Sharma v Craft Construction Limited (in liquidation) - [2022] NZHC 3600

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-118

[2022] NZHC 3600

BETWEEN
SUJENDRA SHARMA

Plaintiff

AND

CRAFT CONSTRUCTION LIMITED (IN LIQUIDATION)

First Defendant

AND

BEN HOLDICH

Second Defendant

Hearing: 20 June 2022

Appearances:

F B Q Collins for Plaintiff K K Kommu for Defendants

Judgment:

22 December 2022

JUDGMENT OF PAUL DAVISON J

This judgment was delivered by me on 22 December 2022 at 11am pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:
Gibson Sheat, Wellington Glaister Ennor, Auckland

SHARMA v CRAFT CONSTRUCTION LTD (IN LIQ) [2022] NZHC 3600 [22 December 2022]

Introduction

[1] Sujendra Sharma (the plaintiff), applies pursuant to s 248(1)(c) of the Companies Act 1993 for leave to commence proceedings against Craft Construction Limited (In Liquidation) (CCL),1 in which it seeks relief by way of an order for an inquiry into the value of the construction work and services provided pursuant to a construction contract.

[2] CCL opposes the application. The liquidators allege that in accordance with an adjudicator’s determination dated 12 October 2021, the plaintiff owes CCL
$140,023.38 together with interest and costs.2 They say that the plaintiff’s proposed
proceeding and claim is not sustainable and the Court should not grant leave.

Background

[3] The plaintiff is the owner of a residential property in Auckland. In December 2019 he obtained a building consent for the construction of a planned extension to the house which would comprise a three bay car garage, a dining room, a prayer room, two bathrooms and a sleep-out (the extension project).

[4] In early 2020 the plaintiff engaged a construction company, Dynamic Renovations Limited (Dynamic) to build the planned extension. However, having commenced the work Dynamic left the site at a point where the foundations were incomplete. The plaintiff then entered into negotiations with CCL to take over the construction and complete the project. The negotiations on behalf of CCL were undertaken by it director and manager, Mr Ben Holdich (the second defendant).

[5] On 11 April 2020 the plaintiff and CCL entered into a written building contract in respect of the extension project. The written contract was a “Cost and Margin Building Contract” in the standard form of the New Zealand Certified Builders Association (the contract). The contract provided for an estimated commencement date for the building work of 1 May 2020, and an expected completion date of

1 CCL was placed into liquidation on 19 July 2021, pursuant to a shareholders special resolution passed by the second defendant, Mr Ben Holdich.
2 As at 4 April 2022 interest totalled $58,849.56.

1 December 2020. The contract also stated that the builder had provided an estimate of the “Final Contract Price” of $362,000. The contract further stated that the estimated cost was not intended to be a guaranteed fixed price for the building work.

[6] The plaintiff says that CCL commenced construction of the extension project on or about 12 May 2020. In late May and early…

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: [2022] NZHC 3600
Decision Date: 22 December 2022

CaseChat Overview and Summary

The plaintiff, Sujendra Sharma, applied to the High Court for leave to commence proceedings against Craft Construction Limited (CCL) (in liquidation) and Mr Ben Holdich, the director and manager of CCL, to recover sums he had overpaid for construction work undertaken by CCL on the plaintiff’s property. CCL opposed the application on the basis that the plaintiff had already been found liable to pay the liquidators of CCL in an adjudication determination dated 12 October 2021. The court was required to determine whether the plaintiff should be granted leave to commence proceedings against CCL and Mr Holdich in circumstances where there had already been two adjudications which had determined that the plaintiff owed money to CCL. The court had to consider the effect of section 248(1)(c) of the Companies Act 1993, the nature of the dispute between the parties, and the factors relevant to the exercise of the court’s discretion when deciding whether to permit the commencement or continuation of proceedings against a company in liquidation. The court found that the adjudication decisions did not provide a complete and reliable basis on which to finally determine the merits of the plaintiff’s claim or dispose of his claim as being clearly unsustainable. It was in the interests of justice that the merits of his claims be considered by the court and the question of whether or not he was an unsecured creditor of CCL be finally determined on the basis of evidence including expert opinion evidence regarding the value of the work undertaken by CCL and its entitlements under the construction contract. The court granted the plaintiff leave to commence the proceeding. The plaintiff having succeeded in his application was entitled to an award of costs.

Orders