McDonald v Amba Holdings Limited

[2019] NZHC 3380

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2019-485-453

[2019] NZHC 3380

BETWEEN

JULIE MCDONALD and OTHERS

Plaintiffs

AND

AMBA HOLDINGS LIMITED

Defendant

Hearing:

17 December 2017

Appearances:

J Mahuta-Coyle for plaintiffs

N Patel given leave to speak on behalf of defendant

Judgment:

17 December 2019

EX TEMPORE JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]                  Collectively, the plaintiffs, Ms Julie McDonald and others, and the defendant, Amba Holdings Ltd, are the owners of a property at 3 Aro Street in Wellington known as Blythswood Flats. The occupiers of 34 units in the building each own an undivided one 34th share in the freehold. The freehold is subject to 34 leasehold interests and the plaintiffs and the defendant all lease one or more units — in the case of the defendant, two residential units and a commercial unit.

[2]                  The plaintiffs say that the defendant is indebted to them in respect of certain properly imposed levies and related charges.

[3]                  On 17 June 2019 the plaintiffs served on the defendant a statutory demand pursuant to s 289 of the Companies Act 1993. In this they claim $26,406.26. The defendant did not comply with the demand or apply for an order setting it aside within the timeframe required. This of course meant that under s 287(1) of the Companies

JULIE MCDONALD and OTHERS v AMBA HOLDINGS LIMITED [2019] NZHC 3380 [17 December 2019]

Act a presumption of insolvency applied entitling the plaintiffs to commence proceedings for the defendant’s liquidation.

[4]                  The plaintiffs commenced such proceedings by notice of proceeding, statement of claim and verifying affidavit on 8 August 2019. The originating documentation was served on the defendant on 16 August 2019.

[5]                  On 30 August 2019, the defendant filed both a statement of defence and a notice of opposition. The latter is otiose and can be ignored. In its statement of defence the defendant denies that it is indebted to the plaintiffs in the sum claimed in the plaintiffs’ statement of claim, but goes on to say that it calculates that “… it owes a maximum of $23,675.78”. The defendant also denies that it was served with the plaintiffs’ statutory demand, though that contention does not appear to be pursued. Along with its statement of defence, the defendant also filed a verifying affidavit, though that too was unnecessary.

[6]                  The proceeding was originally set down for hearing on 24 September 2019. When it was called Mr Mahuta-Coyle and Mr Manktelow, who was then acting for the defendant, indicated that the parties were in settlement discussions and I adjourned the matter to 22 October 2019. When it was called on that date Associate Judge Lester recorded that part payment had been proffered by the defendant and adjourned it to  5 November 2019 to enable the parties to resolve any remaining issues. When it was called again on 5  November  2019  I  was  informed  by  Mr  Mahuta-Coyle  and  Mr Manktelow that the parties had been unable to do so, and I therefore set it down for hearing today and made directions for the disposal of pre-hearing matters.

[7]                  On 30 November 2019 the defendant filed and served an interlocutory application for orders extending the time for the bringing of an application staying the plaintiffs’ proceeding, and an application for a stay. The grounds stated in the application are that:

“The debt is disputed”.

[8]                  This application was said to be brought in reliance on rr 1.19 and 31.11 of the High Court Rules 2016. Rule 1.19 relates to the extending of time in respect of steps

taken under the Rules and confers on the Court a discretion to do so. Rule 31.11 appears in pt 31 of the Rules which relates to company liquidations and confers on the Court power to stay liquidation proceedings.

[9]                  The defendant’s application for a stay in this case is made squarely on the basis that it disputes the amount of the debt which of course is the basis upon which a party served with a statutory demand may apply to set that demand aside pursuant to s 290 of the Companies Act. Section 290 of the Companies Act provides that such applications must be made within ten working days of the service of the demand and it is well settled that the Court has no jurisdiction to extend that time.

[10]              What the defendant is seeking in this case is an order staying the proceedings on the grounds that would have entitled it to seek an order setting the demand aside, but it has approached the matter as it has pursuant to r 31.11 because it is no longer in a position to do so under s 290 of the Companies Act.

[11]Prima facie that appears to me to be an abuse of process.

