Binxi Foods NZ Limited v Progressive Meats Limited

[2024] NZHC 734

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE

CIV-2023-441-46

[2024] NZHC 734

UNDER

the Companies Act 1993

IN THE MATTER

of a statutory demand

BETWEEN

BINXI FOODS NZ LIMITED

Applicant

AND

PROGRESSIVE MEATS LIMITED

Respondent

Hearing:	29 February 2024
Appearances:	K Morrison and R Hindriksen for Applicant J C Cameron for Respondent
Judgment:	8 April 2024

JUDGMENT OF ASSOCIATE JUDGE SKELTON

[1]    The applicant, Binxi Foods NZ Ltd (Binxi), applies by originating application to set aside a statutory demand served on it by the respondent, Progressive Meats Ltd (Progressive). The statutory demand requires payment of the sum of $208,726.74 in respect of five invoices for meat processing fees. Binxi does not dispute the processing fees but says that the statutory demand should be set aside because it has a counterclaim against Progressive in the sum of around $11.2 million. Progressive opposes the application on the basis that Binxi has failed to establish a reasonably arguable counterclaim.

[2]    The issues I need to consider are, first, whether Binxi does have a reasonably arguable counterclaim against Progressive as alleged by it. Secondly, I consider

BINXI FOODS NZ LIMITED v PROGRESSIVE MEATS LIMITED [2024] NZHC 734 [8 April 2024]

whether to exercise my discretion not to set the demand aside even if jurisdiction is found to exist.

Background

[3]    Binxi is part of a group of New Zealand companies in the meat industry known as the Binxi NZ Group (BXNZ), with its ultimate parent company, Heilongjiang Binxi Cattle Industry Co Ltd (Binxi China) based overseas. From BXNZ’s establishment to 31 July 2023, it was managed by Arron Hoyle, Richard Thorp and Gerard Brier (Management Team).

[4]    Progressive operates a meat processing factory in Hawkes Bay. Progressive was incorporated on 5 February 1980. Richard Hickson has been a director of Progressive since 1987.

[5]    Kelcold Ltd (Kelcold) operates a cold storage and loadout service. The facility is in the building next the Progressive processing room. Product is transferred by Progressive to Kelcold directly for storage and loadout services. Kelcold shares common management with Progressive. Mr Hickson is also a director of Kelcold.

[6]    From around March 2018, Binxi engaged Progressive to process product. The agreement was negotiated by Mr Brier and Mr Hoyle. Under the agreement:

(a)ownership of the product was retained by Binxi;

(b)a toll processing fee was paid by Binxi to Progressive; and

(c)a storage and loadout fee were paid by Binxi to Kelcold.

[7]    On 30 April 2019 Kereru Foods Ltd (KFL) was incorporated. The directors of KFL are Mr Brier and Mr Hoyle, two of the three members of the Management Team. None of the companies in the BXNZ Group or Binxi China hold shares in KFL.

[8]    In late May 2020, the Binxi sales and operational planner emailed Kelcold (copying Mr Brier and Mr Hoyle and Progressive) advising that it would trial all production going directly into the KFL account. The email stated:

Hi Pete

As per our discussion we will target NEXT weeks production to trial all production including part cartons to go directly into the Kereru Account.

IT has now been changed at our end and I understand a few things tidy up & check at your end before then.

If you need anything further from us please sing out. Thanks.

[9]    On 2 June 2020, the Progressive accountant (Gavin Beaver) emailed Mr Brier at his Binxi email address with the following request:

Morning Gerard

Hope you’ve had a restful but wet weekend.

Do you want us to change who we charge for production as well? Currently charged to BX, is that to change to kereru foods?

[10]Mr Brier responded on 2 June 2020 as follows:

Hi GB,

As discussed we’d prefer to leave processing costs charged thru to BX for now.

Thanks.

[11]   Binxi continued to pay Progressive’s processing invoices until July 2023. KFL paid Kelcold the storage costs for products. Binxi says that at least $11.2 million worth of product processed through Progressive was released to KFL during the 2020–2023 period.

[12]   Another company Atkins Ranch Ltd (Atkins Ranch) supplies the American market with Global Animal Partnership (GAP) accredited Frenched rack lamb product at a premium rate. Progressive is one of two producers of this product in New Zealand. The other producer is Lean Meats Oamaru Ltd (LMO). Atkins Ranch, Progressive and

LMO have a commonality of shareholding and directorship through Mr Hickson and his related interests.

