Ingenious Asset Management Limited v McConnon
[2025] NZHC 1269
•23 May 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-1719
[2025] NZHC 1269
BETWEEN INGENIOUS ASSET MANAGEMENT LIMITED
ApplicantAND
SIMON McCONNON
First Respondent
JOHN McCONNON
Second Respondent
Hearing: 28 April 2025 Appearances:
Gautam Jindal for the Applicant
Kirsten Maclean for the Respondents
Judgment:
23 May 2025
JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
[Application to set aside a statutory demand]
This judgment was delivered by me on 23 May 2025 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar
Solicitors:
Ormiston Legal, Auckland, for the Applicant
D’arcy Thomson Law (Kirsten McLean), Christchurch, for the Respondents
Copy for:
M Wallace, Freedom Chambers, Christchurch, for the Respondents
INGENIOUS ASSET MANAGEMENT LIMITED v McCONNON [2025] NZHC 1269 [23 May 2025]
Introduction
[1] Ingenious Asset Management Limited (Ingenious) applies to set aside a statutory demand issued by Simon McConnon and John McConnon (together the respondents) for an amount of $9,383.50 on 11 July 2024.
[2] The statutory demand arose in respect of a judgment by Associate Judge Brittain on 11 July 2024, awarding the respondents costs (the Costs Judgment).1 Pursuant to s 290 of the Companies Act 1993, Ingenious applies for the statutory demand to be set aside.
Background
[3] There is a history of proceedings between the parties. I largely adopt Muir J’s summary of the facts, below.2
[4] Global Dairy Ltd (in liq) (GDL) was placed into liquidation in March 2020. In proceedings CIV-2023-404-2103 (the Recovery Proceedings) the defendants are GDL’s three directors, including the respondents and two liquidators. GDL’s three creditors assigned their unsatisfied claims in GDL’s liquidation to Ingenious under deeds of assignment (deeds of assignment).
[5] Ingenious’ statement of claim dated 6 September 2023 advances 11 causes of action premised on insolvent/reckless trading by the directors and unreasonable fees claims by the liquidators and/or failure on their part to investigate the directors.
[6] On 21 March 2024 Associate Judge Brittain determined an application by the defendants for security for costs, in favour of the defendants.
[7] On the application of Ingenious this judgment was recalled on the 20 May 2024, and reissued on 31 May 2024 with one amended paragraph. Costs were reserved. The parties were subsequently unable to agree on costs following the
1 Ingenious Asset Management Ltd v McConnon [2024] NZHC 1888.
2 Ingenious Asset Management Ltd v McConnon [2024] NZHC 2982 at [3] to [5].
judgment. The Costs Judgment dated 11 July 2024 awarded costs against Ingenious, in favour of all the defendants.
[8] The jurisdiction of an Associate Judge to deal with the Recovery Proceedings is being challenged by Ingenious under s 26(2) of the Senior Courts Act 2016 (the Jurisdictional Challenge). Muir J delivered his judgment on 14 October 2024 finding that the determinations by Associate Judge Brittain in the Recovery Proceedings were within an Associate Judge’s jurisdiction and accordingly Ingenious’ application for a stay of all orders, directions and judgments of Associate Judge Brittain was declined.3 Leave to appeal Muir J’s decision in the Jurisdictional Challenge was granted on 28 November 2024.
[9] On the same day the respondents issued a statutory demand in respect of the costs awarded to them by the Costs Judgment. The statutory demand has not been satisfied and the costs awarded in the Costs Judgment are outstanding.
