PARDINGTON v MELITA PROPERTIES LTD (IN STATUTORY MANAGEMENT) [2016] NZHC 1046

PARDINGTON v MELITA PROPERTIES LTD (IN STATUTORY MANAGEMENT) [2016] NZHC 1046 [19 May 2016]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2015-404-2862[2016] NZHC 1046BETWEEN RODNEY GANE PARDINGTONPlaintiffAND MELITA PROPERTIES LIMITED (INSTATUTORY MANAGEMENT)First DefendantGWIN CORPORATION LIMITED (INLIQUIDATION AND IN STATUTORYMANAGEMENT)Second DefendantMISKIN ENTERPRISES LIMITED (INSTATUTORY MANAGEMENT)Third DefendantCHISMON LIMITEDFourth DefendantNORTHFORD HOLDINGS LIMITED(IN STATUTORY MANAGEMENT)Fifth DefendantTHE MILLENNIUM CHARITABLETRUST (IN STATUTORYMANAGEMENT)Sixth DefendantHearing: 19 May 2016Appearances: N H Malarao for plaintiffNo appearance for defendantsJudgment: 19 May 2016JUDGMENT OF LANG J[on application for orders placing defendants in liquidation]This judgment was delivered by me on 19 May 2016 at 2.30 pm,pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate[1] In this proceeding the statutory manager of the six defendants seeks orders placing each in liquidation. The first to fifth defendants are companies incorporated under the Companies Act 1993, whilst the sixth defendant, The Millenium Charitable Trust (Millenium), is a charitable trust incorporated under the Charitable Trusts Act 1957.[2] The only parties interested in the proceeding are Mr and Mrs Garry and Wendy Crawford, who were shareholders and directors of all of the companies other than the fourth defendant, Chismon Limited (Chismon). Mr and Mrs John and Christine Parkes are the shareholders and directors of Chismon. Those parties have been served, but have taken no steps to oppose the applications. They have contacted the Court by email, however, to confirm they are aware of the applications. Mrs Crawford appeared at the hearing but did not wish to make submissions in relation to the orders that the statutory manager seeks.[3] As protector of charities, the Attorney-General has also been served with this proceeding because of the involvement of Millenium. Counsel for the Attorney- General has filed a memorandum confirming that the Attorney-General accepts that the liquidation of Millenium appears to be justified. For that reason the Attorney- General does not oppose Millenium being placed in liquidation.Background[4] All of the defendants were involved in one way or another in the development and operation of a retirement village complex known as the Peninsula Club. The retirement village is situated at Whangaparaoa.[5] The contractual relationship between each of the defendants and between the defendants and the residents of the retirement village is extremely complex. In the early 1990s, the defendants defaulted on their obligations to the residents. A state of paralysis then ensued, and this prevented residents of the village from being able to resell their units. As a result, Mr Pardington was appointed statutory manager of all six defendants on 20 October 1994 under the Corporations (Investigations and Management) Act 1989 (CIMA).[6] Since his appointment Mr Pardington has spent considerable time and money endeavouring to unravel the affairs of the defendants. He has set out the results of his investigation in a detailed affidavit sworn in support of the current application. It is not necessary to describe his findings for present purposes, but the affidavit provides a convenient summary of the defendants' affairs. It will no doubt be an extremely valuable starting point for those tasked with continuing the administration of the defendants' affairs from this point on.[7] The current position appears to be that the first defendant, Melita PropertiesLimited (Melita), has outstanding liabilities to the Commissioner of Inland Revenuein respect of GST amounting to approximately $464,000. Melita is also indebted toMillennium in the sum of $1.8 million. The second defendant, Gwin CorporationLimited, was already in receivership and liquidation when it was placed in statutorymanagement. It owes creditors the sum of $454,197.55. Mr Pardington hasconcluded that both Melita and Gwin are insolvent.[8] Mr Pardington has identified several complex legal issues that will need to be determined as residents leave and the units in the complex are sold down. A statutory manager does not have the power to deal with many of these because it is likely that insolvency principles will need to be applied. For that reason he recommends that all defendants be placed in liquidation by the Court, and that the Official Assignee be appointed as liquidator. The Official Assignee will then be able to determine and distribute residual surpluses in accordance with the respective entitlements of creditors and shareholders.JurisdictionThe companies[9] There is no jurisdictional barrier to all the defendants other than Gwin being placed in liquidation under the Companies Act 1993 on the ground that it is just and equitable to make that order.1 Once such an order is made, the statutory management will come to an end.21 Companies Act 1993, s 241(4)(d).2 Corporations (Investigation and Management) Act 1989, s 62(2).[10] There is an issue with Gwin, because it was placed in liquidation under the provisions of the Companies Act 1955. The liquidation ceases by virtue of s 61 of CIMA for the duration of the period of statutory management, but it is obviously not possible to place Gwin in liquidation on a second occasion. For that reason Mr Malarao advises me that no order is now sought in relation to Gwin. Instead it will be necessary for the statutory manager to seek the promulgation of an Order in Council terminating the statutory management of Gwin. At that point the liquidation of Gwin will again take effect, and arrangements can be made for the Official Assignee to conclude the liquidation.Millenium[11] As counsel for the Attorney-General reminds me, the general rule in trust law is that a trust cannot be terminated.3 Where, as here, the deed creating the trust does not contain a clause permitting the board to wind the trust up, the Court has the power under s 25 of the Charitable Trusts Act 1957 to place the trust in liquidation. It may do so where it is just and equitable to make such an order. The applicant must satisfy the Court on the balance of probabilities that it is just and equitable to make the order having regard to all relevant rights and interests.[12] The circumstances in which the Court may exercise this power differ significantly from those in which the Court will exercise its power to place a company in liquidation. It should not be assumed that the order will be made merely for the sake of convenience.4Decision[13] There can be little doubt that the issues Mr Pardington has identified warrant a common liquidator being appointed for all defendants. For that reason, I have concluded it is appropriate for the statutory management of the defendants now to be brought to an end, and for the affairs of the defendants other than Gwin to be placed in the hands of a common liquidator.3 National Anti-Vivisection Society v Inland Revenue Commissioners [1047] 2 All ER 217.4 Congregational Christian Church of Samoa (Westmere) Trust Board v Tilaima HC Auckland CIV 2008 404 1893, 20 December 2010 at [74]-[77] and [98].[14] I therefore make orders under s 241(4)(d) of the Companies Act 1993 placing all defendants other than Gwin in liquidation on the ground that it is just and equitable that such orders be made. The Official Assignee is appointed liquidator of each of those companies.[15] The orders are timed at 12.30 pm on 19 May 2016.[16] I make no order in respect of Gwin Corporation Limited.Lang JSolicitors:Meredith Connell, Auckland