[13]   BXNZ sold GAP lamb product to Atkins Ranch that was produced by LMO’s factory in the South Island. BXNZ also sold the product it sourced from farmers in the North Island and paid Progressive to process. KFL supplied to Atkins Ranch the GAP lamb product it obtained from both the North Island and South Island operations paid for by BXNZ. Atkins Ranch had an arrangement with KFL whereby the margin on the GAP lamb sold to it by KFL was shared equally between Atkins Ranch and KFL.

[14]   The Management Team has been removed by Binxi China due to concerns about their conduct, particularly alleged breaches of their fiduciary duties. The concerns largely stem from the involvement of KFL in BXNZ’s business.

[15]   BXNZ is engaged in extant proceedings in the High Court at Auckland with the Management Team, KFL and other entities. The central allegations are that the management team breached their director and fiduciary duties to BXNZ by devising a scheme that would see profits from BXNZ’s business stripped and diverted to KFL by inserting KFL as the end sales company instead of Binxi and retaining the profits from the sale of products to consumers. Progressive is not a party to these proceedings.

[16]   In July 2023, Binxi halted payment of Progressive’s invoices. Five invoices totalling $208,726.74 remain unpaid.

[17]   On 11 August 2023, Mr Hickson of Progressive met with Mr Haoran Wang and Mr Zhiyun He of Binxi China. Progressive was requested not to release stock held for KFL pending determination of the dispute as to ownership. PML was unwilling to withhold the product because Mr Hickson advised that he had sighted documents indicating that Binxi sold the product to KFL and that Binxi owed KFL substantial debt. Binxi have requested copies of these documents. Progressive has not provided copies of the documents citing “privacy and commercial considerations” because KFL is a party to the documents. Progressive says it would abide by any Court decision if Binxi made any applications in relation to the documents.

[18]   On 30 August 2023, Mr Hickson advised Binxi’s solicitor that none of the product held in store related to processing after Binxi had advised Progressive of the dispute. Further, as the stock was aging and losing value every day the sensible solution was to release the stock to KFL.

[19]   The statutory demand was served by Progressive on Binxi on 31 August 2023. Binxi applied to set aside the statutory demand on 14 September 2023.

Legal principles — setting aside statutory demand

[20]Section 290 of the Companies Act 1993 states as follows:

290     Court may set aside statutory demand

(1)The court may, on the application of the company, set aside a statutory demand.

(2)The application must be—

(a)made within 10 working days of the date of service of the demand; and

(b)served on the creditor within 10 working days of the date of service of the demand.

(3)No extension of time may be given for making or serving an application to have a statutory demand set aside, but, at the hearing of the application, the court may extend the time for compliance with the statutory demand.

(4)The court may grant an application to set aside a statutory demand if it is satisfied that—

(a)there is a substantial dispute whether or not the debt is owing or is due; or

(b)the company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or

(c)the demand ought to be set aside on other grounds.

(5)A demand must not be set aside by reason only of a defect or irregularity unless the court considers that substantial injustice would be caused if it were not set aside.

(6)In subsection (5), defect includes a material misstatement of the amount due to the creditor and a material misdescription of the debt referred to in the demand.

(7)An order under this section may be made subject to conditions.

(emphasis added)

[21]In Confident Trustee Ltd v Garden and Trees Ltd, the Court of Appeal held:1

[16]The general principles under s 290(4) are well settled:

(a)The onus is on the applicant seeking to set aside the statutory demand to show there is arguably a genuine and substantial dispute as to the existence of the debt. The Court’s task is not to resolve the dispute but to determine whether there is a substantial dispute that the debt is due.

(b)The mere assertion that a dispute exists is not sufficient. Material short of proof is required to support the claim that the debt is disputed.

(c)If such material is available, the dispute should normally be resolved first in ordinary civil proceedings before any statutory demand is issued.

(d)If a counterclaim, cross-demand or set-off is suggested an applicant must establish that this is reasonably arguable in all the circumstances.

(e)It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise unless such evidence is contrary to the available documents or earlier statements made by the parties.

[22]   In 144 Trustees Ltd v Mike Pero Real Estate Ltd, Osborne J set out a general approach to the exercise of the jurisdiction under s 290(4). With regard to s 290(4)(b) he identified the following principles:2

As to s 290(4)(b):

·An applicant must establish that it appears to have a counterclaim, cross-demand or set-off which is reasonable arguable in all the circumstances.

