The Olive Press Limited v Matapiro Olives (2008) Limited
[2018] NZHC 3144
•30 November 2018
IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY
I TE KŌTI MATUA O AOTEAROA NGĀMOTU ROHE
CIV-2018-443-56
[2018] NZHC 3144
UNDER part XIV of the Companies Act 1993 IN THE MATTER
of an application to put a company into liquidation
BETWEEN
THE OLIVE PRESS LIMITED
Plaintiff
AND
MATAPIRO OLIVES (2008) LIMITED
Defendant
Hearing: 30 November 2018 Appearances:
N J G Smith for plaintiff
T R Wano and N Croft for defendant
Judgment:
30 November 2018
ORAL JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
[1] On 20 August 2018 the plaintiff, The Olive Press Ltd, served a statutory demand pursuant to s 289 of the Companies Act 1993 on the defendant, Matapiro Olives (2008) Ltd. The plaintiff is in the business of processing olives. The defendant is an olive grower. The plaintiff’s claim against the defendant to which its demand related concerns invoices rendered by it for the processing of olives between May and July 2018.
[2] The defendant did not respond to the service of the plaintiff’s demand, whereupon the plaintiff commenced this winding up proceeding pursuant to s 241(2)(iv) of the Act. The ground for its application is the defendant’s deemed insolvency pursuant to s 287(a).
THE OLIVE PRESS LIMITED v MATAPIRO OLIVES (2008) LIMITED [2018] NZHC 3144
[30 November 2018]
[3] It is well settled that a company that has not taken any steps following service of a demand may nevertheless defend a subsequent application for an order winding it up.
[4] There is some history to this matter. On behalf of the plaintiff, Mr Smith submitted in strong terms that the defendant has, at every stage, sought to delay paying the money it owes the plaintiff. Whatever the defendant’s motivation, it is not difficult to sympathise with the obvious frustration felt by the plaintiff, and, seemingly, its advisers.
[5] However, no useful purpose would be served by recounting the background in detail.
[6] By the time of the substantive hearing of the plaintiff’s application today, the issues were reduced to a fairly narrow compass.
[7] The plaintiff’s demand concerned invoices totalling $87,018.28. Since it was served, the defendant has paid all but $23,197.14. This amount, it is said, is the subject of a genuine dispute. The plaintiff’s case is that it is entitled to rely on the presumption of insolvency arising from the defendant’s failure to respond to its demand as a basis for seeking an order winding it up.
[8]The defendant says:
(a)first, that the $23,197.14 which it has not paid is not owed by it; and
(b)second, it can establish, and as Mr Smith submits the burden is on the defendant in these circumstances to do so, that it is solvent as that term is used in s 4 of the Act.
[9] Submissions were made on behalf of both parties as to whether the first of those arguments was available to the defendant. In my view, it is. Pursuant to s 241(4)(a) of the Act, the Court may make an order winding up a company where it is satisfied that it is unable to pay its debts (or is insolvent in a cash-flow sense). If the Court is satisfied that the defendant has an argument that the amount claimed is
not due, it may exercise its discretion in favour of the defendant by refusing a winding up order, leaving the plaintiff to pursue its claim against the defendant through the usual channels rather than by proceedings under pt 16 of the Act for its liquidation which is designed primarily to deal with situations where there is no doubt about the claim.
[10] That brings me to what appears to me to be the key issue here, whether the defendant is able to establish that it has a prima facie defence to the plaintiff’s claim for the unpaid proportion of these invoices.
[11] It is common ground that the $23,197.14 which remains unpaid is the difference between invoices originally raised by the plaintiff and replacement invoices raised when the original invoices were not paid. The plaintiff’s case is that the original invoices were calculated at a discounted rate to which the defendant was only entitled so long as it paid them when they were due, that the defendant did not do so and that at that stage it was entitled to raise the replacement invoices at the non-discounted or “default” rate. The defendant’s case is that the contractual arrangements entitled it to the discounted rate even if it did not pay them when they fell due.
[12] Mr Smith for the plaintiff and Mr Wano for the defendant both submit that the parties’ contractual arrangements were set out in the plaintiff’s terms of trade and a series of email exchanges between them concluding on 28 April 2017. They agree that the plaintiff’s standard terms were a processing rate of 50c per kilogram plus an administrative charge of $45 per batch, and that the plaintiffs offered the defendant a discounted rate of 47c per kilogram with no administrative charge. They agree that, as a further inducement, the plaintiff then offered the defendant a more heavily discounted rate of 45c per kilogram which offer was accepted.
[13] Where Mr Smith and Mr Wano part company, however, is in relation to the effect of the email exchanges and in particular whether the plaintiff’s final offer of 45c per kilogram was contingent upon the defendant paying the invoices when they fell due. The plaintiff’s Mr Ron Lingard recorded that the rates to apply were:
Rates and charges
·Default rates [ie] 50c per kg for 50+ tonnes, as per 2018 handbook.
