Vae NZ Ltd v Decmil Construction NZ Ltd (in liquidation)

[2020] NZHC 2025

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-1334

[2020] NZHC 2025

IN THE MATTER

of a contract dated 24 November 2017

BETWEEN

VAE NZ LTD

Applicant

AND

DECMIL CONSTRUCTION NZ LTD (IN LIQUIDATION)

First Respondent

DERMOTT MCVEIGH

Second Respondent

Judgment:

(On the papers)

11 August 2020

JUDGMENT OF BREWER J

Solicitors:

Wynn Williams (Christchurch) for Applicant

VAE NZ LTD v DECMIL CONSTRUCTION NZ LTD (IN LIQ) [2020] NZHC 2025 [11 August 2020]

[1]    The applicant has applied without notice for an interlocutory interim prohibitory injunction.

[2]    Essentially, the applicant was a subcontractor to the first respondent which was the head contractor in a contract with the New Zealand Department of Corrections. Pursuant to its subcontract with the first respondent the applicant provided one performance bond and two retention bonds as security.

[3]    The first respondent terminated the subcontract in about March 2020 purportedly on the basis the head contract was terminated.

[4]    The first respondent went into liquidation on or about 17 April 2020. The second respondent was appointed liquidator.

[5]    The applicant has made request to the respondents for the return of the bonds. The respondents have failed or refused to do so.

[6]    Mr Phillip Jason Lowe, in his affidavit in support of the application, refers to an email from Ms Kelly Meyn of the second respondent referring to the presence of water damage which may be attributable to the applicant’s activities. Mr Lowe, the chief financial officer for the applicant, deposes:

16I am not aware of any water damage caused by any defect or omission in the Applicant’s work. Ms Meyn also expresses the opinion that the First and Second Respondents are uncertain as to the cause of the damage too. While I am not aware of any water damage, I am aware of a minor water leak which was identified and rectified by the Applicant in around February 2020.

[7]Subsequently, Mr Lowe deposes:

22 On Friday, 31 July 2020, l had a telephone conference with Ms Kelly Meyn of the Second Respondent from about 11.30am to 11.50am. During that conversation, Ms Meyn and I stated, amongst other things words to the effect of:

Me: The purpose of this call is to understand why the liquidators are continuing to hold our bonds. When wil1 you be in a position to return those bonds to us?

Ms Meyn: We have decided to retain all subcontractor’s bonds. There are three issues with the prison, being a water leak, a

reduction in Decmil’s claim by the principal and liquidated damages having been applied. We are trying to determine if any subcontractors should be liable·for those head contractor claims.

Me: We have not been notified of any defects or claims and those issues have nothing to do with us. Can you please clarify what water leak you are talking about?

Ms Meyn: I do not have any detailed information available. We sent you a letter on 7 July 2020 regarding the water leak.

Me: We are not responsible for any water leaks and I do not know what letter you are referring to. Where in the Contract does it say you are entitled to continue to hold our bonds?

Ms Meyn: You can read the Contract for yourself.

Me: Yes, I do have a copy of the Contract. What I am saying is that there isn’t a right in the Contract for you to continue to hold the bonds, and you need to formally notify us of any defects if you require us to fix any issue with our work. We have not received any such notices.

Ms Meyn: The decision to cash the bonds has already been made. We are not returning them and I do not wish to discuss the matter further.

[8]    I am satisfied there is a real risk that the respondents will make demand on the bonds. On the face of the material before me, there is a serious question to be tried as to whether the respondents are entitled to make demand on the bonds. Further, given the status of the first respondent as a company in liquidation, the balance of convenience favours the granting of interim relief to prevent peremptory demand on the bonds.

[9]I make orders:

(a)granting the applicant leave under s 248 of the Companies Act 1993 to commence a proceeding against the first respondent being a company in liquidation;

(b)for an interim injunction restraining the first respondent and the second respondent from calling on the performance bond and the two retention bonds (or any one or more of them) provided to the first respondent by the applicant under a subcontract.

[10]   Leave is reserved to the first respondent and the second respondent to apply on notice to vary or discharge these orders.

[11]   The applicant is to file its substantive proceeding within 20 working days of the date hereof.

[12]Costs are reserved.

Brewer J