Central Plateau Steel Structures Limited t/a Coresteel v Dealership Properties Limited

[2023] NZHC 3213

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

I TE KŌTI MATUA O AOTEAROA

TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE

CIV-2023-463-45

[2023] NZHC 3213

UNDER

the Companies Act 1993

IN THE MATTER OF

an application for the liquidation of Dealership Properties Limited

BETWEEN

CENTRAL PLATEAU STEEL

STRUCTURES LIMITED trading as “CORESTEEL”

Plaintiff

AND

DEALERSHIP PROPERTIES LIMITED

Defendant

Hearing:	24 October 2023
Appearances:	James McDougall for the Plaintiff Shane Elliott for the Defendant
Judgment:	15 November 2023

COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

This judgment was delivered by me on 15 November 2023 at 3:00pm

pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

Solicitors:

Holland Beckett Law (James McDougall/Melissa Hunia), Tauranga, for the Plaintiff Insight Legal Limited (Hugh K Gladwell), Warkworth, for the Defendant

Counsel:
Shane Elliott, Blackstone Chambers, Auckland, for the Defendant

CENTRAL PLATEAU STEEL STRUCTURES LIMITED trading as “CORESTEEL” v DEALERSHIP PROPERTIES LIMITED [2023] NZHC 3213 [15 November 2023]

Introduction

[1]    This matter was called before the Court on 24 October 2023. At the hearing, the plaintiff’s application was discontinued with leave of the Court as the amount claimed in the liquidation proceedings had been paid by the defendant.

[2]    The plaintiff seeks an award of costs on a 2B basis (plus disbursements) against the defendant. Counsel for the plaintiff filed a memorandum as to costs dated 20 October 2023, and counsel for the defendant filed a reply dated 23 October 2023. Counsel for the defendant’s position is that costs should lie where they fall.

Background

[3]    The plaintiff served a statutory demand on the defendant on 27 April 2023 for the payment of a debt of $198,974.80. On 15 May 2023 the defendant company paid the plaintiff $140,571.06, leaving a balance  owing  of  $58,403.74  plus  interest  (the Debt).

[4]    On 27 June 2023 the plaintiff advised the defendant that the liquidation application would be filed without further notice if the Debt was not paid by 30 June 2023. On 30 June 2023 the defendant proposed to pay the Debt to the plaintiff’s counsel’s trust account, to be held pending resolution of remedial work, which proposal the plaintiff did not accept.

[5]    The plaintiff filed the liquidation proceedings on 4 July 2023, which was the last day liquidation proceedings could be filed based on the statutory demand.

[6]The defendant company paid the Debt on 5 July 2023.

[7]    On 17 July 2023, the defendant was provided a copy of the pleadings and the request was made to pay the plaintiffs 2B costs and disbursements.

[8]    The proceeding was served on the defendant’s counsel via email by agreement on 8 September 2023.

[9]The parties have not been able to agree costs.

Plaintiff’s submissions

[10]   Counsel for the plaintiff submits the presumption that a discontinuing plaintiff must pay costs under r 15.23 of the High Court Rules 2016 is rebutted in this case because:

(a)the payment of the Debt amounted to a change in circumstances obviating the need for the proceeding to continue;

(b)the plaintiff was the successful party, and the Debt was paid in full after the proceedings were issued;

(c)costs followed the event;

(d)the plaintiff acted reasonably, allowing the defendant until the last possible point to pay the debt, and the plaintiff should not have been required to file the liquidation application and would not have done so if the defendant had paid the debt as required on or before 4 July 2023;

(e)the plaintiff was put to unnecessary cost and expense in preparing and filing the liquidation application;

(f)it is just and equitable that the plaintiff be awarded costs in this case.

[11]   Counsel for the plaintiff refers to decisions of Royal Forest & Bird Protection Society of New Zealand Inc. v Northland Regional Council and Davies & Co Solicitors Nominee Company Limited v Yelcich1 as examples of where the presumption in r 15.23 has been successfully rebutted by the plaintiff.

1      Royal Forest & Bird Protection Society of New Zealand Inc. v Northland Regional Council [2019] NZAR 587; Davies & Co Solicitors Nominee Co Ltd v Yelcich [2013] NZHC 2546.

Defendant’s submissions

[12]   Counsel for the defendant submits that the statutory demand issued by the plaintiff was inappropriately issued, as was the liquidation application. He submits the Debt was the balance of the purchase price under a construction contract between the parties which was payable on practical completion, and practical completion was not achieved due to a number of significant remedial works to be done by the plaintiff which were outstanding.

[13]   Counsel for the defendant submits that the defendant repeatedly communicated its position to the plaintiff that the purchase price would be paid on completion of the remedial works, and offered to pay funds into the plaintiff’s solicitor’s trust account pending completion of the remedial works, which offer was refused by the plaintiff.

[14]   Counsel for the defendant submits that when it became clear the plaintiff intended to file its liquidation application notwithstanding the genuine dispute in regard to the debt, it paid the outstanding amount of 5 July 2023 to avoid unnecessary litigation and cost. Counsel submits that the remedial works have not been carried out to date, and the defendant proposes to recover those costs from the plaintiff.

[15]   Counsel for the defendant submits that once the Debt had been paid, the appropriate course was for the plaintiff to discontinue the proceeding then, and if it wished, to apply for costs but instead the plaintiff allowed the proceeding to languish for a further three months resulting in unnecessary litigation and costs.

[16]   Counsel for the defendant submits that this is an example of a statutory demand/liquidation procedure being used as a means of leveraging collection of a disputed debt and the plaintiff had no genuine belief that the defendant was insolvent. Counsel refers to the decision of Gateway Cargo Systems Limited v Airborne Freight Limited2 as authority for the proposition that it is not permissible to use the statutory demand procedure for collection of a disputed debt.

2      Gateway Cargo Systems Limited v Airborne Freight Limited 16/3/04 CIV-2003-404-7207.

Result

[17]   I am of the view that costs in this proceeding should lie where they fall. There was a genuine dispute between the parties as to construction work under the construction contract between them and outstanding remedial works. The dispute was communicated to the plaintiff by the defendant but nonetheless the plaintiff proceeded to issue the statutory demand and then the liquidation proceedings. As these proceedings should not have been issued in the circumstances of a genuinely disputed debt, the plaintiff is not entitled to recover costs from the defendant.

Order

[18]I order that costs in this proceeding lie where they fall.

…………………………….. Associate Judge Taylor