Taumarunui Liquor 2007 Limited v Beale HC Palmerston North CIV-2011-454-214
[2011] NZHC 1528
•22 September 2011
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
CIV-2011-454-214
UNDER the Companies Act 1993
IN THE MATTER OF a Statutory Demand
BETWEEN TAUMARUNUI LIQUOR 2007 LIMITED Applicant
ANDMICHAEL BERNARD BEALE Respondent
Hearing: 21 September 2011
(Heard at Palmerston North)
Counsel: P.J. Drummond - Counsel for Applicant
G.A. Paine - Counsel for Respondent
Judgment: 22 September 2011 at 3:00 PM
JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL
This judgment was delivered by Associate Judge Gendall on 22 September 2011 at
3.00 pm under r 11.5 of the High Court Rules.
Solicitors: Fergusson, Bhullar & Scott, Solicitors, PO Box 26, Taumarunui
Jacobs Florentine, Solicitors, PO Box 12015, Palmerston North
TAUMARUNUI LIQUOR 2007 LIMITED V MB BEALE HC PMN CIV-2011-454-214 22 September 2011
Introduction
[1] This is an application to set-aside a statutory demand dated 21 March 2011 issued by the respondent, Michael Bernard Beale (Mr Beale) against the applicant, Taumarunui Liquor 2007 Limited (Taumarunui Liquor) claiming the sum of
$24,401.72 described as being:
A debt owing for goods provided and unauthorised charges to his (Mr Beale’s) credit
card particulars whereof have already been supplied.
[2] The essential grounds advanced by Taumarunui Liquor in its application to set-aside the statutory demand are that first, there is a substantial dispute as to whether the debt claimed is owing and secondly, that Mr Beale has acted improperly in issuing the statutory demand when it is said he was aware there was a dispute as to the debt. These aspects are strongly contested by Mr Beale in his opposition to the present application.
[3] In addition, there is before me an application by Mr Beale for leave for the late filing of his Notice of Opposition to the present application and his affidavit in support. That leave application is itself opposed by Taumaranui Liquor. Given the outcome of the present application which will be clear later in this judgment, it is appropriate here that leave should be granted, and I so order.
[4] I now turn to consider the substantive application before the Court.
Background Facts
[5] Taumarunui Liquor is a supplier of liquor. For some years it has made supplies to a bar operating at Taupo known as the Townhouse, it says on 7 day credit terms. The Townhouse bar was owned and operated by a company known as The Townhouse Limited.
[6] Taumarunui Liquor’s original completed application form from The
Townhouse Limited for the supply of liquor was apparently completed in November
2009 by Mr Raymond Bishop (Roy) who was at that time a director and sole shareholder of the company and Bar Manager at the Townhouse bar.
[7] After accepting this application, from 1 December 2009, Taumarunui Liquor commenced supplying liquor to The Townhouse Limited for the operation of the Taupo bar.
[8] By 13 January 2010 it seems The Townhouse Limited’s account with Taumarunui Liquor had fallen into arrears. Although supplies of liquor still continued from Taumarunui Liquor, by August 2010 it apparently advised The Townhouse Limited that in future and as a condition of the continuation of the supply arrangement, Taumarunui Liquor would require cash on delivery and in addition, for each payment, it would require a contribution to be paid towards reducing the account arrears. It seems this arrangement was agreed to by The Townhouse Limited.
[9] Subsequently, Taumarunui Liquor states that on many occasions when Roy contacted it to order liquor, he would supply credit card details of his friends and associates for each of the payments on delivery. Taumarunui Liquor contends that this happened on at least four occasions and each time a contribution (usually between $100.00 and $300.00) was charged towards the arrears in accordance with the arrears arrangement made earlier.
[10] Mr Beale the respondent is an accountant practising in Palmerston North. He deposes that for many years he has acted as accountant for the family of Mr Raymond Bishop (Roy) who operated, the Townhouse bar and nightclub in Taupo through The Townhouse Limited his company.
[11] Mr Beale says further that from 14 September 2009 a company of which he is a director and shareholder, Prestige Wools Limited (Prestige Wools) made loan advances to Roy personally for the purpose of the Townhouse business which it seems was struggling financially.
