Fox v Northern Land Holdings Limited HC Auckland CIV 2007-404-001146

[2008] NZHC 2417

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2007-404-001146

UNDER  The Companies Act 1993

BETWEEN  DLA PHILLIPS FOX Plaintiff

ANDNORTHERN LAND HOLDINGS LIMITED

Defendant

Hearing:         25 September 2007

Counsel:         M R Bos for plaintiff

L A O'Gorman & L A de Villiers for defendant

Judgment:      24 July 2008 at 3:00pm

JUDGMENT OF ASSOCIATE JUDGE ABBOTT

This judgment was delivered by me on 24 July 2008 at 3:00pm pursuant to Rule 540(4) of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Buddle Finlay, PO Box 1433, Auckland

DLA Phillips Fox, PO Box 160, Auckland

DLA PHILLIPS FOX V NORTHERN LAND HOLDINGS LTD HC AK CIV 2007-404-001146  24 July 2008

[1]      Northern Land Holdings Limited, (Northern Land) the defendant in this liquidation proceeding has applied to restrain advertising of this proceeding and for the proceeding to be stayed.  As the application was filed late, an order is also sought extending time.

[2]      The underlying liquidation proceeding is based on Northern Land’s failure to pay legal fees totalling $60,134.26 rendered to it by the plaintiff law firm DLA Phillips Fox (Phillips Fox) in 2003 and 2004 in connection with a conveyancing transaction.   Northern Land has subsequently refused to pay the accounts on the grounds that Phillips Fox failed to take a certain step, as a consequence of which Northern Land has been left with a restrictive covenant on its land.

[3]      Phillips Fox does not accept that it is responsible for the restrictive covenant remaining on the land.    It says that it had ceased to act for Northern Land by the time the restrictive covenant was to be removed, and that the alleged dispute is merely a smokescreen to hide the fact that it is insolvent.   Phillips Fox served a statutory demand for the unpaid legal fees and disbursements.  When that demand was not met it issued this application for liquidation.

[4]      Northern Land accepts that it took no steps to set aside the statutory demand or to bring a claim in respect of its alleged losses until after the statutory demand was made.  It has filed a statement of defence in this proceeding, however, claiming that its liability for the fees is extinguished by losses it has suffered as a result of Phillips Fox’s negligence or breach of their contract of retainer.     Northern Land seeks an order restraining advertising, and staying the liquidation proceeding, on the grounds that the proceeding is an abuse of process in light of the known dispute and because it is not in fact insolvent.

[5]      Phillips Fox denies there is any abuse of process.   It says that the defendant does not have a genuine set off or counter-claim (to extinguish the otherwise undisputed legal fees and disbursements), and that it has failed to rebut the presumption of insolvency.

Background

[6]      Phillips Fox acted for Northern Land in 2000 when it acquired land from Northland Port Corporation (NZ) Limited (NPC).     As part of that transaction Northern Land and NPC granted one another restrictive covenants over their respective lands.   Registration of the restrictive covenants was to be carried out by NPC’s solicitors.    The restrictive covenants in favour of Northern Land were not registered against the titles of NPC’s land.  This was not picked up at the time.

[7]      In early 2004 Northern Land and NPC were separately wishing to sell parts of their respective land.  They agreed to a mutual surrender of the covenants.  That agreement and other matters were recorded in a deed of arrangement dated 5 April

2004.  What role (if any) Phillips Fox had in drawing up the deed is not clear, but it appears to have been signed before NPC’s solicitors sent the surrender instruments and consent forms to Phillips Fox on 8 April 2004.   Phillips Fox then forwarded them to Northern Land for execution.  Phillips Fox asked for the executed documents to be returned to it both as consents were needed from third parties, and for its file record.

[8]      At  the  end  of  May  2004  Phillips  Fox  ceased  acting  for  Northern  Land because of the unpaid accounts which are the subject of this proceeding.     These accounts date from 30 July 2002 to 28 May 2004, and total $60,134.26.  They were not disputed at the time they were rendered to Northland Land.

[9]      On 2 August 2004 NPC sent an email message to Northern Land pointing out that  it  was  waiting  for  signed  originals  of  the  surrender  documents  ahead  of settlement of a sale due to take place on 13 August 2004.

[10]     Although it is not known when or by whom, the surrender documents were delivered to Phillips Fox at some point.  In late August 2004 it forwarded copies of them to mortgagees, requesting that they give their consent before sending the executed documents directly to Northern Land.

