Body Corporate 447594 v Ay & Co Limited

[2025] NZHC 2985

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2025-404-001034

[2025] NZHC 2985

BETWEEN

BODY CORPORATE 447594

Plaintiff

AND

AY & CO LIMITED

Defendant

Hearing:	8 October 2025
Appearances:	T J G Allan for the Plaintiff R Scott for the Defendant
Judgment:	9 October 2025

JUDGMENT OF ASSOCIATE JUDGE COGSWELL

This judgment was delivered by me on 9 October 2025 at 3.00 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date.......................................

Solicitors:

Fraundorfer Ltd, Tauranga Martelli McKegg, Auckland

T J G Allan, Auckland

BODY CORPORATE 447594 v AY & CO LTD [2025] NZHC 2985 [9 October 2025]

Introduction

[1]                 The plaintiff Body Corporate seeks an order liquidating the defendant, which is the owner of four units in a complex known as Grand Central Station. It is a unit title development under the Unit Titles Act 2010 (UTA).

[2]                 The defendant has not paid the Body Corporate levies issued to it for the operational levy account or the ground lease account for a period exceeding two years.

[3]                 The plaintiff issued a statutory demand to the defendant. It was not complied with.

[4]                 The defendant says that it never became aware of the statutory demand before it expired, but acknowledges that the demand was served in terms of the service requirements under the Companies Act 1993 (Act).

[5]                 Rather, the defendant says that the reason why it did not apply to set aside the statutory demand was that it was not aware of it. I proceed on the basis that service was effected.

[6]                 The defendant has now sought to oppose the application for liquidation on the basis that it has a genuine and substantial dispute about the amounts outstanding.

Approach

[7]                 Under s 241(4)(a) of the Act, a creditor may apply to the Court for liquidators to be appointed if a company is unable to pay its debts.

[8]                 Inability to pay debts is established in several ways, one of which is failure to comply with a statutory demand issued under s 287(a) of the Act. A failure to respond to a statutory demand raises a rebuttable presumption of insolvency.

[9]                 To challenge a statutory demand on the grounds that the debt is not due, the defendant must establish a genuine and substantial dispute as to whether the debt that is the subject of the statutory demand is due.1

[10]              The defendant must demonstrate a genuine and substantial dispute, one that is “real and not fanciful or insubstantial”, and the grounds of the dispute must be “clear and persuasive”.2 Material, short of proof, is required to support the claim that the debt is disputed.

[11]              If the Court is satisfied that the defendant has not rebutted the presumption of insolvency and there is no genuine and substantial dispute, then it may liquidate the company. The Court retains an inherent jurisdiction not to do so, where the technical requirements of an order for liquidation are made out. That discretion should be exercised sparingly and in a judicial way.

Background

[12]              The plaintiff has a leasehold interest in the land on which the property is located. The owner of the land is Whai Rawa Railways Lands LP.

[13]              As a consequence, the Body Corporate levies two amounts to its members, operational levies for the expenses of operating the building and levies to meet the ground rent payable to the lessor.

[14]              The Body Corporate issued levies to the defendant under the operational levy account and the ground lease account. Neither type of levy has been paid. The levies have been outstanding since June 2023.

[15]              There is no argument raised about the Body Corporate’s ability to raise and issue the levies.  Nor could  there be due to  the effect  of ss  87  (ground  rental),  115 (operational account) and 121 (raising levies by ownership interest) of the UTA.

1      Yan v Mainzeal Property & Construction Ltd (in rec and in liq) [2014] NZCA 190 at [80].

2      Waikato Motors Ltd v West End Property Developments Ltd [2019] NZHC 865 at [5].

The disputes

[16]              The defendant has filed evidence. The evidence does not challenge the plaintiff’s right to issue the levies.

[17]              Rather, the evidence raises numerous complaints about management of the Body Corporate, including governance failures, conflicts of interest, mismanagement of maintenance and building compliance issues, failure to provide essential services and the like. The evidence also directly raises allegations about a member of the Committee, Mr Song.

[18]              I have considered the evidence provided by the defendant company in opposition to the liquidation application. I consider that the evidence more properly raises issues about the management and conduct of the Body Corporate rather than its ability to raise levies or that the debt is not due.

[19]              The disputes are wide-ranging. They are controversial. They are not accepted by the plaintiff.

[20]              The difficulty in the context of an unchallenged statutory demand and claim for liquidation is that the disputes are unliquidated and unquantifiable claims raised against the Body Corporate in relation to separate issues. That is, its management and conduct, but also the involvement of one of the Committee’s members, Mr Song.