[12] As to this, on 14 September 2009, $20,000.00 was advanced by Prestige Wools and this was followed on 26 August 2010 by a further advance of $12,000.00 and on 14 October 2010 further advances totalling $3,350.00. Loan Agreements were signed for these advances. They were each repayable over a short term with interest at 12% per annum.
[13] Mr Beale deposes that, despite his injections of cash, the Townhouse business was still struggling and in addition some difficulties with the liquor licence then apparently occurred. A renewal of the liquor licence for 6 months did take place but this apparently was on the basis that a new Bar Manager, Mr Beale’s wife Elsie, was employed to ensure the Townhouse operation complied with its obligations under the Sale of Liquor Act. At that time Mr Beale deposes that his wife Elsie, who held a General Managers Certificate, agreed to employ her son Pierre in effect as Bar Manager with Elsie being effectively the licensee of the Townhouse.
[14] Mr Beale then addresses the November/December 2010 situation at the bar
(at para 11 of his 3 May 2011 affidavit) and states that:
In an attempt to try and get the Christmas trade up and running, which was estimated to be substantial, I contacted some of the creditors of the Townhouse advising that I would take over managing the financial situation.
[15] Then around 20 November 2010 Mr Beale agreed that liquor which was to be purchased from Taumarunui Liquor by the Townhouse Limited was to be charged to his personal credit card account. This occurred it seems on at least eleven occasions between 20 November 2010 and 1 January 2011.
[16] A first issue arises here on all of this. On eight of these occasions, however, Taumarunui Liquor had included in the credit card payment debit, in addition to the amounts required for liquor supplied at the time, certain amounts as a contribution towards reducing the arrears owing by The Townhouse Limited. Taumarunui Liquor contends that these arrangements were with the full agreement of Mr Beale and The Townhouse Limited but Mr Beale now disputes that there was any agreement to include an arrears contribution on this credit card debt.
[17] A second issue arises. This relates to the return to Taumarunui Liquor in about February 2011 of alcohol to the value of some $7,705.00 (including GST) which had been supplied earlier to the Townhouse bar. It seems that this stock was effectively taken back by Taumarunui Liquor as a form of repossession following further financial difficulties encountered by the Townhouse bar.
[18] Mr Beale contends however that this returned liquor belonged to him and the
$7,705.00 is now owing to him personally for the agreed return.
[19] Rather confusingly however, on 15 February 2011 Mr Beale provided to Taumarunui Liquor a tax invoice in the name of Prestige Wools Limited (and bearing Prestige Wool’s GST number) addressed effectively to Taumarunui Liquor for the
$7,705.00. Mr Beale’s explanation of this now is that the tax invoice was simply
issued in error as the liquor was his and the refund was due to him.
[20] Turning now to the present statutory demand, as I have noted above, it was issued for the total sum of $24,401.72. As I understand the position this amount is effectively made up of the following sums:
(a) $16,696.72 representing the total amount for credit card debits made on Mr Beale’s credit card for liquor supplied by Taumarunui Liquor to the Townhouse bar between November 2010 and January 2011.
(b)$7,705.00 representing the value of the liquor returned from the Townhouse bar to Taumarunui Liquor (including GST) in about February 2011.
[21] Before me however, Mr Paine counsel for Mr Beale, conceded that the amount claimed in the statutory demand was over stated. He said that the
$16,696.72 claim should in fact only have been for $1,800.00. This represented six unauthorised $300.00 deductions lodged on Mr Beale’s credit account to reduce the Townhouse bars arrears. Mr Paine accepted before me that the other payments on Mr Beale’s credit card relating to liquor supplied at the time of the individual payment were in order.
[22] Mr Beale therefore seeks now to have the amount claimed in the statutory demand effectively amended to the total figure of $9,505.00 representing this
$1,800.00 plus the $7,705.00 due for liquor returned.
[23] It is this amount which is at issue here now. Mr Drummond for Taumarunui Liquor before me contended that all this $9,505.00 claim is still the subject of a substantial dispute and hence the statutory demand, even for this reduced amount, should be set aside.