[11]     Other than assisting in this way with the obtaining of mortgagees’ consents Phillips Fox did not act on behalf of Northern Land in settlement of a deed of arrangement, including registration of the surrender of the covenants.  Northern Land approached Phillips Fox on 1 September 2004 requesting a signed copy of the deed of arrangement.   When advised that it had checked its files and did not appear to have received the signed document, Northern Land’s director Mr A S Jones replied that he would “take it from here”.  The only other step taken by Phillips Fox was to forward the original easement document (giving effect to the agreed surrender) to NPC’s solicitors on 20 September 2004, together with copies of the earlier letters to the mortgagees requesting consent.  In that letter Phillips Fox pointed out to NPC’s solicitors that the mortgagees had been asked to deal directly with Northern Land in relation to the consent forms.

[12]     NPC proceeded with sale of some of the land to third parties, apparently without registering the agreed surrenders.  Northern Land did not find out that the covenants had not been registered against NPC’s land, and the mutual surrender contemplated by the deed of arrangement of April 2004 had not been effected, until May 2005 (after it had agreed to sell part of its land to a third party).  The purchasers of NPC’s land did not accept that the original covenants or the deed of arrangement of  April  2004  were  binding  on  them,  and  refused  to  release  the  covenants  on Northern Land’s land.

[13]     Shortly before the purchasers of NPC’s land advised their unwillingness to release the covenants Phillips Fox served a statutory demand on Northern Land for payment of its outstanding fees.  Solicitors then acting for Northern Land wrote to Phillips Fox setting out the problem that had arisen, contending that it was inappropriate for Phillips Fox to pursue its claims for fees whilst the matter was being investigated, and indicating a possible counterclaim if Northern Land was unable to resolve matters with the various purchasers.  The solicitors said that steps would be taken to oppose any application for liquidation based on the statutory demand.

[14]     Phillips Fox responded to Northern Land’s concerns by referring to the deed of arrangement and the instruments recording the reciprocal surrender of covenants,

but did not pursue the statutory demand.   No progress was made in resolving the issue over the covenants, and the  accounts remained outstanding.   The plaintiff served a further statutory demand on Northern Land on 22 December 2006. Northern Land had discussions with Phillips Fox to try to resolve the disputes, but this again was  unsuccessful.    Northern  Land’s  director,  Mr  A  S  Jones  says  that  these discussions were undertaken “on the basis that no steps would be taken in respect of the statutory demand in the meantime”.  That is not disputed by Phillips Fox.

[15]     When it became apparent that an agreement could not be reached, Phillips Fox applied to put Northern Land into liquidation on the grounds of non-compliance with the statutory demand.   Following service of that application Northern Land’s solicitors wrote to Phillips Fox inviting withdrawal of the proceeding on the ground that it was inappropriate given the ongoing dispute over removal of the restricted covenants.  They said that Northern Land did not dispute that it owed the fees, but said that it had a setoff or counterclaim arising out of the dispute over the restrictive covenants and that it was inappropriate to pay until that dispute had been determined. They also said that Northern Land was solvent and able to pay its debts.   They informed Phillips Fox that they had instructions to defend the application, and to make an application to restrain publication and stay the proceeding if Phillips Fox did not confirm it would discontinue the proceeding by the end of the following working day.

[16]     Phillips Fox replied it would review its file and offered to consent to a short extension of time for filing an application to restrain publication and stay the proceeding until it provided a considered response later that week.   That response was not given until some three weeks later.   In it Phillips Fox rejected Northern Land’s alleged counterclaim, on the grounds that it owed no duty in respect of the failure of Land Information New Zealand to record the restrictive covenants initially, but in any event matters were overtaken by the agreement to surrender the covenants. It said that it owed no duty in the latter respect because it had ceased to act in May

2004, before settlement of the deed of arrangement.  It said it would withdraw the liquidation proceeding only if Northern Land paid the full amount of the outstanding costs into Northern Land’s solicitors’ trust account pending a judgment or agreement

between the parties, and paid its disbursements for service of the statutory demand and issue of the liquidation proceedings.

[17]     In the meantime Northern Land made the application now before the Court for restraint of advertising and stay of the proceeding.  As it was made outside the time provided by the High Court Rules (although within the extra time offered by Phillips Fox) an application was also made for extension of time.   A statement of defence to the application for liquidation was filed  at  the same time,  including affirmative defences alleging negligence or breach of contract of retainer in relation to the restrictive covenants, and claiming that the liquidation procedure was an abuse of process as it would be unjust to determine their application without taking its claims against Phillips Fox into account.

