THE COMMISSIONER OF INLAND REVENUE V HERMES CONSULTING LIMITED HC WN CIV-2006-485-2071

THE COMMISSIONER OF INLAND REVENUE V HERMES CONSULTING LIMITED HC WN CIV-2006- 485-2071 23 November 2006IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV-2006-485-2071IN THE MATTER OF The Companies Act 1993 BETWEEN THE COMMISSIONER OF INLAND REVENUE Plaintiff AND HERMES CONSULTING LIMITED Defendant Judgment: 23 November 2006 at 11.45am In accordance with r540(4) I direct the Registrar to endorse this judgment with a delivery time of 11.45am on the 23 rd day of November 2006.DECISION OF ASSOCIATE JUDGE D.I. GENDALL[1] On 12 September 2006 the plaintiff Commissioner of Inland Revenue issued proceedings against the defendant company to place the defendant into liquidation. This was based upon an outstanding debt of $4,252.95 owing to the plaintiff, and an unsatisfied statutory demand served upon the defendant on 28 July 2006. [2] On 6 November 2006 at 10.54am an order was made in this Court placing the defendant company into liquidation. The order appointed Barry Phillip Jordan and David Stuart Vance as liquidators. There was no appearance for the defendant company on 6 November 2006. [3] Subsequently, on 22 November 2006 counsel for the plaintiff filed submissions in this Court seeking confirmation of the appointment of Mr Jordan and Mr Vance as liquidators of the defendant company pursuant to the orders made on 6 November 2006.[4] This submission advises for the first time that since 6 November 2006 the plaintiff has learned that the defendant company purported to go into voluntary liquidation by shareholder resolution on 30 October 2006 at 10.30am. Pursuant to this resolution, Mr John Archibald ("Mr Archibald") was purportedly appointed as liquidator. The plaintiff's 22 November 2006 submissions have attached a copy of the shareholders resolution purporting to appoint the liquidator, and a copy of a "consent to appointment as liquidator" signed by Mr Archibald. [5] It is clear from s241(5) Companies Act 1993 that the liquidation of a company commences on the date and at the time at which a liquidator is appointed. [6] Section 282 Companies Act 1993 also provides that the appointment of a person other than an Official Assignee as liquidator is of no effect unless that person has consented in writing to the appointment. [7] In Commissioner of Inland Revenue v Service Equipment Limited (2000) 19 NZTC 15,832 Master Faire (as he then was) stated at page 15,834 that:A resolution of shareholders appointing a liquidator will not be effective if at the time of its passing there is not a consent in writing of the liquidator proposed to be appointed by the resolution at the time the resolution is passed.[8] The principles have been applied in a number of cases to the point where it is clearly established that in cases where shareholders pass a special resolution to appoint liquidators under s241(2)(a) Companies Act 1993, for this to be effective the liquidator's written consent to the appointment must be obtained prior to the passing of the resolution – see Paperlinx (NZ) Limited v Colourpak Cartons Limited (HC Christchurch, CIV-2005-409-2529, 12 December 2005, Associate Judge Christiansen) and Voss v Layhatton Innovations Limited (HC Palmerston North, CIV-2006-454-685, 30 October 2006, Associate Judge Gendall). [9] In the present case the resolution of shareholders attached to the plaintiff's submissions filed 22 November 2006 states that the resolution was passed on 30 October 2006 at 10.30am. The consent to appointment as liquidator signed by Mr Archibald was also dated and timed at 30 October 2006 at 10.30am.[10] Brookers Company and Securities Law (vol 1) at para CA282.01 in noting the stipulation under s282 Companies Act 1993 that the appointment of a person as liquidator is of no effect unless that person has consented in writing to the appointment comments:Significantly, s282 uses the past tense in referring to the consent in writing.[11] Here, the document purporting to be the written consent of Mr Archibald is dated and timed at precisely the same moment as the shareholders resolution placing the company into liquidation – that is 30 October 2006 at 10.30am. [12] There can be little doubt that Mr Archibald's consent was not given prior to the passing of the shareholders resolution. [13] Although it may be seen by some to be rather pedantic, there can be no doubt from the clear wording of s282 Companies Act 1993 that this written consent of a liquidator must be given prior to and exist at the time a company is placed into liquidation and the appointment is made. A reason for this, no doubt, lies in the need for there to be no hiatus between the time a resolution for liquidation of a company is passed, at which point management and operation of the company passes to the liquidator, and the time a liquidator takes charge of the company's affairs. [14] That said, the requirements in s282 Companies Act 1993 clearly provide that, as Mr Archibald's written consent to appointment had not been provided prior to the shareholders resolution being passed, then his purported appointment as liquidator under the special resolution "is of no effect". [15] The Court confirms, therefore, that the appointment of Barry Phillip Jordan and David Stuart Vance as liquidators of the defendant company pursuant to the orders made in this Court at 10.54am on 6 November 2006 shall stand. [16] So far as it may be necessary to do so, a declaration is made pursuant to s284(1)(g) Companies Act 1993 that Mr Archibald was not validly appointed as liquidator of the defendant company, and as such he was not able to validly assume custody or control of the property of the defendant company.[17] The plaintiff's 22 November 2006 submission goes on to seek a further order requiring Mr Archibald and Scott Crawford Anderson to deliver all company records of the defendant to the liquidators within 14 days. There is no evidence before this Court as to whether Mr Jordan and Mr Vance as liquidators may have sought to avail themselves of the powers contained in s261 Companies Act 1993. [18] In my view, therefore, it is not appropriate at this stage to make the orders sought in paragraph [17] above. [19] Leave, however, is reserved for the liquidators Mr Jordan and Mr Vance to make any appropriate application they may wish to in terms of s284 Companies Act 1993. ________________________________Associate Judge D.I. GendallSolicitors:P.H.B. Latimer, Inland Revenue Department, Wellington for Plaintiff