THE COMMISSIONER OF INLAND REVENUE v LIVINGSPACE PROPERTIES LIMITED (In Liquidation and Receivership) [2019] NZHC 366

THE COMMISSIONER OF INLAND REVENUE v LIVINGSPACE PROPERTIES LIMITED (In Liquidationand Receivership) [2019] NZHC 366 [7 March 2019]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV 2010-409-002323[2019] NZHC 366UNDER The Companies Act 1993IN THE MATTERANDof the liquidation of Livingspace PropertiesLimitedIN THE MATTER of an application by Ms Kristina LouiseBuxton & Ors pursuant to Section 284 of theCompanies Act 1993BETWEEN THE COMMISSIONER OF INLANDREVENUEApplicantAND LIVINGSPACE PROPERTIES LIMITED(In Liquidation and Receivership)RespondentHearing: 27 February 2019Appearances: G Neil and H Jones for Mr Robert Walker, liquidator ofLivingspace Properties Ltd (In Liq)J Moss and H Weston for K L Buxton, D Henderson, RFDFinance Ltd, FTG Securities Ltd, Castle Operations Ltd and TayOperations Ltd, the Applicants (in the Section 284 Application)Judgment: 7 March 2019JUDGMENT OF ASSOCIATE JUDGE P J ANDREWThis judgment was delivered by me on7 March 2019 at 3.00 pm, pursuant toRule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateIntroduction[1] This is a liquidation proceeding in relation to the company LivingspaceProperties Ltd (in liq and in rec) (LPL). Mr Robert Walker is the liquidator. Thedefendant company was placed into liquidation in 2010 when Mr David Hendersonwas one of its directors.[2] On 29 May 2018, Associate Judge Osborne made orders under s 266 of theCompanies Act 1993 (the Act) requiring Ms Christina Buxton, a director of RFDFinance Ltd (RFD) and the wife of Mr Henderson, to produce documents and recordsrelating to the business or affairs of the defendant company.[3] On 12 October 2018, the liquidator filed an application (by memorandum)seeking directions for what he says are Ms Buxton's non-compliance with the s 266orders made by Associate Judge Osborne. Ms Buxton then filed an application fororders for removal of Mr Walker as the liquidator and for a stay of the proceedings.[4] The liquidator now applies for orders striking out Ms Buxton's amendedapplication for orders for removal under s 284 insofar as it seeks leave for Ms Buxtonand others (together the applicants) to apply for the removal of Mr Walker as theliquidator of Castle Street Ventures Ltd (in liq) (Castle), Tay Ventures Ltd (in liq andin rec) (Tay) and Lichfield Ventures Ltd (in liq) (Lichfield). Those three companies,all in liquidation, are said to be related to the defendant company, LPL, but are notparties to this proceeding.[5] The liquidator contends that Ms Buxton's applications are frivolous, vexatiousor otherwise an abuse of the process of the Court.1 He seeks an order striking out theobjectionable parts of the amended application with a direction that the applicants, ifthey so elect, file separate applications under s 284 in each of the separate liquidationproceedings.1 See High Court Rules 2016, r 15.1.Relevant legal principles[6] Rule 31.35 of the High Court Rules 2016 applies to applications in respect ofliquidated companies. It relevantly provides:31.35 Procedure in respect of miscellaneous applications(1) Subpart 2 of Part 7, relating to interlocutory applications, applies toapplications to the court in respect of—(b) a company in respect of which a liquidator has been appointedunder section 241(2)(c) of the Companies Act 1993.(2) Subclause (1) is subject to subclauses (3) and (4).(3) An application specified in subclause (1) must have the same headingas the heading on the application for putting the company intoliquidation.(4) Subclause (1) does not apply to—(a) an application under rule 31.36; or(b) an application to which Part 18 or 19 applies.[7] In Mulholland v Levin, the Court held that r 31.35 of the High Court Rulesapplies to applications for orders under s 284 of the Act.2 Venning J stated:3The plaintiff's application for an order assigning the third party claim againstthe solicitor to the directors is, in fact, an application by the directors fordirections in relation to a matter arising in connection with the liquidation,and/or reversing or modifying a decision of the liquidators. The decision inissue is the liquidators' refusal to assign the claim without imposing the non-consolidation condition. As such it must be treated as an application unders 284 of the Companies Act 1993 (the Act) and r 31.35(1)(b) of the High CourtRules applies. The application should have been filed in the course of theoriginal liquidation proceedings, just as Lang J directed on 16 May 2012.However I grant leave to bring this aspect of the application by way oforiginating application.