[18]     Northern Land issued proceedings against Phillips Fox in the District Court in September 2007 (shortly before this application was heard seeking recovery of alleged costs as a consequence of the continuing restrictive covenants over its land.

Applicable principles

[19]     The application is brought under Rule 700K of the High Court Rules.  It is common ground that the principles which the Court applies are well established and may be found in Taxi Trucks Limited v Nicholson [1989] 2 NZLR 297 and Nemisis Holdings Limited v North Harbour Industrial Holdings Limited (1989) 1 PRNZ 379. For the purposes of the present application they may be summarised as:

a)      Rule 700K is a procedural provision which retains the inherent jurisdiction of the Court to stay liquidation proceedings that are an abuse of the Court’s process;

b)an order to liquidate a company will not be made where there is a genuine dispute over the debt on which an application is based, as there is then an issue as to whether the applicant is a creditor or the company has neglected to pay;

c)       there is no inflexible rule to this effect.  The governing consideration is whether the proceeding suggest unfairness or undue pressure.  This must be decided on the facts of each case; and

d)it is for the defendant company to show that there is a genuine and substantial dispute or otherwise that there are clear and persuasive grounds for a stay.

The opposing contentions and issues arising

[20]     Northern Land accepts that the accounts have been rendered and does not dispute that they are owing save for the issues arising over the restrictive covenants. Although it claims that there is a genuine and substantial dispute as to the existence of  the  debt,  the  real  thrust  of  its  case  was  that  it  has  an  arguable  setoff  or counterclaim in respect of the costs of unravelling the dispute of the covenants which is likely to exceed the value of the outstanding accounts and, if that cannot be achieved, for the diminution of value of its land with the covenants remaining in place.  It also argues that it has shown that it is solvent and says that this is also a sufficient ground for stay.   It says that it was inappropriate to issue a statutory demand in the circumstances (there is an acknowledged dispute), and that the matter should be resolved by the District Court proceeding it has issued.

[21]     Phillips Fox says that there is no dispute as such over the fees, and that Northern  Land has failed to  show  clear  and  persuasive  grounds  for  a  setoff  or counterclaim, both in respect of any liability on the Phillips Fox’s part and as to any losses arising.  It says that Northern Land has not shown that any loss will exceed the amount of the debt.  It also says that Northern Land has failed to produce satisfactory evidence of solvency, and thus to rebut the statutory presumption arising by reason of its failure to respond to the statutory demand.   By way of further evidence in support of insolvency, it relies on Northern Land’s failure to accede to its proposal that it should lodge the amount of its fees into a solicitors trust account.

[22]     The issues that the Court must determine on this application are:

a)       Whether Northern Land has shown clear and persuasive grounds for a setoff or counterclaim in excess of Phillips Fox’s fees.

b)Whether it would be an abuse of process to proceed with liquidation in the event that Northern Land has shown a sufficient setoff and counterclaim in the circumstances of the case, and having regard to the evidence as to solvency.

Is there a sufficient setoff or counterclaim

[23]     Northern Land contends that Phillips Fox was both negligent and in breach of its  contract  of  retainer  first  by failing to  obtain  a  search  of  the  titles  after  the restrictive covenants were to have been registered in 2000, and at the time that Northern Land was entering into the deed of arrangement in April 2004, and in the course of implementing that arrangement.  It says that if that had occurred it would have been a simple matter to have remedied the problem because NPC was still owner of the land at the time, and rights under the original transfer of the deed of arrangement could have been enforced directly against it.  Instead it says that it is now in a position that it cannot enforce its rights without incurring the cost of legally complicated, and therefore risky, litigation against third parties.   It relies on an estimate of $80,000 given by Phillips Fox when first approached (May 2005) as the potential cost of that litigation.  In oral submissions, counsel for Northern Land also raised the prospect of a claim for diminution in value of the land if the covenants could not be removed.

[24]     Phillips Fox contends that there is no prospect of Northern Land succeeding on these claims.  It says that there was no duty on it to undertake a search of the title following registration of the transfer containing the restrictive covenants in 200 (it was entitled to assume that Land Information New Zealand would correctly register the document).  However, more significantly, counsel argued that there was no duty arising out of the deed of arrangement in April 2004 because it ceased acting before the arrangements for surrender of the covenants were to be put in place, and had no continuing duty.    It  argues  that  Northern  Land  thereafter  had  responsibility for

ensuring the mutual surrender was registered ahead of any transfers to third parties but railed to do so.

