Pauaco Limited v Seasir Limited

[2025] NZHC 2058

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2025-409-344

[2025] NZHC 2058

UNDER

the Companies Act 1993

IN THE MATTER

of an application for putting company into liquidation

BETWEEN

PAUACO LIMITED

Plaintiff

AND

SEASIR LIMITED

Defendant

Hearing:	24 July 2025
Counsel:	V T D Adams for Plaintiff B Bao for Defendant
Judgment:	25 July 2025

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 25 July 2025 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:

PAUACO LIMITED v SEASIR LIMITED [2025] NZHC 2058 [25 July 2025]

[1]    In this proceeding the plaintiff seeks an order putting the defendant company into liquidation on the ground that it is insolvent and unable to pay its debts. It relies upon the failure by the defendant company to comply with the requirements of a statutory demand dated 20 December 2024 which the defendant company had applied to set aside but then withdrew its application.1

[2]    This proceeding was filed on 19 June 2025 and served on the defendant company on 4 July 2025. On 18 July 2025 the defendant company filed a statement of defence along with an application for orders including:

(a)extending time within which the defendant company could file an application under r 31.11 of the High Court Rules 2016 to restrain publication of any advertisement of the proceeding;2 and

(b)that the plaintiff be restrained from advertising the proceeding until such time as the defendant company’s application under r 31.11 was heard and determined by the Court.

[3]    The application was put before Associate Judge Lester in Chambers on 18 July 2025, where he made the following order:

There is an interim order restraining advertising in this proceeding. The application to restrain will be called in the 10 am list on 24.7.25. This interim order is purely to hold the position until then. For the avoidance of doubt the making of this interim order is not to be taken as meaning an extension of the time in rule 31.11 will be granted.

[4]    When the application came before me in the Associate Judge’s List yesterday, I received written and oral submissions from counsel on the issue of whether the defendant company should be granted an extension of time to make an application under r 31.11 to restrain advertising. The plaintiff opposes the granting of an extension of time.

1      On 16 May 2025 I made an order extending the time for compliance with the statutory demand but the defendant company did not do so.

2      As required by High Court Rules 2016, r 31.9. The defendant company has not sought a stay of the proceeding, only to restrain advertising.

High Court Rules 2016, r 31.11

[5]Rule 31.11 provides as follows:

31.11   Power to stay liquidation proceedings

(1)If an application for putting a company into liquidation is made under rule 31.3, the defendant company, or, with the leave of the court, any creditor or shareholder of that company or the Registrar of Companies, may, within 5 working days after the date of the service of the statement of claim on the defendant company, apply to the court—

(a)for an order restraining publication of an advertisement required by rule 31.9 or any other information relating to that statement of claim; and

(b)for an order staying any further proceedings in relation to the liquidation.

(2)The court must treat an application under subclause (1) as if it were an application for an interim injunction and, if it makes the order sought, it may do so on whatever terms the court thinks just.

(3)The inherent jurisdiction of the court is not limited by this rule.

[6]    As will be noted, r 31.11 requires that any application to stay a liquidation proceeding or restrain advertising must be made within five working days of the date of service of the statement of claim. It is common ground that the defendant company did not make an application in time, rather its application for an extension of time to do so was filed on the 10th working day following service of the statement of claim.

The defendant company’s submissions

[7]    Mr Bao submits the Court may extend time for the making of an application under r 31.11. He referred me to two decisions of this Court. The first is Safari Vervaardiging CC v Safari BBQ Products Ltd, where Associate Judge Gardiner noted that Associate Judge Lester had made an interim order restraining advertising despite the fact that the application was filed out of time.3 Associate Judge Gardiner stated “… by making the interim stay and restraint order, Associate Judge Lester must be taken to have excused the non-compliance with r 31.11”.4 However, I note that in this

3      Safari Vervaardiging CC v Safari BBQ Products Ltd [2023] NZHC 2303.

4 At [12].

case Associate Judge Lester was clear that in granting an interim restraint on advertising he was not granting an extension of time to make an application under     r 31.11.

[8]    The second case is Fatweb Ltd v Manaia One Ltd, where the application under r 31.11 was  filed  one  day  outside  the  prescribed  period.5  There,  Associate  Judge Matthews considered, notwithstanding that the time limit for making an application under r 31.11 is strict, the delay in applying was reasonably explained. Counsel had made an error in failing to make a diary entry of the deadline and the Judge considered that such an error “should not be a bar to a party seeking to have a substantive issue put before the Court when no prejudice to the other party is shown”.6

[9]    The reason the defendant company seeks a restraint on advertising is that it wishes to make a compromise proposal to its creditors under pt 14 of the Companies Act 1993 and considers the outcome of the proposal will be impacted should the plaintiff advertise the application to put it into liquidation. This, it says, may adversely affect the vote on the proposal and the interests of creditors and others. However, it appears no such proposal has yet been finalised and there is no information before the Court as to its proposed terms.

[10]   Counsel for the defendant company explains that the reason for the delay in making an application under r 31.11 was because the defendant company received late advice from its financial advisor and proposed compromise manager that they could no longer act due to a conflict of interest. The defendant company says it was then forced to seek alternative advice and did not wish to file the application until such time as it had the benefit of that advice.

