Henderson Timbers Limited v Artisan Painting Decorating Limited

[2018] NZHC 1048

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-2975

[2018] NZHC 1048

UNDER

the Companies Act 1993

IN THE MATTER OF

liquidation proceedings

BETWEEN

HENDERSON TIMBERS LIMITED

Plaintiff

AND

ARTISAN PAINTING DECORATING LIMITED

Defendant

Hearing:	9 May 2018
Appearances:	D A Jaques for the Plaintiff A M Swan for the Defendant
Judgment:	9 May 2018

ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL

Solicitors/Counsel:

Legal Associates, Auckland for the Plaintiff Whitlock & Co, Auckland, for the Defendant Copy for:

A M Swan, Auckland, for the Defendant

HENDERSON TIMBERS LIMITED v ARTISAN PAINTING DECORATING LIMITED [2018] NZHC 1048 [9 May 2018]

[1]                Henderson Timbers Ltd applies for Artisan Painting Decorating Ltd to be put into liquidation. It says that it is a creditor of Artisan Painting Decorating Ltd for

$54,287.28 for timber and building products supplied between March 2017 and May 2017. At the time of filing the proceeding it had not been paid at all. It turned out that the debt to it has been reduced since then. Henderson Timbers Ltd served a statutory demand on Artisan Painting Decorating Ltd on 12 November 2017. The company did not comply with the demand. Henderson Timbers Ltd began this proceeding during the period when the presumption of insolvency applies.

[2]                Artisan Painting Decorating Ltd has applied to stay the proceeding and to restrain advertising, saying that there is a genuine and substantial dispute as to its liability. The current leading authority is the Court of Appeal’s decision in Yan v Mainzeal Property and Construction Ltd (in receivership and in liquidation).1 See also the judgment of Associate Judge Smith in Body Corporate 392619 v Yee Good Fortune Investments Ltd.2

[3]                The director of Artisan Painting Decorating Ltd is Mr Skirmantas Saltis. He is the director of other companies. One of them is Infinity Business Concepts Ltd. That is the owner of a property at 52 Landing Drive, Albany. Mr Saltis says that Infinity has in recent years carried on business buying damaged or leaking houses, repairing them, and on-selling them. Infinity has had a recent project at 52 Landing Drive, Albany. It is the registered proprietor of the property. He says that it engaged a contractor, Dama Concepts Ltd, to carry out the work. Henderson Timbers Ltd supplied timber and other building supplies for the Landing Drive job. Henderson’s invoices for the various deliveries are all noted as “For delivery at Landing Drive (Dama)”, and the person to be invoiced is “Landing Drive (Dama)”.

1      Yan v Mainzeal Property and Construction Ltd (in receivership and in liquidation) [2014] NZCA 190 at [61] and [63].

2      Body Corporate 392619 v Yee Good Fortune Investments Ltd [2018] NZHC 214 at [62]–[64]

[4]                The case for Henderson Timbers Ltd relies primarily on certain emails that Mr Saltis sent after the last delivery. On 12 October 2017, Mr Saltis sent an email to the accounts department of Henderson Timbers in response to an update as to payment:

[5]                  Apologies, but money not yet drawn, lawyers have not completed all documents yet, hopefully by the end of this week.

The email has Mr Saltis’s electronic signature. Under his name appears “Artisan Painting Decorating Ltd”.

[6]There is an earlier email of 3 July 2017 by Mr Saltis:

We couldn’t process the payment by the end of last month, very short on cashflow, not all our payments has arrived, two properties on the market are not yet sold.

We are happy to pay you the interest on amount outstanding [if] you are able to wait a bit more until one of the properties will be sold, so we would be able finally cash money form there.

Could you get back to us. Thank you.

Again with the electronic signature and “Artisan Painting Decorating Ltd”.

[7]                It turns out that payments were made by either Infinity or Artisan to reduce the debt owed to Henderson Timber Limited for the timber and building products supplied.

[8]                The case for Henderson Timber is this: it accepts that the timber was ordered by Dama Concepts Ltd and it supplied the timber to the building site in Landing Drive, but Dama was no more than an agent for the developer. Infinity was never identified as the developer until this proceeding. The entity that Mr Saltis treated as the developer was Artisan, because that is the company that appeared beneath his name in the emails.

[9]                On the other hand, Mr Saltis says that Artisan Painting Decorating Ltd never ordered any of the timber in this case; the timber was never supplied to it; it never

opened a credit account application with Henderson; and it was not involved in the Landing Drive Development.

[10]            I put to Mr Jaques that in a typical case where a developer carries on a development using contractors, contractors will supply labour and materials under contract to the developer, and in turn carry contractual responsibility to the employees, subcontractors and building materials suppliers. It is relatively unusual for the building contractor to be an agent of the developer. Instead there are separate contracts, on the other hand between the developer and the builder, and then between the builder and subcontractors, employees and materials suppliers. Given that standard situation it needs to be shown that in this case there was some other arrangement. I am aware of cases where a developer may have an account with a building merchant and will permit the contractor to order materials for a job using the developer’s account. But there is no suggestion that there was any such account in this case.

[11]            The affidavit for Henderson Timbers Ltd says very little about how the supply to the Landing Drive project was initially arranged. I infer from Mr Martin’s affidavit that Henderson Timber was aware that the contractor was Dama. He says that they became aware later that Dama was not the owner, and that Dama was working for somebody else. Henderson’s initial invoices refer to “Landing Drive (Dama)”. There is no suggestion on their documents that at the time of ordering the materials and the time of deliveries they were dealing with anyone else except Dama. The claim that Dama was an agent for somebody else is at this stage only speculative.

[12]            I need to be satisfied that there is no serious dispute as to any liability on the part of Artisan Painting Decorating Ltd. On the present evidence it seems to be entirely open to serious dispute whether Artisan Painting Decorating Ltd was contractually liable to Henderson Timbers Ltd for the supply of timber and building products in this case.

[13]            The strong points for Henderson Timbers Ltd are the emails that Mr Saltis sent after the last deliveries. I accept Mr Swan’s submission that those are not binding contractual promises because there was no consideration for them. The consideration

was past for deliveries that had already been made. Henderson Timbers Ltd did not provide any consideration for any promises or payment made by Mr Saltis after the last deliveries.

[14]            Although Mr Swan did not raise this, it also seems possible for Artisan Painting Decorating Ltd to contend that the use of “Artisan Painting Decorating Ltd” in the emails was inadvertent, being no more than the use of an automatic signature.

[15]            While there is some evidence for Henderson, it does not take me to the stage where I can say that the debt is not subject to a substantial dispute. As I have decided that liability is genuinely disputed, the appropriate course is to stay the proceeding and to leave Henderson Timbers Ltd to pursue its ordinary remedy by bringing a proceeding in the District Court to determine the who is liable for the supply of the timber. I appreciate that if Dama is sued, Dama may in turn look to the developer, Infinity, and that Mr Saltis may end up having to ensure that funds are in hand to clear all liabilities for the building project. That does not mean that Infinity or Artisan have contractual liability to Henderson for its unpaid accounts.

[16]            Accordingly, I grant the application. I restrain advertising and stay the proceeding. Artisan Painting Decorating Ltd is entitled to costs on the application. Costs are Category 2. I encourage counsel to confer to see if they can reach agreement on costs. If they cannot, memoranda may be filed.

……………………………….

Associate Judge R M Bell