Provida Foods Ltd v Foodfirst Ltd - [2012] NZCA 326

IN THE COURT OF APPEAL OF NEW ZEALAND

CA132/2011
[2012] NZCA 326

BETWEEN PROVIDA FOODS LIMITED
Appellant

AND FOODFIRST LIMITED
Respondent

CA364/2011

AND BETWEEN FOODFIRST LIMITED
Appellant

AND PROVIDA FOODS LIMITED
Respondent

Hearing: 15 March 2012

Court: Glazebrook, Arnold and White JJ

Counsel: M D Branch and K I Bond for Appellant in CA132/2011 and Respondent in CA364/2011
D A Campbell and M L E Broad for Respondent in CA132/2011 and Appellant in CA364/2011

Judgment: 25 July 2012 at 3.00pm

JUDGMENT OF THE COURT

A The appeal in CA132/2011 is dismissed.

B The appeal in CA364/2011 is allowed.

CThe order of Associate Judge Faire of 18 May 2011 at [123](c) of his judgment of that date is set aside.
DThe Registrar of the High Court at Auckland is ordered to pay the sum of $363,633.67 together with interest to Foodfirst Limited.
EProvida Foods Limited is to pay the costs of Foodfirst Limited for a standard appeal on a band A basis together with usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by White J)

Table of Contents

Para No
Introduction  [1]
Provida’s solvency  [28]
Provida’s counterclaims  [32]

The “best endeavours” claim [33]
The “oppression” claim [55]

The setting aside conditions  [73]
Provida’s agreement to disbursement  [82]
Result  [86]

Introduction

Provida Foods Ltd (Provida) was a member of a food distribution co-operative run by Foodfirst Ltd (Foodfirst). In that capacity Provida incurred a debt to Foodfirst of $977,852.13 for food products purchased from Foodfirst. The debt was incurred shortly before Provida resigned as a member of the cooperative on 31 October 2009 and became a competitor of Foodfirst.
Provida was also, and remains, a shareholder of Foodfirst, which is incorporated under the Companies Act 1993 (the Act) and not registered as a co-operative company under the Co-operative Companies Act 1956.
On 4 November 2009 Foodfirst served a statutory demand on Provida under s 289 of the Act requiring Provida to pay the debt of $977,852.13.
On 16 November 2009 Provida applied to the High Court under s 290(4) of the Act for an order setting aside the statutory demand on the grounds that:
(a)it was solvent and able to pay the debt; and/or
(b)there was a substantial dispute and/or set-off in relation to the debt; and/or
(c)the demand ought to be set aside on other grounds.
In an interim judgment delivered on 29 June 2010 Associate Judge Faire ordered Provida to pay the sum of $977,852.13 into court and Foodfirst to file and serve an affidavit of documents providing particular discovery.[1]
[1] Provida Foods Ltd v Foodfirst Ltd HC Hamilton CIV-2009-419-1581, 29 June 2010.
On 9 July 2010 Provida paid the full amount of the debt into Court.
On 30 September 2010 Provida issued a separate proceeding in the High Court against Foodfirst containing four causes of action (Provida’s counterclaim proceeding).
Central to Provida’s statement of claim are allegations relating to its Retained Discount Account (RDA). We explain the RDA in more detail later.[2] For present purposes it is sufficient to…

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: [2012] NZCA 326
Decision Date: 25 July 2012

CaseChat Overview and Summary

The Court of Appeal of New Zealand heard two appeals involving Provida Foods Limited (Provida) and Foodfirst Limited (Foodfirst). Provida was a member of Foodfirst's food distribution cooperative, as well as a shareholder. Provida incurred a debt to Foodfirst of $977,852.13 for food products purchased from Foodfirst. Provida resigned as a member of the cooperative and became a competitor of Foodfirst on 31 October 2009. On 4 November 2009, Foodfirst served a statutory demand on Provida under s 289 of the Companies Act 1993 (the Act) requiring Provida to pay the debt. Provida applied to the High Court under s 290(4) of the Act for an order setting aside the statutory demand on the grounds that it was solvent and able to pay the debt, or that there was a substantial dispute and/or set-off in relation to the debt. Associate Judge Faire set aside the statutory demand subject to conditions, including that the Registrar of the High Court pay a sum of $517,303.13 plus interest to Foodfirst, and hold the balance of $416,983 until certain conditions were met. Provida and Foodfirst appealed to the Court of Appeal. Provida's appeal was dismissed, while Foodfirst's appeal was allowed. The Court found that Provida's statutory demand should not be set aside solely on the ground that it was solvent and had paid the debt into Court. The Court also found that Provida's counterclaims, including the "best endeavours" claim and the claim based on "oppression" under s 174 of the Act, would not survive a strike-out application. The Court further held that the conditions imposed by the Associate Judge on the payment out of the balance of the funds held in Court were not authorized. The Registrar of the High Court at Auckland was ordered to pay the sum of $363,633.67 together with interest to Foodfirst. Foodfirst was to pay the costs of Provida for a standard appeal on a band A basis together with usual disbursements.

Orders