Hearing
[10] At the hearing, counsel for the respondents objected to the counsel for Ingenious’ introduction of the evidence regarding amalgamation of Health &Nutrition Dairy Trust Ltd (HNDTL) with Ingenious (the Amalgamation), which occurred on 22 April 2025. Counsel for the respondents submitted:
(a)the Amalgamation application is dated and was registered on 22 April 2025, the respondent’s submissions were filed and served on 22 April 2025, which set out at paras 29 to 31 the difficulties with Ingenious’ assignment claims;
(b)Ingenious’ current application has been pleaded in reliance on the deeds of assignment, as between Ingenious and three creditors of GDL, and neither the current application, nor Ingenious’ submissions in support of the application and/or the substantive proceeding plead the Amalgamation;
3 Ingenious Asset Management Ltd v McConnon, above n 2.
(c)the respondents had not been afforded the opportunity to consider the issues raised by the Amalgamation and respond.
[11] To ensure that the Court has the best evidence available in making its decision, I directed that counsel for the respondents was to file any submissions they wished to file in respect of the Amalgamation within 5 working days, and counsel for Ingenious had an opportunity to file submissions in response within a further 5 working days. The Court issued a minute to that effect on 28 April 2025.
Legal principles
[12]Section 290 of the Companies Act 1993 sets out:
290 Court may set aside statutory demand
(1)The court may, on the application of the company, set aside a statutory demand.
(2)The application must be—
(a) made within 10 working days of the date of service of the demand; and
(b) served on the creditor within 10 working days of the date of service of the demand.
(3)No extension of time may be given for making or serving an application to have a statutory demand set aside, but, at the hearing of the application, the court may extend the time for compliance with the statutory demand.
(4)The court may grant an application to set aside a statutory demand if it is satisfied that—
(a) there is a substantial dispute whether or not the debt is owing or is due; or
(b) the company appears to have a counterclaim, set-off, or cross- demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or
(c) the demand ought to be set aside on other grounds.
(5)A demand must not be set aside by reason only of a defect or irregularity unless the court considers that substantial injustice would be caused if it were not set aside.
(6)In subsection (5), defect includes a material misstatement of the amount due to the creditor and a material misdescription of the debt referred to in the demand.
(7)An order under this section may be made subject to conditions.
[13] The Court of Appeal in Confident Trustee Ltd v Garden and Trees Ltd outlined that the principles under s 290(4) are well settled and this includes that: 4
(a)The onus is on the applicant seeking to set aside the statutory demand to show that there is arguably a genuine and substantial dispute as to the existence of the debt. The Court’s task is not to resolve the dispute but to determine whether there is a substantial dispute that the debt is due.
(b)The mere assertion that a dispute exists is not sufficient. Material short of proof is required to support the claim that the debt is disputed.
(c)If such material is available, the dispute should normally be resolved first in ordinary civil proceedings before any statutory demand is issued.
(d)If a counterclaim, cross-demand or set-off is suggested an applicant must establish that this is reasonably arguable in all the circumstances.
(e)It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise unless such evidence is contrary to the available documents or earlier statements made by the parties.
Ingenious’ application to set aside statutory demand
[14] Mr Jindal, for Ingenious, submits that the statutory demand is an abuse of process and should not have been issued. He submits it was served shortly after the Costs Judgment was delivered and is misguided.
[15]Mr Jindal submits there are five issues.
Ingenious has a counterclaim which exceeds the amount claimed in the statutory demand.
[16]Mr Jindal submits as follows:
(a)Ingenious is the claimant in the Recovery Proceedings, where recovery of losses suffered by the unsecured creditors are sought from the
4 Confident Trustee Ltd v Garden and Trees Ltd [2017] NZCA 578 at [16].
respondents pursuant to s 301 of the Companies Act 1993 (the Companies Act). Ingenious stands in the shoes of the unsecured creditors. The pleadings filed by the liquidators and by Ingenious speak for themselves;
(b)losses caused due to breach of various sections of the Companies Act by the respondents (ss 131, 135, 136, 137 and 380) are also sought from the respondents. Recovery is also sought for losses suffered on account of any breaches of trust and dishonest assistance by the respondents in relation to GDL;
(c)Ingenious has a counterclaim or a cross-demand in the amount of
$159,527.30 that exceeds the $9,383.50 sought in the statutory demand. This consists of the unpaid balance of 52 cents in the dollar of losses suffered by creditors which is sought to be recovered from the respondents, together with interest calculated at $27,752.28.