·The “appearance” test involves a review of low threshold.3

1      Confident Trustee Ltd v Garden and Trees Ltd [2017] NZCA 578 at [16].

2      144 Trustees Ltd v Mike Pero Real Estate Ltd [2018] NZHC 3197, (2018) 20 NZCPR 2022 at [8].

3      Industrial Group Ltd v Bakker [2011] NZCA 142, (2011) 20 PRNZ 413 at [25]; AAI Ltd v 92 Lichfield Street Ltd (in rec and in liq) [2015] NZCA 559 at [21]–[22].

·The hearing relating on a s 290(4)(b) argument is to be short and to the point

·it is to be distinguished from a summary judgment application where complex legal issues are not a bar to a remedy.4

As to both ss 290(4)(a) and (b)

·It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise.5

[23]   In NF Global Ltd v Sky Management Ltd, the Court stated with regard with    s 294(4)(b):6

… The power to set aside under s 290(4)(b) is discretionary, not mandatory. In some cases, “pay now, argue later” considerations have been allowed to prevail over the effect of liquidation.7 While “counterclaim, set-off, or cross-demand” is given broad scope, it does not cover claims that are not actionable, such as contingent claims. To show a claim within the subsection the company must show a real basis for it with evidence. It cannot rely on assertion alone but must show clear and persuasive grounds.8

[24]   An applicant seeking to rely on s 290(4)(b) is not required to establish any link between the amount claimed in the statutory demand and the subject matter of the cross claim or counterclaim relied upon, although the absence of such a link may be relevant to the exercise of the court’s residual discretion.9

[25]   In Manchester Securities Ltd v Body Corporate 172108, the Court of Appeal stated:10

It is unnecessary to attempt to formulate any test for the exercise of the residual discretion. Clearly it will only be a rare case where the discretion is exercised against setting aside a statutory demand where a genuine and substantial dispute has been shown or the applicant has raised clear and persuasive grounds for a set-off or counterclaim. …

4      Industrial Group Ltd v Bakker, above n 3, at [25].

5      Osborne J acknowledged the editors of Brooker’s Company and Securities Law for the formulation of the principles. The updated citation is Bull, Howes and Revill (eds) Company and Securities Law (looseleaf, Thomson Reuters, Wellington, 2019) at [CA290.02(1)].

6      N F Global Ltd v Sky Management Ltd [2020] NZHC 2196 at [40].

7      Volcanic Investments Ltd v Dempsey & Wood Civil Contractors Ltd (2005) 18 PRNZ 97 (HC);

Browns Real Estate Ltd v Grand Lakes Ltd [2010] NZCA 425, (2010) 13 NZCPR 349.

8      Covington Railways Ltd v Uni-Accommodation Ltd [2001] 1 NZLR 272 (CA) at 274–275.

9      Phoenix Organics Ltd v RD2 International Ltd (2003) 9 NZCLC 263,380, at [26]–[36].

10 Manchester Securities Ltd v Body Corporate 172108 [2018] NZCA 190, [2018] 3 NZLR 455 at [49].

[26]   In summary, the authorities require the applicant to show a reasonably arguable counterclaim on “a review of low threshold”.11 It must be more than mere assertion. There must be clear and persuasive grounds based on the affidavit evidence, albeit short of proof. It is not usually possible to resolve disputed issues of fact on affidavit evidence particularly where issues of credibility arise.

Does Binxi have a reasonably arguable counterclaim against Progressive?

[27]Ms Morrison, for Binxi, submits that:

(a)Progressive dishonestly assisted the Management Team in breaching their fiduciary duties to Binxi by diverting profits to KFL that ought to have been in the hands of Binxi; and

(b)Progressive’s liability to Binxi for Progressive’s dishonest assistance far outweighs the debt it claims from Binxi.

[28]   Ms Morrison submits that to establish its dishonest assistance claim against Progressive in ordinary civil proceedings, it will need to prove that:

(a)the Management Team had a duty of trust to Binxi;

(b)the Management Team breached that trust, resulting in loss to Binxi;

(c)Progressive’s conduct assisted the Management Team in that breach of trust;

(d)Progressive was ‘dishonest’ in providing that assistance.

