Goldridge Estates Vineyards 4334 Ltd v Weta Estate Ltd HC Auckland CIV 2010-404-3831

[2010] NZHC 1307

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-003831

BETWEEN  GOLDRIDGE ESTATE VINEYARDS

4334 LTD First Plaintiff

ANDHILLERSDEN VINEYARD CONTRACTING LTD Second Plaintiff

ANDWETA ESTATE LTD First Defendant

ANDKAKARA ESTATE LTD Second Defendant

Hearing:         9 July 2010

Appearances: DPH Jones QC and M Chisholm for Plaintiffs

A R Gilchrist for Defendants (By telephone for part of hearing) Judgment:   9 July 2010

ORAL JUDGMENT OF ASSOCIATE JUDGE BELL

Solicitors/Counsel:

Hesketh Henry, Private Bag 92093, Auckland

Kiely Thompson Caisley, PO Box 7359, Wellesley Street, Auckland

DPH Jones QC, PO Box 1750, Shortland Street, Auckland

A R Gilchrist, PO Box 5444, Auckland

GOLDRIDGE ESTATE VINEYARDS 4334 LTD AND ANOR V WETA ESTATE LTD AND ANOR HC AK CIV-2010-404-003831  9 July 2010

[1]      This proceeding is an application for the defendant companies to be put into liquidation.  It is an application under Part 31 of the High Court Rules.  Each of the plaintiffs has served statutory demands on each of the defendants so we have four statutory demands giving rise to two applications for orders being made for the companies to be put into liquidation.

[2]      The matter was brought to my attention on 8 July 2010.  The defendants had filed an application seeking urgent interim orders to restrain advertising and stay proceedings.   Mr Gilchrist’s memorandum dated 8 July 2010 said that an urgent order  was  required  because  the  plaintiffs  were  threatening  to  advertise  the application on Monday, 12 July 2010.   In these circumstances, it seemed to me important that the matter be determined as soon as possible and I directed that the matter be called before me this afternoon, 9 July 2010 at 2:15 pm.

[3]      Mr Jones QC and Ms Chisholm have appeared for the plaintiffs.  Mr Gilchrist had advised that he would not be able to attend in person because he was out of town.   Arrangements were made to connect with him by telephone.   When the conference was called, attempts were made to contact Mr Gilchrist.  While he could speak to the telephone in the conference room, he was unable to hear anything being said from the courthouse to him.  Attempts were made to establish communication with him but without success.

[4]      In these circumstances, I have decided to deal with this application on the papers and I have not required counsel for the plaintiffs to address me.  They have filed written submissions and I have glanced at them briefly but I prefer to deal with the matter by considering only the defendants’ papers.

[5]      The affidavit of Murray Forlong sworn in support of the application for stay in restraint of advertising has attached to it a letter signed by Mr Gilchrist dated

30 April 2010 addressed to Hesketh Henry, the present solicitors for the plaintiffs, and Alexander Dorrington, who were formerly acting for the plaintiffs.  Paragraphs 3 and 4 of that letter make interesting reading.  Paragraph 3 says:

My clients are not creditors of your client, and are not insolvent.  Your client

(but see further comments below) has substantial obligations to both Kakara

and Weta which greatly exceed the amounts set out under the Statutory Demands.  Your clients are aware of the basis of these issues, and it is an abuse of process to issue a Statutory Demand to endeavour to recover the claimed sums.

[6]      Paragraph 4 says:

My clients have made a deliberate decision not to seek to set aside the Statutory Demands because they do not wish to become involved in the “wasted” and dead costs in going through a defended setting aside hearing. If your client does not voluntarily agree to withdraw the Statutory Demands/not  proceed  upon  it,  then  my  clients  are  in  a  position  to demonstrate  to  the  Court,  their  solvency,  and  the  genuine  disputes  and claims that they have against your client.   In short, any winding up proceedings will be defended, and my clients will immediately commence their own separate proceedings against your client (which they reserve their right to do in any event), seeking to recover their losses from your clients. You will be well aware that the Courts will not wind up solvent companies, particularly when there are disputes involving those companies and the Applicant in the Court’s winding up jurisdiction.

