DOE v REGISTRAR OF COMPANIES [2021] NZHC 2654

DOE v REGISTRAR OF COMPANIES [2021] NZHC 2654 [6 October 2021]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2021-404-1107[2021] NZHC 2654UNDER Section 329 of the Companies Act 1993IN THE MATTER of an application to restore a company to theRegister of CompaniesBETWEEN KIERAN EDWARD DOEApplicantAND REGISTRAR OF COMPANIESRespondentHearing: On the papersCounsel: J Donkin for the ApplicantG Caro for the RespondentJudgment: 6 October 2021JUDGMENT OF ASSOCIATE JUDGE SUSSOCKThis judgment was delivered by me on 6 October 2021 at 2.30pmpursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarSolicitors/Counsel:Burton Partners, AucklandRegistrar of Companies, AucklandJ Donkin, Quay Chambers, AucklandIntroduction[1] This is an application to restore Spirax Ltd ("Spirax") to the Register ofCompanies pursuant to s 329(1)(b) of the Companies Act 1993. It is brought by itsformer director and shareholder, Mr Kieran Edward Doe.[2] Mr Doe seeks to restore Spirax so it can take advantage of an opportunity topurchase a property back from Waka Kotahi New Zealand Transport Agency("NZTA"). The property was previously acquired by NZTA for the purposes of a roadwidening project but it is no longer required for that purpose.[3] Mr Doe has filed an affidavit in support of the application dated 16 June 2021together with an affidavit from Mr Kenneth O'Shea, an accountant at Lockhart O'SheaLtd, the accountancy firm engaged by the applicant to provide accountancy servicesto Spirax.Relevant Legal Provisions and Principles[4] The Companies Act provides for the removal and the restoration of companiesto the Companies Register. As the Court of Appeal states in Commissioner of InlandRevenue v Commercial Management Ltd:1 the provisions concerning removal of a company are designed to ensurethat a company is only removed if there is no good reason for it to continue inexistence. The controllers of the company and other interested persons aregiven the opportunity to object to removal for a range of reasons. But therecan be cases where a company is removed from the register as a result of anerror or oversight, or where circumstances change and it becomes apparentwith the benefit of hindsight that there were good reasons for the company tocontinue in existence. In such cases, a company can be restored to the register.[5] Section 328 provides for the circumstances in which the Registrar may restorea company to the Register. This application does not fit within the circumstancesprovided for in that section and therefore must be made to the Court under s 329.Section 329 provides:1 Commissioner of Inland Revenue v Commercial Management Ltd [2019] NZCA 479 at [29].329 Court may restore company to New Zealand register(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 satisfiedthat,—(a) at the time the company was removed from the register,—(i) the company was carrying on business or [aproper] reason existed for the company to continue inexistence; or(ii) the company was a party to legal proceedings; or(iii) the company was in receivership, or liquidation, orboth; or(iv) the applicant was a creditor, or a shareholder, or aperson who had an undischarged claim against thecompany; or(v) the applicant believed that a right of action existed, orintended to pursue a right of action, on behalf of thecompany under Part 9 of this Act; or(b) for any other reason it is just and equitable to restore the company tothe New Zealand register.(1A) In considering whether to restore a company to the register on theground referred to in subsection (1)(a)(i) or (b), the court must haveregard to the reasons for the company's removal and whether thosegrounds existed at the time of removal or exist at the time of thehearing of the application.(2) The following persons may make an application under subsection (1):(a) any person who, at the time the company was removed fromthe New Zealand register,—(i) was a shareholder or director of the company; or(ii) was a creditor of the company; or(iii) was a party to any legal proceedings against thecompany; or(iv) had an undischarged claim against the company; or(v) was the liquidator, or a receiver of the property of, thecompany:(b) the Registrar:(c) with the leave of the Court, any other person.(3) Before the Court makes an order restoring a company to the NewZealand register under this section, it may require any provisions ofthis Act or any regulations made under this Act, being provisions withwhich the company had failed to comply before it was removed fromthe register, to be complied with.(4) The Court may give such directions or make such orders as may benecessary or desirable for the purpose of placing the company and anyother persons as nearly as possible in the same position as if thecompany had not been removed from the New Zealand register.[6] The Court of Appeal in Commissioner of Inland Revenue v CommercialManagement Ltd distinguished s 329 from the s 328 process as follows:2[32] Section 328 contemplates a relatively simple and uncontroversialrestoration process where it is apparent that the company should not have beenremoved from the register having regard to circumstances at the time of thatremoval, and where no one objects to that restoration. Section 329 enables awider range of grounds to be invoked, including the broad "just and equitable"ground. It is available in cases where restoration is opposed. In circumstanceswhere s 329 is invoked, and in particular where the "just and equitable"ground is relied on, an evaluative judgment is required. Responsibility formaking that judgment is conferred on the court rather than on the Registrar.As is apparent from the structure of these provisions, s 329 is aimed at morecomplex cases where restoration may or may not be appropriate. As 329 application is not simply a mechanical procedural hurdle to be overcomebefore arriving at an inevitable destination.