Concrete Structures (NZ) Ltd v NMHB Ltd - [2019] NZHC 268

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-2074

[2019] NZHC 268

IN THE MATTER OF the Companies Act 1993

BETWEEN

CONCRETE STRUCTURES (NZ) LIMITED

Plaintiff

AND

NMHB LIMITED

Defendant

Hearing: 26 February 2019

Appearances:

P F Dalkie and S Bhanabhai for NMHB Limited

K A Badcock for Concrete Structures (NZ) Limited

Judgment:

26 February 2019

ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL

Solicitors:
Dyer Whitechurch (S Bhanabhai), Auckland, for NMHB Ltd
Kevin A Badcock Limited, Rotorua, for Concrete Structures (NZ) Ltd
Copy for:
Paul F Dalkie, Auckland, for the Plaintiff

CONCRETE STRUCTURES (NZ) LIMITED v NMHB LIMITED [2019] NZHC 268 [26 February 2019]

[1] Concrete Structures (NZ) Ltd has applied for NMHB Ltd to be put into liquidation. It says that it is a creditor for $206,391.94. In September 2018, Associate Judge Sargisson dismissed an application by NMHB Ltd under s 290 of the Companies Act 1993 to set aside a statutory demand by Concrete Structures (NZ) Ltd for payment of $206,391.94.1 Under s 291(1)(a) of the Companies Act, she ordered NMHB Ltd to pay the amount of the statutory demand within five working days. NMHB Ltd did not comply with the order. Concrete Structures relies on the non-compliance with that order as giving rise to a presumption of insolvency under s 291(2) of the Companies Act 1993. While the statement of claim does not say so expressly, Concrete Structures is relying on the ground under s 241(4)(a) of the Companies Act that NMHB Ltd is unable to pay its debts.

[2] NMHB Ltd has applied for a stay of the proceeding. It has appealed against Associate Judge Sargisson’s decision of 18 September 2018 dismissing the application to set aside the statutory demand. It says that this proceeding should be put on hold until the Court of Appeal has given its decision on its appeal. It filed the appeal in October 2018. The Court of Appeal is to hear the appeal in Auckland on 21 May 2019.

Background

[3] NMHB Ltd is a building contractor. It had a contract to erect a building in Rabone Street, Henderson, Auckland, for Rabone Estates Ltd. Mr Sam Tolich is the manager of NMHB Ltd. Concrete Structures (NZ) Ltd is a Rotorua company and, as its name suggests, manufactures concrete products to be used in construction. It had a contract with NMHB Ltd to manufacture and supply concrete panels for the Rabone Street job. That was construction work as defined by the Construction Contracts Act 2002, s 6(1)(f)(iv):

(1) In this Act unless the context otherwise requires, construction work
means any of the following work-

(f) any operation that forms an integral part of, or is preparatory to or is for rendering complete, work of the kind referred to in paragraphs (a) to (d); including:

1 NMHB Ltd v Concrete Structures (NZ) Ltd [2018] NZHC 2436.

…

(iv) prefabricating customised components of any building or structure, whether carried out…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] NZHC 268
Decision Date: 26 February 2019

CaseChat Overview and Summary

Concrete Structures (NZ) Ltd, a creditor, applied for NMHB Ltd to be put into liquidation based on an unpaid debt of $206,391.94. NMHB Ltd, the defendant, opposed the application and sought a stay of the proceedings pending an appeal of an earlier decision dismissing its application to set aside a statutory demand issued by Concrete Structures (NZ) Ltd. The court was required to decide whether to grant the stay application and, if not, to determine how to proceed with the liquidation application.

The court considered the applicable rules and principles governing stays of proceedings and determined that the stay application was not appropriate under the High Court Rules or the Court of Appeal (Civil) Rules. The court also examined the effect of the "pay now/argue later" policy of the Construction Contracts Act 1993 and insolvency set-off under the Companies Act 1993. The court found that the policy of the Construction Contracts Act was procedural, while the effect of insolvency set-off was substantive. Therefore, even if the appeal were to succeed, NMHB Ltd could still raise its counterclaims in the liquidation proceeding. The court also noted that the appeal seemed to be a sideshow, as NMHB Ltd was likely insolvent regardless of the outcome.

Accordingly, the court dismissed the stay application and provided case management directions for the proceeding to continue. The defendant was given until 18 April 2019 to file a statement of defence setting out full particulars of any counterclaims and all evidence in support. The plaintiff had until 2 May 2019 to file any reply to the statement of defence and any opposition to it. The court also set deadlines for the filing of casebooks and synopses of submissions and scheduled a one-day hearing no earlier than 24 May 2019. Costs were reserved for the final outcome of the proceeding.

Orders