[29]   The test for dishonesty has been succinctly summarised by the Supreme Court in Sandman v McKay:12

[77]      … The test for dishonesty is an objective one, judged against the background of what the defendant subjectively knew. If a defendant’s mental state would be described as dishonest by ordinary standards, it is irrelevant

11     See Industrial Group v Bakker and AAI Ltd v 92 Lichfield Street Ltd (in rec and in liq), above n 3.

12     Sandman v McKay [2019] NZSC 41, [2019] 1 NZLR 519 at [77]–[78].

that the defendant does not consider his or her conduct to be dishonest and/or does not appreciate that, by ordinary standards, it would be regarded as dishonest.

[78]      A defendant is dishonest if he or she has actual knowledge that the transaction is one in which the defendant cannot honestly participate. Wilful blindness, which equates in equity with actual knowledge, also suffices. This arises where a defendant strongly suspects a breach of trust but makes a deliberate decision not to inquire in case the inquiry results in actual knowledge. It is “necessary that the strength of the suspicion … makes it dishonest to decide not to make the inquiry”.

[citations removed]

[30]   This test involves both a subjective element and an objective element.13 It is necessary to consider:

(a)whether there was actual knowledge or whether the defendant was wilfully blind to the relevant facts (subjective element); and

(b)whether the defendant’s conduct in the circumstances is contrary to the ordinary standards of honest behaviour (objective element).

[31]   It is also apparent that the defendant does not need to know that the person he or she is assisting was acting in breach of trust.14

[32]   The Supreme Court in Sandman noted with approval that the New Zealand courts have followed the approach of the Privy Council in Royal Brunei Airlines Sdn Bhd v Tan.15 In that case, Lord Nicholls discussed the meaning of “dishonesty”:16

… in the context of the accessory liability principle acting dishonestly, or with a lack of probity, which is synonymous, means simply not acting as an honest person would in the circumstances. This is an objective standard. At first sight this may seem surprising. Honestly has a connotation of subjectivity, as distinct from objectivity of negligence. Honesty, indeed, does have a strong subjective element in that it is a description of a type of conduct assessed in the light of what a person actually knew at the time, as distinct from what a reasonable person would have known or appreciated. Further, honesty and its counterpart dishonesty are mostly concerned with advertent conduct, not inadvertent conduct. Carelessness is not dishonesty. Thus for the most part dishonesty is to be equated with conscious impropriety. However, these

13     Scott v ANZ Bank (NZ) Ltd [2020] NZHC 906, [2020] 3 NZLR 145 at [33] and [81].

14     At [35] and [81].

15     Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 (PC).

16     At 389.

subjective characteristics of honesty do not mean that individuals are free to set their own standards of honesty in particular circumstances. The standard of what constitutes honest conduct is not subjective. Honesty is not an optional scale, with higher or lower values according to the moral standards of each individual.

[33]   Ms Morrison refers to a report from Grant Thornton, as independent forensic accountants (exhibited to the affidavit of Mr Wang) which BXNZ/Binxi has obtained for the litigation against KFL. Grant Thornton opine that, given the overlap in key management, it is unclear what commercial and sales purpose KFL served that BXNZ/BXNZ could not have achieved itself. Grant Thornton put forward a preliminary assessment of losses to BXNZ/Binxi arising from the use of KFL as an intermediary of up to $23.3 million.

[34]   Ms Morrison submits that it is undisputed (in the sense that no contrary evidence has been provided by Progressive) for the purposes of these proceedings that:

(a)the Management Team, which included Mr Brier, owed fiduciary duties to Binxi;

(b)the Management Team breached those duties by inserting KFL as the end sales company and diverting profits to KFL;

(c)Progressive’s agreement to the arrangement where Binxi paid Progressive’s processing fees but the product was transferred into Kelcold’s storage facility under KFL’s account assisted the Management Team to divert profits;

(d)the total amount of product paid for by Binxi and diverted to KFL in the relevant period was around $11.2 million.

[35]   Ms Morrison submits that Progressive had either actual knowledge or was wilfully blind to the fact that KFL was not entitled to receive the benefit or profit from the products paid for by Binxi. She submits that Progressive does not need to have known that the Management Team were acting in breach of trust. Ms Morrison submits that:

(a)Progressive knew that KFL was an unrelated company to Binxi yet was receiving the profits from the product that Binxi was paying for. Progressive chose not to make further enquiries or to seek formal commercial paperwork from Binxi approving the arrangement. It simply relied on an oral discussion and an email from Mr Brier who was a director/shareholder of KFL.

