Northern Civil Consulting Engineers Limited v Sovereign Station Trustee Limited

[2013] NZHC 2952

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-404-3491 [2013] NZHC 2952

BETWEEN  NORTHERN CIVIL CONSULTING ENGINEERS LIMITED

Plaintiff

ANDSOVEREIGN STATION TRUSTEE LIMITED

Defendant

Hearing:                   8 November 2013

Counsel:                  J A Browne for Plaintiff

W D McKean for Defendant

S W Greer for B R Satherley Transport Ltd (supporting creditor)

Judgment:                8 November 2013

(ORAL) JUDGMENT OF HEATH J

Solicitors:

Henderson Reeves Connell Rishworth, Whangarei
WRMK, Whangarei
Counsel:

S W Greer, Auckland

NORTHERN CIVIL CONSULTING ENGINEERS LIMITED v SOVEREIGN STATION TRUSTEE LIMITED [2013] NZHC 2952 [8 November 2013]

[1]      Northern Civil Consulting Engineers Ltd (Northern Engineers) applies to put Sovereign Station Trustee Ltd (Sovereign Station) into liquidation.  The application followed service of a statutory demand on 13 May 2013 in the sum of $24,788.25. Sovereign Station did not pay all or any part of that debt.   Nor did it secure or compound  it  to  the  satisfaction  of  Northern  Engineers.     In  reliance  on  the presumption of insolvency flowing from non-compliance with the statutory demand, a liquidation order is sought.

[2]      The liquidation proceeding was issued on 15 July 2013.   In a Statement of Defence filed on 9 August 2013, Sovereign Station claimed that it did not owe the money.   Instead, it asserted that Sovereign Resources Trustee Ltd (Sovereign Resources) was the true debtor.   The Statement of Defence went on to aver that Sovereign Station was not, in any event insolvent, and that an order putting the company into liquidation ought to be denied on discretionary grounds.

[3]      The  defended  application  for  a  liquidation  order  was  to  be  heard  on  5

November 2013.   In the lead-up to that date, further evidence had been filed, in relation  to  the  alleged  disputed  debt.    I convened  a  telephone  conference  with counsel on the evening of 4 November 2013, at which time the proceeding was adjourned to today with further timetabling orders made.

[4]      Mr McKean, for Sovereign Station, applied this morning for an adjournment. A further  affidavit  was  sworn  by  Mr  Hanger  yesterday,  on  behalf  of  Northern Engineers, to  which  Mr  McKean  objected.    Notwithstanding that  objection,  Mr McKean indicated that he wished to take further instructions on some of the issues raised that go to the nature of the disputed debt.

[5]      In particular, Mr McKean referred to an explanation provided as to why an invoice, apparently in relation to the work for which Sovereign Station was billed, was sent to another company MDCC Ltd,1  on 30 November 2011.   A Mr Gary

Beckham was the person associated with that company.

1      Said to be short for mangonui Development and Civil Construction Ltd. See para [9] below.

[6]      Notwithstanding its original assertion that Sovereign Resources was the true debtor, Sovereign Station’s position is now that the true debtor is either Mr Beckham or Mangonui Development and Civil Construction Ltd, or a combination of the two.

[7]      On the current state of the evidence and without cross-examination, I would have had no hesitation in finding, on a balance of probabilities that Northern Engineers had established that it was owed the debt by Sovereign Station.  However, it is not inconceivable that further inquiries might, in light of the invoice that has been discovered and cross-examination on the explanation given by Mr Hanger, reveal a different position.

[8]      My concern has been that the stance taken by Sovereign Station in defence of the liquidation proceeding has vacillated considerably during the course of the claim. Not only did it originally nominate another company as the true debtor, it has also reneged from that and suggested one or two other parties may owe the debt.   No evidence has been lodged from Mr Beckham, who is alleged to be one of the parties who was involved in the work, in relation to the identity of the debtor.  Evidence was originally given by a director appointed after all the work was done who had no personal  knowledge  of  the  contractual  arrangements.     Another  director  gave evidence supporting the proposition that Sovereign Resources was the true debtor.

[9]      In those circumstances, I indicated to Mr McKean that I was only prepared to grant an adjournment if costs were paid in any event to Northern Engineers.   I indicated that they would be fixed in the sum of $6,000, inclusive of disbursements. That equates (more or less) to the costs that would be ordered as payable on a 2B basis, if the liquidation application had been successful.

[10]     I consider that it is appropriate to allow one last opportunity for Sovereign Station to respond to the claim.  I take that view because, in hearing evidence on a disputed  debt,  the  Court  is  exercising  a  discretion  to  depart  from  the  norm. Ordinarily, no order will be made in liquidation proceedings on any debts that are genuinely disputed.  However, the Court has a discretion, in circumstances such as these, to allow the liability for the debt to be explored in cross-examination.  The

relevant principle was stated succinctly by the Privy Council, in Bateman Television

Ltd (in liq) v Coleridge Finance Co Ltd.2

[11]     An adjournment will be granted on terms requiring prompt payment of costs. Based on my current view of the evidence, if those costs were not paid, a liquidation order would necessarily follow.

[12]     Having heard from counsel for both parties, and Mr Greer, for a supporting creditor, I now make the following orders:

(a)       The liquidation proceeding is adjourned until 10am on 20 November

2013,  for  a  defended  hearing.     The  hearing  is  transferred  to Whangarei.  The proceeding will be heard by Associate Judge Bell, to whom any further procedural issues should be referred, save for those I am about to mention in relation to payment of costs and the consequences of non-payment.

(b)Sovereign Station shall pay to the solicitors for Northern Engineers, by midday on 11 November 2013, the sum of $6,000, as a global sum to reflect both costs and disbursements.

(c)      By  12.30pm  on  11  November  2013,  Mr  Browne,  for  Northern Engineers shall file and serve a memorandum advising the Court whether those costs have been received.  If they have been received, the adjournment would stand.   If they have not been received and counsel may apply for an (unopposed) order immediately putting Sovereign Station into liquidation, I shall issue a judgment later that afternoon making relevant orders, including providing for costs for the supporting creditor.

(d)A memorandum from counsel for the supporting creditor shall be filed and  served  by  10am  on  11  November  2013  identifying  the  costs

sought.

2      Bateman Television Ltd (in liq) v Coleridge Finance Co Ltd [1971] NZLR 929 (PC) at 932.

[13]     On the assumption that the application proceeds to a defended hearing, I

direct:

(a)      The affidavit sworn by Mr Hanger on 7 November 2013 be admitted in evidence.

(b)Any further affidavit evidence in response on behalf of Sovereign Station shall be filed and served by midday on 15 November 2013. Filing of that affidavit (or affidavits) shall complete the evidence.

(c)       All deponents shall be available for cross-examination in Whangrei on

20 November 2013.

(d)Counsel  for  Northern  Engineers  shall  compile,  file  and  serve  an updated bundle of documents for the hearing.   That bundle may be filed in the Whangarei Registry for the attention of Mr Lincoln.

[14]     In  the  event  that  the  application  proceeds  to  a  defended  hearing  on  20

November 2013, questions of costs will be for the Associate Judge.  If an order were made after such a hearing, it would need to take account of the order I have made today.  Save for that one qualification, costs will be at the discretion of the Associate

Judge.

P R Heath J