(d)in the alternative, the shortfall amount of $42,000 identified by Associate Judge Brittain has accrued interest of $8,023.9334 and this amount exceeds the amount in the statutory demand;
(e)the amount retained by the respondents following their settlement with the liquidators (being $58,932.76, calculated as the amount of the liquidators’ claim against the respondents of $308,932.76 less the settlement amount paid by the respondents of $250,000) exceeds the amount of the statutory demand.
Genuine dispute with Costs Judgment
[17] There is a genuine dispute with the Costs Judgment. Mr Jindal submits on this issue:
(a)The debt arises due to a Costs Judgment of Associate Judge Brittain. Leave to appeal the Costs Judgment has been filed pursuant to s 56(3) of the Senior Courts Act 2016. The decisions of Associate Judge
Brittain are also subject to a Jurisdictional Challenge under s 26(2) of the Senior Courts Act 2016. There are two appeals to the Associate Judge’s decisions;
(b)Ingenious has been granted leave to appeal the High Court’s decision in the Jurisdictional Challenge. If the Jurisdictional Challenge is successful in the Court of Appeal, it will mean the decisions and the directions of Associate Judge Brittain are void ab initio and will be null and void with no legal effect;
(c)Accordingly:
(i)pending an appeal, there is a dispute under s 290(4)(b) of the Companies Act about whether the debt is owed or will remain owed; and
(ii)the possibility that the underlying Costs Decision may be invalidated ab initio is a valid consideration under s 290(4)(c) of the Companies Act to set the statutory demand aside.
The statutory demand was issued with an ulterior motive
[18] Mr Jindal submits that the statutory demand was issued by the respondents with an ulterior motive, in an to attempt to terminate the Recovery Proceedings and therefore is a misuse of the statutory demand process.
Ingenious was prevented from seeking stay of enforcement
[19] Mr Jindal submits that Ingenious was prevented from filing an application for a stay of the Costs Judgment pending appeal, at the request of the respondents. He submits Ingenious was prevented from obtaining a stay by the directions of Peters J5 and Muir J.6
5 Minutes of Peters J in the Recovery Proceedings, dated 14 August 2024.
6 Minutes of Muir J in the Recovery Proceedings, dated 1 October 2024.
Amalgamation and validity of assignments
[20] Ingenious filed a memorandum dated 22 April 2025, confirming that Ingenious was amalgamated with HNDTL on 22 April 2025.
[21]Mr Jindal submits that Ingenious is a 100% shareholder of HNDTL and:
(a)HNDTL’s unsecured creditor claim has been accepted in the amount of
$225,224.11 in the liquidation of GDL. HNDTL has been paid 48 cents in the dollar amounting to $108,107.57. Hence, HNDTL has a claim against the respondents for the balance of 52 cents in the dollar of its losses, being the amount of $117,116.54 plus interest;
(b)Ingenious has amalgamated HNDTL with itself — which means that Ingenious stands in the shoes of HNDTL. There is no assignment or transfer of rights and obligations from the amalgamating companies to the amalgamated company; rather the amalgamated company, as the continuing entity, succeeds to those rights and obligations and "stands in the shoes" of the amalgamating companies;
(c)Alternatively, the assignment between HNDTL and Ingenious is not contrary to law. A company is entitled to enforce a claim/debt owned by its wholly owned subsidiary. A right to a debt is a right to be paid a sum of money; it is a chose in action. Choses of action may be absolutely assigned. Any incidental causes of actions necessary to preserve and claim the property rights are permitted at law.
[22] Overall, Mr Jindal submits the statutory demand “was issued in haste and with the underlying motive that the Recovery Proceedings may be avoided by [the] McConnons” and for these reasons the statutory demand should be set aside.