(b)Notwithstanding the commercial relationship and period of instruction relied on by Mr Hickson, this does not alter the apparent conflict of interest when the management of one company decides to divert that company’s profits to another unrelated company that is owned and controlled by  those  same  managers.  Ms  Morrison  submits  that  Mr Hickson knew or ought to have known from his dealings with    Mr Hoyle and Mr Brier, his industry knowledge, and publicly available records, that KFL was their own company and was not related to Binxi. Mr Hickson’s knowledge is imputable to Progressive.

(c)It may be inferred from the profit sharing arrangement between KFL and Atkins Ranch that Progressive, despite having cause to suspect the arrangement was to Binxi’s detriment, chose to turn a blind eye in the interests of Progressive’s sister company;

[36]   Ms Morrison also submits that adverse inferences can be drawn from Progressive’s failure to provide the documents between KFL and Binxi which have been referred to in correspondence between the parties.

[37]   Binxi has not yet commenced any claim against Progressive. In a joint memorandum in the proceeding by Binxi and others against the Management Team, KFL and others (CIV-2023-441-32) dated 21 February 2024, it is recorded that:

[15]     The plaintiffs do not foresee the need for other parties to be joined to the proceedings.

[38]   However, Ms Morrison submitted before me that it is likely that Progressive will be joined in CIV-2023-441-32. She noted that at this stage discovery and

inspection in CIV-2023-441-32 are not timetabled to be completed until September 2024 and a further case management conference is scheduled for October 2024.

Progressive’s position

[39]   Mr Cameron, for Progressive, submits that the claim against Progressive appears to only be viable if Binxi’s claim against the Management Team/KFL is successful. Mr Cameron submits that s 290(4)(b) does not cover contingent claims.

[40]   Mr Cameron submits that there was no actual knowledge or wilful blindness on the part of Progressive. He refers to the evidence of Mr Hickson that:

(a)There was no reason to doubt the instructions from Mr Brier.

(b)Mr Brier and Mr Hoyle had been instructing Progressive for over six years.

(c)In relation to the product title:

(i)during Progressive processing, the product title remained with Binxi;

(ii)the product title only changed from Binxi to KFL when the product was processed and passed to Kelcold (when it was sold).

(d)In line with the above title arrangements, Progressive then invoiced Binxi for the processing of the product. Kelcold invoiced KFL for the storage of the product.

(e)At the end of each week, Progressive sent a production return report and invoice to Binxi.

(f)Mr Hickson understood the detail in the production return allowed Binxi to generate an invoice for the sale of the week’s production to

KFL.    Progressive was not privy to the commercial arrangements between Binxi and KFL.

(g)For around three years Binxi continued to pay the invoices sent to it and Progressive had no reason to doubt the business arrangement.

[41]   Mr Cameron submits that, against that background, Progressive’s conduct was not contrary to the ordinary standards of honest behaviour. He submits that, given the lengthy commercial relationship  between  the  parties  there  was  no  reason  for  Mr Hickson or Progressive agents to have made further enquiries as to the instructions. The instructions were in keeping with common business practice. Mr Cameron submits that, even if the Court found that Progressive’s business practices could have been improved, it is submitted that Progressive’s conduct was, at worst, careless.

Assessment

[42]   I do not consider that this is a case where “pay now, argue later” is properly invoked.17 This principle most commonly arises in the context of the Construction Contracts Act 2002. It may apply in an insolvency procedure where there is a “no set-off” provision.18 However, that is not the situation here.

[43]   In my view, the issue of whether Binxi has a reasonably arguable counterclaim for dishonest assistance against Progressive turns on the fact that Binxi’s proposed counterclaim is, at this stage, a contingent claim.

[44]   In Alfex Doors and Windows Ltd v Alutech Windows and Doors Ltd, the Court of Appeal held that:19

[15]  For our part, however, we prefer to deal with the matter without reaching the residual discretion. Employing the generally accepted threshold of a

17     Simply Logistics Ltd v Real Foods Ltd (HC Auckland) CIV-2011-404-3497, 14 September 2011  at [23]–[43].

18   Browns Real Estate Ltd v Grand Lakes Properties Ltd, above n 7; Simply Logistics Ltd v      Real Foods Ltd above n 17 at [23]–[43].

