Onyx International Limited v Pasifikar Group Limited

[2013] NZHC 3307

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-003631 [2013] NZHC 3307

UNDER

the Companies Act 1993

IN THE MATTER

of notice of proceeding for putting a company into liquidation

BETWEEN

ONYX INTERNATIONAL LIMITED (IN LIQUIDATION)

Plaintiff

AND

PASIFIKAR GROUP LIMITED Defendant

Hearing:	3, 9 and 10 December 2013
Appearances:	B Pamatatau for plaintiff G Thwaite and F The for defendant
Judgment:	10 December 2013

(ORAL) JUDGMENT OF LANG J

[on application for order placing company in liquidatioin]

ONYX INTERNATIONAL LIMITED (IN LIQUIDATION) v PASIFIKAR GROUP LIMITED [2013] NZHC

3307 [10 December 2013]

[1]      In  this  proceeding  Onyx  International  Limited  (In  Liquidation)  (“Onyx”) seeks to have Pasifikar Group  Limited  (“Pasifikar”) placed in liquidation.   The proceeding is based on a debt of $20,000 together with interest being the balance payable to Onyx under an agreement for sale and purchase that the liquidators of Onyx entered into with Pasifikar on 27 November 2012.

[2]      The liquidators  arranged  for a statutory demand  to  be served  Pasifikar’s registered office on 28 June 2013.  This expired unremedied on 19 July 2013.  The present proceeding follows as a result.

Background

[3]      Onyx was placed in liquidation on 21 November 2013.  Its principal assets at that time were two trucks, a forklift, furniture and fittings in rented office premises and two containers of frozen fruit and vegetables.   The liquidators immediately secured these assets, and sought to find a purchaser for them.  Pasifikar turned out to be that purchaser.

[4]      Prior to the agreement for sale and purchase being finalised, the liquidators allowed Pasifikar to have access to Onyx’s premises so that it could attend to the sale of the frozen produce.   The evidence before the Court reveals that security staff employed by the liquidators opened the premises for Pasifikar’s staff on 24, 26, 27 and 28 November 2012.

[5]      The parties eventually concluded the agreement for sale and purchase on

27 November  2012.    After  some  negotiation,  the  purchase  price  was  agreed  at

$40,000.  This was to be paid by way of an immediate deposit of $10,000, and three subsequent   payments   of   $10,000   each   on   7   December,   11   December   and

14 December 2012. The agreement required Pasifikar to pay interest at the rate of ten per cent per annum in the event that any payment was late.

[6]      The deposit was duly paid and the first instalment due on 7 December 2012 was also paid, albeit late.  To date, however, Pasifikar has never paid the remaining instalments of the purchase price.  The sum now outstanding inclusive of interest is

$20,630.20.

Grounds of defence

[7]      Pasifikar has sought to defend the application on three grounds.   First, it argues that it has a counterclaim against Onyx that equals or exceeds in value the sum that it owes Onyx under the agreement for sale and purchase.   Secondly, it argues that Clause 22 of the agreement for sale and purchase prevents Onyx from proceeding to recover the balance of the debt.  Thirdly, it argues that a dispute exists between the parties by virtue of the counterclaim, and that Clause 13.0 of the agreement for sale and purchase requires this to be determined through a specified dispute resolution procedure.

The counterclaim

[8]      Details  of  the  counterclaim  are  contained  in  an  affidavit  sworn  by  Mr Ghaboos, Pasifikar’s director, and the person with whom the liquidators dealt when they sold the assets to Pasifikar.  Mr Ghaboos deposes that Pasifikar was unable to obtain access to the produce for approximately one month after the date of the agreement for sale and purchase.   He says that this meant that the produce had deteriorated in condition and become worthless.  He says that the failure by Onyx to provide Pasifikar with prompt access to the produce has caused it to suffer loss in excess of the sum that it owes Onyx under the agreement for sale and purchase.

[9]      Counsel for Onyx accepts that the existence of a genuine counterclaim may be sufficient to prevent a creditor from seeking an order that the other party be placed in liquidation.   This will generally occur where the liquidation proceeding savours of unfair pressure.

[10]     Counsel for Onyx submits that no genuine counterclaim exists in the present case.  He points out that the liquidators and Mr Ghaboos were involved in lengthy correspondence between  January 2013 and July 2013.   This related to  the debt outstanding under the agreement for sale and purchase.    Throughout this correspondence, Mr Ghaboos made promises to pay the debt.   He also provided Onyx with post-dated cheques that were subsequently dishonoured.    More importantly for present purposes, he did not at any stage suggest that he had any issues with the manner in which Onyx had discharged its obligations under the

agreement for sale and purchase.   In particular, he made no mention of Pasifikar being  denied  access  to  the  produce  for  an  untimely  period  after  the  date  of settlement.

