OCR International Limited v Leighton - [2021] NZHC 3377

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-443-00012

[2021] NZHC 3377

UNDER Companies Act 1993, s 290

IN THE MATTER OF

An application to set aside a statutory demand

BETWEEN

OCR INTERNATIONAL LIMITED

Applicant

AND

STEPHEN PHILIP LEIGHTON

Respondent

Hearing: 18 October 2021

Appearances:

J Long and P K J Roycroft for Applicant

Z G Kennedy and D M Kraitzick for Respondent

Judgment:

9 December 2021

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by Associate Judge Andrew on 9 December 2021 at 4.00 pm
pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar

Date……………………………

OCR INTERNATIONAL LTD v LEIGHTON [2021] NZHC 3377 [9 December 2021]

Introduction

[1] OCR International Limited1 applies to set aside a statutory demand.2 It does not dispute that the debt is owing; only that it is due. The narrow issue for determination is the interpretation of two clauses in a repayment plan between the parties of July 2020. Under that repayment plan OCRI agreed to pay, by way of instalments, its undisputed debt to Mr Leighton, the respondent. The debt then due and owing totalled approximately £1.5 m.

[2] OCRI acquired shares in Mr Leighton’s UK-based company, Has Bean Coffee Limited, in June 2018 for £6 m. The repayment plan restructured OCRI’s debt obligations to Mr Leighton for a deferred payment that was part of the purchase price and the repayment of a credit facility provided by Mr Leighton. The restructuring was brought about by the significant impact of COVID-19 on OCRI’s coffee business.

[3] OCRI contends that it has a genuinely arguable claim that under the repayment plan it had a unilateral right to cease making further instalments because of ongoing financial difficulties owing to COVID-19 and that Mr Leighton cannot enforce his accrued enforcement rights until April 2022. Mr Leighton says that his contractual obligation not to seek to enforce his rights continues only so long as the repayments under the repayment plan continue to be met.

[4] The issue I must determine is whether OCRI can establish the interpretation it contends for is genuinely and fairly arguable.

Factual background

[5] OCRI has operated as a New Zealand-based parent company coffee business since 2011.

[6] In 2018, OCRI sought to expand and, following a commercial negotiation, agreed to purchase all of the shares in Has Bean Coffee Ltd. OCRI was to pay the agreed purchase price of £6 m in several tranches: £4 m in cash and shares in OCRI

1 OCRI.
2 Companies Act 1993, s 290.

on settlement, with the remaining balance divided into two equal deferred payments of £1,084,297.89 due at the end of June 2019 and June 2020 respectively. The first of these deferred payments was paid. It is the second payment that is at issue.

[7] From the beginning of 2020, restrictions imposed in response to COVID- significantly impacted OCRI’s business. Demand for wholesale coffee supplies declined, requiring the closure…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2021] NZHC 3377
Decision Date: 9 December 2021

CaseChat Overview and Summary

OCR International Limited sought to set aside a statutory demand issued by Stephen Philip Leighton, who claimed OCRI owed approximately £1.5 million. The debt stemmed from a purchase of shares in Has Bean Coffee Limited and a credit facility. The core issue was the interpretation of clauses in a repayment plan between OCRI and Leighton, specifically regarding OCRI's right to unilaterally cease repayments due to financial difficulties caused by COVID-19. OCRI argued it had a unilateral right to stop repayments, whereas Leighton maintained his enforcement rights would only be restrained as long as the repayments continued. The court examined the objective meaning of the clauses within the context of the entire contract and relevant background, concluding that Leighton's interpretation was the only tenable one. The court held that OCRI's interpretation was contrary to the natural and ordinary meaning of the clauses, and thus rejected OCRI's application to set aside the statutory demand. The court also dismissed OCRI's alternative claim that the statutory demand should be set aside on grounds of material misstatement. The court ordered OCRI to pay Leighton by a specific date or face potential liquidation proceedings.

Orders