Auckland City Council v Citiland Limited HC Auckland CIV 2010-404-4075

[2010] NZHC 1207

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2010-404-004075

UNDER  the Companies Act 1993

BETWEEN  AUCKLAND CITY COUNCIL Plaintiff

ANDCITILAND LIMITED Defendant

Hearing:         16 July 2010

Counsel:         AM Halloran for plaintiff

JST Nguy for defendant

Judgment:      16 July 2010 at 4:00pm

(ORAL) JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for order putting defendant into liquidation]

Solicitors:           Auckland City Council, Private Bag 92 516 Auckland, for plaintiff

Jesse & Associates, PO Box 106 773, Auckland for defendant

AUCKLAND CITY COUNCIL V CITILAND LTD HC AK CIV 2010-404-004075  16 July 2010

[1]      The plaintiff  seeks  an  order  putting the defendant  into  liquidation.   The application is based on the non-compliance by the defendant with the service of a statutory  demand  under  the  Companies  Act  1993,  s289.    The  plaintiff  relies, therefore, on ss 241(4)(a) and 287 and alleges that the defendant is unable to pay its debts.

[2]      The defendant applies for orders pursuant to r 31.11 staying this proceeding and restraining advertising.   The application pleads that the plaintiff has effective security for the debt.

[3]      The plaintiff opposes the application pursuant to r 31.11.   The debt is for outstanding rates areas and penalties outstanding in relation to properties at 1, 2 and G of 160 Grafton Road, Grafton, Auckland.

[4]      The  defendant  has  arranged  for  a  sale  of  its  Grafton  Road  properties. Settlement of the sale is due on 31 August 2010.   An employee of the defendant, who has authority to commit the defendant, has sworn an affidavit which:

a)        Confirms that the proceeds of sale will be used to pay the debt due to the plaintiff;

b)        Confirms the contract is unconditional; and

c)        Annexes a letter from the purchaser’s solicitor confirming that the purchaser has its funding in place and is able to settle on 31 August

2010.

[5]      It  is  appropriate  that  I  briefly  refer  to  the  applicable  principles  on  an application under r 31.11.  Rule 31.11 of the high court rules empowers the court to make an order restraining publication of any advertisement required by r 31.9 or any other information relating to that statement of claim and staying any further proceedings in relation to the liquidation.   Subrule (2) requires the court to deal with such application as if it were an application for an interim injunction and provides that if the court makes an order as sought, it may make it on such terms as the court

thinks  fit.    The  rule  further  provides  that  nothing  in  it  shall  limit  the inherent jurisdiction of the court.

[6]      The general principles applicable in respect of an application for an order retraining advertising and staying a winding up application were referred to in Taxi Trucks Ltd v Nicholson.[1]  That decision referred to the earlier decision in Exchange Finance  Co  Ltd  v  Lemmington  Holdings  Ltd[2]   and  to  the  decisions  in  Bateman

Television  Limited  (in  liq)  &  Anor  v  Coleridge  Finance  Company  Ltd.[3]      The

principles were confirmed also in Edge Computers Ltd v Colonial Enterprises Ltd.[4]

[1] Taxi Trucks Ltd v Nicholson [1989] 2 NZLR 297 (CA).

[2] Exchange Finance Co Ltd v Lemmington Holdings Ltd [1984] 2 NZLR 242 (CA).

[3] Bateman Television Ltd (in liquidation) & Anor v Coleridge Finance Co Ltd [1971] NZLR 929 (CA); [1971] NZLR 297 (PC).

[4] Edge Computers Ltd v Colonial Enterprises Ltd 9 PRNZ 621.

[7]      From those authorities I extract the following specific principles:

a)       A winding up order will not be made where there is a genuine and substantial dispute as to the existence of a debt such that it would be an abuse of the process of the court to order a winding up;

b)In  such  circumstances,  the  dispute,  if  genuine  and  substantially disputed,  should  be  resolved  through  action  commenced  in  the ordinary way and not in the companies court;

c)       The assessment of whether there is a genuine and substantial dispute is made on the material before the court at the time and not on the hypothesis that some other material, which has not been produced might, nonetheless be available;

d)The   governing   consideration   is   whether   proceeding   with   an application savours of unfairness or undue pressure;

e)       The rule directs the court to deal with the application as if it were an application for an interim injunction;

f)        Rule 31.11 enables the court to impose terms on any order it makes;

and

g)       Such applications are interlocutory in nature and accordingly it would be wrong to express a concluded view of the merits of the dispute.

[8]      The position in summary is:

a)        The debt is not disputed;

b)        The defendant’s current inability to pay is most likely to cease as at

31 August 2010;

c)       It is unlikely that the plaintiff’s position will be prejudiced by making a stay to cover the period up to the settlement date of 31 August 2010; and

d)If the contract settles and payment is made the proceeding will be discontinued.

[9]      I am satisfied that, in this particular case, there is justification for a limited stay.  Accordingly, I order:

a)        This proceeding be stayed until 31 August 2010;

b)        The proceeding shall not be advertised before 31 August 2010;

c)       The substantive proceeding is adjourned to 10am on 15 October 2010. [That  will  give  sufficient  time  for  advertising  in  the  event  that payment is not made]; and

d)       Appearances on 13 August 2010 are excused.

Costs

[10]     Although the defendant has been partially successful in obtaining a limited stay, it is, in reality, the party responsible for the position that it now finds itself in. It seeks, and I have given it, an indulgence.  No criticism can be made of the position adopted by the plaintiff.  I conclude that the plaintiff is therefore entitled to costs on this   application,   which   I   fix   based   on   Category   2   Band B   together   with

disbursements as fixed by the Registrar.

JA Faire

Associate Judge