[7]      I put the matter in context.   The plaintiffs have issued statutory demands. When a company is faced with statutory demands, it has open to it a number of options it can take in response.  The first step that the company can take is to apply to have the statutory demands set aside under s 298 of the Companies Act 1993.  But there are other steps available to it as well.  It could also, before any proceedings are issued, apply to the Court for an injunction to stop proceedings being issued against it.   That step is not commonly taken these days but Cameron Distributors Ltd v Nashua Australia Ltd (1990) 4 PRNZ 304 is authority that that step is available. Another step available is to apply for a stay and to restrain advertising under r 31.11 of the High Court Rules.   That step can only be taken after the proceedings have been issued.  And finally, the company can decide not to take any of those steps but to await the hearing of the application.

[8]      There is a difference between the first three steps and the fourth step.  In the first three steps, any application to restrain any further steps being taken is primarily directed  at  showing  either  that  the  procedure  has  been  undertaken  by abuse  of process or that the creditor is not in fact a creditor for the purpose of any company liquidation.  That is usually demonstrated by showing that there is a dispute as to the debt, or to show that there are cross claims that equal or exceed the amount of the debt.

[9]      At the fourth stage, in defending a proceeding, the company has the option of defending on all matters assuming the burden of proving that it is in fact solvent, notwithstanding any presumptions arising under s 288, and of showing that in all other respects, it is not appropriate that a winding-up order ought to be made.

[10]     In this case, I read Mr Gilchrist’s letter of 30 April 2010 as indicating where his clients wish to fight matters between the plaintiffs and the defendants.   Both made an election that they will wait until winding-up proceedings are issued and then they have chosen to defend those winding-up proceedings on their ... merits. They have indicated that they do not want to have preliminary skirmishes and will save their resources until then.

[11]     On stay of proceedings, in Nemesis Holdings v North Harbour Industrial

Holdings Ltd (1989) 1 PRNZ 379, at p 385, Wallace J said:

(a)The   Court   has   an   inherent   jurisdiction   to   stay   winding-up proceedings  where  the  debt  upon  which  such  proceedings  are founded is the subject of genuine dispute.   In those circumstances the plaintiff cannot show it has the status of a creditor or that there has been neglect by the company to pay.

(b)      The jurisdiction  is  an  inherent  one  to  prevent  abuse  of  process.

There is no inflexible rule.

(c)The governing consideration is whether the proceedings suggest unfairness or undue pressure.

(d)It is a serious matter to stay winding-up proceedings, so the decision to do so is never made lightly.  The onus is on the applicant and it is normally necessary to demonstrate “something more” than the balance of convenience considerations which are usually considered on an application for interim injunction.  ...

[12]    I bear in mind in particular the governing consideration is whether the proceedings suggest unfairness or undue pressure.   Given that Mr Gilchrist has signalled that the defendants will save their resources until the application for winding-up is heard on its merits, there cannot be any unfairness or undue prejudice to the defendants by the plaintiffs taking the steps that they have and choosing to meet the defendants on the terms stated by Mr Gilchrist in his letter.  That is, that I see nothing unfair or smacking of abuse of process with the defendants continuing with this proceeding.

[13]     In his letter also, Mr Gilchrist said, at paragraph 5:

The advertising of winding up proceedings has no fear for my clients, as their bankers are fully aware of the circumstances of this matter, and their complaints against your client ... . ... The advertising of the bringing of winding up proceedings will not bring to light any unpaid creditors, as there are none.

[14]     Accordingly, I see no prejudice to the defendants in the matter now being advertised if, in fact, advertising will not flush out any unpaid creditors.

[15]     In these circumstances, I do not see any reason to stay the proceeding or to restrain advertising, and I dismiss the present application.

[16]     When I had completed delivering the above judgment, Ms Chisholm received a text from Mr Gilchrist.  The text says:

Can you please advise outcome asap and if Judge declines application can you please advise him that I then seek a stay pending review/appeal.

[17]     Given Mr Gilchrist’s desire to protect his clients’ rights, I make these interim orders pending any application he might make for review and/or appeal.  I make an interim order restraining the plaintiffs from advertising the present proceeding, that order to lapse on 16 July 2010, unless the defendants sooner apply to the Court by way of review and/or appeal and obtain an order from a Duty Judge extending the restraint on advertising.

[18]     Costs on the present application are reserved.

R M Bell

Associate Judge