DRILLING FLUID EQUIPMENT NZ LIMITED V THE REGISTRAR OF COMPANIES AND ANOR HC WN CIV 2008-485-1985

DRILLING FLUID EQUIPMENT NZ LIMITED V THE REGISTRAR OF COMPANIES AND ANOR HC WN CIV 2008-485-1985 17 December 2008IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV 2008-485-1985UNDER the Companies Act 1993 BETWEEN DRILLING FLUID EQUIPMENT NZ LIMITED Plaintiff AND THE REGISTRAR OF COMPANIES First Respondent AND THE OFFICIAL ASSIGNEE Second Respondent Hearing: 17 December 2008 Judgment: 17 December 2008ORAL JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALLSolicitors: Dennis King Law, Solicitors, PO Box 1092, New Plymouth[1] On 9 September 2008 a statement of claim was filed in this proceeding seeking restoration of Water Treatment Products Limited (in liquidation) ("the company") to the Companies Register, reversal of the liquidator's report and appointment of new parties as liquidators in place of the Official Assignee. [2] On 1 December 2008 in this Court, Dobson J. made an order restoring the company to the Companies Register and adjourned other matters for consideration today. [3] On 5 December 2008 the applicant filed a fresh application for leave to reverse the liquidator's report and to appoint fresh liquidators in place of the Official Assignee. [4] The Official Assignee has advised the Court by letter dated 16 December 2008 that the Official Assignee does not wish to be heard on this matter and will abide the decision of the Court. The Official Assignee confirms there are no funds in the liquidation and that he wishes to cease incurring further expense in this matter. [5] The applicant Drilling Fluid Equipment NZ Limited is a creditor of the company having filed two unsecured creditor's claim forms with respect to the company. (The company itself was placed into liquidation by the High Court at Tauranga on 11 September 2006). [6] The applicant accordingly has standing to bring the current application. The application is bought in reliance upon ss. 241(2)(c)(iv), 282 and 284(1)(b)Companies Act 1993. [7] The applicant's concern here, as I understand it, appears to relate to its claim that the Official Assignee as liquidator has failed to adequately investigate all of the circumstances surrounding various transactions involving the company. In particular a complaint is made that the Official Assignee failed to investigate the relationship between the company and a third party company to whom it sold off its assets. In addition there are claims regarding the actions of the directors of the company which are said to amount to reckless trading and the like.[8] It is clear that under s. 284 Companies Act 1993 the Court is empowered to give directions in relation to any matter arising in connection with a liquidation or to confirm, reverse or modify any act or decision of a liquidator. [9] On this aspect Brookers Insolvency Law and Practice at para. CA284.05(1)(c) states:"(c) Creditors entitled to thorough investigation One such special case (where the Court will intervene to revise or modify an act or decision of a liquidator) is Re Ocean Shipping Limited, 16 July 1996, Fisher J., High Court Auckland M384/96, in which the High Court ordered the restoration of the company to the register of companies, the recommencement of the liquidation of the company, and the re-appointment of the original liquidators to enable a creditor to investigate the company further, under the equivalent provision to s. 284(1)(b) Companies Act 1955. The creditor claimed that the financial history of the company had not been adequately explored, and that the liquidator had acted prematurely in ending the liquidation and removing the company from the Register. Fisher J. considered the competing interests of the parties and held that there was a very strong presumption that creditors are entitled to a thorough investigation of companies in liquidation. The reinstatement was achieved by reversing the filing of the final report and accounts. In Black v Selwyn Developments Limited (in liquidation) 20 August 2007, Courtney J, High Court Auckland, CIV 2007-404-4525, Courtney J agreed with this approach in the context of the Companies Act 1993.[10] The decision in Re Ocean Shipping clearly provides authority for the Court to intervene in a case such as the present to use its supervisory powers vested in it by s. 284 of the Companies Act. As Fisher J. noted in Re Ocean Shipping, there is a very strong presumption that the creditors of a failed company are entitled to a full andthorough investigation of the financial history and status of that company, and that is especially the case where they are prepared to fund the exercise. In my view the creditors appear to have been denied that opportunity in the present case although, it may be that at the end of the day " the further investigation will prove fruitless but for my part I would be very slow to see a creditor denied at least the opportunity." –Fisher J. in Re Ocean Shipping.[11] Here the situation, in my view, is similar to that which prevailed in Re Ocean Shipping. And here, the Official Assignee, the current liquidator of the company, appears to take an entirely neutral position. He does not oppose the present application. [12] As was the case in Re Ocean Shipping Limited the company has been restored to the Register. In my view the orders sought for appointment of new liquidators to replace the Official Assignee (who has indicated he is not prepared to take any further action to investigate the company's financial history) is appropriate. [13] A Consent to Act has been provided to the Court by James Gregory Eden and Bruce Carlaw Richards both of New Plymouth, Chartered Accountants. [14] In addition as occurred in Re Ocean Shipping Limited it is appropriate here in reinstating matters to reverse the filing of the final liquidator's report and accounts provided by the Official Assignee and an order is now made reversing that report. [15] That said the current application before the Court succeeds and orders are now made as follows: a) Leave is granted pursuant to s. 284(1)(b) Companies Act 1993 to reverse the "liquidator's final report" of the company dated 14 November 2006 by the Official Assignee and to recommence the liquidation of the company and orders are now made to this effect. b) James Gregory Eden and Bruce Carlaw Richards, Chartered Accountants of New Plymouth are now appointed liquidators of thecompany, Water Treatment Products Limited (in liquidation) pursuant to s. 241 Companies Act 1993 in place of the previous liquidator, the Official Assignee. c) The costs of this application calculated on a Category 2B basis together with any disbursements as approved by the Registrar are awarded to the applicant and are to be costs in the liquidation. [16] This order is timed today, 17 December 2008 at 1.30 pm.'Associate Judge D.I. Gendall'