Elite Advance Tiling Limited v Bellaroc Limited

[2017] NZHC 1552

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2016-409-001238 [2017] NZHC 1552

BETWEEN

ELITE ADVANCE TILING LIMITED

Plaintiff

AND

BELLAROC LIMITED Defendant

Hearing:

6 July 2017 (Determined on the papers)

Counsel:

R A Hearn for Plaintiff

G K Riach for Defendant

Judgment:

6 July 2017

FINAL JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1]      The  Court  issued  an  interim  judgment  on  4  May  2017.    The  judgment included the following findings:

(a)     There is an arguable dispute over whether a sum of $18,642.12, which is owing by Elite Advance Tiling Limited (Elite) to Bellaroc Limited (Bellaroc), is yet due.1

(b)There is an arguable dispute over whether Elite has a counterclaim against Bellaroc for $14,202.50 for work undertaken by Elite at Bellaroc’s own showroom.2

(c)     The  statutory  notice,  which  has  been  issued  in  a  total  sum  of

$22,267.13, relates not only to the work carried out on a job at a house in MacDougall Avenue but also materials provided to Elite by Bellaroc for other jobs, in a total sum of $3,625.01 and there is no arguable

defence to this sum now being owing.

1      Elite Advance Tiling Ltd v Bellaroc Ltd Interim Judgment [2017] NZHC 878 at [12].

2 At [13].

ELITE ADVANCE TILING LTD v BELLAROC LTD Final Judgment [2017] NZHC 1552 [6 July 2017]

[2]      The consequence of these findings was that the Court observed that it could set aside the statutory demand in full at that point.  However, the Court went on to note the interrelated affairs between the parties to this case, and Build Team Limited. On a related proceeding argued at the same time as the application by Elite to set aside the statutory demand issued by Bellaroc, the Court made an order that Build Team be placed into liquidation, but suspended the order for a period to allow Build

Team to make a payment to Elite.3    The Court is now informed that payment was

made so the related proceeding is at an end (save only on any issues about costs).

[3]      Because of the interrelationship between Bellaroc, Elite and Build Team the Court noted the caution it must exercise in making orders which isolate the financial position established in relation to some jobs, and some materials supplied, from those over which doubt remains.  The Court noted that this is particularly so when the Court is dealing with applications brought under the Companies Act in relation to notices under s 289 and proceedings to place companies into liquidation.  The Court went on to note that this may be a case where the Court should exercise a discretion not to set aside the statutory demand issued against Elite if Build Team paid to Elite the sum specified in the related proceeding, which in fact it has.

[4]      As  a  consequence  I have received  written  submissions  from  counsel  for Bellaroc and Elite on the question of whether the statutory demand should be set aside or not.

[5]      Both counsel note that there are few decided cases in relation to the exercise

of the Court’s discretion,, and it is clear that the discretion is rarely exercised.

[6]      The only reason I considered that there may be a reason to take the rare step of not setting aside the statutory demand when there is a dispute over liability for the greater part of it, and an arguable counterclaim in relation to a sum exceeding half of the amount claimed, was the interrelationship between the three companies.  These companies traded together successfully for a considerable period, until Mr Araujo and  Mr  North  fell  out.     Because  they  were  trading  together  regularly  and

harmoniously the business arrangements between them were informal and plainly

3      Elite Advance Tiling Ltd v Build Team Ltd [2017] NZHC 879.

relied on the considerable goodwill each party had to the other.   Only when the personal relationship between Mr Araujo and Mr North deteriorated did the financial position between the three companies come to be examined, and the minimal records of arrangements between them came into the spotlight.   These facts would have caused difficulties at trial, but the obstacles in the pathway to resolution were exacerbated by the parties electing to avail themselves of the procedures set out in the  Companies Act  which  lead  to  liquidation.    In  the  judgment  on  the  related proceeding, and in the interim judgment on this proceeding, I was able to reach conclusions with sufficient certainty for the outcomes which resulted, but that was only possible because there was a partial acceptance of liability on some claims, and very clear facts on other claims.  That does not mean, however, that there is not a significant number of disputes remaining for final resolution between these three companies.   Unless they are able to reach settlement, civil litigation is likely to follow.   This is a factor which  I take into account on the issue of exercise of discretion, which is presently before the Court.

[7]      It is relevant, too, to another factor I take into account.   I am urged to find that the claim Elite maintains it has against Bellaroc for tiling work undertaken at Bellaroc’s showroom is weak. As with other disputes there is no documentation.  No invoice was  rendered  for 20  months.   No price for the work  was  ever agreed. However, those are issues for trial.  They simply cannot be assessed in any realistic or fair way on this application.

[8]      These factors underscore the difficulties which face parties who invoke a jurisdiction which is not intended and in large measure is unsuited as a medium for resolution of their differences.  They also lead me to conclude that the only course open to the Court is to set aside the statutory demand, and not to exercise the discretion of the Court against doing so.

[9]      This conclusion is fortified by the fact that the sum claimed by Bellaroc

$18,642.12 is for materials supplied for the MacDougall Avenue job, referred to in more detail in the interim judgment, but Build Team has not, to my knowledge, paid Elite for that work.  It was not included within the sum Build Team was directed to pay (and paid) to Elite in order to avoid liquidation.  It seems inevitable other issues

relating to this job will be litigated; Bellaroc’s claim against Elite in respect of this sum should properly be considered at that time.  As Bellaroc and Build Team are under the same ownership and governance, this is a further factor which weighs in the balance against exercising a discretion not to set the notice aside.

Outcome

[10]     The demand under s 289 of the Companies Act issued by Bellaroc to Elite dated 15 December 2016 is set aside.

[11]     Costs are reserved.

[12]     Unless counsel are able to agree costs, memoranda may be filed within 10 working days.   These are to cover costs on both this proceeding and the related

proceeding, and are not to exceed four pages in length.

J G Matthews

Associate Judge

Solicitors:

Corcoran French, Christchurch

Harmans Lawyers, Christchurch