Titan Earthmovers Limited v PC5 Projects Limited
[2018] NZHC 2125
•3 October 2018
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 debt is subject to a substantial dispute. I do not see any significant
1 Nemesis Holdings Ltd v North Harbour Industrial Holdings Ltd (1989) 1 PRNZ 379 (HC) at 385.
difference between the test stated by Wallace J in Nemesis and the test for setting aside a statutory demand under s 290(4)(a) on the grounds of substantial dispute.
[4] In this case PC5 Projects Ltd did not apply to set aside the statutory demand. Mrs Parkes, a director of PC5 Projects Ltd, explains that she was not informed of the service of the statutory demand by those at the company’s registered office, a chartered accountant’s office. The failure to apply to set aside under s 290 of the Companies Act does not stand in the way of PC5 Projects Ltd applying for a stay of the proceeding.
[5] In its application PC5 Projects Ltd alleges that it is solvent and able to pay its debts, but it has not offered any evidence in support of that. It is in any event not a stand-alone ground to stay the proceeding.2 Instead, the issue in this case turns on whether PC5 Projects Ltd has genuine grounds to dispute the indebtedness alleged by Titan Earthmovers Ltd.
[6] PC5 Projects Ltd was the head contractor for a development on two properties at Chippendale Crescent, Birkdale, Auckland. The developer was Garelja Trust Ltd. That work included the demolition and removal of two homes on the site, and part of that work involved clearing the site, removing spoil and disposing of grass and topsoil.
[7] Mrs Parkes says that PC5 Projects Ltd engaged NiuBro Multi Services Ltd to complete that work. She says that the contact person at NiuBro was Mr Sitanilei Niupalau. There was no written contract with NiuBro. Mrs Parkes says that PC5 had worked with NiuBro on various projects for nearly a year. Each time they met them on site and briefed them for the works. This job was simply their next project.
[8] Mrs Parkes’ affidavit goes on to describe arrangements made for the Chippendale Crescent job. Mrs Parkes does not however say that she dealt directly with NiuBro in connection with that job. Her evidence is that PC5 Projects Ltd engaged NiuBro as a subcontractor, and that NiuBro in turn sub-sub-contracted part of the work to Titan Earthmovers Ltd. She alleges that NiuBro did this without PC5’s direct approval. Again, she has no direct knowledge of this, and does not state in her evidence any dealings she had directly with NiuBro or Titan Earthmovers Ltd.
2 AMC Construction Ltd v Frews Contracting Ltd [2008] NZCA 389, (2008) 19 PRNZ 13.
She does however accept that a lot of the correspondence relating to the work was by text message between Mr Niupalau of NiuBro; Perry, PC5’s project manager; and her husband, Tony, who was involved on site.
[9] Mrs Parkes has attached to her evidence copies of quotations for plant and tipping rates sent by Mr Williams of Titan Earthmovers Ltd to Mr Niupalau. She says that they were then forwarded on to PC5. She maintains that PC5 Projects Ltd did not at any time agree to pay Titan directly for any work carried out at the property. She accepts that her husband, Tony, was asked for invoice details for a tipping station for waste disposal, and provided those details as requested. Her position remains that although they received invoices directly from Titan demanding payment, Titan was never entitled to look to PC5 Projects Ltd for payment. Instead Titan ought to have invoiced NiuBro, and NiuBro in turn should have invoiced PC5 Projects Ltd.
[10] The case for Titan Earthmovers Ltd is that they carried out their work under contract with PC5 Projects Ltd and not as sub-sub-contractor to NiuBro. It relies on an affidavit of its director, Mr Williams, and an affidavit by Mr Niupalau of NiuBro.
[11] Mr Williams, director of Titan Earthmovers Ltd, says that Mr Niupalau contacted him on 15 February 2018 about carrying out the work. On 21 February 2018 he arranged to hire a digger from Pronto Hire Ltd. At Mr Niupalau’s request, he contacted Mr Tony Parkes of PC5 Projects Ltd to arrange payment for the costs of the digger to come directly from PC5 Projects Ltd to Pronto Hire Ltd. Mr Williams says that Mr Parkes arranged those payments for the digger directly to Pronto Hire Ltd. Mr Williams says that he also arranged for the demolition, waste and soil-tipping sites with “Green Gorilla” for PC5, and again Mr Parkes arranged payment of a deposit directly with Green Gorilla. He confirms that he discussed payment rates with Mr Niupalau. He says that in early March 2018 Mr Niupalau directed him to invoice PC5 Projects Ltd for the work. Mr Williams says that he asked Mr Parkes where to send the invoices. He has attached to his affidavit copies of text messages sent by Mr Parkes. Significantly, this one says:
Hi Robbie. Invoices to [email protected]. [email protected]. Please send to accounts with copy to me. Thanks Robbie. Cheers, Tony.
