Waimarie Management Limited v Body Corporate 169791 HC Ak CIV 2010-404-000189

[2010] NZHC 76

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV 2010-404-000189

BETWEEN  WAIMARIE MANAGEMENT LIMITED

Applicant

AND  BODY CORPORATE 169791

Respondent

CIV 2010-494-000190

BETWEEN  PAKENHAM GROUP LIMITED Applicant

AND  BODY CORPORATE 169791

Respondent

Hearing:         10 February 2010

Counsel:         S A Grant for applicants

G J Beresford for respondent (in each case) Judgment:  10 February 2010

ORAL JUDGMENT OF ASSOCIATE JUDGE ABBOTT

Solicitors:

Claymore Law, PO Box 1382, Auckland 1140 for applicants

Grimshaw & Co, PO Box 6646, Auckland 1141 for respondent

WAIMARIE MANAGEMENT LIMITED V BODY CORPORATE 169791 HC AK CIV 2010-404-000189  10

February 2010

[1]      These related applications are  being heard  together  as  they arise  out  of  the

same matter and involve the same issues.

[2]      The respondent, Body Corporate, has issued statutory demands against both applicants claiming a sum of $13,425.77, which they were ordered to pay as costs following an unsuccessful application to strike out a civil proceeding brought by the respondent and various other parties who are members of the Body Corporate.

[3]      The costs order was made on 3 December 2009.  I note here that it was made against  three  companies  named  as  fourth  defendants  in  that  proceeding. The applicants are  two  of  those  fourth  defendants. The  applicant  Pakenham  Group Limited was formerly known as Symphony Group Limited.

[4]      The applicants have not appealed against that cost order, nor sought a stay of

it.  The respondent served its statutory demands on 24 December 2009.

[5]      The applicants have applied within time  to set aside the statutory demand. The application  has  been  opposed  by  the  respondent. This  is  the  first  call  of  the application. Counsel  for  the  applicants  has  today  sought  leave  to  file  a  further affidavit in support of the application and asked for it to be allocated as a defended fixture.  Counsel for the respondent contends that the matter can be dealt with today on the ground that there can be no dispute about the debt and there is no other valid ground that can be advanced by the applicants.   This requires consideration of the grounds advanced.  After hearing from counsel, I have reached the view that nothing further will be achieved by the further affidavit that the applicants seek to file, and that there is no arguable basis for the applications.

The grounds for the application

[6]      The grounds for each application are:

a)        There  is  a  genuine  and  substantial  dispute  as  to  whether  or  not  the debt is owing or due;

b)The applicants have a fairly arguable basis for a set off exceeding the amount  due,  such  that  the  respondent’s  claim  to  be  a  creditor  is seriously at doubt;

c)        The demand is an abuse of process because it has been issued to place undue pressure on the applicants.

[7]      The applications are supported by affidavits of a director Mr C W Reynolds.

He says that the demands have been served at the registered offices of the applicants, that they have no assets with which to meet the demand, that they are not trading and that they have no sundry (external) creditors other than the respondent.   Pakenham Group  Limited  is  said  to  have  substantial  secured  creditors  and  an  even  more substantial  excess  of  liabilities  over  assets.      Mr  Reynolds  contends  that  both applicants have a good defence to the substantive proceedings in which they brought their strike out application (a leaky building claim involving a property at Parnell, Auckland).   He says that, if successful, it is his understanding that costs awarded to the applicants will substantially exceed any sums claimable by the respondent.

[8]      I do not accept that there can be any genuine dispute that the debt is due and owing.   The applicants have not appealed the costs order, nor have they applied for any stay of execution.  The order is payable as of the date that it was made.

[9]      I am not in a position to assess the relative strengths and weaknesses of the leaky building claim but I do not need to do so.   It may well be that the applicants have  arguable  defences,  and  that  those  defences  could  succeed.   However,  that  is well  in  the  future  and  there  is  no  evidence  before  this  Court  as  to  what  set-off  or counterclaim  it  may  have,  other  than  the  possibility  of  costs. Further,  I  do  not consider  that  an  unquantified  counterclaim  or  a  potential  cost  recovery  should  be accepted as a ground for resisting a costs order.  In my view that is inconsistent with the costs provisions in the High Court Rules which contemplate immediate payment: Wiseline  Corporation  Limited  v  Hockey  (HC  Auck,  CP  143-SD99,  26  July  2002, Nicholson J) and Spencer v Jed Rice Building Contractors Limited (HC Auck, CIV 2007-404-7539, 21 February 2008, Abbott AJ)

[10]     I  do  not  consider  that  any  claims  that  might  arise  in  the  course  of  the substantive immediate claim or at its conclusion impugn the respondent’s position as a creditor at this time.

[11]     That leads me to the third ground for opposition, namely that the demand is

an abuse of process. The  applicants  contend  that  the  demand  has  been  issued  to prevent them from maintaining and pursing meritorious defences in the substantive proceeding. Again I reject this ground.  The applicants chose to take their strike out application and had to be aware that if they were unsuccessful they would be liable to pay costs. I do not consider that it is unfair for the respondent to seek payment of those  costs. The  consequences  of  the  demand  are  a  matter  for  the  applicants,  not matters to be held against the respondent.   That is particularly so if one takes into account  the  evidence  of  Mr  Reynolds,  from  which  is  clear  that  the  applicants  are being funded in the leaky building litigation by other parties.   It is for those other parties  now  to  decide  whether  to  continue  funding  (in  the  form  of  meeting  these costs) or not.

[12]         This brings me to the request for leave to file a further affidavit.  Counsel for the  applicants  informed  me  that  the  applicants  were  being  funded  in  the  leaky building  litigation  by  other  companies  within  the  Symphony  Group  (the  purpose being to defend the name and reputation of the group as a developer).  She says that there have been issues “behind the scenes” leading to a change of position within the group and a lack of continuing support.  She wishes to adduce evidence to this effect and to the possibility of the position changing again (I infer, so as to allow the fourth defendants to continue their defence on the substantive action).

[13]     I  am  prepared  to  accept  this  is  so,  for  the  purpose  of  this  application. However,  I  do  not  see  that  it  constitutes  “other  grounds”  for  setting  aside  the statutory demand (s 290 of the Companies Act 1993).   It is a commercial decision being made by those in control of the applicants.   I do not see that the respondent should be prejudiced by it.

Decision

[14]     Weighing all of these matters I have come to the view that the applicants do not have grounds to set aside the statutory demands.  Counsel for the respondent has invited me to accept the evidence of Mr Reynolds that these companies are insolvent, and invoke my jurisdiction under s 291 to place them into liquidation at this point.  I am not prepared to go that far.  I will give those behind the applicants further time in which to meet the demands.  If they chose not to do so, then the consequences of an application for liquidation will follow.

[15]     The   application   in   each   proceeding   is   dismissed. I   extend   time   for compliance with the statutory demands to 4:00pm on 24 February 2010.

[16]     The respondent seeks costs but asks that a determination be deferred to allow memoranda  to  be  filed.  Counsel  informs  me  that  there  are  background  matters which could alter the way in which the Court looks at costs for these applications (usually on a 2B basis).  I reserve costs accordingly for determination on the basis of memoranda to be filed, if counsel cannot agree.   The respondent’s memorandum is to  be  filed  within  10  working  days;  the  applicants’  memoranda  within  a  further 5 working days.

Associate Judge Abbott