Chilltech Regrigeration & Engineering Services Limited HC Auckland CIV 2010-404-1469

[2010] NZHC 1285

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2010-404-001469

UNDER  the Companies Act 1993

IN THE MATTER OF     an application pursuant to s 241 of the

Companies Act 1993

BETWEEN  CHILLTECH REGRIGERATION & ENGINEERING SERVICES LIMITED Plaintiff

ANDCRL MECHANICAL LIMITED Defendant

Hearing:         30 July 2010

Counsel:         AJ Orme for plaintiff

JD Noble for defendant

Judgment:      30 July 2010 at 12:20pm

(ORAL) JUDGMENT OF ASSOCIATE JUDGE FAIRE [an application for order putting company into liquidation]

Solicitors:           Lawson Robinson, PO Box 45, Napier for plaintiff

Boyle Mathieson, PO Box 21 640, Waitakere City for defendant

CHILLTECH REGRIGERATION & ENGINEERING SERVICES LIMITED V CRL MECHANICAL LIMITED HC AK CIV 2010-404-001469  30 July 2010

The application

[1]      The plaintiff applies for an order that the defendant be placed into liquidation and that a liquidator be appointed.

[2]      A statement of defence was filed on the defendant company’s behalf.   It asserts that the debt claimed is not owed by the defendant but is owed by CRL Air Ltd.

[3]      The proceeding was called before Associate Judge Doogue on 7 May 2010. At that time his Honour directed that an affidavit in support of the statement of defence be filed and served by 28 May 2010 and that reply affidavits be filed and served by 11 June 2010.  He directed a half-day fixture at 10am today.

[4]      No affidavits were filed on behalf of the defendant company as directed.  On

21 July 2010 an affidavit in opposition was filed.  Subsequently an application for leave to read the late-filed affidavit in opposition was filed.   An affidavit in reply was subsequently filed.

[5]      Non-compliance with orders of the court is unacceptable.  However, a court will always be concerned to see that no miscarriage of justice results by either granting or refusing leave.   In Nelson Lifecare Centre Ltd v Sampson[1]  the court considered the position in relation to a summary judgment application and said:

[1] Nelson Lifecare Centre Ltd v Sampson (1995) 8 PRNZ 376 per Hansen J.

If too rigid an approach is taken, one possible consequence will be that affidavits in reply will be so limited that matters that could properly be put before the Court to show that summary judgment should be entered will not be available to the Court. The consequence is an unnecessary trial. Equally, if further affidavits are not allowed to be filed by a defendant, the consequence  could  be  that  summary  judgment  could  be  entered  the defendant who had a perfectly valid defence. The drafters of the Rules could not   have   envisaged   such   possible   injustice  arising  from  their  strict application. I agree with the Judge in the Allied Mortgage Nominees Ltd case that it is not a practice to be encouraged. However, given the very frailties of human nature, it is inevitable that on occasions both plaintiffs and defendants,  or  their  advisers,  will,  for  some  reason,  not  place  relevant material .going to the heart of whether or not summary judgment should be granted before the Court in the initial affidavit. It would almost make a mockery of the procedure if too rigid an application of the Rules led to that

situation. It is a matter that can be readily and properly controlled by awards of costs, but it is important that all relevant material should be placed before the Court to enable justice to be done between the parties.

[6]      I consider that statement of principle applies equally in this case.  Mr Orme confirmed to me that no particular prejudice was occasioned to the plaintiff by the late failing of the affidavit.  The matter, obviously would cause additional costs but that problem can be cured by an appropriate order for costs.  I therefore consider that leave should be granted to read the affidavit of the defendant’s director.  However, an indulgence has been sought and it is appropriate that costs cover the additional expense and inconvenience caused to the plaintiff by the non-compliance.   In the orders that appear at the conclusion of this judgment that position will be taken into account.

Failure to apply to set aside a statutory demand

[7]      The application in this case is based on a failure to comply with a statutory demand.   Where a company fails to take steps to set aside a statutory demand normally the defendant will not be permitted to raise a substantive defence to the liquidation proceedings:  Investment Enterprises Ltd v Private Sale Company Ltd.[2]

The defence

[2] Investment Enterprises Ltd v Private Sale Company Ltd (1997) 10 PRNZ 282.