[12] The invoices were dated 2 March and 9 March 2018 respectively. Mr Williams confirms that the work was carried out in early March 2018. He says that Mr Niupalau was hardly present when he was working on the site, but Mr Parkes and an employee, Perry, visited the site a number of times to check progress. After he sent his invoices, Perry called a stop to the work. He chased up about payment. He received a text message from Perry on 21 March 2018 which said:
I have already spoken to Tony, Robbie. We are sorting out your first Bill.
Notwithstanding this indication that the bill was being sorted out, no payment was made.
[13] Mr Niupalau’s evidence is consistent with Mr Williams’s. He explains that PC5 Projects Ltd asked him to carry out the work in early February 2018. He says that NiuBro was not able to carry out the work because of other commitments. He tried to obtain another contractor, but PC5 Projects Ltd was not happy with that company. He then contacted Titan Earthmovers Ltd to complete the work. He said that he advised Perry that Titan would do the work. He says that Perry told him that PC5 Projects Ltd would pay Titan directly, and that Titan was to send the invoices for the work directly to PC5 Projects Ltd. He told Mr Williams accordingly. He says that his involvement with Titan and PC5 Projects Ltd was purely one of introduction. He says that NiuBro never contracted with PC5 Projects Ltd to carry out the work. The contract was always directly between Titan and PC5 Projects Ltd.
[14] There is no evidence in response by PC5 Projects Ltd. It asserts that it was never in a contractual relationship with Titan Earthmovers Ltd, and that NiuBro was between the two as subcontractor with Titan as sub-subcontractor. Mr Niupalau’s evidence characterises the arrangements as NiuBro acting as an agent that helped bring the parties together.
[15] I am unable to place much weight, if any at all, on the evidence of Mrs Parkes on this question whether the arrangement was one where NiuBro was merely an agent that brought the parties together or there was a subcontract and a sub-subcontract. Mrs Parkes has no direct knowledge of that. Her evidence is simply assertion and hearsay. As hearsay her evidence is not admissible. Here I apply the test under s 18 of the
Evidence Act 2006. I have no reasonable assurance that her evidence is accurate. There are other people who did deal directly with Titan Earthmovers Ltd and with Mr Niupalau. They are available and would be able to give evidence. I accept that PC5 Projects Ltd had to move promptly to begin the stay application, but it also had time to obtain the evidence from other people within its organisation: Mr Parkes and Perry, who had direct knowledge of the matters. I do not regard Mrs Parkes’ evidence as relevant or helpful in deciding the nature of the relationship between Titan and PC5 Projects Ltd.
[16] What helps Titan Earthmovers Ltd is the text messages that Mr Williams received from PC5 Projects Ltd. The text messages saying that invoices should be sent to PC5 Projects Ltd and that the first bill was being sorted out are clear indications by PC5 Projects Ltd of contractual responsibility to Titan Earthmovers Ltd for the work it had done at the Chippendale Crescent site. With those text messages, any suggestion that the liability to pay the bill can be disputed goes away. In my judgment there is no genuine ground for PC5 Projects Ltd to dispute its liability to Titan Earthmovers Ltd to pay for the work in the invoices.
[17] There is an additional matter. The amount claimed in the statutory demand and in the statement of claim is $33,967.26. That is more than the amount of the invoices Titan sent to PC5 Projects Ltd. Titan’s debt collectors have topped up the amounts in the invoices with costs claimed in the statutory demand. The statutory demand can only claim for a debt due as at the date of the demand. PC5 Projects Ltd is not liable for any costs as at the date that the statutory demand was served. At that stage costs could only be prospective. They would depend on the court making an order for costs following a liquidation application being heard. Similarly, Titan Earthmovers Ltd is not entitled to claim those costs as a debt due in the statement of claim. If the proceeding is to continue, it is to be on the basis that Titan Earthmovers Ltd can claim no more than $33,449.76.
[18]I make these orders:
(a)The application for a stay and to restrain advertising is dismissed.
(b)Titan Earthmovers Ltd is now free to advertise the application.
(c)The proceeding is to be called in the liquidation list on Thursday 1 November 2018 at 10.00 am.
(d)Titan Earthmovers Ltd will have costs on the application, but with a deduction of $500 on account of the excessive amount claimed in the statement of claim and the statutory demand. Costs are Category 2. I trust that counsel will be able to agree costs, but if necessary memoranda may be filed.
……………………………….
Associate Judge R M Bell
0
1
0