MORTYNE AND ANOR v MOANA SUPERTEE PTY LIMITED [2018] NZHC 2671

MORTYNE AND ANOR v MOANA SUPERTEE PTY LIMITED [2018] NZHC 2671 [16 October 2018]IN THE HIGH COURT OF NEW ZEALANDWHANGAREI REGISTRYI TE KŌTI MATUA O AOTEAROAWHANGĀREI-TERENGA-PARĀOA ROHECIV 2017-488-113[2018] NZHC 2671BETWEEN WARWICK RICHARD MORTYNE ANDTRACY CHARLOTTE MAREE RUKEPlaintiffsAND MOANA SUPERTEE PTY LIMITEDDefendantHearing: 11 October 2018Appearances: S B Punshon for PlaintiffsNo appearances for DefendantJudgment: 16 October 2018JUDGMENT OF VAN BOHEMEN JThis judgment was delivered by me on 16 October 2018 at 2.00pmPursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy RegistrarSolicitors:Patterson Law Ltd, Kaitaia[1] The plaintiffs, Warwick Mortyne and Tracey Ruke, have applied for orders:(a) declaring that a property in Ahipara – of which the registered owner isthe defendant company which has been deregistered in Australia - isheld by the company on trust for the plaintiffs; and(b) vesting the property in the plaintiffs.[2] The central issue is whether the Court has the power to make such orders.There is also an ancillary question of whether the proceeding is validly issued sincethe defendant, Moana Supertee Pty Ltd, no longer exists. However, for reasons thatwill become apparent, it is not necessary to deal with that question.[3] The application was filed on 13 October 2017 with an affidavit in supportsworn by Mr Mortyne on 2 October 2017. I heard the application on 11 October 2018.During the hearing, I was provided with further information by Mr Mortyne andMs Ruke to supplement that contained in Mr Mortyne's affidavit.Relevant factual background[4] Mr Mortyne, who is an Australian citizen but is resident in New Zealand, andMs Ruke, who is a New Zealand citizen, were once married and lived in Queensland,Australia. They established a company, Moana Supertee Pty Ltd, in Queensland forthe purposes of managing their property interests. Mr Mortyne and Ms Ruke were theonly two directors of the company. They were also the sole shareholders, each holding50 per cent of the shares.[5] In March 2011, while still resident in Australia, Mr Mortyne and Ms Rukedecided to buy the property at 3 Poseidon Way, Ahipara in New Zealand. While theyused their own funds to meet the purchase price, the purchase was settled in the nameof their company, Moana Supertee. Mr Mortyne and Ms Ruke also used their ownfunds to buy and move a relocatable house onto the property and to meet all expensesassociated with the property.[6] Subsequently, Mr Mortyne and Ms Ruke moved to New Zealand and lived inthe Poseidon Way property. They did not pay rent to Moana Supertee and paidpersonally for the outgoings and maintenance and repair of the property.[7] In April 2013, Mr Mortyne and Ms Ruke separated. They both continue toreside in New Zealand.[8] On 9 April 2016, the Australian Securities and Investment Commission (ASIC)deregistered Moana Supertee apparently having reached the view that the companywas no longer carrying on business. As a consequence, Moana Supertee ceased toexist and could not deal with the Poseidon Way property. Mr Mortyne and Ms Rukeonly became aware of this development after the event.[9] On 6 September 2016, Mr Mortyne and Ms Ruke concluded a RelationshipProperty Agreement which, among other things, provided for the sale of the PoseidonWay property and the division of the proceeds equally between them. To achieve thatoutcome, the Agreement provided that Mr Mortyne and Ms Ruke would apply to theCourt in New Zealand for the property to be vested in them or would seek re-registration of Moana Supertee to enable the company to sell the property.Steps taken to implement the Relationship Property Agreement[10] On 13 October 2017, Mr Mortyne and Ms Ruke filed the current proceeding toachieve the vesting of the Poseidon Way property provided for in the RelationshipProperty Agreement.[11] By minute dated 25 October 2017 in the context of an application for directionsas to service, Bell AJ observed that if Moana Supertee had been a New Zealandcompany, the standard remedy would have been to have the company restored to thecompanies register. Bell AJ noted that similar arrangements appeared to apply inAustralia under the Corporations Act and invited counsel for the plaintiffs to considerthe matter further.[12] By letter dated 16 May 2018, ASIC declined an application by Mr Mortyne forreinstatement of the registration of Moana Supertee on the grounds that unders 201A(1) of the Corporations Act 2001 (Commonwealth), office holders of anAustralian registered company must be ordinarily resident in Australia.[13] By minute dated 13 July 2018, Bell AJ noted that with Moana Superteeremaining deregistered and therefore no longer in existence, there appeared to be no-one holding a freehold estate in the Poseidon Way property – in which case theproperty appeared to have reverted to the Crown by escheat. Accordingly, theAssociate Judge directed that the proceeding be served on the Crown, namely theTreasury.