SOUTH CANTERBURY FINANCE LIMITED V THE REGISTRAR OF COMPANIES HC PMN CIV 2009-454-497

SOUTH CANTERBURY FINANCE LIMITED V THE REGISTRAR OF COMPANIES HC PMN CIV 2009- 454-497 28 October 2009IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY CIV 2009-454-497IN THE MATTER OF the Companies Act 1993 AND IN THE MATTER OF an application pursuant to section 323 of that Act BETWEEN SOUTH CANTERBURY FINANCE LIMITED Applicant AND THE REGISTRAR OF COMPANIES Respondent Hearing: 27 October 2009 (On Papers) Counsel: D I Sheppard for Applicant G Caro for Respondent Judgment: 28 October 2009JUDGMENT OF SIMON FRANCE J Introduction[1] By agreement this matter is being determined on the papers following the filing of written submissions. [2] The case concerns the meaning of s 323(1) of the Companies Act 1993. The section provides:(1) A person who gives notice objecting to the removal of a company from the New Zealand register on a ground specified in s 321(1)(d), (e) or (f) may apply to the Court for an order that the company not be removed from the register on any ground set out in that subsection.[3] The issue is whether the notice provision in s 321, which requires notice of objection to be given to the Registrar by a certain date, governs s 323. Does the Court's power arise independently, or only if notice was first given to the Registrar within time?Facts[4] Notice was given by the Registrar of an intention to remove a company, Future Developments Limited. Notice of objection was to be given by 17 January 2009. [5] South Canterbury Finance Limited filed objection on 11 February 2009. The Registrar rejected the Notice as being out of time. On 3 July 2009 the applicant filed an Originating Application in this Court seeking orders that Future Developments Limited not be removed from the register. It had not by then been removed because Inland Revenue had filed a notice in time. That objection still exists, so removal has not occurred.Submissions(a) Applicant[6] The applicant's submissions are founded on the proposition that the Registrar's interpretation creates serious difficulties. These difficulties focus on the plight of creditors. It is said: a) if no notice is filed, the Registrar must remove. As a consequence all assets of the removed company are vested in the Crown, free of any encumbrance or security. Here, an asset of Future DevelopmentsLimited over which the applicant holds a security will be vested in the Crown and lost to the applicant. It is acknowledged that there is capacity to apply to the Court for compensation; b) to have the company restored the Creditor will have to go to Court if any objection to restoration is filed; c) if the company is restored, only the company and not the creditor may apply to have land vested in the Crown by removal transferred back. [7] Because of these difficulties the applicant seeks a remedial reading which would allow an application to the Court any time before the company is removed.(b) Respondent[8] The Registrar replied first by filing evidence from an Assistant Registrar. [9] The Act requires the Registrar to give notice of an intention to remove. Time is to be allowed for objections, such period being not less than twenty working days. On the day following expiry, checks are made to see if an objection has been lodged. If not the direction to remove is entered, and this will take effect at 5.00 a.m. the next day (when the computer system does its end run). Thus, if notice expires at 5.00 p.m. Tuesday, and there is no objection, removal will occur at 5.00 a.m. Thursday. [10] Practically it is said the applicant's concerns do not arise. First, the Crown is not notified of removals so the vesting process does not in fact ever occur, at least formally. Second, restorations almost always are done by the Registrar. Of 1010 restorations done up to September 30 this year, 997 were effected by the Registrar and 13 by the Court. [11] In submissions on behalf of the Registrar the primary focus is the statutory scheme. I will address that in my decision. Concerning policy, it is said the applicant's concerns are overstated. Objections are rare, and on restoration propertythat was vested in the Crown because of removal revests automatically as if removal had not occurred. The one exception is land, but only if transmission has been effected under the Land Transfer Act 1952. Such transmission seldom, if , ever occurs.Decision[12] The Act provides a clear scheme. Section 318 sets out different grounds of removal, and differing requirements and processes in relation to each. In this case the ground was s 318(1)(b) – cessation of business. [13] Section 318(3A) says that in relation to this ground the Registrar must comply with s 319. Section 319 in turn sets out notice requirements, both for public notice and to persons with a security interest who have registered it under the Personal Property Securities Act 1999. [14] Section 321 then provides for filing an objection to removal. It requires notice of objection to be delivered to the Registrar:not later than the date specified in the notice.Different grounds for objection are identified. [15] Section 322 says that if an objection is filed under grounds (a), (b) or (c), removal shall not proceed unless: a) the objection is withdrawn; or b) the factual basis for objection changes; or c) the objection is frivolous. [16] A different procedure is provided for objections which rely on grounds (d), (e), or (f). Those grounds are available for creditors, shareholders, those with a rightof action on behalf of the company and anyone claiming it would not be just and equitable. [17] Under s 323, any person relying on these grounds may apply to the Court for an order that the company not be removed. This is the provision the applicant relies on. [18] However, under s 322(2), where an objection is made under grounds (d), (e) or (f), the Registrar is required to give the objector notice that unless an application under s 323 is made within twenty working days, the removal will proceed. Likewise, the Registrar is required to notify any objection to the person (if there is one) who requested removal in the first place. [19] The obvious question is how is the Registrar to do this, if the notice requirement under s 321 is inapplicable? The scheme is complete if read as a whole, and the notice requirements are integral to it. Section 323 refers to a person "who gives a notice objecting". That person may apply to the Court. I regard these as sequential rather than the s 323 application constituting the notice. [20] For completeness I observe that I do not consider it matters that the company is still on the register because someone else objected. Section 323(1) can only be read as referring to a person who has validly given notice under s 321. The applicant has not, so cannot rely on s 323. It is also to be noted that there is a relatively straight-forward restoration process that has the automatic effect of undoing the process (except for land in the circumstances already noted). There is no need to complicate the simplicity by allowing a stand alone procedure under s 323. [21] I have no doubt that s 323 is contingent on an objection first being validly filed under s 321. That was not done here and the Court has no jurisdiction to hear the applicant's application of 3 July 2009.[22] The Registrar was correct to decline the applicant's notice, it being filed out of time. There being no valid notice, s 322(2) was not engaged, nor does the Court's power under s 323 arise. Thus the applicant's Notice in this Court must be rejected. ___________________________ Simon France JSolicitors: D Sheppard, FitzherbertRowe, Private Bag 11016, Palmerston North email: d.sheppard@fitzrowe.co.nz G Caro, Ministry of Economic Development, Private Bag 92 513, Wellesley Street, Auckland email: guy.caro@med.govt.nz