[25]     I am not prepared, on the scant information before me on this application, to say that Northern Land could not have had a claim against Phillips Fox for failure to check that the restrictive covenants were registered in 2000.   The fact that NPC’s solicitors were registering the transfer would not of itself be a sufficient basis for deciding that there could be no duty to check that registration had in fact occurred. However, it seems to me that any failure in that regard was overtaken by the deed of arrangement in April 2004.

[26]     As I have already noted, there is little evidence about Phillips Fox’s role in the drafting of that deed, although it was certainly acting for Northern Land on other matters at that time.   Again, I am not in a position on the evidence before me to determine whether or not Phillips Fox owed a duty of care to identify the state of the title at that point but cannot rule out that possibility.  It would certainly have owed Northern Land a duty of care in some respects, but the scope of that duty would depend on the nature of the retainer. It is significant, however, that Northern Land has not pleaded or provided evidence of a direct role in the preparation of the deed (prepared by NPC’s solicitors), and the deed appears to have been signed before NPC’s solicitors forwarded surrender documents to Phillips Fox on 8 April 2004.

[27]     What then followed was of greater significance.   The surrender documents were sent to Northern Land for execution.  At that point all parties were assuming that there were restrictive covenants over NPC’s land to surrender.   It is also reasonable to assume that the  “mutual” surrender  would  be  registered  ahead  of further dealings by either party.  Before any of that occurred, Phillips Fox ceased to act.    The  importance  of  the  “mutual”  surrender  can  hardly  have  been  lost  on Northern Land.   NPC’s general manager noted it in an email to Northern Land’s director Mr Jones on 2 August 2004, ahead of the settlement of a proposed sale by NPC, yet Northern Land appears to have chosen not to take any further legal advice on the matter after Phillips Fox withdrew from acting.

[28]     The onus is on Northern Land to show clear and persuasive grounds for the setoff or counterclaim:  Covington Railways Limited v Uni-Accommodation Limited [2001] 1 NZLR 272 (CA) at para [11]; Apollo Fruit Limited v Cooper Horticulture Limited, HC Napier CIV 2006-441-908, 14 February 2007, Gendall AJ.

[29]     The evidence in support of this application does not meet this test.  Northern Land has not produced any evidence as to the scope of Phillips Fox’s retainer from which  a  duty to  investigate  title  and  advise  Northern  Land  on  it  ahead  of  the cessation of the retainer could be inferred.  The only evidence suggests that up until the time that it ceased to act Phillips Fox did no more than receive the surrender documents (after signature of the deed by both parties) and the surrender documents to Northern Land for execution.   The position may have been different if Phillips Fox  had  continued  to  act  through  to  the  point  of  settlement  of  the  deed  of arrangement and registration of the surrender documents, but by that time Northern Land had assumed responsibility for the matter, and had had opportunity either to obtain other advice or check the matter itself.

[30]     Northern Land’s delay in issuing its District Court proceedings reinforces my view as to the lack of the strength of its claim.  I accept that it did not learn of the absence of the covenants until May 2005, and raised its concerns at that time, but it took no steps to bring its claim in respect of them until September 2007 (six months after the issue of this liquidation proceeding and shortly before this application to restrain advertising and stay the proceeding was to be heard.  This does not suggest the existence of clear and persuasive grounds.

[31]     Counsel for Northern Land sought to explain the delay on the grounds that attempts were made to resolve the covenants issue when it first came to light, and to negotiate a solution on fees after issue of the statutory demand in December 2006. However the evidence to support that is simply that since May 2005 NPC and one of its purchasers have refused to acknowledge the effect of the deed of agreement or surrender the restrictive covenants over Northern Land’s land, and there has been an ongoing dispute between it and Phillips Fox over Phillips Fox’s liability.  This does not assist Northern Land.  I also note that Northern Land did not immediately take steps to set aside the demand, and was content merely to have an agreement that no

steps were to be taken whilst settlement discussions were held.  Again, this is hardly an indicator of a clear and persuasive basis for a setoff or counterclaim, particularly when coupled with the six months that it then took to issue its claim in the District Court.

[32]     There is a further difficulty for Northern Land in the quantification of its setoff or counterclaim.   Northern Land has the onus of showing that its claimed setoff or counterclaim will put in issue the whole of the sum demanded.  There are two aspects to this to consider.  The first is the relationship of the unpaid fees to the claimed setoff or counterclaim.   The second is the quantification of the setoff or counterclaim.

