Elite Advance Tiling Limited v Build Team Limited
[2017] NZHC 879
•4 May 2017
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2016-409-001140 [2017] NZHC 879
BETWEEN ELITE ADVANCE TILING LIMITED
Plaintiff
AND
BUILD TEAM LIMITED Defendant
Hearing: 4 April 2017 Appearances:
R A Hearn for Plaintiff
G K Riach for DefendantJudgment:
4 May 2017
JUDGMENT OF ASSOCIATE JUDGE MATTHEWS
[1] Elite Advance Tiling Limited (Elite) applies for an order under s 241 of the
Companies Act 1993 appointing liquidators to Build Team Limited (Build Team).
[2] Section 241 of the Companies Act sets out the circumstances in which a liquidator may be appointed. Of present relevance, the Court may appoint a liquidator if it is satisfied that the company is unable to pay its debts. As proof of this fact, Elite relies on s 287 which provides that a company is presumed to be unable to pay its debts if it has failed to comply with a statutory demand. A statutory demand is a demand issued by a creditor in respect of a debt, under s 289. Elite says that on 20 September 2016 it served a statutory demand on Build Team under s 289 in the sum of $32,686.45. Build Team has not complied with the statutory demand, either by making payment of this sum or otherwise. Because the notice issued under
s 289 was not complied with Build Team is presumed to be unable to pay its debts.
ELITE ADVANCE TILING LTD v BUILD TEAM LTD [2017] NZHC 879 [4 May 2017]
[3] Build Team denies liability for part of the debt claimed by Elite. Although not pleaded in its statement of defence it also says that it is in fact able to pay its debts.
[4] The events which gave rise to the sums claimed by Elite in its statutory notice arose as part of a factual matrix involving not only Elite and Build Team, but also a company called Bellaroc Limited (Bellaroc). Both Bellaroc and Build Team are controlled by Mr S W North. Elite is controlled by Mr A C O Araujo. Elite carries out tiling. Bellaroc supplies tiling materials. Build Team carries out building and tiling. Elite bought tiling materials from Bellaroc to be used on tiling jobs it carried out for Build Team. Mr Araujo previously worked for Build Team. Further, there was a three-way arrangement by which Build Team would source tiling jobs, Elite would carry out the tiling and receive, as payment, 80 per cent of the amounts received from Build Team’s customers for labour and materials, and materials other than tiles would be sourced from Bellaroc. These are such items as grout, adhesives etc.
[5] Unfortunately, Mr Araujo and Mr North who once were close friends fell out during the course of working under this arrangement. There are significant disputes between them, and unpaid invoices issued by Elite and by Bellaroc. This led to Elite issuing a notice under s 289 against Build Team which has led to this proceeding. Bellaroc also issued a notice under s 289 against Elite. Elite has applied to set aside that notice. That application is proceeding CIV-2016-409-1238 (proceeding 1238). Bellaroc opposes the application to set aside. Both cases were heard by the Court at the same time, with all evidence being considered on each, to the extent relevant. At the hearing Mr Araujo, Mr Anderson and a Mr P W Watts, a former employee of Build Team who now works with Elite, were cross-examined. Mr Araujo gave evidence with the assistance of an interpreter in Portugese.
[6] Although as recorded in paragraph [2] Elite served a statutory demand in respect of the sum of $32,686.45, that is not the full amount it maintains it is owed by Build Team. It maintains that Mr North has not kept accurate records of the numerous jobs which were covered by the arrangement I have described, but Elite accepts that there are material disputes of fact in relation to some of these jobs which
will have to be decided either by a claim for breach of contract or by a form of alternative dispute resolution. It says, however, that there are sums owing under a number of contracts which are not in dispute and which must be paid by Build Team.
[7] In evidence and in submissions Build Team says that it accepts that it owes a sum of money to Elite. Mr North says that in order to establish what he sees as the correct financial position between Elite and Build Team he went right back through all the jobs undertaken, and the records in relation to them, creating a spreadsheet to arrive at what he calls “the ultimate result”. Initially, the ultimate result was that Build Team owed Elite $25,290.85. On further examination of the facts Mr North now accepts that there should be an amendment in favour of Elite in the sum of
$1,360 plus GST in respect of some additional work carried out on a residence for some people called Snelling. Elite now says, therefore, that the ultimate result is that Build Team owes Elite $26,854.85, but denies liability to pay any further sums as alleged by Elite. I will turn to the claims by Elite for other jobs which Elite maintains are indisputably owing, below. Build Team says, however, that it is solvent and that any payment it is required to make should be on condition that Elite pays to Bellaroc the sum which Mr North says Elite indisputably owes to that company.
[8] The evidence in support of the proposition that Build Team is solvent is scant and of little assistance to the company. No annual or management accounts, nor any up to date accounting information were produced in evidence. Mr North says that he has decided that Build Team will cease trading after it has completed currently contracted projects. He says that apart from one other disputed claim by a different tiler for about $3,000, which is before the Disputes Tribunal, Build Team has no other creditors. All revenue commitments are up to date. It has no term bank debt but a small overdraft of $1,700. Its assets comprise a motor vehicle with a book value of $7,700 which is subject to a finance charge of nearly double that sum, and limited items of plant with a book value of $2,300.
[9] On the basis of this information it appears that Build Team is insolvent. Its liabilities exceed its assets, and it has a limited future in trading. However, Mr North
said in evidence that he will place into the company sufficient money to ensure that
Build Team pays its liability to Elite in the undisputed sum of $26,854.85.
