Body Corporate 406198 v Argon Construction Limited

[2025] NZHC 771

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-001772 [2025] NZHC 771

BETWEEN  BODY CORPORATE 406198 & ORS

Plaintiffs

AND  ARGON CONSTRUCTION LIMITED

First Defendant

AUCKLAND COUNCIL
Second Defendant

Hearing:                   On the papers

Counsel:                   H Chung for Plaintiffs

W A McCartney for First Defendant (now Parkwood Builders Ltd)

S C Price, M J Ferrier and C M Fairnie for Second Defendant

Judgment:                3 April 2025

JUDGMENT OF ANDREW J

This judgment was delivered by Justice Andrew on 3 April 2025 at 3.00 pm

pursuant to r 11.5 of the High Court Rules 2016 Registrar / Deputy Registrar

Date …………………………..

BODY CORPORATE 406198 & ORS v ARGON CONSTRUCTION LTD [2025] NZHC 771 [3 April 2025]

Introduction

[1]       The applicant, Parkwood Builders Ltd (formerly Argon Construction Ltd (Argon)) (Parkwood), the first defendant, applies for orders staying the execution of the following judgments, pending the appeals to the Court of Appeal:

(a)[2023] NZHC 3034 (liability judgment);

(b)[2024] NZHC 237 (damages judgment);

(c)[2024] NZHC 3791 (correction of damages judgment); and

(d)[2024] NZHC 1037 (costs judgment).

[2]       The appeals are to be heard by the Court of Appeal for three days from 8 April 2025.

Amended application

[3]       Parkwood’s original application dated 19 December 2024 only related to the costs judgment. The plaintiffs advised this Court at that time that they did not wish to be involved in relation to Parkwood’s application. That is unsurprising, as the costs judgment had been fully satisfied by the Auckland Council.

[4]       Parkwood’s amended application dated 17 March 2024 now also relates, as indicated above, to the substantive judgments. A substantial amount of money remains payable to the plaintiffs under those judgments.

[5]       The plaintiffs were not originally served with the amended application. That issue was addressed in a memorandum from the Auckland Council dated 21 March 2025. In that memorandum, counsel for the Auckland Council asked Parkwood’s counsel for confirmation that the plaintiffs had been served with the amended application but indicated it had received no response.

[6]       The plaintiffs were subsequently served, and the Court has received a memorandum from them dated 25 March 2025.

[7]       It is regrettable that Parkwood has waited for approximately a year, and until after the Auckland Council had paid out most of the judgment debts to the plaintiff, before seeking a stay. Equally, it is regrettable that further delay has been occasioned by issues with the service of both the original application for stay dated 19 December 2024 and the amended application for stay dated 17 March 2025. There may have been an unfortunate series of events with the service of the original application,1 but no explanation has been provided as to why the plaintiffs were not served immediately with the amended application. It must have been obvious to Parkwood at that time that the plaintiffs’ interests were directly affected and engaged by the amended application. Parkwood must accept a significant degree of responsibility for the very late determination of this application.

The judgments

[8]       Parkwood and the Auckland Council have satisfied part of the substantive judgments (i.e. my liability, damages, and correction of damages judgments):

(a)All but the general damages portion of Parkwood and the Auckland Council’s jointly liable amount has been paid to the plaintiffs, of which Argon has paid $3 million. Pursuant to the proportions I determined, Parkwood is thus liable to the Auckland Council for approximately

$1.275 million.

(b)The general damages proportion ($799,000) has not been paid to the second plaintiffs. Parkwood’s liability to the second plaintiffs for these damages is 85 per cent, pursuant to the orders made in my substantive judgment.

(c)The acoustic matting portion ($111,628) has not been paid to the plaintiffs by Parkwood. The Auckland Council is not liable for that particular judgment debt.

1       See memorandum of counsel for the First Defendant dated 21 February 2025.

[9]       The Auckland Council has satisfied the entirety of my costs judgment. Pursuant to the proportions I determined, Parkwood is liable to the Auckland Council for $411,968.07 plus all interest due up to the date of payment.

Transfer of Parkwood’s business to a related entity

[10]     My original liability judgment was issued on 30 October 2023.2 Whilst damages were still to be finalised, I indicated that Parkwood (then Argon) and the Auckland Council should meet an order for damages (yet to be finalised, but in the range of $5–$6 million) to be met in the proportions 85 per cent Parkwood and 15 per cent Auckland Council.

[11]     The affidavit evidence filed in support of Parkwood’s stay application demonstrates that Parkwood transferred its business to a related entity (Argon Contractors Ltd), likely in about November 2023. However, as the Auckland Council submits, it appears steps may potentially have been commenced in the months prior.

