H&M Remuera Limited v Rentmax Limited
[2025] NZHC 369
•3 March 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-2198
[2025] NZHC 369
IN THE MATTER of the Companies Act 1993 and in the matter of an application putting a company into
liquidation
BETWEEN
H&M REMUERA LIMITED
Plaintiff
AND
RENTMAX LIMITED
Defendant
Hearing: 25 February 2025 (by AVL) Appearances:
R J Latton for Plaintiff
J R Duckworth for Defendant
Judgment:
3 March 2025
JUDGMENT OF ASSOCIATE JUDGE LESTER
This judgment was delivered by me on 3 March 2025 at 4.30pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
………………………………………..
H&M REMUERA LIMITED v RENTMAX LIMITED [2025] NZHC 369 [3 March 2025]
[1] H&M Remuera Limited (H&M) applies to liquidate Rentmax Limited (Rentmax), relying on an unpaid statutory demand totalling $18,227.49.
[2] H&M’s statutory demand relies on three invoices issued to Rentmax pursuant to a Heads of Agreement between H&M and Rentmax dated 29 September 2021 (Heads of Agreement). A total of six invoices were issued pursuant to the Heads of Agreement. It is noteworthy that Rentmax does not take any issue with the services provided as recorded in any of the invoices, indeed it paid the first three.
[3] This proceeding is the second proceeding concerning amounts charged pursuant to the Heads of Agreement. The first was a liquidation proceeding brought against Rentmax by a company called Prosec Group Limited (Prosec) which is related to H&M. Prosec sought the liquidation of Rentmax, having issued a statutory demand for the same sums claimed in the invoices in issue in this proceeding having issued invoices in its name as creditor. That application was dismissed in a decision of Associate Judge Gardiner dated 11 December 2023, essentially on the basis Prosec was not a party to the Heads of Agreement.1
[4] Mr and Mrs Talbot are the directors of H&M and of Prosec. Mr and Mrs Thompson are the directors of Rentmax. Mrs Talbot is a member of the Vietnamese community.
[5] The intention of the Heads of Agreement was that Mrs Talbot would refer members of the Vietnamese community who owned rental properties to Rentmax to manage. H&M would be paid a fee (on the basis which I discuss below) and it is that fee that makes up the invoices for which H&M issued its statutory demand.
[6] How is it then that an earlier liquidation proceeding concerning the same sums came to be issued in the name of Prosec? Shortly after the Heads of Agreement was signed, it was realised that H&M was no longer registered for GST. In the proceeding before Associate Judge Gardiner, Mr Talbot said it was agreed with Mrs Thompson that H&M would invoice through another company (Prosec) but this was denied by Rentmax. Prosec is named as the creditor in the first three invoices which were paid
1 Prosec Group Ltd v Rentmax Ltd [2023] NZHC 3612.
by Rentmax without any dispute. Associate Judge Gardiner recorded that it was common ground that the invoices, the basis of the liquidation proceeding before her Honour, were issued pursuant to the Heads of Agreement. Rentmax had applied to set aside the statutory demand, however that application was out of time and did not proceed. In that application, Rentmax’s position was that H&M, rather than Prosec, was the contracting party to whom Rentmax owed the debt.
[7] A complicating factor is that H&M was removed from the Companies Office Register on 14 September 2022. The invoices claimed in the statutory demand in this proceeding are dated 31 July 2022, 31 August 2022 and 30 September 2022 being the same amounts claimed in the proceeding before Associate Judge Gardiner. The invoices were reissued in the name of H&M after it was restored to the Register on 19 February 2024, albeit Prosec is named as its payment agent to receive the funds.
[8] From H&M’s point of view, it has therefore addressed the irregularity with its earlier invoices issued in Prosec’s name given Rentmax’s position that it only ever dealt with H&M. With the invoices now in the name of H&M and with there being no dispute as to the services provided, H&M says it is entitled to seek the liquidation of Rentmax on the basis it is presumed to be insolvent having not met H&M’s statutory demand.
Use of Prosec as receiving agent
[9] While Rentmax makes something of the reissued invoices directing payment to Prosec’s bank account, there is nothing in that. H&M as creditor is entitled to request payment be made to a nominated account unless such is prohibited by the Heads of Agreement. That the nominated bank account is held by a third party is of no moment to Rentmax. Nothing in the Heads of Agreement prescribed where payment had to be made or how.
[10] It is clear H&M designated Prosec to receive payment on its behalf by including its bank account number on the reissued invoices. Payment to an agent of a creditor operates to discharge the debt if the agent had the creditor’s authority to
accept the payment.2 There can be no argument as to Prosec’s authority to accept payment on behalf of H&M when H&M named Prosec as agent to receive payments.
