Waitakere Farms Limited v Epsom Woods Limited
[2021] NZHC 1602
•1 July 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-001883
[2021] NZHC 1602
BETWEEN WAITAKERE FARMS LIMITED
Plaintiff
AND
EPSOM WOODS LIMITED
Defendant
On the papers: 13 April 2021 Counsel:
A A H Low for the Plaintiff D Hayes for the Defendant
Judgment:
1 July 2021
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 1 July 2021 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors:
Alexandra Low & Associates, Auckland Hunwick Law Ltd, Hamilton
D Hayes, Hamilton
WAITAKERE FARMS LTD v EPSOM WOODS LTD [2021] NZHC 1602 [1 July 2021]
Introduction
[1] Waitakere Farms Ltd applies to have Epsom Woods Ltd put into liquidation. Epsom Woods has not paid several costs judgments against it in this Court, the Court of Appeal and the Supreme Court arising out of disputes concerning forestry properties on Anzac Valley Road in the Waitākere Ranges.
[2] In the most material of these, Associate Judge Bell ordered Epsom Woods to pay Waitakere Farms $22,323.40 in costs after its failed claim for recognition of unregistered rights in one of the forestry properties (Lot 1) (the judgment sum). 1 Epsom Woods did not pay, and Waitakere Farms served a statutory demand on Epsom Woods for the judgment sum. Epsom Woods applied to have the statutory demand set aside, but that was dismissed by Gault J, who directed Epsom Woods to pay the judgment sum within 15 working days.2 Epsom Woods still did not pay or enter into an agreement or compromise with Waitakere Farms. As such, it is presumed to be insolvent.3
[3] On that basis Waitakere Farms filed and served the present application for liquidation. Epsom Woods did not file a statement of defence within the required 15 working days. It then filed an interlocutory application under rr 31.20 and 31.22 for an extension of time to file a statement of defence. It claims that the delay is reasonably explained, and it has an arguable defence that it has a counter-claim or set- off that equals or exceeds the sum it owes to Waitakere Farms. Waitakere Farms opposes, saying that Epsom Woods does not have an arguable defence, it is attempting to re-run an argument already decided by Gault J, it has not provided any evidence that it is solvent, and it has not offered a reasonable explanation for the delay.
[4] Granting a debtor an extension of time to file a statement of defence is an indulgence. In deciding whether to exercise my discretion, I will consider these factors:
1 Epsom Woods Ltd v Waitakere Farms Ltd [2019] NZHC 1374.
2 Epsom Woods Ltd v Waitakere Farms Ltd [2020] NZHC 2283.
3 Companies Act 1993, s 291(2).
(a)whether Epsom Woods has a reasonable explanation for the delay;
(b)whether Epsom Woods has an arguable defence;
(c)whether Epsom Woods is insolvent; and
(d)the overall justice.
[5] In terms of (b), the arguable defence asserted by Epsom Woods is that it has a counterclaim for damages for conversion of its property that off-sets the uncontested debt owed to Waitakere Farms. Epsom Woods claims that Waitakere Farms entered its property and harvested some of its trees. So, I need to decide whether Epsom Woods has established a reasonable argument that:
(a)it owned the trees;
(b)Waitakere Woods harvested the trees; and
(c)that the value of the harvest off-sets the uncontested sum owed to Waitakere Farms to less than $1,000.
Background
[6] The factual and procedural background is summarised in the judgment of Gault J:4
[3] An agreement dated 15 December 2009 to lease a 51 hectare forestry lot at 131-149 Anzac Valley Road, Waitakere (Lot 1) provided for a lease in the form attached to the agreement – a deed of lease. The agreement was between Richard Gregory Vesey (as trustee of the Doug Vesey Trust) as lessor and North Kaipara Nominees Ltd (as trustee of the Anzac Valley Forestry Trust). Schedule C of the proposed deed provided that the lessee was to own trees on Lot 1.
[4] On or about 27 August 2010, Nags Head Horse Hotel Ltd (Nags Head) loaned the owner of Lot 1 $420,000, secured by a registered first ranking mortgage.
4 Epsom Woods Ltd v Waitakere Farms Ltd [2020] NZHC 2283.
[5] In September 2010, a forestry right (8601968.3) was granted over part of a lot at 199-201 Anzac Valley Road, Waitakere (Lot 323) and registered on the title in the name of Peter William Mawhinney and Sixty-Six Auckland Ltd.5
[6] On 21 July 2011, Mr Vesey, as landlord, and Anthony Mawhinney entered into a residential tenancy agreement.
