Ceva Logistics (New Zealand) Limited v Jua Kali World Limited HC Wellington CIV 2010-485-153

[2010] NZHC 805

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2010-485-153

AND UNDER                 the Companies Act 1993

IN THE MATTER OF     an application to put company into liquidation

BETWEEN  CEVA LOGISTICS (NEW ZEALAND) LIMITED

Plaintiff

ANDJUA KALI WORLD LIMITED Defendant

Appearances: R.J. Bates - Counsel for Plaintiff

A. Hill - Counsel for Defendant

Reasons for Decision: 29 March 2010

REASONS FOR DECISION OF ASSOCIATE JUDGE D.I. GENDALL

Solicitors:           Quigg Partners, Barristers & Solicitors, PO Box 3035, Wellington

Morrison Kent, Solicitors, PO Box 10035, Wellington

CEVA LOGISTICS (NEW ZEALAND) LIMITED V JUA KALI WORLD LIMITED HC WN CIV-2010-485-

153  29 March 2010

[1]      The plaintiff’s application for an order to place the defendant company into liquidation came before me today, 29 March 2010.

[2]      After hearing and considering submissions from Mr Bates for the plaintiff and Ms Hill for the defendant an order was made at 10.34 am placing the defendant company into liquidation.   The Official Assignee was appointed liquidator.   Costs were awarded to the plaintiff on a 2B basis together with disbursements as fixed by the Registrar.

[3]      In making that decision, I indicated that my detailed reasons for the decision would follow.  I now set out those reasons.

[4]      The present debt upon which the plaintiff’s application to place the defendant into liquidation is founded amounts to the sum of $34,606.00.   It represents the balance of seven invoices (totalling $39,606.72) issued by the plaintiff for the provision of air freight services to the defendant over a period leading up to October

2009.

[5]      On  20  October  2009  the  plaintiff  served  the  defendant  company  with  a statutory demand for these seven invoices which totalled $39,606.72.  The amount of the demand was not disputed nor was there any application made by the defendant to set it aside.

[6]      Instead, it appears to be accepted that around 3 November 2009 the defendant agreed that it would clear the debt by paying the plaintiff the sum of $20,000.00 by

16 November 2009 and the balance of the then outstanding debt (being $19,606.72) by 16 December 2009, together with a further payment of $2,500.00 for costs and interest.  On this basis, the plaintiff agreed that upon full payment of those amounts it would withdraw the statutory demand.

[7]      It is clear that the defendant company immediately failed to pay the first amount of $20,000.00 due on 16 November 2009 although subsequently it did pay

$5,000.00 on or about 2 December 2009.  No further payments were made however.

The  present  proceeding  before  the  Court  was  brought  then  by  the  filing  of  a statement of claim and notice of proceeding on 1 February 2010.

[8]      Those proceedings were served upon the defendant company on 2 February

2010 and advertised in the Dominion Post newspaper and New Zealand Gazette on 4

March 2010.

[9]      On 15 March 2010 when the matter was first called before me, I adjourned the  proceeding  to  today,  29  March  2010  on  the  basis  that  the  director  of  the defendant at the time was in surgery and   in addition, certain   issues   had   arisen regarding  compliance  with s 288(1) Companies Act 1993.  In particular the present proceeding by the plaintiff, which appeared at least in part to rely upon the defendant’s failure to comply with a statutory demand issued against it, was unable to rely upon the presumption that the company is unable to pay its debts in terms of s

288(1) Companies Act 1993 as the liquidation application had been made more than

30 working days after the last date for compliance with the demand.   Thus, the presumption of inability to pay debts on the part of the defendant company in terms of s 287 Companies Act 1993 arguably did not apply here because of this failure to comply with the strict time requirements outlined in s 288(1) Companies Act 1993.