[21]              I do not need to determine whether the disputes raised are a genuine and substantial dispute calling into question the levies, because I do not consider that they can challenge the levies. The levies are issued properly under the UTA. As the plaintiff says, there is no nexus between governance and the obligation to pay the levies.

[22]              The complaints raised may give rise to claims against the plaintiff, the Committee, Mr Song, or all of them. Remedies are available under, inter alia, ss 140, 141, 142 and 210 of the UTA for the type of complaints raised. But, currently, those claims await determination and are presently incapable of quantification.

[23]              It cannot be said that there are “clear and persuasive grounds” for a claim of set-off, much less that such claims call into question whether the plaintiff is a creditor of the defendant.3

[24]              Rather, they are best dealt with in another forum. At the hearing counsel for the defendant confirmed that the defendant company has commenced:

(a)proceedings in the Tenancy Tribunal challenging the levies and the management of the Body Corporate; and

(b)proceedings in this Court seeking the appointment of an interim administrator to the Body Corporate.

[25]              Those claims were filed the day before the hearing. I consider that they are the appropriate fora to determine the types of disputes the defendant raises.

[26]              The plaintiff reinforces in submission the “pay now and argue later” approach to the payment of levies. There are many examples in the Body Corporate context, one example of which is Manchester Securities Ltd v Body Corporate 172108.4 There the Court of Appeal stated: “What is clear is that the obligation to pay levies is special. They should be paid at once, whether or not there is a dispute. Pay now, argue later.”5

[27]              One of the most persuasive arguments raised by the plaintiff is that the failure to pay levies that are properly raised and payable causes loss to the other members of the Body Corporate. Failure to pay by one member causes an unfair burden to fall one the others.

[28]In the present case, I have reached the view that:

(a)The statutory demand was properly served on the defendant and has expired. The defendant did not apply to set that statutory demand aside.

3      Covington Railways Ltd v Uni-Accommodation Ltd [2001] 1 NZLR 272 (CA) at [11].

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

5 At [56]. See also the discussion of ordinary levies at [63]–[66].

(b)The presumption of insolvency under s 287 of the Act is not rebutted and is not displaced by raising allegations of governance dispute.

(c)The present application is not the proper forum for determining wide- ranging grievances about the Body Corporate administration or particular members of the Committee running the Body Corporate. It is confined to whether the debt is due and payable.

[29]The debt is due and payable.

[30]              In saying that, I intend to exercise my inherent jurisdiction to make an order of liquidation, but stay its execution for a brief period to give the defendant company an opportunity to pay the levies rather than face liquidation. That will allow the company to avoid liquidation and, if the levies are paid, to air its wide-ranging grievances in the appropriate forum.

[31]              The plaintiff urges caution in granting a stay of the liquidation order. It points to cases such as the Manchester Securities line of authority, where it says the Court showed that extreme caution was required (and where an application to set aside the statutory demand was refused).

[32]              However, those authorities are more properly considered as applying to the statutory demand stage, rather than the application for liquidation stage. At this later stage the Court has an inherent jurisdiction as to whether to order liquidation and may order a stay in order to effect justice between the parties.

[33]              In the context of the evidence before this Court, the defendant company has stated that it is able to pay the levies and that it is not insolvent. There is no evidence of an intention to make away with assets to prevent the plaintiff recovering the levies. The period of stay will be brief, as that reflects the defendant’s position that it is not insolvent and able to pay.

[34]              Hence, this order provides justice between both parties and acknowledges (but does not deal with) the wide-ranging grievances the defendant company raises.

[35]              The plaintiff provided a certificate as to unpaid debt which confirms that the amount sought in the statutory demand remains unpaid at the date of the hearing.

Decision

[36]              I order that the defendant company be placed in liquidation and the Official Assignee be appointed.

[37]              The order of liquidation is stayed until 4.00 pm on the tenth working day from the date of this judgment. That is to enable the defendant to pay the sum of

$158,639.74 to the Body Corporate’s solicitor’s trust account.

[38]              Time is of the essence for that payment. Should the defendant company fail to pay that amount, then it is placed into liquidation pursuant to this judgment, without a further step being required by the plaintiff.

Costs

[39]The plaintiff seeks costs. Costs will be determined on the papers.

[40]              The plaintiff is to file its memorandum as to costs, which is not to exceed five pages (including attachments) within five working days of the release of this judgment.

[41]              The defendant is to respond to the plaintiff’s memorandum as to costs within a further five working days, with a memorandum of its own not exceeding five pages (including attachments).

[42]              I thank counsel for the cooperative way they dealt with this application. I record that the defendant company’s counsel did not consent to the orders, but responsibly did not oppose them being made on the terms described above.

Associate Judge Cogswell