Counsels’ Arguments and My Decision
[24] The present application is brought pursuant to s 290(4)(a) Companies Act
1993. This provides that the Court may grant an application to set-aside a statutory demand if it is satisfied that there is a substantial dispute whether or not the debt in question is owing or is due.
[25] The principles relating to s 290(4)(a) Companies Act 1993 are well settled. The authors of Brookers Insolvency Law & Practice provide the following succinct summary at para CA290.02:[1]
[1] Insolvency Law and Practice (online looseleaf ed, Brookers) at [CA290.02]; adopted in North Harbour Equine Hospital Limited v Little HC Auckland CIV-2006-404-7585, 19 February 2007 at [17]; Carpet Plus 2003 Ltd v A Team Flooring Specialist Ltd HC Auckland CIV-2008-404-4725, 19
CA290.02The general principles applicable to applications under s 290(4) are now well established. These principles, which can be discerned from cases such as United Homes (1988) Ltd v Workman [2001] 3 NZLR
447; (2001) 9 NZCLC 262,605 (CA); Fletcher Homes Ltd v Ellis
23/7/99, Master Faire, HC Auckland M471IM99; Forge Holdings Ltd v Kearney Finance (NZ) Ltd 20/6/95, Tipping J, HC Christchurch M149/95; Queen City Residential Ltd v Patterson Co- Partners Architects Ltd (No 2) (1995) 7 NZCLC 260,936; Rennie v Prospect Resources Ltd 3/11/95, Tipping J, HC Greymouth M14/95; Crown Transport Services Ltd v Waipa District Council 2/7/08, Associate Judge Faire, HC Hamilton CIV-2007-419-1711; and Taxi Trucks Ltd v Nicholson [1989] 2 NZLR 297; (1989) 1 PRNZ 390 (CA), are as follows:
(a) The applicant must show that there is arguably a genuine and substantial dispute as to the existence of the debt. The task for the Court is not to resolve the dispute but to determine whether there is a substantial dispute that the debt is due. The mere assertion that there is a genuine substantial dispute is not sufficient: Queen City Residential Ltd v Patterson Co-
Partners Architects Ltd (No 2) (1995) 7 NZCLC 260,936 (HC).
(b) The mere assertion that a dispute exists is not sufficient.
Material, short of proof, is required to support the claim that the debt is disputed.
(c) If such material is available, the dispute should normally be resolved other than by means of proceedings in the Companies Court.
(d) An applicant must establish that any counterclaim or cross demand is reasonably arguable in all the circumstances. The obligation is not to prove the actual claim. Such an obligation would amount to the dispute itself being tried on the application.
(e) It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise.
[26] As I have noted above, the present application is essentially based on the contention that there is a substantial dispute whether or not the debt even in its reduced form claimed by Mr Beale is owing or is due. There are two issues which arise concerning this balance $9,505.00 claimed by Mr Beale under the statutory demand.
A. T h e all eged u n au thorised d ed u ction of $1,800.00 f rom Mr B eale’s c re d it
card account.
[27] As I have noted, Mr Beale claims there were unauthorised deductions from his credit card totalling $1,800.00. He says these represent six contributions of
$300.00 each towards the arrears owed to Taumarunui Liquor by The Townhouse
Limited.
[28] Leaving aside issues as to the quantum of the $1,800.00 claim by Mr Beale here (given that the evidence of Mr Geoffrey Henderson for Taumarunui Liquor is that, taking into account the three $300.00 arrears payments agreed to by Mr Beale, as confirmed in his affidavit, there is only $1,312.72 by way of arrears deductions which were made from his credit card), in my view this issue is quickly dealt with.
[29] In his 4 May 2011 affidavit at para 12 Mr Beale states in relation to these credit card purchases:
I was purchasing liquor for and on behalf of the Townhouse nightclub to enable it to trade. I was not in the business of paying off the debts of that company and whilst I did not query the matter at that time I have never agreed in any way shape or form to payments for past purchases being debited to my credit card, apart from three deductions where Taumarunui Liquor rang and asked for approval and I agreed.
[30] What is undisputed is that Mr Beale did agree for three arrears payments each of $300.00 to be debited to his credit account, and it seems he raised no specific issue about the further arrears deductions at the time.