[7] In 2013, following default in relation to the Nags Head loan, Nags Head sought to exercise the rights under its mortgage. It faced obstruction by Peter Mawhinney, brother of Anthony Mawhinney. Court proceedings followed, and this Court held that Nags Head was entitled to sell Lot 1.6 It entered into an agreement to sell Lot 1 to Adam Buttling. Further obstruction from Peter Mawhinney and court proceedings followed.7 Lot 1 was eventually transferred to [Waitakere Farms Ltd (WFL)] as Mr Buttling’s nominee on 14 March 2017.
[8] On 29 October 2018 [Epsom Woods Ltd (Epsom Woods)] took an assignment of the 2009 agreement to lease from the “Trustee in the Anzac Valley Forestry Trust” for $1.
[9] A document dated 27 November 2018 records an agreement for sale and purchase of standing timber between Sixty-Six Auckland Ltd (as trustee) as vendor (signed by Anthony Mawhinney) and Epsom Woods as purchaser. The relevant standing timber was the subject of two forestry rights, one of which was the registered forestry right 8601968.3 over part of Lot 323.
[10] Epsom Woods brought proceedings against WFL claiming that Epsom Woods was entitled to the trees grown on Lot 1, through the 29 October 2018 assignment. The first cause of action relied on a constructive trust. Epsom Woods relied on a caveat lodged in 2013 and correspondence in 2017 which Epsom Woods said was notice to WFL. The second cause of action sought a declaration in relation to Anthony Mawhinney’s occupation rights under the residential tenancy agreement. In effect, Epsom Woods claimed that WFL’s interest in Lot 1 was subject to interests not registered against the title – as neither the 2009 agreement to lease nor the residential tenancy agreement had been registered. Only the caveat had been registered but that caveat had been removed by this Court in 2017. There was no evidence the residential tenancy agreement had been assigned to Epsom Woods and in any event the Tenancy Tribunal had held it was a prohibited transaction.
[11] Associate Judge Bell concluded that WFL had an indefeasible title, that Epsom Woods’s causes of action could not succeed and granted WFL summary judgment, and costs.8 An appeal by Epsom Woods was dismissed by the Court of Appeal on 10 June 2020.9 Epsom Woods has filed an application for leave to appeal to the Supreme Court.10
5 Lot 323 DP 210991, NA139A/726.
6 Nags Head Horse Hotel Ltd v Mawhinney [2016] NZHC 1740.
7 Nags Head Horse Hotel Ltd v Mawhinney [2017] NZHC 401.
8 Epsom Woods Ltd v Waitakere Farms Ltd [2019] NZHC 1374 at [46] and [53].
9 Epsom Woods Ltd v Waitakere Farms Ltd [2020] NZCA 226.
10 Epsom Woods Ltd v Waitakere Farms Ltd SC 51/2020.
[7] Waitakere Farms served Epsom Woods with a statutory demand for the costs order made by Associate Judge Bell. In support of its application to set aside the statutory demand, Epsom Woods claimed that it had an arguable set-off or counterclaim. Specifically, Epsom Woods claimed that Waitakere Farms owed it compensation for converting its property when it perhaps inadvertently harvested 95 trees on the neighbouring land – Lot 323. Epsom Woods asserted a value for the trees of $23,000 plus GST (230 tonnes at $100 per tonne). Epsom Woods claimed a further $18,071 which was said to be the cost of obtaining permission to remove the trees from the lots. Gault J declined to set aside the statutory demand, concluding that there was no evidential basis giving rise to a reasonably arguable counterclaim for more than the $22,323.40 or within $1,000 of it.
[8] In its statement of claim seeking that Epsom Woods be put into liquidation, Waitakere Farms claims that Epsom Woods is indebted to it not just for the costs order made by Associate Judge Bell but also:
(a)the balance of a costs order given by the Court of Appeal on 10 June 2019, amounting to $302.58;
(b)a costs order made by Campbell J on 20 August 2020 for $1,434.00;
(c)a costs order made by the Supreme Court on 23 September 2020 for
$2,500.00; and
(d)a costs judgment by Gault J on 27 November 2020 of $13,991.04.
[9] The total debt on which Waitakere Farms’ application to put Epsom Woods into liquidation rests is $39,117.02.11
Legal Principles
[10] A person who fails to file a statement of defence or appearance within the time prescribed may not appear at the hearing without an order of the court extending the
11 Affidavit of Joe Duncan sworn 9 February 2020 at [13].
time granted on an interlocutory application under r 31.22, or with the special leave of the Court.12 An extension of time/special leave is an indulgence, as the rules of the Court are designed to assist the speedy resolution of such proceedings.13 The applicant must provide a proper factual foundation upon which the Court can exercise its discretion.14 Matters that the Court has considered in determining whether to allow this indulgence include:
(a)whether the applicant can show on the papers an arguable basis upon which it is not liable for the amount claimed;15
(b)whether the applicant is insolvent;16
(c)whether the applicant has demonstrated a convincing reason for granting leave, a lack of prejudice to the respondent and a justification for the indulgence.17
The ultimate consideration that informs the exercise of the Court’s discretion is the overall justice of the case.18
[11] It is helpful to consider the grounds for this application for an extension of time in the context of the liquidation application. The Court may appoint a liquidator to a company if it is satisfied that the company is unable to pay its debts; or the company has persistently/seriously failed to comply with the Companies Act 1993; or has not complied with essential requirements for companies; or it is just and equitable for the company to be placed in liquidation.19 Waitakere Farms applies, as a creditor, to put Epsom Woods in liquidation on the first ground: that it is unable to pay its debts. It does so because Epsom Woods’ failure to comply with the statutory demand or
