DEPARTMENT OF INTERNAL AFFAIRS v OTT TRADING GROUP LTD [2020] NZHC 3073

DEPARTMENT OF INTERNAL AFFAIRS v OTT TRADING GROUP LTD [2020] NZHC 3073 [20 November2020]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2020-404-001739[2020] NZHC 3073UNDER The Companies Act 1993 and the Court'sinherent jurisdictionBETWEEN DEPARTMENT OF INTERNAL AFFAIRSPlaintiffAND OTT TRADING GROUP LIMITEDDefendantHearing: 6 November 2020Appearances: L Wilson for PlaintiffNo appearance for DefendantJudgment: 20 November 2020JUDGMENT OF ASSOCIATE JUDGE P J ANDREWThis judgment was delivered by Associate Judge Andrewon 20 November 2020 at 4.30 pmpursuant to r 11.5 of the High Court RulesRegistrar / Deputy RegistrarDate.Introduction[1] These are uncontested liquidation proceedings. On 6 November 2020, I madeorders placing the defendant company into liquidation, appointed the OfficialAssignee as liquidator and awarded costs on a 2B basis plus disbursements in favourof the plaintiff.[2] The plaintiff, the Department of Internal Affairs (the Department), filed amemorandum immediately prior to the hearing addressing the issue of its standing tomake the application for liquidation. This judgment briefly addresses the issue ofstanding. Because the issue was not argued before me (I have heard no submissionsadopting a contrary view), I do not consider it appropriate to embark on any detailedanalysis of the submissions of the Department. Having said that, I acknowledge thatthey are comprehensive and very helpful.The issue[3] The Department's liquidation application relates to the recovery of a costsaward made in a proceeding the Department brought against the defendant company(OTT) and a related entity, under the Anti-Money Laundering and CounteringFinancing of Terrorism Act 2009. In the proceedings the Department sought andobtained against OTT a pecuniary penalty (which is payable to the Crown, and notrecoverable by the Department), an injunction and costs (which are payable to theDepartment and said to be recoverable by it).[4] The issue of the Department's standing primarily turns on the properinterpretation of s 308(c) of the Companies Act 1993. The combined effect of ss 241,303(2), 303(3) and the definition of "creditor" in s 240 of the 1993 Act, is that theDepartment in a liquidation may not recover costs ordered to be paid in relation to amonetary penalty. A degree of ambiguity in the legislation arises from the fact that therelief the Department sought in the proceedings was not limited to a monetary penalty.It also related to an injunction. And, if the Department only sought an injunction ofthe proceeding, it cannot be disputed that costs could be admitted in a liquidation.Decision[5] I accept the submission of the Department that costs which are properly due asa result of the imposition of an injunction, even if a monetary penalty is also awardedin the same proceeding, are admissible claims under s 303 of the 1993 Act. That isbecause, properly interpreted, s 308(c) does not constrain the recovery of costs in aliquidation to all causes of action to which those costs relate. So long as the costsrelate to a cause of action not captured by s 308, they may be admitted in a liquidation.That means that where such a debt is owed by a company to the Department, theDepartment is a "creditor" and for the purposes of s 240 of the 1993 Act, and hasstanding under s 241(2)(iv) to apply to put it into liquidation.__________________________Associate Judge P J Andrew