Rentmax’s first counterclaim – recovery of first three invoices
[11] Rentmax refers to its payment of the first three invoices which named Prosec as creditor. It will be recalled that Associate Judge Gardiner recorded the Prosec invoices were issued pursuant to the Heads of Agreement.3
[12] At [6] of the statement of defence it pleads, relying on Associate Judge Gardiner’s decision:
As a result of this decision, the Respondent Company believe that the invoices referred to at paragraph 4 above, need to be repaid given the findings of the learned Judge. Those total $15,849.99.
[13] The above proposition is not developed in submissions for Rentmax and Mr Duckworth, counsel for Rentmax, essentially abandoned this point. In my view, that was wise.
[14] While H&M had not at the time designated Prosec as its agent to receive payment of the first three invoices, it subsequently ratified Prosec acting as its agent. Even if that is incorrect, because no limitation issue arises and because Rentmax has not taken any issue with its obligation to pay for the services reflected in the first three invoices (recall they were paid without demure), H&M could reissue invoices to replace those paid to Prosec. No doubt if that had occurred, Rentmax would say it had paid the invoices to the party nominated by H&M. H&M would be estopped from denying the original invoices issued in the name of Prosec had been paid when H&M issued the invoices in Prosec’s name. The first three invoices issued in the name of Prosec do not give rise to a defence to this liquidation proceeding.
2 Roy Goode and Victoria Dixon, Goode on Payment Obligations and Commercial and Financial Transactions (4th ed, Sweet & Maxwell, London 2021) at 5-26.
3 Prosec Group Ltd v Rentmax Ltd, above n 1, at [2].
Second counterclaim - breach of the Heads of Agreement
[15] Rentmax claims substantial damages for what it says is H&M’s breach of the Heads of Agreement. Rentmax must first show a reasonably arguable case of breach and then explain how it has quantified its claim given it is facing an undisputed liquidated debt otherwise owed to H&M.4 When the invoices issued on 31 July 2022 and 31 August 2022 were not paid, Mr and Mrs Talbot wrote to Rentmax about the default. While the tenor of the correspondence was initially reasonably cordial, matters deteriorated when Rentmax wrote to Mrs Talbot on 8 September 2022 the letter concluding: “The deal as it currently stands just doesn’t work for us, we need to renegotiate the rates/repayments or we can’t continue to manage these”. That was compounded by an email Rentmax sent on 14 September 2022:
The only options available to us going forward are as follows:
· Immediately reduce the monthly payments to $2,641.66
· Cease all future payments and have the amount we owe written off.
[16] In an email of 19 October 2022, H&M said, referring to the above statement of options made by Rentmax, that:
This conduct by words and actions clearly shows that your company does not intend to perform its obligations and complete performance under the contract. We deem this a breach of an essential term.
We hereby give notice that Rentmax Limited has repudiated the contract, as the company does intend to perform the contract only in a manner that is inconsistent with the terms of the contract.
The letter concluded:
We reserve our rights to claim damages under the cancellation clause in the contract, including, but not limited to, the outstanding invoices. For avoidance of doubt, Rentmax Limited foregoes any and all refund entitlements.
[17] Mr Duckworth accepted during the hearing that by September/October 2022, the commercial relationship between H&M and Rentmax had come to an end.
4 Covington Railways Ltd v Uni-Accommodation Ltd [2001] 1 NZLR 272 (CA) at [11].
[18] Rentmax had its solicitor reply on 21 October 2022 to H&M’s 19 October 2022 email raising the issue of the correct identity of the invoicing party and called for repayment of the first three invoices paid to Prosec. H&M replied again referring to Rentmax breaching and repudiating the contract and issuing an invoice for its own damages.
[19] As H&M was restored to the Register, it is deemed to have always been in existence.5 While H&M did not in its correspondence expressly state it was cancelling the Heads of Agreement for Rentmax’s breach, the reference to the repudiation by Rentmax, the tendering of an invoice for damages arising from the breach, and the general tenor of the correspondence made it clear that H&M considered the contract at an end.
[20] Section 41(2) of the Contract and Commercial Law Act 2017 (the Act) provides:
The cancellation may be made known by words or by conduct showing an intention to cancel, or both. It is not necessary to use any particular form of words, so long as the intention to cancel is made known.
[21] Certainly, Rentmax did not take any steps after receipt of the damages claim from H&M suggesting it thought the Heads of Agreement claim was still alive. The involvement of its solicitor suggests it did not believe the contract was on foot.
[22] Rentmax, in its solicitor’s letter of 21 October 2022, referred to H&M being removed from the Companies Register on 14 September 2022. The letter said as a result H&M was in breach of the Heads of Agreement because it was not in a position to meet its obligations under that Agreement. Rentmax’s solicitor said there was no need for either party to give notice of termination as there was no contract to perform, following H&M being removed from the Register.
