COMMISSIONER OF INLAND REVENUE v REGISTRAR OF COMPANIES [2019] NZHC 2347

COMMISSIONER OF INLAND REVENUE v REGISTRAR OF COMPANIES [2019] NZHC 2347 [13September 2019]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-1644[2019] NZHC 2347UNDER the Companies Act 1993 section 329 andPart 19 of the High Court RulesIN THE MATTER OF YOGI TRUSTEE LIMITEDBETWEEN COMMISSIONER OF INLANDREVENUEApplicantAND REGISTRAR OF COMPANIESFirst RespondentSECRETARY TO THE TREASURYSecond RespondentPAUL NIGEL WEBBThird RespondentCalled 13 September 2019 at 11:45amAppearances: Oscar Upperton for the ApplicantNo appearance for the RespondentsJudgment: 13 September 2019Reasons: 17 September 2019REASONS FOR JUDGMENT OF ASSOCIATE JUDGE R M BELLReasons for judgment were delivered by me on 17 September 2019 at 4:00pmpursuant to Rule 11.5 of the High Court Rules.Deputy RegistrarSolicitors:Crown Law (Harry Ebersohn/Oscar Upperton), Wellington, for the Applicant[1] When the Commissioner of Inland Revenue's application to restore YogiTrustee Company Limited to the register was called on 13 September 2019, I grantedthe application. I now give reasons for my decision.[2] Yogi Trustee Company Ltd was incorporated on 26 March 2002. It wasremoved from the register on 15 December 2017. Mr Paul Webb, the third respondent,was the director of the company. Yogi Trustee Company Ltd is the corporate trusteeof the Yogi Trust. The company is the registered proprietor of a property in ArneyRoad, Remuera, Auckland. The company's sole shareholder is Mr Andrew Tauber.The Commissioner believes that Mr Tauber holds the shares on trust either forMr Webb or for others associated with Mr Webb. Mr Webb and Mr Tauber areassociates. They operated through a group of companies called the Hong Group. Forsome years the Commissioner has pursued the Honk Group, Mr Webb and Mr Tauberfor non-payment of taxes. There has been considerable litigation. On 26 November2018, the Commissioner obtained judgment against Mr Webb in the District Court for$26,304,198.48.1[3] Earlier this year, the Commissioner began a proceeding against Mr Webb, YogiTrustee Company Ltd and other defendants, CIV-2019-404-806. In that proceeding,she seeks orders declaring that the Yogi Trust is illusory, that trust powers anddiscretions given to Mr Webb under the trust deed are his property and assets heldunder the trust can properly be treated as his assets, and an order setting aside a leaseto Mr Webb's current partner. That proceeding was started after Yogi TrusteeCompany Ltd had been removed from the register.[4] For the application to restore Yogi Trustee Company Ltd to the register, theCommissioner relies on an earlier proceeding, CIV-2013-404-901. In that originatingapplication the Commissioner sought a freezing order under Part 32 of the High CourtRules 2016. The respondents were Mr Webb and Yogi Trustee Company Ltd.1 Commissioner of Inland Revenue v Webb [2018] NZDC 24228.A freezing order was made on 20 February 2013. On 6 March 2013, Woolford Jdirected that the freezing order should continue pending further order of the court.Keane J made a similar order on 17 April 2013. In May this year, the Commissionerapplied for orders to vary the freezing order. Woolford J granted the variation on 2May 2019.[5] For the restoration application, the Commissioner relies on these groundsunder s 329 of the Companies Act 1993:329 (1) The court may, on the application of a person referred to insubsection (2) of this section, order that a company that has been removedfrom 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, -(ii) the company was a party to legal proceedings; or(iv) the applicant was a creditor, or a shareholder, or aperson who had one undischarged claim against thecompany; [6] The Commissioner has served the proceeding on the Registrar of Companiesand the Secretary to the Treasury. They have indicated that they do not oppose. TheCommissioner has also served Mr Webb. He has taken no steps to oppose.[7] The Commissioner has made out the ground under s 329(1)(a)(ii). The freezingorder proceeding is the relevant proceeding. While the Commissioner had obtainedfinal orders, the proceeding remained on foot in that there were binding orders whichcontinued to apply and were enforceable. For those orders to be enforceable againstYogi Trustee Company Ltd, the company must continue to exist. I see no need to readdown s 329(1)(a)(ii) to apply only to proceedings that have not yet reached a finaljudgment. The same considerations for keeping the company in existence apply bothbefore judgment and afterwards when the company is required to comply with thecourt's judgments and orders.[8] I am also satisfied that under s 329(1)(a)(iv) the Commissioner had anundischarged claim against the Yogi Trustee Company Ltd when it was removed fromthe register. The Commissioner does not say that Yogi Trustee Coy Ltd owed her taxesdirectly (although there are grounds for suspecting that that may be the case). Instead,the Commissioner says that she has a claim to the assets of Yogi Trustee Company Ltdas a way of discharging Mr Webb's debt under the District Court judgment.Admittedly the Commissioner had not obtained judgment against Mr Webb when YogiTrustee Company Ltd was removed from the register, but the District Court judgmentis for unpaid taxes going back many years. In short, both Mr Webb's liability for taxes,and the Commissioner's claim that assets held by Yogi Trustee Company Ltd can betreated as his property and can be applied against his liability under the District Courtjudgment, give the Commissioner an undischarged claim against Yogi TrusteeCompany Ltd. The case meets the low threshold of showing a genuine case.2[9] My finding that the Commissioner has an undischarged claim against YogiTrustee Company Ltd under s 329(1)(a)(iv) also means that the Commissioner hassatisfied the requirement for standing under s 329(2)(a)(iii):329 (2) The following persons may make an application undersubsection (1) of this section:(a) Any person who, at the time the company wasremoved from the New Zealand register:-(iv) had an undischarged claim against thecompany[10] There are no reasons counting against the company not being restored to theregister.[11] Under s 324 of the Companies Act, the property of any company removed fromthe register vests in the Crown. Superficially, it might be thought that that suits theCommissioner as the Crown already has the benefit of the Arney Road property. That,however, would be short-term thinking. I suppose that the Crown does not, as a matterof practice, appropriate for its own purposes assets vested in it under s 324 of theCompanies Act. Section 324 may operate as no more than a default interim measure:the asset vests in the Crown until the company is restored or the court makes vestingorders under s 324(4). Moreover, a bank has a mortgage registered against the title tothe Arney Road property. Clear rulings are required as to the extent to which assets2 Re Salamanca Investments Ltd [2015] NZHC 572, [2015] 3 NZLR 411 at [104].held in the name of the company can be applied in partial discharge of Mr Webb'sindebtedness to the Commissioner. For that, the company needs to be restored to theregister.[12] I see good reason for Yogi Trustee Company Ltd to be restored to the register,even if the Commissioner had not made out the grounds under s 329(1)(a)(ii) and (iv).If required, I would have restored the company under the just and equitable ground ins 329(1)(b). Further, if the Commissioner did not have standing under s 329(2)(a),I would have granted leave under s 329(2)(c). Yogi Trustee Company Ltd ownsproperty in New Zealand. It is unacceptable for property to be left in the nominal titleof a body which has ceased to exist. Restoration to the register is required so that theproperty can be dealt with..Associate Judge R M Bell