·Contract flat rate of 47c per kg for 2018 season, subject to above conditions.
·Admin charge of $45.00 per batch waived, subject to above conditions.
·Other charges as per 2018 handbook.
·Any rate/charge increases for 2019/2020 seasons not to exceed respective CPI annual adjustments in March each year.
[14]Later in the same email Mr Lindgard said:
In all other respects, TOP’s Terms of Trade will apply – see page 13 in our 2018 handbook, as attached.
[15] Then in a later email on 27 April 2017, which appears to have followed a telephone discussion between Mr Lingard and Mr Arthur, the former said:
We are prepared to amend our proposal below as follows:
·Contract flat rate of 45c per kg for 2-year term (until end of 2019 season).
…
[16] The dispositive issue is whether it was a condition of the parties’ arrangements that that rate of 45c per kilogram (as it became) was contingent upon the defendant paying all invoices on time, as the plaintiff contends, or whether it was free of any such contingency, as is contended by the defendant.
[17] In my judgment, the contention advanced on the defendant’s behalf is untenable. The terms of trade set out in the plaintiff’s “Olive Processing & Oil Production Handbook for 2018” are comprehensive. They are structured so as to incentivise the company’s customers to pay its invoices on time by the mechanism of a default rate and a discounted rate. When a discounted rate is offered the customer is obliged to comply with a series of requirements or the default rate will apply. These include payments of invoices when they fall due. The default rate, though higher than the discounted rate offered by the plaintiff to the defendant in this case, could scarcely be regarded as usurious. In my view, taking those terms of trade together with the
correspondence between the parties by which they negotiated an arrangement in this case, it could not be plainer that the plaintiff’s offer contained its email of 27 April 2018 was an offer which modified the discounted rate without altering the other terms of the arrangement as I have described them.
[18] The defendant does not – and nor could it in the circumstances – contend that it complied with the obligation to pay invoices by their due date. It follows that, upon the defendant failing to do so, the plaintiff was entitled to do as it did and issue new invoices at the default rate, and thus that the difference between the original discounted invoices and the reissued invoices, the $23,197.14 in issue is owed to the plaintiff by the defendant.
[19] Prima facie then, the plaintiff is entitled to the order it seeks winding up the defendant.
[20] However, the Court has a residual discretion as to whether to make an order to wind up a company, which is always a series matter, and more especially in the case of a company which appears to be a viable ongoing concern.
[21] Relevant considerations include the financial position of the company, and whether other creditors are known to exist.
[22] So far as the company’s financial position is concerned, there is evidence in relation to this. Neither Mr Bruce McCallum who gives evidence as to the company’s financial position from the plaintiff’s perspective, nor Mr Macy who gives such evidence for the defendant, are entitled to be regarded as independent expert witnesses. Mr McCallum is the major shareholder of the plaintiff company, and Mr Macy is a partner in a firm which acts for the defendant and has at least one partner with an interest in the company. Nevertheless, I accept that they have both made an attempt to provide an objective analysis. The impression I have from their evidence is that the defendant’s financial position is marginal. Its assets and liabilities are fairly evenly balanced. If it is able to meet its debts as they fall due, then it is not able to do with ease. As I say, without reaching any final conclusions as to this, I am inclined to think that the defendant company’s solvency – as defined in s 4 of the Act – is marginal at best.
[23] Having said that, the plaintiff aside, no other creditors have been concerned enough to involve themselves in this proceeding, and I accept that the defendant’s continued operation is not putting others at risk.
[24] In all the circumstances, my judgment is that the most appropriate course in this case is to make an order winding the defendant company up pursuant to s 241(4) of the Act, but staying that order for a short time in order to give the defendant a final opportunity to meet its obligations to the plaintiff.
[25] As to costs, having heard from counsel as to these, I am satisfied that there is no reason for departing from the general rule that costs follow the event so that the plaintiff is entitled to its costs on a 2B basis together with disbursements. In summary then:
(a)I make an order pursuant to s 241(4)(a) of the Companies Act 1993 winding up the defendant company, Matapiro Olives (2008) Ltd, and appointing Colin David Owens and David Stuart Vance as liquidators on the terms set out in their consent to act dated 12 October 2018;
(b)I award costs to the plaintiff on a 2B basis together with disbursements which may be fixed by the Registrar;
(c)I stay the coming into force of that order for a period of approximately 10 working days until 4.00 pm on Friday 14 December 2018 and I direct that if, prior to that time and date, the defendant has paid both the sum of $23,197.14 together with the costs payable by it to the plaintiff on a 2B basis and disbursements, the order for its winding up will not come into force.
Associate Judge Johnston
Solicitors:
MinterEllisonRuddWatts, Wellington Govett Quilliam, New Plymouth
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