Wellington City Council v Registrar of Companies

• Jurisdiction: New Zealand
• Judge: R M Bell
• Judgment Date: 26 March 2015
• Neutral Citation: [2015] NZHC 572
• Docket Number: CIV-2014-404-3039
• Court: High Court
• Date: 26 March 2015

BETWEEN

Wellington City Council

Applicant

and

Registrar of Companies

First Respondent

and

Registrar of Companies

First Respondent

and

Timothy Owen Dromgool

Second Respondent

and

Allan McKenzie Fraser

Third Respondent

and

Willemstad Developments Limited

Fourth Respondent

and

Secretary of the Treasury

Fifth Respondent

[2015] NZHC 572

CIV-2014-404-3039

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

Application under s329 Companies Act 1993 (CA) (Court may restore company to New Zealand register) to restore a company to the register so that the applicant council could claim a contribution from it under s17(1)(c) Law Reform Act 1936 in a leaky building claim — company went into voluntary liquidation shortly after building an apartment complex — the last of the code compliances was issued in 1999 — company was removed from register in 2006 — owners applied for an assessors report under Weathertight Homes Resolution Services Act 2006 (WHRSA) in 2008 — whether the proceedings were time barred — whether the council had standing as a creditor of the company under s329(1)(iv) CA — whether the council had to prove that it had a strong claim against the company — whether the application was futile because it was inevitable that any joinder application would fail under s111 WHRSA and because the company had no assets to satisfy any liability — whether there should be an order under s248(1)(c) CA permitting the council to commence and continue proceedings against the company rather than proving its claim in the liquidation.

Counsel:

F Divich and B Martelli for Appellant

K P McDonald for Second and Third Respondents

S P Pope and A J Nelder for Fourth Respondent

No apperance for Fifth Respondent (abides decision of court)

JUDGMENT OF ASSOCIATE JUDGE R M Bell

TABLE OF CONTENTS

	Paragraph
Introduction	[1]
Facts	[6]
The council's case	[14]
Companies Act 1993 ss 329 and 330	[19]
A procedural matter: leave to apply by originating application — r 19.5	[21]
Insufficient particulars of just and equitable ground	[29]
Insufficient pleading as to Council's status as creditor	[32]
Insufficient evidence on delay	[33]
Not all required parties joined	[34]
Three preliminary matters	[42]
Limitation	[43]
Limitation for a negligence claim in this court	[44]
Limitation for a contribution claim in this court	[48]
Winding the clock back under s 329(4) of Companies Act	[50]
Limitation under the Weathertight Homes Resolution Services Act 2006	[56]
As a matter of law was the council a creditor of Salamanca?	[62]
Delay by the council	[87]
Merits of the application to restore Salamanca to the register	[95]
The ground under s 329(1)(a)
As a matter of fact, was the council a creditor under s 329(1)(a)?	[103]
The council's delay in applying for restoration	[113]
Even if Salamanca is restored, the council will recover nothing	[122]
Just and equitable ground under s 329(1)(b)	[127]
Leave under s 329(2)(c)	[128]
Wind the clock back under s 329(4)	[129]
Application to reverse the liquidator's final report	[132]
Appointment of new liquidators	[135]
Application under s 248 to take proceeding	[145]
Outcome	[152]

Introduction

1 I heard this case on 4 February 2015 and issued a minute on 5 February giving my decision, but without reasons. A prompt decision was required to give the applicant time in which to make an application in a related proceeding in the Weathertight Homes Tribunal. This judgment gives my reasons.

2 A development company, Salamanca Investments Ltd, builds an apartment complex. Some time after the end of the project, the company goes into voluntary and apparently solvent liquidation. When that is completed, it is removed from the Companies Register. The apartment complex leaks. The body corporate and apartment owners bring a claim in the tribunal. They do not sue Salamanca because it has been removed from the register. Instead, they sue the Wellington City Council. It wants to make a contribution claim against Salamanca under s 17(1)(c) of the Law Reform Act 1936, but before it can do so, the company needs to be restored to the register.

3 Salamanca's directors and shareholder oppose the company being restored. They say that at relevant times the council was not a creditor of the development company or someone with an undischarged claim against the company. The effect of that position — if it is upheld — is that those behind the development company will have been able to carry out this project and withdraw any profits from it, but leave either the apartment owners or those with secondary liability to carry the costs of the defects in the development.

