Body Corporate 63891 v Corsair Products Limited

[2018] NZHC 1702

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2018-485-145

[2018] NZHC 1702

UNDER

the Companies Act 1993

IN THE MATTER

of an application to liquidate

Corsair Products Limited pursuant to s 241(4)(a) of the Act

BETWEEN

BODY CORPORATE 63891

Plaintiff

AND

CORSAIR PRODUCTS LIMITED

Defendant

Hearing:

9 July 2018

Appearances:

M Riordan for plaintiff

M W Anderson for defendant

Judgment:

10 July 2018

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]        In this proceeding the plaintiff, Body Corporate 63891, seeks an order for the winding up of the defendant, Corsair Products Ltd.

[2]The background can be outlined briefly.

[3]        The plaintiff is the body corporate of a complex in which the defendant is a unit title holder. For reasons which I am told are complex and which have developed over a long period of time, but which are ultimately irrelevant, the defendant fell behind on the payment of body corporate levies so that by 13 December 2017 it was indebted to the plaintiff in the sum of $11,594 for such levies. On that date the plaintiff served a statutory demand pursuant to s 289 of the Companies Act 1993 for that

BODY CORPORATE 63891 v CORSAIR PRODUCTS LIMITED [2018] NZHC 1702 [10 July 2018]

amount plus costs of $22,138.   A total demand of $33,732.   The defendant had     15 working days to apply to set the statutory demand aside. It did nothing. In an affidavit sworn on 24 April 2018 the defendant’s director, Mr Tony Graham, said that he did not receive the statutory demand until 15 December 2017, by which time there was only a week before the court closed for the year and that because it was the holiday season he did not have time to attend to the statutory demand. Needless to say, that explanation is not a satisfactory one.

[4]        On 1 February 2018 the plaintiff commenced this proceeding for an order winding the defendant up on the grounds of its insolvency. To establish insolvency the plaintiff relied on the statutory presumption arising from s 288 of the Act following on from the defendant’s failure to meet the statutory demand.

[5]        The defendant entered a defence on 20 March 2018. In its defence it accepted that it had owed the $11,594 in body corporate levies, but questioned its liability for costs of $22,138. The points raised in relation to these costs included:

(a)the plaintiff had not raised any costs issues with the defendant prior to the service of its statutory demand;

(b)the invoices in question were raised by the plaintiff’s solicitors against the plaintiffs and not against the defendant;

(c)the plaintiff had not raised any invoices in respect of costs against the defendant;

(d)at least one item of costs appeared to relate to something unconnected with the plaintiff’s claim against the defendant for levies;

(e)the costs appear to include travel time and Mr Graham could not see how travelling would be involved;

(f)the costs — or some proportion of them — might relate back to an earlier dispute between the parties which was settled on the basis that each party would bear its own costs.

[6]        Insofar as evidence of solvency is concerned the defendant accepts that it must establish its solvency, given that it did not meet the statutory demand or take steps in relation to it. In order to do so Mr Graham, in the affidavit already referred to, deposed:

(a)as the director of the company he was able to aver that the company was not insolvent;

(b)the company was essentially a property holding company and the value of the two properties it held exceeded the indebtedness secured over them by something approaching $150,000 so that it was not insolvent from a balance sheet perspective;

(c)the company’s operating account was in credit to the tune of about

$25,000;

(d)the company had paid the outstanding levies of $11,594.

[7]Since Mr Graham’s first affidavit was filed and served, things have moved on:

(a)first, simply by reason of the effluxion of time, further levies have become due to the plaintiff by the defendant which have been paid;

(b)second, and critically, the defendant company has paid $22,000 to its solicitors and consents to an order being made by the court that its solicitors, Thomas Dewar Sziranyi Letts, are to hold those funds pending further order of this Court of any other court or tribunal having jurisdiction over the dispute between the parties as to costs claimed by the plaintiff.

[8]        Mr Riordan for the plaintiff and Mr Anderson for the defendant very helpfully filed written submissions so that at the hearing, it was possible to focus very quickly on the key issues.

[9]I am grateful for the assistance I received from both of them.

[10]      In the end, having reviewed the evidence and heard from Mr  Riordan and  Mr Anderson, I have reached the following conclusions.

[11]      First, I am satisfied that the defendant has discharged its obligation of demonstrating that it is not insolvent. It is common ground that it has a positive balance sheet position. It has demonstrated by paying the levies which were due as at the date of the commencement of this proceeding, and those which have since become due, and paying the amount of the fees claimed by the plaintiff to its solicitors, that it is able to meet its obligations as they fall due.

[12]      I am also satisfied that there is a genuine dispute about how much, if any, of the fees claimed by the plaintiff against the defendants are due. For a start, fees totalling over $20,000 in respect of bankruptcy proceedings strike me as surprisingly high. The plaintiff accepts that the claim was to some extent at least overstated as a result of error. The defendant has raised other issues. In short, there is a genuine dispute about the fee component of the plaintiff’s claim which in my judgment needs to be dealt with — most probably by the commencement of proceedings by the plaintiff in the District Court (although counsel tell me that the matter could be litigated in the Tenancy Tribunal).

[13]For those reasons I dismiss the plaintiff’s claim.

[14]      In doing so, by consent, I order that the defendant’s solicitors hold the monies paid to them pending agreement between the parties or further order of this Court or any other court or tribunal having jurisdiction in the matter.

[15]      That leaves costs. As I indicated to counsel during the course of the hearing my preliminary view, subject to hearing further from them, is that the plaintiff is entitled to recover costs from the issue of the statutory demand bearing in mind that the defendant simply ignored that demand. However there may be matters about which I am unaware (and indeed Mr Anderson signalled as much). Accordingly, I reserve costs and direct that:

(a)the plaintiff file a memorandum as to costs (no more than 3 pages) together with a schedule of costs claims within 5 working days;

(b)the defendant file a memorandum in response (again, no more than 3 pages) within a further 5 working days.

[16]I will deal with costs on the papers.

Associate Judge Johnston

Solicitors:

Morrison Mallet, Auckland for the plaintiff

Thomas Dewar Sziranyi Letts, Lower Hutt for the defendant