[14] By email dated 26 July 2018, a senior solicitor at the Treasury advised theplaintiffs' solicitors that the provisions of the Companies Act 1993 concerning thevesting in the Crown of property of a company removed from the register did not applyto companies such as Moana Supertee registered under overseas legislation. TheTreasury solicitor recommended that the plaintiffs contact ASIC to ascertain whetherASIC considered the Poseidon Way property had vested in the Australian government.[15] By letter dated 27 July 2018, the plaintiffs' solicitors wrote to ASIC outliningthe background to and providing copies of the current proceeding and asked whetherASIC considered the Poseidon Way property had vested in the Australian Governmentand, if so, whether ASIC would be prepared to disclaim the property.[16] By letter dated 24 August 2018, ASIC confirmed to the plaintiffs' solicitorsthat Moana Supertee had been deregistered on 9 April 2016 and that the property hadeither vested in ASIC (if non-trust property) or the Commonwealth of Australia (if theproperty had been held on trust at the time of deregulation). ASIC went on to adviseon options available under Australian law for reinstatement of the company and fordealing with deregistered company property.[17] With regard to the current proceeding, the ASIC letter suggested that theproceeding was already at an end insofar as it related to the deregistered defendant.However, the letter went on to state that: on the strict understanding that no orders are sought against, or directly affecting,ASIC/the Commonwealth, then ASIC does not oppose any orders sought by theplaintiff in the proceeding. Further, ASIC does not wish to be heard nor wishes to bejoined as a party to the proceeding.Where does title to the Poseidon Way property lie?[18] The answer to this question has been provided to the plaintiffs' solicitors byASIC in its letter of 24 August 2018. In accordance with s 601AD of the CorporationsAct 2001 (Commonwealth), under Australian law:(1) A company ceases to exist on deregistration.(1A) On deregistration, all property that the company held on trust immediatelybefore deregistration vests in the Commonwealth. (2) On deregistration, all the company's property (other than any property heldby the company on trust) vests in ASIC [19] It follows that, whether or not the Poseidon Way property was held on trust forthe plaintiffs, upon the deregistration of Moana Supertee the property vested either inthe Commonwealth of Australia or in ASIC. Accordingly, this is not a case where theproperty is ownerless and requires the intervention of equity to fill a legal vacuum.[20] I do not consider the letter of 24 August 2018 from ASIC to the plaintiffs'solicitors to constitute a waiver of or disclaimer to title to the Poseidon Way property.While the statement in the letter that ASIC does not oppose any orders sought by theplaintiff in the proceeding might be read as acquiescence in the granting of the ordersin the plaintiffs' application, that statement is subject to the qualification that suchorders are not sought against or directly affect ASIC or the Commonwealth. An ordervesting in the plaintiffs a property currently vested in ASIC or the Commonwealthnecessarily directly affects ASIC or the Commonwealth.[21] Accordingly, the essential relief sought by the plaintiffs is outside the terms ofthe permission given in the ASIC letter. Even if that were not the case, I do notconsider that the ASIC letter can be taken as conceding title to property that has vestedin ASIC or the Commonwealth by operation of Australian law.[22] Since the Poseidon Way property has vested in another party, it could not beconsidered to be held on trust by Moana Supertee and it is not open to this Court,whether by way of constructive or resulting trust or otherwise, to purport to vest it inthe plaintiffs.Do the plaintiffs have a beneficial interest in the Poseidon Way property?[23] Even without the complication of the property being vested in ASIC or theCommonwealth of Australia, I do not consider the Court has power to grant the orderssought in the plaintiffs' application.[24] First, the first order sought is an order declaring that Moana Supertee holds thePoseidon Way property on a resulting or constructive trust for the plaintiffs. That is alegal impossibility since Moana Supertee does not exist.[25] Secondly, even if the proposed order was expressed in the past tense, namelythat Moana Supertee held the Poseidon Way property on a resulting or constructivetrust for the plaintiffs, that would require the plaintiffs to establish that they had abeneficial interest in the Poseidon Way property.