[10] The financial position of Build Team and the acknowledged liability to Elite are sufficient to dispose of this application by the making of an order placing Build Team into liquidation. However, because Mr North asserted more than once that in the event of his having to do so he is in a position to place funds into the company to meet this liability, and will do so, Mr Hearn accepts that time should be given for Build Team to take that step. I agree that in the circumstances that course is appropriate.
[11] Where there is a further difference between the parties, however, is in the amount that Build Team should be required to pay in order to avoid liquidation. Mr Hearn argues that apart from claims for payment which are clearly in dispute, there are three sums owing to Elite, over and above the sum which Build Team accepts, which are clearly indisputable. I refer to these in turn.
[12] First, Elite says it is owed $6,728.80 for a job undertaken at Ballantynes store, in addition to the sum that has been allowed for by Build Team in the the ultimate result. Build Team quoted for tile laying at Ballantynes in a total area of
250m2, billed Ballantynes for that sum, and was paid. Under the arrangement with
Elite, and after adjustments for an administration fee and for some tiles provided by Build Team, Elite would be entitled to 80 per cent as it carried out the work. In fact, Elite has been paid on the basis of the job having an area of 200m2 and it therefore says that it is entitled to a further $6,728.80. Elite says that the original spreadsheet prepared by Build Team allowed for payment to Elite on the basis of 250m2, but the reduction was made because Build Team formed the view that a lesser area had been tiled. When this issue was raised Build Team went back on site and had the tiled area measured. It is 226m2. However, Build Team accepts that it has been paid for
250m2 and says that it should not be required to pay any further sum to Elite because
Ballantynes may well require a refund or credit.
[13] It is clear from the evidence that Elite’s entitlement to payment is based on
invoice and it should therefore receive 80 per cent of the invoiced amount less an
adjustment for the administration fee. Elite says this leads to a figure of a further
$6,728.80 being owed. For present purposes I accept that, in the absence of a figure which takes into account the contentions of Build Team in relation to an administration fee, and an issue in relation to the cost of tiles. It is clear that there are numerous other disputes between Elite and Build Team in relation to other jobs. Any adjustment in relation to the Ballantynes job for an administration fee or for supply of tiles, or any adjustment that might be required if a credit is in fact passed to Ballantynes, can be taken into account in later negotiations or litigation. I am satisfied that there is no arguable dispute over liability to pay the invoiced amount and I therefore find that a further sum of $6,728.80 must be paid.
[14] The second job in respect of which Mr Hearn says there is no dispute was undertaken at 132 Neville Street. He says this is not included in Mr North’s spreadsheet nor, therefore, in the ultimate result. Build Team accepts that position. It says, however, that this work was undertaken by Mr Watts, personally, at a time when Build Team did not know that Mr Watts was employed by Elite. It seems to be prepared to pay Mr Watts but no reason emerges as to why this has not occurred. Mr Watts says that the money belongs to Elite, as does Elite, and Mr Hearn says that Mr Watts was the employee and agent of Elite.
[15] Build Team is concerned that if it pays Elite, Mr Watts may later make a claim that he is owed this money, and has not been paid. On the facts as I find them Mr Watts was the employee of Elite and has no claim against Build Team. The liability of Build Team in respect of this job will be satisfied by payment to Elite. There will, however, be one loose end in relation to the amount of the payment. The sum invoiced by Elite is $3,303.95 including GST. Mr North, in evidence, disputes any liability to pay for splash backs installed at this address. This cost $900 plus GST, a total of $1,035. As this sum is in dispute it is to be deducted from the amount sought. Therefore an additional sum of $2,268.95 is indisputably owing by Build Team to Elite.
[16] The third sum which Mr Hearn says is indisputably owing relates to a contract carried out for Mr North’s parents. There is a dispute about a broken tile on the floor in the shower. Evidently Build Team has deducted $10,000 in respect of
one broken tile, which it says is the responsibility of Elite. It says that remedying the situation will be very expensive because the tile is laid on waterproof tanking and until remedial work is undertaken it is impossible to know how much damage will be caused by removing the broken tile and replacing it.
[17] It is by no means clear that responsibility for this broken tile lies with Elite, as it may have been broken by an object being dropped on it or, as Mr Araujo maintains, by the wrong sort of tiles being specified by the property owners. He says the broken tile is not a flooring tile. These issues, however, are beyond the ambit of the application before the Court, as is forming a final view on whether the sum of
$10,000 should be retained, rather than the sum of $1,500 which Elite says it would cost to replace the tile, or even the sum of $2,500 which Mr Hearn suggests would be sufficient to cover the work by a wide margin. I find that the sum of $10,000 retained by Build Team is in dispute.
[18] As a result of these findings I conclude that there is no reasonably arguable dispute that Build Team owes Elite $35,852.60.
[19] As I have described, the affairs of Elite, Build Team and Bellaroc are intertwined. In an interim judgment issued contemporaneously on proceeding 1238 I have found that if the sum owing by Build Team to Elite is paid, the Court presently considers the demand issued by Bellaroc against Elite should not be set aside. For this reason, and because of Mr North’s statement on oath that he will put Build Team in funds to meet the undisputed debt, time should be given for payment to be made before an order for liquidation takes effect.
Outcome
[20] I make an order placing Build Team Limited into liquidation, and appointing the Official Assignee at Christchurch as the liquidator.
[21] This order will lie in court until 4.00 pm on 18 May 2017. In the event the sum of $35,852.60 is paid to Elite, and the case officer is advised of that fact, before that time, the order will not come into effect.
[22] Costs are reserved.
J G Matthews
Associate Judge
Solicitors:
Corcoran French, Christchurch
Harmans Lawyers, Christchurch
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