[11]     These factors are sufficient to persuade me that no genuine counterclaim exists.  It is in any event clear from the correspondence that Mr Ghaboos has been well aware that his company owes money to Onyx.  His concern throughout has been to obtain further time within which to pay the debt.  His failure to raise the alleged counterclaim claim prior to the commencement of this proceeding means that I can give virtually no weight to his present assertions.

[12]     In addition, Mr Ghaboos was required to be present at the hearing of this proceeding in a direction made by Associate Judge Sargisson on 21 October 2013. The date of the hearing was set some considerable time ago.   Mr Ghaboos was clearly aware of the hearing, because in a memorandum filed by Pasifikar’s counsel on 26 November 2013 counsel advised the Court that Mr Ghaboos would be appearing as a witness at the hearing.  Notwithstanding that assurance, Mr Ghaboos was  not  present  for  cross-examination  when  the  proceeding  was  called  on

3 December.  His failure to attend for the purposes of cross-examination also robs his present assertions of any weight.

[13]     I  therefore  do  not  accept  that  Pasifikar  has  established  an  arguable counterclaim that should prevent this Court from making an order placing Pasifikar in liquidation.

Special Condition 22

[14]     Special Condition 22 of the agreement for sale and purchase provides:

Special Condiiton 22: Deposit

The vendor acknowledges that the deposit of $10,000 has been received from the purchaser.  The parties agree that if the purchaser does not pay the remaining payments for the purchase of the business on due dates set out on Special Condition 18 of this agreement, this agreement will become void on the default of the first payment and the deposit will be forfeited.

[15]     Counsel for Pasifikar argues that the word “void” in this context means that the agreement became of no further effect once Pasifikar failed to pay the third instalment.  He submits that, although this means the deposit will be forfeit, it also means that Onyx cannot take any further action to recover the amount outstanding under the agreement.

[16]     The agreement for sale and purchase was drafted by Pasifikar’s accountant. As a result, any ambiguity must be construed against Pasifikar.  In this context, I am satisfied that the effect of clause 22 is that the agreement would become voidable at the  option  of  Onyx  if  Pasifikar  failed  to  make  any  payments  due  under  the agreement. In other words, Onyx would have the right to cancel the agreement if Pasifikar failed to make any of the required payments. Alternatively, it could enforce the payment provisions in the agreement.

[17]     Onyx has not sought to cancel the agreement because of Pasifikar’s failure to meet its obligations under the agreement.  Rather, it has affirmed the agreement and sought to enforce the payment terms contained within it.   I am therefore satisfied Special Condition 22 does not operate to prevent Onyx from proceeding to recover the outstanding debt.

Clause 13

[18]     Clause 13 of the agreement provides as follows:

13.0     Dispute resolution

13.1     Unless otherwise provided in this agreement, if a party considers that there is a dispute in respect of any matters arising out of, or in connection with this agreement, then that party shall immediately give notice to the other party setting out details of the dispute.  The parties will endeavour in good faith to resolve the dispute between themselves within five (5) working days of the receipt of the notice, failing which the parties will endeavour in good faith within a further ten (10) working days to appoint a mediator and resolve the dispute, time being of the essence.

13.2     Neither party will commence legal proceedings against the other except for injunctive relief before following the procedures set out in subclause 13.1.

[19]     As noted above, counsel for Pasifikar contends that where a dispute arises under the agreement, the dispute resolution procedure set out in clause 13.0 must be followed.  He contends that clause 13.2 prevents either party from commencing legal proceedings against the other except for injunctive relief unless that procedure has been followed.

[20]     I  do  not  accept  that  clause  13.0  has  any  application  in  the  present circumstances.   As I have already recorded, I do not consider that there is any genuine  dispute  in  existence  in  the  present  case.    Nor  does  the  fact  that  the liquidators have sought to recover the balance of the purchase price mean that any dispute has arisen.

Conclusion

[21]     Putting these technical issues to one side, it is clear having regard to the evidence as a whole that Pasifikar is unable to pay the debt to Onyx.  This fact has become obvious over recent days because adjournments granted to enable Pasifikar to pay the debt have produced no result.  The tenor of the correspondence from Mr Ghaboos has been to the effect that Pasifikar has been in financial difficulties for some time.  In addition, it is subject to the presumption of insolvency that arose once it failed to pay the amount sought in the statutory demand.

Result: Order

[22]     Given all of those factors, I have reached the clear view that it is just and equitable that Pasifikar be placed in liquidation, and I make an order accordingly. The order is timed at 2.40 pm.   I appoint Grant Bruce Reynolds as Pasifikar’s liquidator,  and  approve  the rates  of remuneration  set  out in  paragraph  4  of his consent to act as liquidator dated 3 December 2013.

Costs

[23]     I award costs in  favour of Onyx  on  a Category 2B basis, together with disbursements as fixed by the Registrar.

Lang J

Solicitors:

Malcolm Whitlock, Auckland

Kenton Chambers Lawyers, Auckland
Counsel:

B Pamatatau, Auckland