The Astrolabe Community Trust v Ngai Te Hapu Incorporated

[2019] NZHC 159

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE

CIV-2018-470-114

[2019] NZHC 159

IN THE MATTER

of the Incorporated Societies Act 1908

BETWEEN

THE ASTROLABE COMMUNITY TRUST

Plaintiff

AND

NGAI TE HAPU INCORPORATED

Defendant

Hearing:

14 February 2019

Appearances:

M Casey QC for the Plaintiff

No appearance by or on behalf of the Defendant

Judgment:

14 February 2019

ORAL JUDGMENT OF GORDON J

Solicitors:           Lowndes, Auckland

Counsel:            M Casey QC, Auckland

THE ASTROLABE COMMUNITY TRUST v NGAI TE HAPU INCORPORATED [2019] NZHC 159 [14

February 2019]

Introduction

[1]                  The plaintiff, The Astrolabe Community Trust (the trust), seeks an order under ss 25 and 26 of the Incorporated Societies Act 1908 (the Act) placing the defendant, Ngai Te Hapu Incorporated (the society), into liquidation for non-payment of a costs judgment.

Background

The debt

[2]The society was incorporated under the Act in July 2013.

[3]                  On 1 June 2018, the High Court made an order for costs in favour of the trust in the sum of $11,150 following judgment in a proceeding between the trust and the society. The sealed costs judgment was served at the society’s address for service on 5 June 2018.

[4]                  On 22 June 2018, a statutory demand (the demand) was served at the registered office of the society requiring it to pay the judgment sum of $11,150 or give a charge over its property to secure the debt. The society has not complied with the demand.

[5]                  On 5 July 2018, a co-debtor paid $9,000 of the original judgment sum, leaving the sum of $2,150 due and owing by the society to the trust.

[6]An updating affidavit, sworn 14 February 2019, deposes that the amount of

$2,150 is still outstanding and has not been paid.

Procedure

[7]                  On 17 July 2018, the present proceeding to wind up the society was commenced. Service was effected on 14 August 2018.

[8]                  On 10 September 2018, a member of the society (Mr Mikaere) appeared and provided contact details to which the proceedings were sent as part of the re-service. Despite this, the society has not taken any steps: there has been no statement of defence

or other document filed, and there was no appearance at the second mentions hearing on 23 October 2018.

[9]Consequently, the matter was set down for formal proof.

Law

[10]Section 25 of the Act provides:

25       High Court may put society into liquidation

A society may be put into liquidation by the appointment by the High Court as liquidator of a named person or of an Official Assignee for a named district under the following circumstances, that is to say:

…

(c)       if the society is unable to pay its debts; or

…

(e)if the High Court or a Judge thereof is of the opinion that it is just and equitable that the society should be put into liquidation.

[11]              Section 26 of the Act provides that an application to appoint a liquidator can be made by a creditor of a society.

[12]              The section also provides that Parts 16 and 17 of the Companies Act 1993 (which relate to company liquidations) shall apply, as if the application were made under s 241(2)(c) of the Companies Act, with such modifications as may be necessary.

[13]              The grounds under s 25 of the Act are similar to the grounds for liquidation of a company under s 241(4) of the Companies Act. Like s 25 of the Act, s 241 of the Companies Act provides that a company may be placed in liquidation on the ground that it is unable to pay its debts.   Therefore, the cases and commentaries regarding   s 241(4) are of some assistance.1

1      New Zealand Greyhound Racing Assoc Inc v Manawatu Greyhound Racing Club Inc HC Palmerston North CIV-2011-454-529, 9 December 2011 at [23].

[14]              Section 287 of the Companies Act provides that, subject to s 288, a company (in this case an incorporated society) is presumed to be unable to pay its debts if the company has failed to comply with a statutory demand.

[15]              Section 288(1) of the Companies Act requires that, on an application for an order that a company be put into liquidation, evidence of a failure to comply with a statutory demand is not admissible as evidence that a company is unable to pay its debts unless the application is made within 30 working days after the last date for compliance with the demand.

[16]              Section 289 of the Companies Act sets out what constitutes a statutory demand. It must be in respect of a debt that is due and is not less than the prescribed amount; it must be in writing and served on the company (here the incorporated society); it must require the company (incorporated society) within 15 working days of service of the notice to pay the debt or enter into a compromise or compound or secure it to the satisfaction of the creditor.

[17]              The “prescribed amount” referred to in s 289 is $1,000 (refer reg 5 of the Companies Act 1993 Liquidation Regulations 1994).

Discussion

[18]              Mr Casey QC for the trust submits, and I accept, that the society is unable to pay its debts for the following reasons:

(a)The demand, was in proper form and followed the requirements  of    s 289.

(b)The demand was served on the society on 22 June 2018. The society had 15 working days from that date to comply. The trust’s application to place the society in liquidation (by way of statement of claim) was filed on 23 July 2018. This was well within the 30 day period.

(c)The debt due by the society at the time the demand was served and upon which the demand was based, was $11,150. This was not less than the “prescribed amount”.

(d)The society is indebted to the trust in the sum of $2,150 being the balance currently due in respect of the costs judgment referred to in [3] above.

(e)The society has failed to comply with the demand.

[19]              Although the foregoing is sufficient to establish that the society is unable to pay its debts, I note that, pursuant to s 288(2) of the Companies Act, inability to pay a debt can be proved by means other than failure to comply with a statutory demand. In that regard, in a written note to the Registrar, dated 11 February 2019, on the letterhead of the Society, Mr Mikaere asserted, on behalf of the society, that the society has no assets apart from a few cents in the bank.

[20]              Having determined that the defendant society is unable to pay its debts, it is unnecessary to consider an alternative ground under s 25(e) of whether the liquidation is just and equitable in the circumstances.

Result

[21]I therefore order that:

(a)The society be put into liquidation by the Court pursuant to ss 25 and 26 of the Act; and

(b)The Official Assignee at Hamilton is appointed liquidator of the society.

Costs

[22]              The trust seeks an order for costs whether or not they are recoverable in the liquidation. Mr Casey submits that Category 1, Band B should apply.

[23]              I accept that it was necessary for counsel to address the issues associated with the winding up of an incorporated society at this and other stages of the proceeding. I therefore accept that Band B is appropriate.

[24]I award costs of $2,368.00 and disbursements of $1,180.00 (a total of

$3,548.00) in accordance with the schedule submitted by counsel in favour of the trust against the society.

Gordon J