[7] The Court of Appeal listed six matters that must be addressed in an applicationfollowing the amendment to the Act inserting s 329(1A). This new subsection requiresa court to have regard to the reasons for the company's removal and whether thosegrounds existed at the time of removal or exist at the hearing of the application. Thesix matters that are required to be addressed in response to this subsection are: 3(a) the ground on which the company was removed;(b) whether that ground was in fact satisfied at the time of the company'sremoval;(c) the position in relation to that ground at the time of the restorationapplication;(d) what steps if any the company and its controllers took to preventremoval from the Register. If no steps were taken, the reason for thefailure to do so needs to be explained;(e) what if anything has changed since the time the company wasremoved from the Register, which would justify the controllers of thecompany changing their position on the appropriateness of thecompany continuing in existence; and(f) the explanation for any delay between the time when the reason forseeking restoration was first identified, and the making of theapplication.2 At [32].3 At [58].[8] The Court of Appeal then referred to three further matters that are required tobe identified to allow the Court to determine whether it is "just and equitable" for acompany to be restored to the Register:(a) the steps that would need to be taken to remedy any failures tocomply with filing requirements under the Companies Act (withcopies of any documents that need to be filed provided) and ifany orders under s 329(3) would be appropriate;4(b) the financial position of the company both at the time of theremoval and the time of restoration;5 and(c) any outstanding creditors of the company and a sufficientdescription of its financial affairs for the court to be able to forma view on whether any orders should be made under s 329(4).6[9] Section 330 relates to the mechanics of restoration, providing that a companyis restored to the Register once a notice signed by the Registrar is registered under theAct (s 330(1)) and that once restored a company is "deemed to have continued inexistence as if it had not been removed from the Register" (s 330(2)).Can Mr Doe apply to restore the company?[10] The applicant in this case is Mr Doe who was the former director andshareholder of Spirax. Directors and shareholders at the time a company was removedare two of the categories that s 329(2) provides may apply for registration. Mr Doe'sapplication therefore meets this requirement.Is it just and equitable that Spirax is restored to the Register?[11] This application is made pursuant to s 329(1)(b) on the basis that it is "just andequitable to restore" Spirax to the Register.[12] I therefore consider the factors that Commissioner of Inland Revenue vCommercial Management Ltd requires to be addressed.74 At [61].5 At [62].6 At [63].7 Commissioner of Inland Revenue v Commercial Management Ltd, above n 1.Grounds on which Spirax was removed[13] Mr Doe and Mr O'Shea's affidavits both describe the background for theremoval of Spirax from the Companies Register. Spirax operated as a property tradingcompany and was in the business of buying and selling residential properties. Mr Doedeposes that he is in the business of property development and Spirax was one of theentities through which he undertook that business.[14] On 13 January 2016, the Crown entered into an agreement with one of MrDoe's other companies, JK Mitchell Ltd, whereby the Crown agreed to acquire aproperty in Bluebird Crescent, Unsworth Heights, from JK Mitchell Ltd (or nominee)under the Public Works Act 1981 to allow for improvements to the state highwaynetwork.[15] JK Mitchell Ltd nominated Spirax to complete the transaction with the Crown.On 22 August 2016 JK Mitchell Ltd transferred the property to Spirax which thenimmediately transferred the property to the Crown.[16] After the transfer of the property to the Crown, Spirax did not engage in anyfurther property transactions or developments. Mr Doe deposes that had the Crownnot exercised its power to acquire the property, it is likely that a planned townhousedevelopment would have proceeded and Spirax would have been used for thatdevelopment. As that could no longer happen, Mr Doe decided that it would be bestto wind-up Spirax as there was no reason for it to continue in existence at that stage.[17] On 9 June 2018 Mr Doe therefore passed a resolution to commence thewinding-up of the company and appointed Lockhart O'Shea Ltd to perform therequired tasks to achieve this.[18] On 10 September 2018 Mr Doe passed a resolution to remove the companyfrom the Register pursuant to s 318 of the Companies Act 1993. Copies of thedirector's resolution and shareholder's resolution are attached to the affidavit of MrO'Shea.[19] On 19 September 2019 Mr Doe applied for Spirax to be removed from theRegister and the application was actioned on 9 November 2019.[20] At the date of removal, as confirmed in both affidavits, Spirax had no creditorsor debtors and was solvent. It was also completely up to date with all of its filings.Since being removed, Spirax has not traded.