100 Investments Ltd and Others v Registrar of Companies

JurisdictionNew Zealand
JudgeP J Andrew,Andrew
Judgment Date01 May 2020
Neutral Citation[2020] NZHC 880
CourtHigh Court
Docket NumberCIV-2019-404-001664
Date01 May 2020

UNDER the Companies Act 1993

IN THE MATTER OF an application to restore SPF NO 10 LIMITED to the Register

Between
100 Investments Limited
First Applicant
FTG Securities Limited
Second Applicant
RFD Finance Limited
Third Applicant
Tomanovich Holdings Limited
Fourth Applicant
and
Registrar of Companies
Respondent

[2020] NZHC 880

JUDGE P J Andrew

CIV-2019-404-001664

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA

TĀMAKI MAKAURAU ROHE

Companies — application to restore a company to the Register of Companies and for leave to continue proceedings against the company — the applicants were assignees of top-ranking securities — whether settlement funds of subsidiary companies belonged to the applicants — whether the settlement funds were after-acquired property of the subsidiaries or proceeds of collateral — Companies Act 1993 — Personal Property Securities Act 1999

Appearances:

A Barker QC for Applicants

No appearance for Respondent (abiding decision of the Court)

D Bigio QC and N Firth for LPF, PVL Group Ltd in opposition

JUDGMENT OF ASSOCIATE JUDGE P J Andrew

This judgment was delivered by Associate Judge Andrew on 1 May 2020 at 3.30 pm pursuant to r 11.5 of the High Court Rules

Registrar / Deputy Registrar

Date

Introduction
1

The applicants are assignees of top-ranking securities in subsidiaries of Property Ventures Ltd (PVL). PVL and its subsidiaries (the PVL group) are now in liquidation. They were originally involved in individual property developments and investments.

2

The liquidators of the PVL group brought proceedings against various parties, including former directors of PVL and PricewaterhouseCoopers, in relation to alleged breaches of duty said to have contributed to the PVL group's collapse in 2010 (the PVL proceedings).

3

To fund the PVL proceedings the liquidators entered into a litigation funding agreement (the funding agreement) with SPF No 10 Ltd (SPF). SPF is the subject of the current application. It was a special-purpose vehicle incorporated for the PVL proceeding and a wholly-owned subsidiary of LPF Group Ltd (LPF). SPF has been removed from the Register of Companies (the Register).

4

PVL's liquidators subsequently reached confidential settlements with each of the defendants in the PVL proceedings, who agreed to pay certain amounts to the liquidators (the PVL settlement). The PVL proceedings were then discontinued.

5

The applicants have filed related proceedings ( 100 Investments Ltd & Ors v Walker & Ors CIV-2019-404-1160) in this Court against the liquidator of PVL and its subsidiaries; and against SPF and LPF (the primary claim proceedings). The substance of the primary claim proceedings is that some of the proceeds from the PVL settlement must have belonged to PVL's subsidiaries and should have been applied to their benefit. If that had been done, the applicants say that they would have received part of the settlement proceeds through the securities that they held.

6

In order to advance the primary claim proceedings, the applicants in their present application before me seek orders pursuant to s 329 of the Companies Act 1993 (the 1993 Act) to restore SPF to the Register, and for leave to continue proceedings against SPF in the primary claim proceedings, pursuant to s 248(1)(c) of the 1993 Act (the applications).

7

LPF opposes the applications and the Registrar of Companies abides the Court's decision. LPF contends there is no utility in restoring SPF to the Register — the sole reason for the applications is to pursue a claim against SPF in the primary claim proceedings, which LPF says is factually and legally unsustainable.

8

The applicants say the legal basis for their claim against SPF is reasonably simple. The funds received in the PVL settlement were owned in part by the applicants. This is either because they were after-acquired property of the subsidiaries under ss 43 and 44 of the Personal Property Securities Act 1999 (PPSA), or they were the proceeds of collateral under s 45 of that Act.

Factual background
9

The applicants describe the funding for the PVL group as follows. Loans were made by third party funders to the individual subsidiary and secured by a first ranking charge over the assets of that subsidiary. There were then cross-guarantees given by other members of the group, including PVL. PVL was not a substantial borrower in its own right. Its liability was only as a result of a claim by a creditor or a subsidiary company pursuant to a guarantee that PVL had granted.