[8] Rule 15.1 of the High Court Rules allows the Court to strike out all or part ofa pleading. It provides:2 Mulholland v Levin [2012] NZHC 1790.3 At [22].15.1 Dismissing or staying all or part of proceeding(1) The Court may strike out all or part of a pleading if it—(a) discloses no reasonably arguable cause of action, defence, orcase appropriate to the nature of the pleading; or(b) is likely to cause prejudice or delay; or(c) is frivolous or vexatious; or(d) is otherwise an abuse of the process of the court.(2) If the court strikes out a statement of claim or a counterclaim undersubclause (1), it may by the same or a subsequent order dismiss theproceeding or the counterclaim.(3) Instead of striking out all or part of a pleading under subclause (1),the Court may stay all or part of the proceeding on such conditions asare considered just.(4) This rule does not affect the court's inherent jurisdiction.The amended application of Ms Buxton[9] By the amended application of 15 January 2019, Ms Buxton seeks orders asfollows:(a) Joining Mr Henderson, RFD, FTG Securities Ltd, Castle OperationsLtd and Tay Operations Ltd as defendants to this proceeding; and(b) If the orders sought at [9(a)] above are granted, the applicants(Ms Buxton, Mr Henderson, RFD, FTG Securities Ltd, CastleOperations Ltd and Tay Operations Ltd) seek orders from the Court:(i) granting leave to bring an application, pursuant to s 284,removing Mr Walker as liquidator of LPL, Castle, Tay andLichfield; and(ii) staying any further steps in the enforcement of judgmentobtained by Mr Walker for orders under s 266 of the Act.[10] The applicants oppose the liquidator's strike-out applications on the basis thatthe companies Castle, Tay and Lichfield are so closely connected that it is appropriateand efficient for a claim against the conduct of the liquidator of those companies (orMr Walker) to be determined collectively rather than independently. The applicantsmade the application for leave under s 284 on that basis.[11] The applicants say they have also applied for a joinder of Castle, Tay andLichfield. If the joinder application is successful, it is claimed that the Court will havejurisdiction to make orders in relation to those companies.[12] In his affidavit filed in support of the notice of opposition, Mr Henderson statesthat the defendant, LPL, operated a combination of businesses known as"Livingspace" from three premises that were owned by Castle (in Dunedin), Tay (inInvercargill) and Lichfield (in Christchurch). Those companies, together with LPL,were companies that operated and were managed as a collective group with a commonpurpose of maintaining the "Livingspace" business.Analysis and decision[13] I accept the submission of the liquidator that r 31.35 of the High Court Rulesapplies to Ms Buxton's (and the others') application for orders under s 284 of the Act.While their application has been properly filed in respect of the orders that are soughtin this proceeding in relation to LPL, I find that it has been improperly filed in respectof the orders that are sought in relation to Castle, Tay and Lichfield.[14] Rule 31.35 of the High Court Rules requires that application to the Court inrespect of "a company in respect of which the liquidator has been appointed unders 241(2)(c) Companies Act 1993 must have the same heading as the heading on theapplication for putting the company into liquidation".[15] I accept that Mr Walker has been appointed liquidator of all four companies,namely LPL, Castle, Tay and Lichfield. However, in accordance with r 31.35, I findthe applications to the Court in respect of them must be brought in the respectiveliquidation proceedings of the particular company in respect of which removal issought. Each liquidation proceeding is separate and distinct and relates to a particularand different entity. I agree with the submission of the liquidator that the High CourtRules do not permit a liquidation interlocutory application to be filed in a differentproceeding to that which it relates.