[10]     Notwithstanding these matters, however, it is clear that it remains open to a plaintiff creditor to prove the insolvency of a defendant company by producing evidence to the Court that shows that the company is unable to meet the current demands made upon it – see Brookers Company & Securities Law paragraph CA288.02.  In Re Taylor’s Industrial Flooring (1990) BCC44 (CA) it was affirmed that if a debt was due and undisputed, failure to pay by a debtor was itself evidence of inability on the part of a company to pay its debts.

[11]     In the present case counsel for the plaintiff submits that there is clear proof before the Court, by a means other than the defendant company’s failure to comply with the statutory demand, that shows that the defendant here is quite unable to pay its debts.

[12]     As Brookers Company & Securities Law at paragraph CA241.03(1) states, when addressing a company’s inability to pay its debts as a ground for making an order for liquidation in terms of s 241(4)(a) Companies Act 1993:

.... However, s 288(2) provides that s 287 does not prevent proof by other means that a company is unable to pay its debts.  Situations where the Court has found that a company is unable to pay its debts include:

......

(d)       Where a debt (based on a series of invoices) has not been paid when due so long as that debt is not bona fide disputed:  Re Taylor’s Industrial Flooring (1990) BCC44; (1990) 8ACLC529 (CA). In this case the petitioning creditor did not issue a statutory demand but simply filed a winding up petition to avoid the three week period necessary for the expiry of the statutory demand ...

[13]     Re Taylor’s Industrial Flooring was cited with approval in Commissioner of Inland Revenue v Berrytime Limited High Court, Tauranga, 3 April 2009, Associate Judge Doogue – CIV-2008-470-808.

[14]     In the present case there is no notice of opposition or defence filed by the defendant to the plaintiff’s claim to have it placed into liquidation.   As I have noted, no application to set aside the original statutory demand was made.   The original debt claimed by the plaintiff amounting to $39,606.72 has never been disputed.  In fact as I understand the position, there was an agreed arrangement between the parties for this to be paid on a progressive basis and indeed $5,000.00 of this debt was paid.  The other aspects of that settlement arrangement were not met however, despite the defendant’s acknowledgement that the outstanding accounts were due and hence the current proceeding was instituted.

[15]   From the decisions in Re Taylor’s Industrial Flooring Limited and Commissioner of Inland Revenue v Berrytime Limited, it is clear that the existence of debts owed by a defendant and the admitted fact that they have not been paid, are available as evidence that the company in question is unable to pay its debts.  If a debt  is  due,  undisputed  and  unpaid,  failure  to  pay  that  debt  by  itself  provides evidence of an inability by a defendant company to pay its debts overall.

[16]     In the present case, there is no contest between the parties that following service of the statutory demand, the agreement struck to make payments of the admitted outstanding accounts totalling $39,606.72 by instalments resulted in one payment of $5,000.00 but otherwise the agreement has not been honoured.  There is no defence before the Court nor any evidence to dispute the basis upon which the present application rests, namely, that the defendant is unable to pay its debts.

[17]     Before me Ms Hill for the defendant did acknowledge that, although she had no specific instructions on the matter and no notice of opposition or defence had been provided by the defendant, the defendant still wished to advance a defence that the material before the Court was insufficient to support a finding that the defendant company was unable to pay its debts.  With respect I disagree.  The evidence and earlier acknowledgments on behalf of the defendant clearly support the strong inference and conclusion that the defendant company cannot in fact pay its debts as they fall due.  There is certainly no evidence of any kind before the Court from the defendant as to its financial position and as I have noted several times, no defence or opposition has been filed.

[18]     For all these reasons I must conclude that the defendant company cannot in fact pay its debts as they fall due and is therefore insolvent in terms of s 241

Companies Act 1993.  The plaintiff’s application succeeds.

[19]     The  orders  placing  the  company into  liquidation,  appointing  the  Official Assignee as liquidator and as to costs made at 10.34 am today, 21 March 2010 are confirmed.

‘Associate Judge D.I. Gendall’