10

In terms of the guarantees that PVL provided, it granted Hanover Finance Ltd (Hanover) a GSA over its assets to support its guarantee of loans to one of its subsidiaries (the Allied GSA). 1 The underlying debt for that advance and the supporting securities were assigned to Allied Farmers Investment Ltd and then SPF (the Allied Finance loan).

11

The PVL group was placed into liquidation in the period between 2010 and 2012. Mr Walker and Mr Scutter were appointed the joint liquidators of PVL. Mr Walker was the sole liquidator of the subsidiaries.

12

Following their appointment, the liquidators investigated the potential for claims on behalf of unsecured creditors of the PVL group. On 31 October 2012, to facilitate those claims, the liquidators entered into the funding agreement.

13

The Supreme Court considered the funding agreement and whether it amounted to champerty and/or abuse of process in its 2018 judgment PricewaterhouseCoopers v Walker. 2 The relevant parts of the Supreme Court's description of the funding agreement are as follows: 3

  • (a) SPF would obtain a first ranking security interest over the assets of PVL, and in particular, would acquire the Allied Finance loan and the Allied GSA.

  • (b) SPF would fund the litigation through a loan to PVL. The costs of the litigation were referred to as the “Project Costs”.

  • (c) If any claim was successful, SPF would be repaid the Project Costs. It would also receive a “Services Fee” of either two times the Project Costs or 42.5 per cent of the remaining amount recovered (whichever was greater).

14

SPF subsequently obtained an assignment of the Allied Finance loan with securities, as well as a loan from the Dominion Finance Group Ltd with securities (not the focus of these proceedings), both of which were guaranteed by PVL. SPF therefore held a priority claim to any funds received by PVL.

15

Following the signing of the funding agreement, the liquidators of the PVL group issued the PVL proceedings. This included not only claims against the former directors and the auditor of PVL (namely, PricewaterhouseCoopers), but also the valuers of various properties owned by PVL's subsidiaries. The claims were brought through a combination of various plaintiffs. All of the claims sought recovery based on the combined liability of the subsidiaries to their third-party funders (some $302m), and some of the claims were brought directly in the name of the subsidiaries (rather than that of PVL).

16

The PVL proceedings were settled in the period between 2015 and 2017.

17

The applicants say that after the deduction of the liquidators' fees, all funds appear to have been paid to SPF and/or LPF, either under the funding agreement, or the Allied GSA. They say that no funds appear to have been paid to PVL's subsidiaries nor dealt with as part of their liquidations.

18

As assignees of top-ranking securities in seven of the subsidiaries, the applicants say PVL's subsidiaries owed them at least 24 per cent of the total amount of the claims that were settled.

19

On 28 February 2019, SPF was placed into liquidation by special resolution of its sole shareholder, LPF.

20

On 5 March 2019, SPF's liquidator issued his first and final report. On the basis of advice from management, he concluded that the company did not have any assets or liabilities and was therefore solvent. He did not take any steps to investigate that claim.

21

SPF was removed from the Register on 4 April 2019.

22

The primary claim proceedings were filed on 14 June 2019. 4 At that time, the applicants say they were not aware that SPF had been removed from the Register. They filed this application once they became aware of that fact.

23

LPF and the other defendants then applied to strike out the primary claim proceedings. Shortly before the hearing of the strike-out application, the plaintiffs (the applicants in these proceedings) agreed to re-plead on the basis of three draft causes of action provided to LPF and the other defendants. These draft causes of action are annexed to the applicants' submissions in this case.

24

LPF says it withdrew its strike-out application not because it conceded that the claims had merit, but only because proposed amendments would result in the claim complying with the basic rules of pleading. LPF remains of the view that those claims cannot succeed against it or SPF.

25

The applicants here have not yet filed an amended statement of claim. However, in the draft amended document before me, attached to their submissions, the applicants make the following claims:

(a) In paying away the settlement proceeds to SPF and LPF, the liquidators, SPF and LPF:

  • (i) Have converted the funds (on the authority of Dunphy v Sleepyhead Manufacturing Co Ltd); 5

  • (ii) are liable for money had and received (on the authority of McKay v Johnson); 6 and

  • (iii) hold the funds subject to the applicants' security interests (in accordance with the provisions of the PPSA).

26

The applicants say that SPF is a critical party in the primary claim proceedings. It was SPF which was party to the funding agreement and took the assignment of the Allied GSA. It was also a party to the PVL settlement and the applicants thereby claim that SPF's role and its potential liability is central to those proceedings.

27

LPF was served with a copy of the application to restore SPF to the...

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    • High Court
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