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AMC Construction Ltd v Frews Contracting Ltd

AMC Construction Ltd v Frews Contracting Ltd

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Case Copied 25 September 2008 11 min read

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IN THE COURT OF APPEAL OF NEW ZEALAND
CA145/2008
[2008] NZCA 389

UNDERThe Companies Act 1993
BETWEENAMC CONSTRUCTION LIMITED

Appellant
ANDFREWS CONTRACTING LIMITED

Respondent

Hearing:19 August 2008

Court:Glazebrook, Fogarty and MacKenzie JJ
Counsel:M J Wallace for Appellant

T J Twomey for Respondent

Judgment:25 September 2008 at 4.30 pm

JUDGMENT OF THE COURT

A The appeal is dismissed.
BThe appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.

_____________________________________________________________________
REASONS OF THE COURT
(Given by MacKenzie J)
[1]       This is an appeal against a judgment of Associate Judge Christiansen in the High Court at Christchurch dismissing an application for an order setting aside a statutory demand under s 290 of the Companies Act 1993. The demand was for some $190,000 claimed as payable under a contract between AMC and Frews under which Frews had contracted to carry out excavation work on a property at Port Hills Road, Christchurch.
[2]       In the High Court, reliance was placed on all three of the grounds in s 290(4). The Associate Judge considered together the grounds under subs (4)(a) and (b), namely, whether there is a substantial dispute whether or not the debt is owing or due and whether the company appears to have a counterclaim set off or cross demand. He stated the principles to be applied in terms which are not disputed, namely, that AMC is required to show a fairly arguable case for saying it is not liable for the amount demanded, or in support of any cross-claim; that it is not sufficient merely to assert the existence of a cross-claim; that the applicant must be able to point to evidence to show that it has a real basis for its claim; and that it is bona fide arguable. He noted that a critical analysis of affidavit evidence is standard, and undertook that analysis. He expressed the view that the evidence of Frews is to be preferred and that there was no sufficient element of substance to AMC’s defence claims. Under s 290(4)(c), the ground relied on was that AMC contended that it was solvent. On this aspect of the claim, the Associate Judge held that it was incumbent upon AMC to satisfy the Court as to its solvency. He held that the information available did not meet that test.
[3]       The grounds of appeal to this Court fall into two groups. These relate to the issue of solvency, and the existence of a dispute or cross-claim:
(a)As to solvency, AMC submits that the Associate Judge erred:
(i)In holding that it was incumbent upon AMC to satisfy the Court as to its solvency. It submits that the correct test is whether AMC satisfied the Court that it is arguably solvent; and that if that test had been applied, the evidence supported a finding that AMC is arguably solvent; and
(ii)In drawing inferences not supported by the evidence that because AMC is involved in the construction industry this must adversely impact on the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2008] NZCA 389
Decision Date: 25 September 2008

CaseChat Overview and Summary

The case of AMC Construction Ltd v Frews Contracting Ltd involved an appeal against a judgment of the High Court, which had dismissed an application by AMC Construction to set aside a statutory demand for approximately $190,000 under the Companies Act 1993. Frews Contracting had issued the statutory demand for an amount claimed to be due under a contract for excavation work at Port Hills Road, Christchurch. The appeal raised two main issues: the question of the appellant's solvency as a ground for setting aside the statutory demand, and whether there was a substantial dispute or a cross-claim against the demand.

The court examined the first issue by considering whether the solvency of the company could constitute a ground for setting aside a statutory demand under section 290(4)(c). The court concluded that solvency is typically relevant as a consideration under sections 290(4)(a) and (b), rather than as a separate ground under section 290(4)(c). The court emphasised that the standard of proof for solvency, if it were to be a ground, would need to show actual solvency rather than mere arguability. The court found no error in the Associate Judge's assessment of the solvency evidence, upholding the conclusion that AMC Construction had not met the required standard.

On the second issue, the court reviewed the appellant's claims of delay and poor performance by Frews Contracting. The court found that the contractual documentation did not support AMC Construction's argument for a specific completion date or for liquidated damages. The court also noted the lack of substantiation and detail in AMC Construction's claims of poor performance and delay. The Associate Judge's conclusions on these matters were held to be properly open on the evidence.

Ultimately, the Court of Appeal dismissed the appeal and upheld the High Court's decision, ordering AMC Construction to pay the respondent's costs for the appeal.

Orders