[12]              The plaintiffs have filed and served a notice of opposition to the defendant’s application dated 6 December 2019. They say:

(a)The defendant’s application is out of time;

(b)It discloses no basis for an extension of time;

(c)Nor does it disclose any basis for the stay sought (other than assert that there is a dispute about the alleged debt).

[13]              They might have said simply that it is an irregular application as r 31.11 is not an alternative route to apply to set aside a statutory demand on the basis that there is a dispute about the debt.

[14]              The parties have filed and served affidavit evidence more or less in compliance with the timetable. Counsel did not comply with the timetable for filing and service of skeleton outlines of their arguments. Indeed, it would appear that Mr Manktelow

had more pressing matters because, when the case was called he did not appear. He made no application for leave to withdraw and has not informed the Court of his unavailability. In the circumstances I allowed Mr Patel, the defendant’s director’s husband, to address the Court.

[15]              The defendant’s evidence is in the form of an affidavit sworn by the company’s director, Ms Nalini Patel.

[16]              Materially, Ms Patel’s evidence is that of the three units owned by the defendant in Blythswood, only two are used for residential purposes and the third used for commercial purposes. She says that this is what has given rise to a long running dispute amongst the owners. Essentially she says that:

(a)The cost of gas supply to Blythswood is levied pro rata against all units when the defendant’s commercial unit does not consume gas at all;

(b)Likewise, the cost of cleaning the common areas are levied pro rata when the commercial unit owned by the defendant does not even have access to these;

(c)That legal costs have been levied against the defendant and are also sought in the plaintiff’s claim, so that there is a doubling up.

[17]              Perhaps more significantly, Ms Patel says that the defendant is solvent, but, beyond asserting that, she makes no attempt to verify it. Her bland assertion is insufficient to refute the presumption of insolvency arising from the defendant’s failure to respond appropriately to the service of the statutory demand by the plaintiffs.

[18]              The plaintiffs’ evidence in response is in the form of an affidavit made by  Mr Anthony Simpson who is involved in the management of Blythswood.

[19]              Essentially, Mr Simpson’s evidence is that whatever the particular position of the unit holders, the agreement between all unit holders is that the costs of such things as utilities and maintenance will be spread amongst the units on a pro rata basis, and that that is exactly what has been done in this case. He adds that although Ms Patel

asserts that these matters have been raised in the past, until the plaintiffs served their statutory demand, he was not aware of it having been raised at all.

[20]              The position appears to me to be straightforward. The owners of this building in their capacities as such, and as lessors and lessees of the various units, have an arrangement for the payment of costs associated with maintenance and utilities. Those responsible for the management of the building have adhered to those arrangements. The defendant doesn’t like them. It thinks that they are unfair. But that does not mean that there is a genuine dispute. Nor is there anything in the defendant’s complaint about costs. The costs in the original claim are not the same as the costs sought in relation to this proceeding.

[21]              The plaintiffs have served a statutory demand. The defendant has not responded, and in particular has neither paid the full amount of that demand, nor applied pursuant to s 290 of the Companies Act to set it aside. The defendant is therefore subject to the presumption of insolvency. The director’s assertions as to solvency, without further evidence, is insufficient to overcome that statutory presumption.

[22]              In addition I repeat that I regard it as an abuse of process for a defendant who has not complied with the obligation to respond to the service of a statutory demand by applying pursuant to s 290 of the Companies Act to set that statutory demand aside to then seek a stay pursuant to r 31.11 on the very grounds that are available to a party proceeding under s 290 of the Companies Act.

[23]On those bases, I dismiss the defendant’s application.

[24]              The plaintiffs are entitled to their costs on a 2B basis in respect of this proceeding and the dismissed application. These are to include such disbursements as may be allowed by the Registrar.

[25]              I make an order liquidating the defendant company and appointing the Official Assignee at Wellington as the liquidator.

[26]              This order will come into force at 4.00 pm on 20 December 2019 unless the amount claimed by the plaintiff in its statutory demand, together with costs and disbursements as ordered above are paid to the plaintiffs before that time and date.

Associate Judge Johnston

Solicitors:

Greenwood Roche, Wellington for plaintiffs Guy Manktelow, Lower Hutt for defendant