[12]     The details of the related party transactions have not been disclosed by Parkwood either in its affidavits filed in this Court or in response to the Auckland Council’s request for such information. There is, however, evidence before the Court that establishes that Parkwood has ceased trading, has no assets, is insolvent based on the judgments, and has no debts other than to the Auckland Council and to the plaintiffs.

Relevant legal principles - application for a stay

[13]The relevant legal principles are not in dispute:

(a)When considering an application for stay, the object is to arrange matters so that, when the appeal comes to be heard, the appeal court may be able to do justice between the parties.3

2       Body Corporate 406198 v Argon Construction Ltd [2023] NZHC 3034.

3       New Zealand Insulators Ltd v ABB Ltd (2006) 18 PRNZ 459 (CA) at [13], citing Minnesota Mining & Manufacturing Co v Johnson & Johnson [1976] RPC 671 (CA) at 676.

(b)The ultimate question on any application for a stay of execution is the interests of justice.4

Analysis and decision

[14]     At [12] of his affidavit of 7 March 2025, Mr Matthew Gabriel, general manager of Argon Constructors Ltd and former general manager of Parkwood Builders Ltd, states:

The notice of opposition [of the Auckland Council] asserts that Argon has not demonstrated it will suffer any real prejudice if a stay of execution is not granted. The prejudice is that Argon will be exposed to possible action to enforce the two judgments before the Court of Appeal has decided Argon’s appeals. That enforcement could come from either the Council or the plaintiffs. If Argon were liquidated before the appeal is decided, that would render Argon’s right of appeal nugatory.

[15]     It is difficult to see any real merit in that contention. By Parkwood’s own admission, it ceased trading in late 2023. It has no assets. It has only the Auckland Council and the plaintiffs as creditors. Furthermore, the Court of Appeal hearing is scheduled to take place next week and it appears that any grant or refusal of a stay would have little impact on that.

[16]     But more to the point, as the Auckland Council submits, I am not tasked with deciding whether or not to place Parkwood into liquidation (i.e. enforcement proceedings). Whether or not Parkwood should be placed into liquidation would be determined by a judge hearing a liquidation proceeding commenced pursuant to s 241 of the Companies Act 1993 and Part 31 of the High Court Rules 2016. That is a separate proceeding and, as indicated, is not before me.

[17]     In practical terms, the issue is whether or not the Auckland Council should be prevented from commencing liquidation proceedings in respect of Parkwood’s indebtedness to the Auckland Council under the substantive and costs judgments, so as to stop time running under s 292 of the Companies Act.

4       Walker v Castlereagh Properties Ltd [2015] NZHC 907 at [23].

[18]     Section 292 provides that certain transactions with related parties are voidable by a liquidator if they took place within “the related party period” (i.e. within two years of a liquidation proceeding being commenced: see s 292(5)(b).

[19]     On the evidence before the Court, there are reasonable grounds to believe that related party transactions did occur between (at least) Parkwood and Argon Contractors Ltd in the period April to November 2023, two years from which would be April to November 2025.

[20]     I agree with and accept the submission of the Auckland Council that a grant of stay preventing it from commencing proceedings against Parkwood (in circumstances where Parkwood is indebted to the Auckland Council (and the plaintiffs) for substantial amounts under judgments, and where Parkwood has admitted insolvency) would almost certainly enable Parkwood, and any related entities with which it transacted in the disposal of its assets, to avoid the s 292 voidable transaction regime.

[21]     That is a significant and, in my view, decisive factor in support of a decision to decline to grant the stay sought.

[22]     Whether or not a judge hearing a liquidation proceeding should place Parkwood in liquidation while the Court of Appeal’s judgments are pending is a matter properly to be determined by that judge in those proceedings and not by me at this stage. That judge would have the benefit of more fulsome evidence as to Parkwood’s financial history and transactions, and would be able to determine whether it was appropriate to make or decline liquidation orders in that context (with up-to-date information including whether to order liquidation but stay that order until after the appeal judgments are issued). The reality is, of course, that the time between commencement of liquidation proceedings, the hearing of such, and the issuing of judgment will likely run in parallel with the Court of Appeal’s own judgment process.

[23]     For all these reasons, I conclude that it is not in the interests of justice (the ultimate issue) to grant the stay.

[24]The application for stay is accordingly refused.

Result

[25]     The amended application for stay of execution dated 17 March 2025 is dismissed.

[26]     As to costs, I find that Parkwood should pay costs on a 2B basis plus disbursements to the Auckland Council and to the plaintiffs.

Andrew J