Titan Earthmovers Limited v PC5 Projects Limited - [2018] NZHC 2125

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-1104

[2018] NZHC 2125

BETWEEN
TITAN EARTHMOVERS LIMITED

Plaintiff

AND

PC5 PROJECTS LIMITED

Defendant

Hearing: 3 October 2018

Appearances:

A M Swan for the Plaintiff

R P Conner for the Defendant

Judgment:

3 October 2018

ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL

Solicitors:
Auckland Property Legal Services, Auckland, for the Plaintiff Hazelton Law (Rachel Conner), Wellington, for the Defendant

Copy for:
Andrew Swan, Auckland, for the Plaintiff

TITAN EARTHMOVERS LIMITED v PC5 PROJECTS LIMITED [2018] NZHC 2125 [3 October 2018]

[1] The plaintiff respondent, Titan Earthmovers Ltd, has begun a liquidation proceeding. It says that it is a creditor of PC5 Projects Ltd for removing demolition waste and soil at a property in Birkdale, where PC5 Projects Ltd was head contractor on a development. Titan Earthmovers Ltd issued two invoices: one for $24,038.45, the other for $9,411.31, a total of $33,449.76. It served a statutory demand on the registered office of PC5 Projects Ltd on 6 April 2018. PC5 Projects Ltd did not comply with the demand. Titan began this proceeding on 8 June 2018. In correspondence before the proceeding was started PC5 Projects Ltd disputed liability.

[2] PC5 Projects Ltd applies under r 31.11 of the High Court Rules to restrain advertising and to stay the liquidation proceeding. It contests its liability for the debt claimed by Titan Earthmovers Ltd. Counsel are agreed on the principles on which the court considers applications for stay under r 31.11. Wallace J stated them in Nemesis Holdings Ltd v North Harbour Industrial Holdings Ltd:1
[a] The court has an inherent jurisdiction to stay winding up proceedings where the debt upon which such proceedings are founded is the subject of genuine dispute. In those circumstances, a plaintiff cannot show it has the status of a creditor or that there has been neglect by the company to pay.

[b] The jurisdiction is an inherent one to prevent abuse of process. There is no inflexible rule.

[c] The governing consideration is whether the proceedings suggest unfairness or undue pressure.

[d] It is a serious matter to stay winding up proceedings, so the decision to do so is never made lightly. The onus is on the applicant and it is normally necessary to demonstrate “something more” than the balance of convenience considerations which are usually considered on an application for interim injunction. If the defendant company has had an opportunity to file appropriate affidavits, such defendant is required to establish a strong prima facie case of the existence of a genuine dispute on substantial grounds, or show that there are clear and persuasive grounds for a stay.

[3] That decision was made in 1989 before the current Companies Act. Nowadays a company served with a statutory demand has the option of applying to set aside the demand under s 290 Companies Act. One of the grounds for setting aside a statutory demand is that the…

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: [2018] NZHC 2125
Decision Date: 3 October 2018

CaseChat Overview and Summary

Titan Earthmovers Limited commenced liquidation proceedings against PC5 Projects Limited after the latter failed to comply with a statutory demand. Titan Earthmovers issued two invoices for demolition waste and soil removal services at a Birkdale property, where PC5 Projects was the head contractor. Titan served a statutory demand on 6 April 2018, which PC5 Projects failed to comply with, prompting Titan to initiate the liquidation proceeding on 8 June 2018. PC5 Projects applied to restrain advertising and to stay the liquidation proceeding, contesting its liability for the debt claimed by Titan.

The primary legal issue was whether PC5 Projects had genuine grounds to dispute its liability for the debt claimed by Titan Earthmovers. The court considered the inherent jurisdiction to stay winding up proceedings where the debt was the subject of a genuine dispute. The test involved determining whether PC5 Projects had a strong prima facie case of a genuine dispute or clear and persuasive grounds for a stay. Additionally, the court examined the nature of the contractual relationship between Titan and PC5 Projects, specifically whether PC5 Projects had a contractual obligation to pay Titan directly or whether NiuBro Multi Services Ltd acted as a subcontractor.

The court found that the evidence provided by Mrs Parkes, a director of PC5 Projects, was hearsay and not admissible under the Evidence Act 2006. The court relied on text messages from PC5 Projects indicating that invoices should be sent directly to them and that they were sorting out the payment of the first bill. These messages, along with the lack of evidence from PC5 Projects, led the court to conclude that there were no genuine grounds for disputing the liability to Titan Earthmovers. Additionally, the court noted that the amount claimed in the statutory demand and the statement of claim included costs that were not due at the time of the statutory demand.

The court dismissed the application for a stay and to restrain advertising, allowing Titan Earthmovers to advertise the application. The proceeding was to be called in the liquidation list on 1 November 2018 at 10.00 am. Titan Earthmovers was granted costs on the application, with a deduction of $500 due to the excessive amount claimed in the statement of claim and the statutory demand.

Orders