The respondents’ opposition
[23] Ms MacLean, for the respondents, addresses the two arguments put forward by Ingenious in support of setting aside the statutory demand:
(a)that there is a genuine dispute as to whether the debt underlying the statutory demand is due and owing; and
(b)Ingenious has a counterclaim against the respondents exceeding the amount in the statutory demand.
Substantial dispute
[24] Ms Maclean submits that Ingenious, as an applicant, cannot claim that there is a substantial dispute if the statutory demand is supported by a judgment of the Court, even if that judgment is under appeal, relying on the decision in Cullen Group Ltd v Commissioner of Inland Revenue.7 She submits that the Court in Cullen Group confirmed that without a stay of enforcement of a costs award there is no substantial dispute about whether the debt is owing. She submits this is even more so when Ingenious has performed the order from which the Cost Judgment arose, namely paid the amount ordered in the security for costs order.
Counterclaim
[25] Ms Maclean submits in regard to Ingenious’ counterclaim or set-off against the respondents under the Recovery Proceedings, that it is a matter of record:
(a)Ingenious had no antecedent commercial relationship with either GDL or the first and second respondents prior to the liquidation;
(b)Ingenious has had no commercial dealings with the first or second respondents;
(c)GDL is not a party to the substantive proceeding; and
(d)HNDTL is not a party to the substantive proceeding.
7 Cullen Group Ltd v Commissioner of Inland Revenue [2019] NZHC 3110, (2019) 24 PRNZ 703.
She submits therefore that Ingenious has no legal basis to claim any relief, by way of counterclaim and/or set-off from the first and second respondents, as no duty was ever owed to Ingenious by either the first or second respondents.
[26] Ms Maclean contends that Ingenious will be unsuccessful in proving the validity of the deeds of assignment, which are in issue in the Recovery Proceedings between the parties. For these reasons, she submits it is clear that Ingenious does not have a direct counterclaim or set-off against the first and/or second respondents. Even if it did, it cannot succeed in arguing such a claim, as the validity of the deeds of assignment must now fail, as on the basis of the agreed statement of facts, the respondents submit Ingenious cannot establish or advance an argument the deeds of assignment were valid as no antecedent commercial relationship existed between the assignors, GDL and/or the first and second respondents at the relevant time and/or prior to the liquidation of GDL.
[27]Ms Maclean summarises the respondents position as follows:
(a)Costs of $9,383.50 were fixed on 11 July 2024 following a successful application for security for costs by the respondents. Costs therefore became payable from 11 July 2024;
(b)there is no stay of the Costs Judgment, and no security has been offered by Ingenious. The appeal of Associate Judge Brittain’s various decisions does not constitute a ground to set aside a statutory demand;
(c)Ingenious has no privity of contract with the first and/or second respondents from which it can claim relief and Ingenious cannot succeed in arguing the validity of the deeds of assignment. As such, there is no arguable case that there is a counterclaim or set-off against the first and/or second respondent;
(d)Ingenious has placed on record that it is impecunious and therefore insolvent. As such, this application is a further attempt by Ingenious
and Mr Jindal (who has a personal interest in Ingenious) to delay the inevitable liquidation of Ingenious.
Subsequent submissions
[28] Further to paragraph [11] of this judgment and the Court’s minute of 28 April 2025, counsel for the respondents submitted further submissions in respect of the Amalgamation dated 2 May 2025 and counsel for Ingenious filed submissions in reply dated 12 May 2025.