4 While that is the main issue, there are others. The Wellington City Council asks for restoration and ancillary orders:

• (a) It applies for leave under r 19.5 of the High Court Rules 2008 to proceed by originating application.

• (b) Under s 329 of the Companies Act 1993 it asks for Salamanca to be restored to the register and, if leave to apply is required, seeks it.

• (c) It asks for the liquidator's final report to be reversed under s 284 of the Companies Act and seeks leave to apply for that order.

• (d) It asks for the liquidator appointed by the shareholder to be replaced by liquidators of its choice, again invoking s 284.

• (e) It seeks an order under s 248(1)(c) of the Companies Act to continue proceedings against the company while in liquidation.

5 The application has been served on the Registrar of Companies and Treasury but, as usually happens, they abide the decision of the court. Salamanca's directors, Messrs Dromgool and Fraser, and its shareholder, Willemstad Developments Ltd, oppose all orders sought.

Facts

6 Salamanca was incorporated on 26 November 1992. Messrs Dromgool and Fraser were its directors until it was removed from the register. It was part of the Newcrest group of companies. Salamanca's shareholder was Newcrest Developments Ltd, now known as Willemstad Developments Ltd. Willemstad's shareholder is Newcrest Holdings Ltd, now known as Tullow Ltd.

7 Salamanca was the developer of the St Paul's Apartments, a complex at 43 Mulgrave Street, Thorndon, Wellington. The development went in stages. Work started on the first stage in July 1997. A code of compliance certificate was issued in October 1998. Construction of the second stage began in October 1998. A code of compliance certificate was issued in December 1999. For the third stage of construction a code compliance certificate was issued in December 1999. In 2007 a conservatory was built on the top of one of the apartment buildings but that is not relevant, as Salamanca had been removed from the register by then.

8 In September 2005 Salamanca went into liquidation by shareholders' resolution. 1 Before the company went into liquidation, the directors passed a

resolution that Salamanca would, upon the appointment of a liquidator, be able to pay its debts. 2 Bruce Sheppard and Greg Rathbun were appointed joint liquidators. Mr Rathbun resigned in 2006. The liquidation was unremarkable. Mr Sheppard made his final report under s 257 of the Companies Act on 3 August 2006. Salamanca was removed from the register on 5 September 2006

9 The St Paul's Apartments were found to have watertightness defects. There is no evidence in this proceeding when those defects became apparent but I was advised from the bar that in a proceeding in the tribunal there is a live issue as to when any causes of action in negligence against the developer and the council arose.

10 On 20 June 2008, the body corporate and apartment owners of the St Paul's Apartments applied for an assessor's report under the Weathertight Homes Resolution Services Act 2006. Under s 37 of that act, the date of the application is important for limitation purposes. A full assessor's report, finding that the owners' claim was eligible, was given on 29 June 2009.

11 On 3 February 2012 the St Paul's body corporate and apartment owners began a claim against the council in the tribunal. 3 The tribunal set a deadline of 23 July 2012 for applications for joinder. The council applied to join further respondents under s 111 of the Weathertight Homes Resolution Services Act 2006. Tullow, Salamanca's ultimate holding company, was joined on 7 August 2012. Others were joined on 30 August 2012. Tullow applied to be removed on the grounds that it was not the developer of the St Paul's apartments, but that Salamanca was. Tullow has the same lawyers as Willemstad, its subsidiary. On 16 January 2013 the Tribunal declined Tullow's application to be removed. The council would have known long before that date that Salamanca was the developer, but in case it had forgotten, Tullow had reminded it. The council did not however apply to have Salamanca restored to the register or joined as a respondent in the proceeding.

12 The proceeding in the tribunal has gone through its interlocutory stages, including discovery, mediation, exchange of evidence and experts' conferences.

The claim has been set down for a hearing of up to eight weeks beginning on 16 March 2015.

13 The council began this proceeding by originating application on 13 November 2014. On 25 November 2014 the council filed a memorandum with the tribunal advising that it had applied for Salamanca to be restored to the register. On 26 November 2014 without hearing from other parties, the tribunal issued a procedural order which included this:

In the memorandum the Council has provided no information as to why the application to restore Salamanca has been made so late in the...