[26] The plaintiffs do not assert that the Poseidon Way property was acquired byMoana Supertee subject to an explicit or implicit understanding that it would be heldon trust for the plaintiffs. Rather, the statement of claim and the submissions of theplaintiffs' counsel assert that because Moana Supertee has been deregistered andbecause the company has no debtors or creditors and no liabilities, and because theplaintiffs were the sole former directors of the company, a resulting or constructivetrust exists or should be declared by the court to exist.[27] That submission overlooks the basic principle of company law that directorsof a company have no beneficial interest in a company, let alone the assets of thecompany. It is the shareholders that own the company while directors direct andsupervise the management of the company's business.[28] Furthermore, the rights and powers of shareholders are in relation to the sharesof the company and not in relation to the company's assets. Under New Zealand law,those rights include the right to a share in dividends authorised by the board and theright to share in the distribution of the surplus assets of the company.1[29] However, a shareholders' ownership interest in the company does not extendto a legal or equitable interest in the assets of a company, even where the shareholderis the sole or majority shareholder in the company. As Lord Buckmaster said inMacaura v Northern Assurance Co Ltd,2 in a passage cited with approval by the Courtof Appeal in Mahon v The Station at Waitiri Ltd:3Now, no shareholder has any right to any item of property owned by the company, forhe has no legal or equitable estate therein.[30] It follows that, under long-standing principles of company law, the plaintiffshave no beneficial interest in the Poseidon Way property, even if they had a contingentclaim to a distribution of the property if the property was unsold at the dissolution ofthe company.[31] I recognise that this is a disappointing result for the plaintiffs but it is theconsequence of their decision to use their company to purchase the Poseidon Wayproperty. As the Court of Appeal said in Mahon v The Station at Waitiri Ltd:4If a commercial party chooses to hold an entity through a company, then thatis the choice that they have made and by which they must be bound. A partycannot utilise an incorporated structure for the benefits it brings them and thendisavow the necessary legal consequences of the use of that structure when itsuits.[32] While the plaintiffs might say they are not commercial parties and while theinterest held though the company is land rather than another legal entity, the sameprinciples and consequences apply.Where to from here?[33] Notwithstanding the above, there appears to be a path forward that is consistentwith Australian and New Zealand law and respects company law principles common1 Companies Act 1993, s 36.2 Macaura v Northern Assurance Co Ltd [1925] AC 619 (HL) at 625-626.3 Mahon v The Station at Waitiri Ltd [2017] NZCA 387, (2017) 18 NZCPR 760 at [33].4 Mahon v The Station at Waitiri Ltd [2017] NZCA 387, (2017) 18 NZCPR 760 at [37].to both jurisdictions. That is for the plaintiffs to apply to ASIC for a distribution ofthe Poseidon Way property to them in accordance with s 601AF of the CorporationsAct 2001 (Commonwealth). Under that section, to which ASIC referred in its letterof 24 August 2018, ASIC may do an act on behalf of a deregistered company if ASICis satisfied that the company would be bound to do the act if the company still existed.[34] While it is not for this Court to comment on Australian law, it is likely that ifthe company had not been taken off the Australian register, as the only directors andshareholders and in the absence of any liabilities on the part of Moana Supertee, theplaintiffs could have required the company to distribute to them the property or theproceeds of sale if the property had been sold as part of a winding up process.[35] Of course, ASIC is not bound to do the requested act. ASIC might reasonablybe expected, however, to take notice of the fact that the plaintiffs were the soledirectors and shareholders of Moana Supertee and – according to the informationprovided to the Court – the property was the company's sole asset and there were nocreditors and no other liabilities for the company to meet. It is also likely to be relevantto ASIC's decision that the plaintiffs had provided the funds for the company toacquire the property and had met all outgoings and the costs of maintenance and repair.[36] ASIC may also take notice of this decision that this Court has found that it doesnot have the power to make the orders sought in the plaintiffs' application.Result[37] The application is dismissed.[38] Leave is reserved to apply in the event the plaintiffs are unable to secure asatisfactory resolution of the issue through an application to ASIC.______________________G J van Bohemen J