[29]Ms Maclean submits:
(a)Ingenious’ application was made in reliance on the deeds of assignment and neither the current application, nor Ingenious’ submissions in support of the application, nor the Recovery Proceedings plead the Amalgamation;
(b)rejects Ingenious’ position that the Amalgamation was always to occur, and has been known for a considerable time, noting that Ingenious’ submissions filed in support of the application on 14 April 2025 made only a passing mention of the Amalgamation and/or that being the basis of the application, and in large part of the submissions relied on the deeds of assignment. The first attempt by Ingenious to raise the Amalgamation as a basis to set aside the statutory demand was made by memorandum dated 22 April 2025, a short time after the application for the Amalgamation was lodged;
(c)no evidence was adduced at the time of Ingenious’ application as to either the circumstances surrounding the acquisition of the shares in HNDTL and/or the Amalgamation and/or the solvency of the purported amalgamated company. Had Ingenious sought to rely on any of that as a basis in its current application it should have produced such evidence in the affidavit of Ms Deepika Jindal dated 16 July 2024, particularly
in circumstances where Ingenious has submitted orally that the Amalgamation has been on foot for a considerable period of time;
(d)the respondents have not had the opportunity to consider and respond by way of evidence to the Amalgamation, and had the Amalgamation been on foot from the outset, a submissions-only hearing would not have been appropriate as the evidence to the acquisition of the shares in HNTDL and the Amalgamation would have had to have been tested. The respondents have been denied that opportunity which has been prejudicial to them;
(e)Ingenious’ claim, if it has a counterclaim or set-off against the Cost Judgment is at best a contingent claim. At the time the statutory demand was issued and the application to set it aside, the Amalgamation was nothing more than a contingent or potential claim and the Court has held that where an application does not state the basis for a set-off and/or counterclaim but rather refers to a possible and/or contingent claim that is not a sufficient basis to establish an arguable counterclaim and/or set-off, relying on the decision in Alfex Doors & Windows Ltd v Alutech Windows & Doors Ltd;8
(f)no evidence has been placed before the Court in support of the application based on the Amalgamation other than through counsel for Ingenious’ purporting to give evidence via a memorandum two working days before the hearing. Details as to the Amalgamation and the claim based on it is not in affidavit evidence, is untested, and based on a contingent/future claim, and accordingly the Amalgamation should not be considered by the Court as part of the current application to set aside the statutory demand.
[30]Counsel for Ingenious in response submits:
8 Alfex Doors & Windows Ltd v Alutech Windows & Doors Ltd CA 38/01, 20 May 2001 at [10].
(a)The respondents acknowledged awareness that Ingenious owned 100 per cent of HNDTL and this ownership structure was inserted in Dr Jindal’s affidavit (dated 16 July 2024). In submissions filed on 13 April 2025, Ingenious explicitly stated that it was actively in the process of amalgamating with HNDTL, the respondent’s assertion that their submissions triggered a last-minute application for the Amalgamation is rejected, the chronology of events being:
(i) 10 April 2025—the Amalgamation documents were being prepared for filing;
(ii) 13 April 2025—Ingenious’ submissions confirmed the Amalgamation process;
(iii) 16 April 2025—the Amalgamation documents were filed;
(iv) 22 April 2025—approval was granted by the Registrar of Companies, whereupon Ingenious filed the memorandum.
(b)That Ingenious’ case is substantively meritorious without the Amalgamation for the following reasons:
(i)Ingenious has consistently maintained that it possesses a set-off, counterclaim, or cross-claim exceeding the amount claimed in the statutory demand and that Ingenious has a substantial proprietary interest in preserving HNDTL’s assets and property and, as the parent company, can assert derivative claims on behalf of its subsidiary to protect its investment;
(ii)The counterclaim arises from claims under s 301 of the Companies Act which are currently the subject of the Recovery Proceedings;
(iii)the Amalgamation does not represent a change in Ingenious’ legal position but rather reinforces the existing argument of it
having a counterclaim, and even absent the Amalgamation, Ingenious’ position establishes a counterclaim because Ingenious owns 100 per cent of HNTDL.
[31] Mr Jindal rejects the respondents’ assertion that Ingenious’ counterclaim is a contingent claim only. He submits:
(a)Ingenious’ claim against the directors of GDL in their application of GDL’s property cannot be characterised as “contingent”, as the respondents misconduct occurred pre-liquidation and Ingenious’ claim under s 301 of the Companies Act is not conditional upon a future event; and
(b)the respondents have failed to articulate what specific contingency would trigger the counterclaim, and this represents an entirely new argument unrelated to the Amalgamation, and should be disregarded by the Court.