[33]     Counsel for Northern Land acknowledged that its claim was for an equitable setoff.   This is available only where the sum claimed arises out of the same transaction as the debt.  There are seventeen accounts involved.  Counsel for Phillips Fox acknowledge that seven totalling $49,003.80 related to sale of the land affected by the covenants, therefore could arguably be the subject of a setoff.  However he submitted that the other ten totalling $11,130.46 were unrelated and could not give rise to a setoff.  He submitted that the general rule was that a counterclaim was an insufficient basis for stay (although that is subject to considerations of unfairness or undue pressure):   Edge Computers Limited v Colonial Enterprises Limited (1996) PRNZ 621.  Counsel for Northern Land contended that all the accounts were related, save for one small account for $678.38, and that account would be paid if necessary.

[34]     There is no evidence establishing the position clearly one way or the other.  It remains open whether or not an equitable setoff is available in respect of all of the accounts.  Although this is not a determinative of the matter one way or the other it is a factor to take into account.

[35]     The second aspect is whether Northern Land has discharged its onus to show that it has a setoff or counterclaim in excess of the sum demanded.   The losses claimed by Northern Land in its District Court proceeding are legal fees incurred with the solicitors engaged in 2005 to address the problem, and further legal fees to achieve  a  surrender  or  removal  of  the  covenant.  Counsel  for  Northern  Land

acknowledged that the only evidence before the Court was Mr Jones’ statement that Northern Land contacted Phillips Fox after first learning that NPC and its purchaser would not surrender the covenant and it was told that “[Phillips Fox] would require

$80,000.00 to be deposited into their trust account in order to make a start to address the problems”.  Counsel submitted however that the Court could take judicial notice of the likely costs of complicated litigation.

[36]     There is no evidence of fees already incurred (with the solicitors in 2005), and no indication of any costs having been incurred since then.   I accept the submission of counsel for Phillips Fox that the comment allegedly made by Mr MacDonald was too vague to be an estimate of likely costs.  There could have been a number of factors in Mr MacDonald requiring lodgement of that amount.  The likely cost of resolving the problem will depend very much on  what has to be done. Northern Land has given no breakdown of that even in a general way, beyond counsel referring in submissions to issues of indefeasibility, and factual complexity due to multiple parties and multiple blocks of land

[37]     Counsel for Northern Land commented in oral submissions that the statutory demand and liquidation proceeding had now given it the incentive to take the matter up again with various purchasers of the land (suggesting that until then nothing done since mid 2005).  Mr Jones gave evidence that shortly before the hearing Northern Land’s solicitors had obtained surrenders from some purchasers, but had not had a response from one that had refused in 2005.  This begs the question as to what is needed to resolve the matter, and the likely cost involved.

[38]     Counsel for Phillips Fox invited me to take the lack of action and absence of proper quantification as an indication that the claim for setoff or counterclaim was merely a tactic to avoid payment.   Although I am not prepared to go that far, I consider that Northern Land should have done more to show what issues were likely to arise, and hence what costs might be involved if proceedings had to be issued.

[39]     As already mentioned, counsel for Northern Land also referred to a possible claim for loss of value in the land if the covenants could not be removed.  There is

no evidence to show whether there is any effect on the land, or any other evidence to support this submission.

[40]     Taking all these matters into account, Northern Land has not satisfied me that it has clear and persuasive grounds for a setoff or counterclaim which would extinguish its acknowledged debt to Phillips Fox in its entirety.

Should liquidation be stayed on the ground of solvency

[41]     Counsel for Northern Land submitted that it had rebutted the presumption of insolvency (arising upon failure to meet the statutory demand) and there was no other evidence that Northern Land was unable to pay its debts.

[42]     There are two aspects to this submission.  The first is whether Northern Land has in fact rebutted the presumption.   The second is whether this issue can and should be determined on an application for stay rather than in the substantive application for liquidation.

[43]     Northern Land’s director, Mr Jones, has produced internal accounts for the company with a profit and loss statement and balance sheet as at 31 August 2007. These accounts show a net profit of $15,300.06 for the five months to 31 August

2007, and net assets of $6,591,103.35.  Northern Land acknowledges, however, that the  balance  sheets  and  the  profit  and  loss  statement  produced  do  not  take  into account Phillips Fox’s outstanding accounts.