19  Alfex Doors and Windows Ltd v Alutech Windows and Doors Ltd CA38/01, 30 May 2001, (2001) 16 PRNZ 963, at [15]–[16]. See also Beckett Books Limited v Moving Out 2012 Limited [2015] NZHC 669 at [12]–[17] and Dairy Solutionz (NZ) Ltd v Pacific Dairy Holdings Ltd (in liq) [2021] NZHC 3054 at [46]–[48].

“fairly arguable basis”: United Homes (1998) Ltd v Workman CA68,69,70/01, judgment 25 May 2001, we are not satisfied that Alfex presently has any counterclaim set-off or cross-demand within the statute. The unquantified claim of “liquidated damages” plainly is contingent on the outcome of the unresolved dispute between Alfex and Ebert. Mr Michalik accepted that it is not possible to set-off or claim in respect of contingent indebtedness, as recognised in Body Corp s66289 v Rua Developments Ltd High Court M328/96, Hamilton Registry, Master Faire, to which we were referred.

[16]  There is before the Court no sufficient basis for Alfex to continue to retain part of the purchase price against unquantified contingent claims of the kind in question. We are not therefore satisfied that there has been shown a substantial dispute whether or not that part of the debt is due.

[45]In Beckett Books Ltd v Moving Out 2012 Ltd, the High Court stated:20

Likewise, in Alfex Doors and Windows, it was unclear whether the counter claim was worth anything at all, because there was insufficient evidence to show that it had any merit, let alone whether it was worth enough to place the debt in doubt. It was the contingent nature of the claim, not the fact that it was unquantified, that was decisive. It was contingent in that it was dependent on the outcome of litigation between the applicant and a third party.

[46]   Here, the issue is not that Binxi’s proposed counterclaim is unquantified. An unquantified claim can still justify the setting aside of a statutory demand if it is obviously substantial.21 Rather, the issue with Binxi’s proposed counterclaim is that it is contingent, in the sense that, as in Alfex Doors and Windows Ltd, it is dependent on the outcome of the unresolved dispute between Binxi and third parties, in particular, the Management Team.

[47]   Binxi acknowledges that to establish the dishonest assistance claim against Progressive it has to establish that:

(a)the Management Team held a duty of trust to Binxi; and

(b)the Management Team breached that trust, resulting in loss to Binxi;

[48]   If Binxi fails to establish these matters, then it has no claim for dishonest assistance against Progressive. The very existence of the proposed counterclaim for

20 Beckett Books Limited v Moving Out 2012 Limited, above n 19, at [14].

21 Pacific Forum Line v New Bay Holdings Ltd HC Auckland M141/96, 4 April 1996 at 7; Beckett Books Limited v Moving Out 2012 Limited, above n 19, at [12]–[17]; Dairy Solutionz (NZ) Ltd v Pacific Dairy Holdings Ltd (in liq), above n 19, at [46].

dishonest assistance depends on the outcome of Binxi’s claim against the Management Team.

[49]   Ms Morrison submits that these elements are “undisputed” in the sense that no contrary evidence has been provided by Progressive in opposition to the application to set aside the statutory demand. However, I do not consider Progressive is required to put forward evidence to the effect that the Management Team has not breached any duties of trust owed by them to Binxi. Progressive was not privy to the relationship between Binxi/BXNZ and the Management Team nor the commercial arrangement between Binxi and KFL. Nor would it appropriate for me to make any findings on these issues in the absence of the Management Team and KFL. These issues are to be considered and determined between Binxi and the Management Team and KFL in a separate proceeding. It is for Binxi to establish that it has a reasonably arguable counterclaim to set aside the statutory demand. The authorities establish that the applicant cannot do so when the proposed counterclaim is contingent on the outcome of an unresolved dispute between the applicant and a third party.

Result

[50]   The application by Binxi Foods NZ Ltd to set aside the statutory demand under s 290(4)(b) of the Companies Act 1993 is dismissed.

[51]   The time for compliance with the statutory demand is extended by a further 14 days from the date of this judgment.

[52]   My preliminary view is that that Progressive is entitled to costs on a 2B basis and reasonable disbursements as fixed by the Registrar. If either party disagrees with this preliminary view, then memoranda may be filed (not exceeding three pages, excluding costs schedules) and costs will be determined on the papers. Otherwise, it is expected that costs will be agreed between the parties.

Associate Judge Skelton

Solicitors:

Meredith Connell, Auckland for Applicant Willis Legal, Napier for Respondent