WENZHOU HONGLIANG TRADING CO Ltd v THE REGISTRAR OF COMPANIES [2023] NZHC 621 _x000b_

WENZHOU HONGLIANG TRADING CO Ltd v THE REGISTRAR OF COMPANIES [2023] NZHC 621[27 March 2023]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2022-404-2028[2023] NZHC 621UNDER the Companies Act 1993, section 329IN THE MATTER OF an application to restore MSM HOLDINGSNZ LIMITED (1573407) to the Register ofCompaniesBETWEEN WENZHOU HONGLIANG TRADINGCOMPANY LIMITEDApplicantAND THE REGISTRAR OF COMPANIESRespondent Cont overHearing: 6 March 2023Appearances: W C Pyke for the ApplicantJudgment: 27 March 2023JUDGMENT OF ASSOCIATE JUDGE BRITTAINThis judgment was delivered by me on 27 March 2023 at 10 am, pursuant tor 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Solicitors/CounselSneddon and Associates, Auckland,CIV-2022-404-2118UNDER the Companies Act 1993 section 329IN THE MATTER of an application to restore MSUTTRUSTEE LIMITED (1573389) to theRegister of CompaniesBETWEEN WENZHOU HOGLIANG TRADING COLIMITEDApplicantAND The REGISTRAR OF COMPANIESRespondentIntroduction[1] Wenzhou Hongliang Trading Co Ltd (WHTC) applies for orders pursuant tos 329 of the Companies Act 1993 (the Act), restoring MSM Holdings NZ Ltd (MSM)and MSUT Trustee Ltd (MSUT) to the New Zealand Companies Register. WHTCalso seeks orders under s 284 of the Act appointing a new liquidator in respect of bothcompanies.[2] The applications are part of WHTC's ongoing effort to recover debts owed toit by Wentzro Co-operation Ltd (Wentzro), by seeking recovery from interestsassociated with a director of Wentzro, Mr Gerald Williams, adjudicated bankrupt.[3] MSM and MSUT were, prior to liquidation, companies associated withMr Williams. MSUT was the corporate trustee of Mr Williams' family trust, theGN Williams Family Trust. Mr Williams owned one share in MSM and MSUT ownedthe balance. Mr Williams was, at relevant times, the sole director of MSM, and hisaccountant was the sole director of MSUT at liquidation.Procedural background[4] On 6 October 2022, WHTC filed originating applications to restore MSM andMSUT to the Register. Mr Wei Lin provided affidavits in support of each application.[5] On 28 November 2022, Associate Judge Taylor granted leave to WHTC toapply for orders under s 284(1)(b) of the Act reversing the liquidator's final reports.1[6] Associate Judge Taylor also ordered that the Official Assignee be served withthe proceedings and that the applications in respect of MSUT and MSM be heardtogether. The respondent and the Official Assignee are abiding the Court's decision.1 Wenzhou Hongliang Trading Co Ltd v Registrar of Companies HC Auckland CIV-2022-404-2118,28 November 2022 at [9] and Wenzhou Hongliang Trading Co Ltd v Registrar of Companies HCAuckland CIV-2022-404-2028, 28 November 2022 at [9].Factual background[7] The dispute underlying these applications relates to a contract between WHTCand Wenztro for the supply of infant formula. Mr Williams was a director of Wenztroand dealt with WHTC on Wenztro's behalf.[8] WHTC alleged that Wenztro supplied it with faulty goods, failed to providesubstitutes and did not refund it for the amount it had paid to purchase the goods.WHTC sought summary judgment against Wenztro for breach of contract. Before thatapplication could be heard, Wenztro was placed in liquidation by its shareholders.WHTC was, however, permitted to continue its claim against Wenztro, and on30 October 2021 WHTC obtained summary judgment against Wenztro for$617,396.61.2[9] Wenztro's liquidators, funded by WHTC, then issued proceedings againstWenztro's directors, including Mr Williams, for breach of their director's duties. Thedirectors defended the proceedings but were unsuccessful. Judgment was enteredagainst Mr Williams for approximately $900,000, inclusive of costs.3[10] Mr Williams did not settle the judgment debt. On 12 February 2019, Wenztro'sliquidators assigned their rights in relation to the judgment to WHTC. On23 September 2020, Mr Williams was adjudicated bankrupt.[11] WHTC then applied to this Court for orders under s 348 of the Property LawAct 2007, in respect of alleged dispositions of funds by Mr Williams to MSUT andMSM, intended to prejudice WHTC's position as a creditor of Mr Williams.