[11]   Mr Bao advises me that the defendant company expects to be in a position to file the compromise proposal by 30 July 2025, and submits that if the liquidation application is advertised before the creditors consider the proposal some of them may be “biased” by the fact of the application. Counsel put the matter this way:

5      Fatweb Ltd v Manaia One Ltd [2016] NZHC 1016.

6 At [9].

Some creditors, who without knowledge of the [plaintiff’s] application and voting solely based on commercial judgment [sic] alone would have voted in favour of a proposed compromise, might be unfairly biased after gaining knowledge through the [plaintiff’s] advertising. That same creditor might then vote against a proposed compromise purely because of that knowledge, even though they may have voted differently had they voted based on commercial judgment [sic] alone.

[12]   Mr Bao acknowledges that the plaintiff’s application to liquidate the defendant company is not an abuse of process. The defendant company is solely concerned to avoid prejudice to the outcome of its compromise proposal. He also submits the harm that may be done to the defendant company should the plaintiff advertise, in affecting the vote on the compromise proposal, exceeds any harm to the plaintiff from delay in the hearing of its application to liquidate the defendant company.

My analysis

[13]   I accept that the Court may extend time for an application under r 31.11 to be made. In addition to the authorities I was referred to, I note that r 1.19 relevantly provides:

1.19     Extending and shortening time

(1)The court may, in its discretion, extend or shorten the time appointed by these rules, or fixed by any order, for doing any act or taking any proceeding or any step in a proceeding, on such terms (if any) as the court thinks just.

(2)The court may order an extension of time although the application for the extension is not made until after the expiration of the time appointed or fixed.

[14]   While the Court has an unfettered discretion to extend and shorten time there is a need for such applications to be justified. In this context, the authors of McGechan on Procedure refer to Lord Guest in Ratnam v Cumarasamy:7

The rules of Court must prima facie be obeyed, and in order to justify a Court in extending the time during which some step in procedure requires to be taken there must be material upon which the Court can exercise its discretion. If the law were otherwise, a party in breach would have an unqualified right to an extension of time which would defeat the purpose of the rules, which is to provide a timetable for the conduct of litigation.

7      Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [NR1.19.01], citing Ratnam v Cumarasamy [1965] 1 WLR 8, [1964] 3 All ER 933 (PC) at 12 and 935.

[15]   Here, the plaintiff correctly points out that there is some considerable history to this proceeding, most notably concerning the circumstances surrounding the defendant company’s non-compliance with the statutory demand upon which the plaintiff relies. After that statutory demand was issued on 20 December 2024, the defendant company sought to set it aside, including on the basis that it intended to seek a creditors’ compromise under pt 14 of the Companies Act. The defendant company brought its application to set aside the statutory demand on 14 January 2025 and withdrew it on 16 May 2025.

[16]   Accordingly, the defendant company has had months to make its compromise proposal to creditors. The recent delay in finalising the proposal, said to have arisen from a conflict of interest identified by its financial advisor, does not provide adequate justification for its failure to prepare its compromise proposal earlier.

[17]   I also do not accept the defendant company’s premises upon which its application for an extension of time is based. These are that advertising could adversely affect the creditors’ views of the compromise proposal and that the creditors should not be made aware of the plaintiff’s proceeding.

[18]   The first premise is, to my mind, specious. I cannot see how the fact that the plaintiff has applied to liquidate the defendant company would influence creditors in supporting or opposing a proposal. The fact that the defendant company is or will be unable to pay its debts follows from the fact that the compromise proposal has been made, and the proponent of a compromise proposal is required to provide sufficient information for creditors to make an informed decision as to whether it is in the best interests of a creditor to accept the proposal.8

[19]   As to the second premise, if, as the defendant company appears to believe, the fact that an application to liquidate the defendant company has been made might be considered material by creditors in assessing the compromise proposal, I do not consider that information should be withheld from them.

8      Companies Act 1993, ss 228 and 229.

[20]   In addition, it would not be proper for the Court to grant the defendant company an extension of time when its application under r 31.11 has no prospect of success. As I noted earlier, in Fatweb Associate Judge Matthews granted an extension of time when there was a substantive issue put before the Court.9 That is not the case here.

[21]   The principles that apply to an application for a stay or to restrain advertising under r 31.11 are well known. The Court’s jurisdiction is exercised to prevent abuse of the Court’s process, the governing consideration being whether the proceeding suggests unfairness or undue pressure.10

[22]   Mr Bao candidly accepts that this proceeding is not an abuse of process and nor is there anything to suggest unfairness or undue pressure. Upon what is before me, the defendant company’s application to restrain advertising has no prospect of success.

[23]   For those reasons, I will not grant the defendant company an extension of time to make its application under r 31.11.

Result

[24]I make the following orders:

(a)The defendant company’s application for an extension of time to make an application under r 31.11 is dismissed.

(b)The interim restraint on advertising imposed by Associate Judge Lester is discharged.

9      Fatweb Ltd v Manaia One Ltd, above n 5.

10     Nemisis Holdings Ltd v North Harbour Industrial Holdings Ltd v North Harbour Industrial Holdings Ltd (1989) 1 PRNZ 379 at 385 (HC).

(c)The plaintiff is entitled to costs and reasonable disbursements on the application on a 2B basis as fixed by the Registrar.

O G Paulsen Associate Judge

Solicitors:

Anderson Lloyd, Christchurch Ford Sumner, Wellington