YENOHAM V CIR HC AK CIV.2006-404-7754

YENOHAM V CIR HC AK CIV.2006-404-7754 18 July 2007IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV.2006-404-7754IN THE MATTER OF the Companies Act 1993 BETWEEN YENOHAM HOLDINGS LIMITED Applicant AND COMMISSIONER OF INLAND REVENUE Respondent Hearing: 18 July 2007 Counsel: T M Molloy for Commissioner Michael W Tolhurst for Yenoham Holdings Ltd Judgment: 18 July 2007[ORAL] JUDGMENT OF WILLIAMS JSolicitors: Crown Solicitor, Auckland Email: tom.molloy@meredithconnell.co.nz Citylaw, P O Box 6086 Wellesley Street, Auckland Email: mike@citylaw.co.nz Sharon Chivers, Case Officer, Auckland High Court Email: sharon.chivers@justice.govt.nz[1] This application by Yenoham Holdings Ltd for restoration to the Companies Register came before the Court today because Associate Judge Faire, on 28 May 2007, made the point that Associate Judges now do not have jurisdiction to restore companies to the register and Yenoham Holdings Limited has been struck off. [2] Alongside an application to restore Yenoham Holdings to the register was an application by the company, or in the company's name, to restrain the publication of the statutory advertisement and stay the Commissioner's liquidation proceedings which were the original bases for the matter being filed in Court. [3] It is plainly appropriate to deal with the restoration application first. [4] The application was brought by way of ordinary interlocutory application in the liquidation proceedings and in the company's name. It is clear, as Mr Molloy for the Commissioner pointed out, that the application has been brought in the wrong form. It has not complied with certain statutory requirements as to service and it appears to have been brought by the company itself when, of course, the company has had no existence since it was struck off the register and accordingly is incapable of filing the application. [5] There is, however, only a comparatively modest amount in dispute between the parties. [6] At or before 13 August 2003, the date Yenoham was struck off the register, it apparently owed $15,977.29 for GST to the Commissioner. Since that time, with the addition of statutory penalties and use of money interest and the like, the sum has increased significantly to the point where the statutory demand dated 26 October 2006 was for $56,765.86. That relates to tax for the 2000-2003 years plus, as mentioned, late payment of penalties and interest.[7] Given the relatively modest sums in issue, this is a case where the technical requirements should be complied with but should not be an impediment to dealing with the issues in the sense of requiring Yenoham or its former director, Mr Mahoney, to start again with the required statement of claim. [8] Accordingly, the application for restoration will be dealt with as if it were made by Mr Mahoney on behalf of Yenoham. He was a shareholder and director of Yenoham at the time it was removed from the register and accordingly qualifies in terms of the Companies Act 1993 s 329(2)(a)(i). [9] Mr Molloy is also correct that the file discloses that the required service of the application on Treasury has not been effected nor has there been service on any secured creditor. Accordingly, the order for restoration will be conditional on service of the proceedings on Treasury and the passage of 14 days after service to enable Treasury to respond if it wishes. [10] The only financial records of the company in evidence are for the period ended 31 March 2000. They show no secured creditors but if, by some chance, there were securities entered into between those accounts and the date the company was removed from the register, then the order for restoration also needs to be conditional on service on any secured creditor with, again, 14 days available for any such creditor to respond. [11] The order for restoration will be as at the date of removal, 13 August 2003, and thus the company will be deemed to have continued in existence since that date (s 330(2)). The order for restoration, however, is also conditional on the payment by Yenoham of all annual fees and any other fees payable to the Registrar of Companies and with a receipt for the payment to be deposited in Court. [12] For reasons which will appear, the restoration order is also to be conditional on Mr Mahoney, on Yenoham's behalf, taking no action to appoint a liquidator to Yenoham without notification to the Commissioner of his intention so to do and 72 hours elapsing after notification in order that the Commissioner can take urgentaction in this proceeding if he thinks it appropriate by way of an application for stay or an injunction to prevent Mr Mahoney appointing a liquidator to Yenoham. [13] The basis for restoring Yenoham to the register is that to date it would appear from the evidence that Mr Mahoney's attempts to negotiate with the Commissioner over the amount of the tax penalties and other dues has been unsuccessful. As the learned authors of Andersons Company and Securities Law make clear, there have been a number of cases where a company has been restored to the register to enable it to pursue investigations against possible claims or to pursue claims (paras CA.329.07, 329.09 pp 1-2022-2023). That provides a sufficient justification for restoring Yenoham to the register. Unless the company is resuscitated there is no legal entity on whose behalf Mr Mahoney can negotiate with the Commissioner, or indeed even pay the debt to the Commissioner if that proves to be the course of action on which Mr Mahoney settles. [14] Turning then to the application to restrain publication of the required advertisement in the winding-up proceedings. [15] As discussed with Mr Tolhurst, counsel for Yenoham during the hearing, there is really no basis, either in law or in logic, for making such an order. [16] Mr Mahoney's concern is that if advertising of the winding-up proceedings against Yenoham is permitted that may have some flow-on effect as regards substantial business which other companies controlled by him have with major corporate entities. However, there is no basis for that concern. The other companies have remained completely different names from Yenoham. A perceptive contractor may work out that Yenoham is Mr Mahoney's name in reverse but, even so, Mr Mahoney's fears of any flow-on effect seem misdirected. [17] In addition, even before today's hearing, Mr Mahoney had attempted to appoint a liquidator, Mr Jollands, to Yenoham. The appointment was invalid of course because the company is no longer in existence, but Mr Jollands' appointment has been advertised and there is nothing in the evidence to suggest thatMr Mahoney's concerns about any possible effect of that appointment on the business of his other companies has come to pass. [18] For all those reasons, as Mr Tolhurst was constrained to acknowledge in the exchanges between Bench and Bar, there is just no basis on which restraint of advertising should be ordered and accordingly there is no basis for ordering a stay as well. [19] Those applications are formally dismissed. [20] That leaves the winding-up proceedings. They are, of course, within thejurisdiction of the Associate Judges and should be determined by an Associate Judge. They are at the point where they are, it would appear, ready to be heard, apart from the fact that Yenoham filed a statement of defence as long ago as 9 February 2007. [21] Accordingly, the appropriate course as regards the winding-up proceedings is to direct that they be set down in an Associate Judge's liquidation list on a date to be fixed by the Registrar in about mid-September 2007. At a convenient point prior to that date an Associate Judge is requested to convene a telephone conference with counsel to ascertain whether the liquidation proceedings are to be opposed. That will obviously have an effect on the duration of the hearing and the Associate Judge can make appropriate timetabling orders in respect of the liquidation proceedings according to the way in which they are to continue. [22] Having regard to the outcome of the various applications, although the Commissioner's stance was a proper one in drawing to attention the problems facing the various matters, the Court's view is that costs should lie where they fall and accordingly there will be no order for costs either way. ..WILLIAMS J.