[31] And in response, the evidence from Mr Geoffrey Henderson on behalf of Taumarunui Liquor is that Mr Beale did in fact agree to the charging of the arrears contribution when new purchase orders were made. The arrangement throughout, confirmed with Mr Bishop and with Mr Beale’s “son” Pierre, according to Taumarunui Liquor was clearly that an arrears contribution of up to $300.00 was to be made on each new order.
[32] It also appears not to be in dispute that Mr Beale in fact received copies of invoices and statements from Taumarunui Liquor at the time showing these credit card payments including the arrears instalment deductions. It seems no issue was raised about this until well into 2011. In addition, the closeness of Mr Beale’s relationship with The Townhouse Limited (it is suggested that around the operative time he also took some shares in the company) and the close involvement of his family with the severely struggling business at the time must be relevant here. For all these reasons, in my view it is arguable on a genuine basis here that the $1,800.00 arrears amount Mr Beale now claims from Taumarunui Liquor is the subject of a substantial dispute and that this should not be resolved by the present proceedings in the Companies Court.
B. The $7,705.00 statutory demand claim for stock returned.
[33] Turning now to this aspect of Mr Beale’s statutory demand claim, in my view this amount too is clearly the subject of a genuine and substantial dispute. I reach this conclusion for several reasons.
[34] First, the returned liquor in question which was clearly collected by
Taumarunui Liquor from the Townhouse bar premises in Taupo, on its face and
despite Mr Beale’s protestations to the contrary, was the property of and owned by The Townhouse Limited. Clearly, it was that company which held the licence and operated the Townhouse bar throughout. No doubt it was this company which sold the liquor through its premises. The only account Taumarunui Liquor had for the Townhouse bar was with the company The Townhouse Limited (this having been opened and operated on since November 2009). In the absence of any compelling evidence to the contrary (of which there is none before me) as I see it the position is clear that the liquor was supplied to The Townhouse Limited.
[35] Secondly, there can be no doubt in my mind that Mr Beale (probably quite generously) provided financial assistance at the time to The Townhouse Limited initially by way of direct loans and then by making available his credit card facility for liquor purchases etc. As I see it, that arrangement however, is likely to be reflected as being simple loans advanced to The Townhouse Limited from Mr Beale and not in any way the direct purchase by him of liquor. Had he done so, then he would need to on-sell that liquor to The Townhouse Limited for its bar operation with consequent GST and other implications. This would make little sense, in my view, given Mr Beale’s occupation as an accountant.
[36] Thirdly, Mr Beale through his company Prestige Wools issued the 15
February 2011 tax invoice (in that company’s name and under its GST number) to Taumarunui Liquor for the $7,705.00 in question. Although according to Mr Paine Mr Beale subsequently claims that this was simply an error, Mr Beale is an accountant and would no doubt be well aware of the implications including GST questions regarding the issue of this invoice. In my view all this also does not support the contention Mr Beale is endeavouring to advance here.
[37] Fourthly and finally the Townhouse bar business it is not disputed was run throughout by the company, The Townhouse Limited. Mr Beale it is said ultimately held some shares in this company. It is simply inconceivable as I see it that Mr Beale has been able to show conclusively on the evidence before me that the returned liquor belonged to him and thus he is entitled to the $7,705.00 refund. Taumarunui Liquor has indicated that it is happy to pay this refund (or credit it
against any outstanding debit account) to the proper owner of the liquor, which it assumes to be The Townhouse Limited, once this is confirmed.
[38] For all these reasons I am satisfied that there is a genuine and substantial dispute also as to the existence of this $7,705.00 portion of the debt claimed by Mr Beale.
Conclusion
[39] For all the above reasons the present application before me succeeds. The statutory demand in question is now set-aside.
[40] Taumarunui Liquor having been successful in this application is entitled to an order for costs in the usual way. Costs are therefore ordered on this application in favour of the applicant, Taumarunui Liquor, on a category 2B basis together with disbursements as fixed by the Registrar.
‘Associate Judge D.I. Gendall’
January 2009 at [4] and Trinity Hills Retreat Ltd v Kroehl HC Nelson CIV-2010-442-101, 12 August
2010 at [5].
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