[21] The grounds on which Spirax was removed are therefore that it was no longertrading and it was unnecessary for it to continue in existence.Was that ground satisfied at the time of the company's removal?[22] Yes, the company was properly removed from the Companies Register at thetime.Position in relation to that ground[23] It is clear from the evidence filed that the circumstances at the time thecompany was removed supported its removal from the Register.Steps taken to prevent removal or reason for the failure[24] It was intended that the company was removed from the Register and theappropriate steps were taken by Mr Doe.What changes, if any, have there been to affect the appropriateness of the companycontinuing in existence?[25] The circumstances have now changed as on 15 March 2021 WSP NZ Ltd("WSP"), on behalf of NZTA, gave notice that the property would be offered back toSpirax as it was surplus to the Crown's requirements. A copy of this letter is annexedto Mr Doe's affidavit.[26] Mr Doe gave a copy of the WSP letter to Lockhart O'Shea Ltd. On 8 April2021, Lockhart O'Shea Ltd applied to the Registrar of Companies to restore Spiraxunder s 328(1)(b) of the Companies Act. This was not accepted by the Registrar asthe application did not fall within s 328. The Registrar suggested that application bemade under s 329.[27] It is appropriate for the company to be restored so that it may accept theCrown's buy-back offer. As recorded in Mr Doe's affidavit, this is a major change incircumstances which warrants the restoration of the company and its continuingexistence.Explanation for any delay between the time and the need for restoration was firstidentified[28] This application has been made relatively expeditiously following the receiptof notice from the Crown that the property was surplus to requirements so there is noconcern with delay.Summary on reasons for removal[29] From the above six factors it is clear that the reasons for removal were justifiedat the time but there has now been a major change in circumstances that supports therestoration of the company to the Register.Further factors relevant to "just and equitable" ground[30] As set out above, the Court of Appeal listed three further factors that are to beaddressed in determining whether it is just and equitable to restore a company to theRegister. I now deal with those factors.What steps, if any, need to be taken to remedy any failure to comply with filingrequirements under the Companies Act?[31] The company has not failed to comply with any filing requirements as it wasappropriately removed from the Register following cessation of its business and therewas no continuing need for it to remain in existence.What was the financial position of the company both at the time of the removal and atthe time of restoration?[32] The affidavits filed in support of this application confirm that Spirax had nocreditors or debtors and was solvent when it was removed from the CompaniesRegister. Mr O'Shea confirmed that in its final financial statement for the year ended31 March 2017 Spirax reported a loss of $21,734 which was allocated to theshareholder as a loss from a Look Through Company. A copy of the financialstatement is annexed to Mr O'Shea's affidavit.[33] Spirax has not traded since it was removed from the Register and so has nocreditors or any other parties that will need to be addressed if the company is restored.[34] Mr O'Shea records that Spirax currently has no assets or liabilities. Uponrestoration it will receive a loan from its shareholder to assist with the re-purchase ofthe property from the Crown.[35] Mr Doe deposes that he initially acquired the property because he wanted toundertake a residential property development on the site. Now that the property issurplus to the Crown's requirements, Spirax is intending to pursue the developmentthat was originally intended.Are there any outstanding creditors and are there any matters in relation to thefinancial affairs of the company that are relevant to restoration?[36] As recorded above, there are no outstanding creditors for Spirax and there areno other matters that need to be taken into account in relation to the financial affairsof the company.Registrar of Companies[37] The proceedings were served on the Registrar of Companies on 9 July 2021.[38] The Registrar of Companies considered the application and supportingaffidavits and has consented to the restoration of Spirax to the Register of Companies.The Registrar confirmed in a joint memorandum filed with the applicant that they areunaware of any failure by Spirax to comply with any provisions of the Companies Actor any regulations made under the Companies Act at the time it was removed from theRegister in terms of s 329(3).Secretary to the Treasury[39] A direction was made by Associate Judge Andrew by minute dated 22 July2021 that the application was to be served on the Secretary to the Treasury. Followingservice, a representative confirmed that the Secretary had no objection to therestoration, did not wish to be heard by the Court and would abide the Court's decision.Conclusion[40] In all of the circumstances, I consider that it is just and equitable for Spirax tobe restored to the Register. I therefore make orders below as sought together with thenecessary grant of leave and an administrative order in case it is necessary.Orders[41] I order that:(a) this proceeding may be brought by way of originating application;(b) Spirax Ltd is restored to the New Zealand Register of Companies;(c) Spirax Ltd is to comply with any requirements of the CompaniesRegistrar in respect of the restoration.________________________________Associate Judge Sussock