[16] In this case Ms Buxton (and the others) have sought orders in respect of Castle,Tay and Lichfield in the liquidation proceeding of LPL. That is in breach of r 31.35.[17] I also accept the liquidator's submission that this is not simply a technical issuewhich might, as the applicants contend, be resolved to allow an amendment in thisproceeding in accordance with r 1.2. While all four companies might be interrelated,the question of whether Mr Walker should be removed must be considered in relationto each particular company. The evidence in relation to each company might well bedifferent, and if there is sufficient commonality such that it makes it sensible to hearall matters together, then the applicants can make an application for consolidation.[18] In their notice of opposition, Ms Buxton and the others have put forward as aground for opposing the orders sought that the liquidator's interlocutory applicationseeking orders under s 266 was brought against Ms Buxton as a non-party in thisproceeding. However, I find that such ground is not a legitimate basis for opposingthe orders sought. The liquidator's application under s 266 was made in thisliquidation proceeding and in respect of LPL. The liquidator sought orders thatMs Buxton appear before the court for examination on oath or affirmation on anymatters relating to the business, accounts, and affairs of LPL, and that she produceoriginals or copies of all books, records and documents relating to the business,accounts or affairs of LPL in her possession or control. The liquidator's s 266application was properly brought in accordance with r 31.35 as an interlocutoryapplication in the liquidation proceeding of LPL.[19] The liquidator has challenged the standing of the applicants, contending thatthey are not "entitled persons" in terms of s 284 (as defined in s 2) of the Act. That isan issue yet to be determined. However, it is clear that there is a statutory intention tolimit the parties who may make an application for leave to bring proceedings toremove a liquidator. In my view, it will be necessary to assess the question of standingin relation to each particular company. This reinforces the need for separateapplications in respect of each company.[20] For all these reasons I conclude that the application to strike out should begranted and that the applicants be required to bring separate proceedings in respect ofeach company. The applications, insofar as they seek leave for the removal ofMr Walker as the liquidator of Castle, Tay and Lichfield, disclose no reasonablyarguable case appropriate to the nature of the pleading and are frivolous in the sensethat they trifle with the Court's processes.4[21] I note that the requirement to re-file is consistent with the approach taken inMulholland v Levin. Whether the applicants are prepared to treat this LPL liquidationproceeding as a test case for Mr Walker's removal, without the complication of furtherproceedings (as the liquidator suggests they should), is a matter for them to determine.Result[22] I make the following orders:(a) The applicants' amended notice of application (dated 15 January 2019)is struck out, insofar as it seeks:(i) leave for Ms Buxton and others to apply for the removal ofMr Walker as the liquidator of Castle Street Ventures Ltd (inliq), Tay Ventures Ltd (in liq and in rec) and Lichfield VenturesLtd (in liq) under s 284(1) of the Companies Act 1993; and(ii) an order removing Mr Walker as the liquidator of Castle StreetVentures Ltd (in liq), Tay Ventures Ltd (in liq and in rec) andLichfield Ventures Ltd (in liq) under s 284(1) of the CompaniesAct 1993.(b) I direct that the applicants, if they wish to challenge Mr Walker's roleas liquidator in relation to Castle Street Ventures Ltd (in liq), TayVentures Ltd (in liq and in rec) and Lichfield Ventures Ltd (in liq), arerequired to file separate applications for leave to apply for the removal4 See Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2NZLR 679 at [89].of Mr Walker and for the removal of Mr Walker in each of the particularliquidation proceedings to which his appointment relates.[23] I reserve the question of costs and will determine that issue following mydecision on the question of the admissibility of the evidence of Mr Kerryn Downey.______________________Associate Judge P J Andrew