Result
[32]There are two issues to be determined this judgment:
(a)whether the Costs Judgment, being the debt underlying the statutory demand, is due and owing and accordingly whether there is a substantial dispute regarding the debt;
(b)whether Ingenious has a reasonably arguable counterclaim against the respondents exceeding the amount of the statutory demand.
Substantial dispute
[33] I am of the view that Ingenious has not established that there is a substantial dispute as to whether the Costs Judgment is due and owing. The reasons for my view are:
(a)In accordance with the decision in Cullen Group, no genuine dispute can be established in respect of the Costs Judgment unless a stay of enforcement of the Costs Judgment has been obtained.9 While Mr Jindal has argued that he has been prevented applying for a stay of the Costs Judgment by the minutes of Muir J and Peters J, this does not lead to an inevitable conclusion that a stay of the Costs Judgment would have to be granted. Ingenious cannot establish a genuine dispute of the Costs Judgment on this ground;
(b)Ingenious argues that the appeal of Associate Judge Brittain’s judgment under the Jurisdictional Challenge means that judgment ordering security for costs, and consequently the Costs Judgment, could be determined as being void ab initio, resulting in them having no legal effect. However, until this is decided, Muir J’s judgment stands and the judgments of Associate Judge Brittain, including the Costs Judgment, remain valid and in force. Accordingly, this is not a ground on which Ingenious can establish a genuine dispute that the Costs Judgment is due and owing.
Counterclaim
[34] I am of the view that Ingenious has a reasonable argument that it has a counterclaim against the respondents exceeding the statutory demand, and on that basis the demand should be set aside under s 290(4)(b) of the Companies Act. The reasons for this view are:
(a)The issue of whether the deeds of assignments are valid are yet to be tested by a hearing of this issue, as a separate question under pt 10 sub-pt 4 of the High Court Rules 2016, which is set down for a hearing on 28 May 2025. If Ingenious is successful in having the deeds of assignments declared valid, then under the causes of action in the Recovery Proceedings against the respondents, it is reasonably arguable that Ingenious’ counterclaim exceeds the statutory demand;
9 Cullen Group v Commissioner of Inland Revenue, above n 7.
(b)it is reasonably arguable that (leaving aside the Amalgamation of Ingenious with HNDTL for the moment) Ingenious as a 100 per cent shareholder of HNDTL in respect of claims against the respondents under the Recovery Proceedings, has a counterclaim in excess of the amount claimed in the statutory demand.
Amalgamation
[35] I have already determined that the respondents’ statutory demand should be set aside on the basis that Ingenious has an arguable counterclaim and consequently it is not necessary for me to deal with the Amalgamation as a ground for setting aside the statutory demand. However, for the sake of completeness, my views are:
(a)The prospect of the Amalgamation occurring was foreshadowed early enough for the respondents to deal with it at the hearing on 28 April 2025;
(b)Mr Jindal is correct that under the Companies Act, following the Amalgamation, Ingenious does stand in the shoes of HNDTL in respect of its claim as a creditor of GDL and the claims against the defendants in the Recovery Proceedings, and the Amalgamation arguably strengthens Ingenious’ counterclaim.
[36] The statutory demand should be set aside pursuant to s 290(4) of the Companies Act.
Orders
[37]I make the following orders:
(a)Ingenious’ application to set aside the statutory demand is granted.
(b)As to costs, as Ingenious is the successful party, costs should follow the event. Counsel are directed to endeavour to agree costs and, failing agreement being reached within a period of 20 working days from the
date of this judgment, counsel for Ingenious will file a memorandum (not to exceed five pages) as to cost within five working days after the expiry of the 20 working day period. Counsel for the respondents will file a memorandum (not to exceed five pages) in response within five working days of receipt of counsel for Ingenious’ memorandum. A decision as to costs will then be made on the papers.
……………………………….
Associate Judge Taylor
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