[23] Even if there was an arguable basis for saying H&M was in breach of its obligations under the Heads of Agreement, I am satisfied that Rentmax has not established a reasonably arguable basis for quantifying its alleged loss. The Heads of
5 Companies Act 1993, s 330(2).
Agreement provided a formula for the fee to be paid by Rentmax to H&M based on the referral of rental properties. The fee was based on the rental property remaining with Rentmax for a minimum of three years. If the property ceased to be managed by Rentmax for any reason then H&M had the option of finding a replacement property at, essentially the same rental, within three months of the management contract coming to an end, or providing the company with a refund. A formula for calculating the refund was provided based on the number of months by which the retention period of three years had not been met; “but capped at an amount equal to the Fees already paid (i.e. the Refund can never be more than the Fees paid).”
[24] Accordingly, to take advantage of the entitlement to a refund, Rentmax would have to identify the property management contracts that it “purchased” pursuant to the first six invoices, identify those which had been cancelled and when, and apply the formula under the contract to arrive at a refund amount. It has not done that.
[25] Rentmax has issued an invoice for the sum it claims as damages, but the basis of the calculation in that invoice has not been explained. The invoice is not based on claiming a refund as provided in the Heads of Agreement. Mr Thompson, in his affidavit, says he prepared the invoice; “… for the amounts due and owing… as a result of the failure of [H&M] to fulfil the terms of their …” obligations under the Heads of Agreement. Beyond saying that the amount claimed of $302,633.76 is based on the retention period. However, it is not possible to understand how that sum is made up. Mr Duckworth, counsel for Rentmax, in his oral submissions accepted Rentmax’s claim would need to be particularised in more detail than provided so far.
[26] Rentmax’s submissions refer to a number of properties it was looking after ending its management contracts with Rentmax. The submissions say that a number of these clients were people who had an association with Mrs Talbot.
[27] Rentmax’s submissions refer to the right to a refund of the amount paid by Rentmax in the event a rental agreement comes to an end. Then the submissions say:
[33]As soon as [H&M] was removed from the Companies Register, this agreement was not able to continue.
[34]As a consequence, [H&M] was in breach of the terms of the agreement, and in accordance with clause 6 of the agreement, the termination clauses would apply.
[35]As a result, the Defendants are entitled to seek the refund referred to in Clause 6, as defined in clause 4 of the Heads of Agreement.
[28] There are a number of flaws in this argument. That H&M was removed from the Register of itself does not trigger the right to a refund. This is because upon a rental management client being “purchased” by Rentmax, the agreement records the management rights belong to Rentmax. If Rentmax holds the management rights for the retention period of three years, no issue of a refund arises.
[29] H&M is only entitled to a fee upon introducing rental properties to Rentmax. Accordingly, if H&M as a result of being removed from the Register was unable to introduce further properties for management by Rentmax, Rentmax would not have a damages claim save perhaps to the extent it lost Mrs Talbot’s ability to assist with language issues with Vietnamese property owners.
[30] The short point is that the contract provides a framework for Rentmax to be compensated if rental property owners for any reason take their business elsewhere within three years. Rentmax has had ample opportunity to identify the properties it says have been lost and calculate the refund it is arguably entitled to. As Mr Latton, counsel for H&M, submitted, an inference is available against Rentmax from its failure to quantify what it may be entitled to by way of a refund under the Heads of Agreement, assuming that entitlement survives cancellation.6
[31] The end result is that Rentmax has not demonstrated a reasonably arguable quantification of its alleged counterclaim against H&M.
Assertion of solvency
[32] Rentmax makes a bare assertion of solvency. No evidence in that regard has been provided. Such bare assertions do not found a defence to a liquidation proceeding.
6 See s 42(1)(a) of the Act which would apply if H&M validly cancelled the Heads of Agreement in October 2022.
Outcome
[33] It follows from the findings I have made that H&M is entitled to seek an order liquidating Rentmax Limited. That said, I am conscious that the amount claimed of
$18,227.49 is relatively modest.
[34] This proceeding is adjourned to 20 March 2025 in the Christchurch High Court List to enable the debt to be paid. If it is not paid by that time, an order for liquidation will be made, as that failure will confirm Rentmax is insolvent. Counsel may appear by AVL. If the debt is paid counsel may file a memorandum avoiding the need to appear.
Costs
[35] There is no reason why costs should not follow the event on a 2B basis plus disbursements as fixed by the Registrar and I so order.
Associate Judge Lester
Solicitors:
NZ Property Law, Auckland (for Plaintiff)
Jennifer G Connell & Associates, Auckland (for Defendants)
Copy to counsel:
R J Latton, Barrister, Auckland (for Plaintiff)
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