[8]      The statement of defence and the affidavit that has been filed in opposition together raise two issues.  They are:

a)        Is the debt due by this defendant? And b)       If so, is the full amount undisputed?

[9]      The documents show that the defendant and plaintiff both made and received orders in the defendant’s name.  The only evidence of any third party involvement was a request by the defendant company to render a bill of costs to a third party.  I

consider, in the circumstances, of this case that there is no question that the ultimate responsibility for what is due and owing under the contract lies with the defendant.

[10]     The defendant accepts that there is no dispute as to quantum in respect of the sum of $2,459.  That sum exceeds the prescribed amount provided by the Companies Act 1993, s 289(2) and the Companies Act 1993 Liquidation Regulations 1994, reg 5.

[11]     I indicated to counsel that my preliminary view was that there was no proper basis for resisting an order appointing a liquidator in respect of this sum.  I granted a short  adjournment  to  enable  counsel  to  take  instructions  to  ascertain  if  that undisputed sum could be paid.  Counsel has taken instructions and has reported to me that the payment of the undisputed sum will not be paid.

The court’s approach to an application to appoint a liquidator

[12]     The Companies Act 1993, s 241 gives the court a discretion to appoint a liquidator if it is satisfied that the company is unable pay its debts.  The Companies Act 1993, s 287 provides that:

287     Meaning of “inability to pay debts”

Unless the contrary is proved, and subject to section 288 of this Act, a company is presumed to be unable to pay its debts if—

(a)       The company has failed to comply with a statutory demand;

[13]     The  approach  that  the  court  should  take  in  considering  an  opposed application to appoint a liquidator has been examined in a number of authorities. In Bateman Television Limited (in liq) & Anor v Coleridge Finance Company Ltd[3] reference was made to the general rule that no order will be made on a petition founded on a debt which was genuinely disputed.  To apply to wind up a company in such a circumstance is an abuse of the court’s process. The court has an inherent

jurisdiction to prevent such an abuse of process.  The position has been considered in a number of cases both in relation to opposed applications to wind up and in respect of applications for orders restraining advertising and staying proceedings:  Exchange Finance Co Ltd v Lemington Holdings Ltd;[4]  Taxi Trucks Ltd v Nicholson;[5]  Edge Computers Ltd v Colonial Enterprises Ltd.[6]

[3] Bateman Television Ltd (in liquidation) & Anor v Coleridge Finance Co Ltd [1971] NZLR 929 (PC).

[4] Exchange Finance Co Ltd v Lemmington Holdings Ltd [1984] 2 NZLR 242.

[5] Taxi Trucks Ltd v Nicholson [1989] 2 NZLR 297.

[6] Edge Computers Ltd v Colonial Enterprises Ltd 9 PRNZ 621.

[14]     From those authorities I extract the following specific principles which are applicable in such cases:

a)     A winding up order will not be made where there is a genuine and substantial dispute as to the existence of a debt such that it would be an abuse of the process of the court to order a winding up;

b)      In such circumstances, the dispute, if genuine and substantially disputed, should be resolved through action commenced in the ordinary way and not in the companies court;

c)     The assessment of whether there is a genuine and substantial dispute is made on the material before the court at the time and not on the hypothesis that some other material, which has not been produced might, nonetheless be available;

d)     The governing consideration is whether proceeding with an application savours of unfairness or undue pressure.

[15]     I am satisfied that there is no dispute to that portion of the claim in respect of which quantum is not disputed.  The jurisdictional basis for the making of an order placing the defendant into liquidation and appointing a liquidator is made out.

Orders

[16]     CRL Mechanical Ltd is placed into liquidation.    The Official Assignee is appointed liquidator.

Costs

[17]     The plaintiff is entitled to costs.  I referred earlier in this judgment to the fact that the plaintiff is entitled to costs on the application for leave to file evidence outside the order as made by Associate Judge Doogue.  The application, however, was heard as part of the application to appoint a liquidator.  The position can best be covered by my making allowance for the preparation of the notice of opposition to the application for leave based on Category 1, Band B of the High Court Rules and by making a general order for costs based on a half-day hearing for the substantive proceeding in  accordance with  Category 2,  Band B.    I order  accordingly.    The plaintiff is entitled to disbursements as fixed by the Registrar.

Time of order

[18]     This order has been made at 12:20pm.

JA Faire

Associate Judge