[44]     Counsel  for  Phillips  Fox  criticises  this  evidence  on  the  grounds  that  it comprises only unaudited and unsigned material with no more than a bland statement by Mr Jones that Northern Land is solvent.  He submitted that at least independent evidence  of  solvency  should  have  been  provided:    Probill  Limited  v  Pimento Holding Limited (HC Wellington, M253/99, 19 November 1999, Master Thomson at p 8; Apollo Fruit Limited v Cooper Horticulture Limited, para [42].  Counsel also pointed out that the balance sheet showed  a deficit of current  assets  to  current liability and that the apparently substantial net asset position is attributable to an entry for “Historical Balancing” of $6,425,336.44.

[45]     Counsel for Northern  Land submitted that the evidence was sufficient to rebut the presumption, (Kim v Wasan International Company CA 39/06, 4 October

2006 at para [27]) particularly in light of Northern Land’s explanation that it did not apply to set aside the statutory demand because it was in negotiations with Phillips Fox.

[46]     I  consider  that  solvency  remains  an  issue,  notwithstanding  Mr  Jones’ assertion to the contrary and the internal accounts he has produced. There is no evidence given by Northern Land as to its ability to utilise assets identified in the balance sheet (including an amount for retained earnings) to meet the debt due to Phillips Fox:   Lawson v Official Assignee (HC Akl, M1217/95, 11 August 1997, Salmon J).  There is other evidence to suggest an inability to pay.  Mr Jones has not given any explanation of Northern Land’s failure to pay the accounts as they were rendered (in the period 2002 - 2004) or indeed at any time up until May 2005.  There is no evidence that the company’s position has improved in any significant respect since that date.  I also take into account that Northern Land did not take any steps to resolve these issues until forced to do so by the statutory demand in December 2006, and even then its first response was to try to negotiate a solution.  When it did take steps it was only to defend the liquidation rather than initiate proceedings itself. That occurred only just before the hearing of this application.  This all speaks, to my mind, of continuing solvency issues.

[47]     Counsel for Phillips Fox submitted that Northern Land’s failure to take up its proposal that fees be lodged in a solicitors trust account pending disposal of the District Court proceeding was another indicator of insolvency.  Counsel for Northern Land relied on Kim v Wasan in submitting that there was no obligation of Northern Land to provide further evidence of solvency or to give any further explanation of its position or provide the security for it.

[48]     Kim v Wasan does not, in my view, determine the matter one way or the other.   Although it too involved an application for stay, the facts were otherwise quite different.   Both this Court and the Court of Appeal found that there was a genuine dispute as whether there was a debt.  Further, there was no reason other than non-payment of the disputed debt for questioning Wasan’s solvency, and there was

evidence of a “campaign” against Wasan which justified its refusal to provide any more information than was absolutely essential.  No such factors exist in this case.

[49]     In summary,  I have come to the conclusion that  Northern  Land  has  not clearly established solvency such that it would be an abuse of process to permit the liquidation proceeding to continue.

Conclusion

[50]     I am required to weigh the competing interests of the parties.  Northern Land seeks stay until its District Court claim against Phillips Fox has been determined. Phillips Fox seeks payment of fees that have been outstanding for up to five years. Northern Land has not persuaded me that it has clear and persuasive grounds for a setoff or counterclaim to extinguish its debt to Phillips Fox or that it is clearly solvent, so that it would be an abuse of process to allow the liquidation proceeding to continue.  There is no suggestion that Phillips Fox will not be in a position to meet any judgment that may be awarded against it in the District Court proceedings. Nevertheless, and notwithstanding that the Court does not, as a matter of routine, require a disputed debt to be paid into Court or otherwise secured (Kim v Wasan) having regard to the fact that a District Court proceeding is now under way I am prepared to stay the liquidation application if Northern Land pays the amount of the outstanding fee invoices ($60,134.26) into Court pending the outcome of that proceeding or agreement of the parties.

[51]     I make an order staying this proceeding, and restraining advertising, pending further  order  of  the  Court  on  condition  that  Northern  Land  pays  the  sum  of

$60,134.26 into Court (or provides security for that sum on terms acceptable to

Phillips Fox) within 21 days.

[52]     I reserve leave for either party to apply for an order for payment out if the

District Court proceeding is not prosecuted expeditiously.

[53]     Costs of this application are reserved.  Either party may apply for an order for costs at this point, by memorandum to be filed within14 days, but I can indicate that my preliminary view is that costs should not be determined until the District Court

proceeding has been determined.

Associate Judge Abbott