to be refinanced.[5] Company A which it sought to restore was a debtor of the BNZ at the date when the company was struck off. Mr Pidgeon QC for Company A did not disagree with this. The only issue therefore is whether it is just and equitable that thecompany should be restored or whether another ground under s 329 would justifyrestoration.[6] The reason why the bank seeks to restore the company is because it says the company owes it in excess of $1,000,000. (Company A apparently contends that it does not owe any money now because there was a re-financing of the debt in 2010).However the Crisford interests seem to also be arguing that the further advance that was provided by the bank in 2010 was obtained by Company B and that Company B was the recipient of those funds which then somehow were used to repay the liability of Company A. Company A therefore does not owe the bank anything and isentitled to a discharge of the mortgage which it gave to the bank over its property onKawau Island.[7] The BNZ on the other hand argues that the second advance was to the Trustand that Company A is the trustee. It submits, correctly, that Company B was neverthe trustee of the family trust. Therefore, the re-financing did not affect the positionof the BNZ as a creditor of Company A which is still indebted to it and the mortgageover whose property it gave is still enforceable at the bank's selection.[8] My view is that while there are difficult issues to be resolved there is areasonably arguable case which the bank seeks to bring against Company A.[9] It is possible that it will be imputed to the company, once restored, that it is liable for engagements made on its behalf by its agents, even though those engagements could not be given contractual force and effect until the company was restored. It may be that Company A, if it is restored to the register, will be estopped from denying that it is liable as the borrower under the re-financing arrangement on the basis that Mr and Mrs Crisford impliedly represented that the trustee, of which they were the agents, was making its security available for a further advance from the bank.[10] It is not necessary on an application to restore the company to resolve theissues that I have described in the previous paragraph or to consider other routes bywhich the plaintiff might succeed in establishing liability on the part of the restoredcompany.[11] It is however sufficient for the bank to establish that it is just and equitablethat the company be restored by demonstrating that the struck off company is thenecessary party to legal proceedings in which there are substantial issues to beargued. For those reasons, in my view, the company ought to be restored. I order that there be an order pursuant to s 329 of the Companies Act accordingly.[12] There was a discussion about the terms of the order. Mr Pidgeon QC was concerned that if Company A were to be restored that it should have an unfettered right to apply for an order or declaration to the effect that the mortgage over theproperty pursuant to which Company A was a mortgagor had been repaid and thatCompany A was entitled to a discharge of the mortgage. Mr Barker for the bankmade it clear that if Company A were to be restored the bank would not attempt tocircumvent the Crisford interests from applying for an order of the type which MrPidgeon outlined.[13] I am not sure that there is any power to attach conditions which would have amaterial impact upon the Crisford interests' rights to seek a declaration of the kindthat they do. It would appear that once an order is made for restoration of acompany the company resumes life as a legal entity with all the rights andobligations that it had before its existence was interrupted by the order striking it off.Those rights must include the ability to bring litigation of the kind to which MrPidgeon adverted. In practical terms, I suggested to Mr Pidgeon in the course of thehearing that it would surprising if the Crisford interests could not bring a counter-claim in proceedings brought by the bank which they, the Crisford interests, couldseek the type of declaration claimed.[14] It is true that conditions have been in the past attached to the grant of an orderrestoring a company: see Sax v Registrar of Companies.1 However once thoseconditions have been satisfied and the company has been restored I am not aware ofany basis for authorising the attachment of conditions which limit the capacities,powers and viabilities of the company once restored.[15] The next issue is the costs of this application.1 Sax v Registrar of Companies [1994] 1 NZLR 605.[16] Mr Pidgeon was instructed by Mr and Mrs Crisford who were shareholdersand directors of Company A. Because they are the unsuccessful party to this presentapplication they should be presumed to be responsible for the costs of the litigation:see r 14.2(a). On the other hand Mr Pidgeon suggested that costs should lie wherethey fall or alternatively that costs should be reserved until the outcome of thelitigation which the bank intends to prosecute against Company A is known.[17] In my view the requirement of the Rules that it is desirable that the process offixing costs should be expeditious and predictable means that the Court should notwait for the outcome of the substantial legal dispute between the two parties butshould fix costs now. I see no reason why the BNZ as the successful party shouldnot have costs and I direct that Mr and Mrs Crisford are to pay costs on a 2B basisand also are to pay to the BNZ the reasonable disbursements of the present litigationas certified by the Registrar._____________J.P. DoogueAssociate Judge