[12] In November 2021, Lang J found that in a series of transactions inSeptember 2017 and October 2018, Mr Williams diverted money to the GN WilliamsFamily Trust and MSM in order to diminish his own estate and defeat his creditors.4Lang J made orders under s 348 requiring MSM to pay $375,425 to the Official2 Wenzhou Hongliang Trading Co Ltd v Wenztro Co-operation Ltd HC Auckland CIV-2012-404-5130, 31 October 2012.3 Finnigan v Ellis [2018] NZHC 1146.4 Wenzhou Hongliang Trading Co Ltd v MSUT Trustee Ltd [2021] NZHC 3052 at [35]–[40].Assignee, and for MSUT and MSM to pay $124,575 to the Official Assignee.5 Thejudgment was sealed on 11 November 2021. MSUT and MSM were ordered to payWHTC $33,638.50 in costs.[13] MSM and MSUT were placed into voluntary liquidation on 15 November 2021and 15 February 2022 respectively. Mr Thomas Rodewald was appointed as the soleliquidator of both companies. WHTC made a claim as a creditor in each liquidation.Discussion[14] A creditor has standing to apply to the Court under s 329 of the Act to restorea company to the Register.6 WHTC is a creditor of MSUT and MSM by virtue ofLang J's orders for costs.[15] The grounds for a restoration order are set out in s 329(1). WHTC relies onthe ground in s 329(1)(a)(iv), namely that it is an undischarged creditor of the twocompanies.[16] Where an applicant can establish grounds for restoration, the Court retains aresidual discretion regarding whether restoration should be ordered. That discretionhas been described as a "negative discretion"; unless there are some discretionaryfactors that point against restoration, an order should be made.7[17] I accept that this is an appropriate case to order restoration. WHTC wishes topursue a genuine claim in good faith. WHTC has pointed to transactions between thirdparties and MSM and/or MSUT, prior to the liquidation of MSM and MSUT, which aliquidator may be able to successfully challenge to return funds to MSM and MSUT.That would then enable:(a) MSM and MSUT to pay their debts to the Official Assignee;5 At [42]–[43].6 Companies Act 1993, s 329(2)(a)(ii)7 100 Investments Ltd v Registrar of Companies [2020] NZHC 880 at [31] citing Re SalamancaInvestments Ltd [2015] NZHC 572, [2015] 3 NZLR 411.(b) the Official Assignee to pay Mr William's judgment debt to Wenztro;and(c) Wenztro to pay its debt to WHTC.[18] In Registrar of Companies v Body Corporate 307730, the Court of Appealclarified the procedure applicable to the restoration of a liquidated company.8 Theliquidator's final report must be reversed under s 284(1)(b) of the Act before acompany is restored to the Register.9 This is necessary because if a final report remainsin place, the Registrar is statutorily obliged to remove the company from the Registeras soon as it is restored.10[19] Reversing the final report has the effect of abrogating the completion of theliquidation.11 When the company is then restored to the Register, the liquidation isreinstated and the previous liquidator resumes their office.12[20] WHTC advises that Mr Rodewald does not wish to continue as liquidator ofMSUT and MSM if they are restored. WHTC seeks the appointment of Mr DennisParsons as a replacement liquidator of both companies under s 241(2)(c)(iv) of theAct. Mr Parsons has filed affidavits consenting to his appointment, and Mr Parsonsqualifies for appointment under s 280 of the Act.Result[21] I make the following sequential orders:(a) The liquidator's final report on the liquidation of MSM Holdings NZLtd is reversed.(b) The liquidator's final report on the liquidation of MSUT Trustee Ltd isreversed.8 Registrar of Companies v Body Corporate 307730 [2013] NZCA 659, [2014] 2 NZLR 623.9 At [26].10 See Companies Act 1993, s 318(1)(e).11 Registrar of Companies v Body Corporate, above n 8, at [16] citing Re Ocean Shipping Ltd HCAuckland M348/96, 16 July 1996.12 Registrar of Companies v Body Corporate, above n 8, at [16].(c) MSM Holdings NZ Ltd and MSUT Trustee Ltd are restored to theRegister.(d) Mr Dennis Parsons is appointed as liquidator of MSM Holdings NZ Ltdand MSUT Trustee Ltd.(e) There is no order as to costs._____________________Associate Judge Brittain