12 High Court Rules 2016, r 31.20.
13 Eversons International Ltd (in liq) v Bionutrient Customs Ltd [2020] NZHC 2989 at [19].
14 Body Corporate 166208 v York Trustees [2018] NZHC 593 at [30].
15 Fresh Cut Flower Wholesalers Ltd v Living and Giving Gift Co Ltd (2001) 16 PRNZ 173 (HC) at [9]; Eversons, above n 13, at [19].
16 Fresh Cut Flower Wholesalers, above n 15, at [9]. See discussion of Van Bohemen J in Khurana Trustee Ltd v Castle Backpacker K Road Ltd [2021] NZHC 1315 at [19]–[25].
17 Sayer v Capital Aviation Ltd (1993) 6 PRNZ 401, 6 NZCLC 68,372 (HC) at 402; Eversons, above n 13, at [21].
18 Eversons, above n 13, at [21], citing Body Corporate 62870 v Health Distributors (Holdings) Ltd
[2018] NZHC 1717 at [8].
19 Companies Act 1993, s 241.
successfully have it set aside means that the company is presumed to be insolvent.20 However, this presumption may be displaced if, for example, there is a genuine dispute as to whether the debt underpinning the statutory demand is due and owing.21 The fact that a company does not apply to set aside the statutory demand, or does but is unsuccessful, does not preclude it from taking steps to prevent the liquidation, including defending the proceedings.22
[12] Here, if Epsom Woods is given leave to file a statement of defence, it will be defending the application not on the basis that the debt is disputed (it could hardly do so as they are orders of the Court) but because there is “no balance owing after taking into account the debt owed by the plaintiff”.23 That is, taking into account the amounts which Epsom Woods says Waitakere Farms owes to it, Waitakere Farms is not in fact a creditor for more than the minimum amount required of $1,000 and has no standing to bring the application.
[13] The existence of a set-off or counterclaim is typically raised at the statutory demand phase, to avoid the presumption of insolvency arising. The fact that Epsom Woods sought that the statutory demand be set aside based on the same set-off or counter-claim does not preclude it from raising it again now (and that was not argued by Waitakere Farms). In deciding whether to exercise my discretion and grant Epsom Woods an extension of time to file a statement of defence, I can consider the merits of that set-off/counter-claim afresh, along with any other relevant factors.
[14] Despite this being an application for an extension of time under rr 31.20 and 31.22 the High Court Rules 2016, the legal principles governing applications to set aside statutory demands on the grounds of a set-off/counterclaim under s 290 of the Companies Act 1993 provide useful guidance. Of these, the following principles are especially pertinent to this case.
20 Companies Act 1993, s 287.
21 Companies Act 1993, s 290(4)(a).
22 Heron’s Flight Ltd v NZ Properties International Ltd [2012] 1 NZLR 424 (HC) at [22]–[27].
23 Draft Notice of Defence at [11].
(a)It is open to the court to set aside a statutory demand even when the two debts or claims are completely unrelated, as s 290(4)(b) explicitly provides for counterclaims.24
(b)Generally, an applicant looking to set aside a statutory demand must go further than mere assertions: there must be some material, short of proof, which backs up the existence of the counterclaim.25 The applicant is not required to prove the counterclaim; but must present enough evidence to establish a reasonably arguable case.26
(c)Where the application for liquidation is based on an undisputed liquidated sum, but the company’s set-off or counter-claim is for an unliquidated sum with liability and/or quantum in dispute, the company must show “clear and persuasive grounds”27 for the set-off or counterclaim such that the applicant’s claim as creditor, to the extent of the counterclaim/set-off, is “seriously in doubt.”28
[15] I will now consider the factors relevant to my discretion, bearing in mind these principles.
Does Epsom Woods have a reasonable explanation for the delay?
[16] The liquidation application was served on Epsom Woods at its registered office on 20 October 2020, with a hearing date of 20 November 2020.29 That is not disputed by Epsom Woods. But Mr Alexander says that he only became aware of the application on 5 November 2020 after it was advertised. Mr Alexander says that the company’s registered office is that of its bookkeeper and the unnamed bookkeeper returned the documents to the Court.30 He exhibits an email from what must be the bookkeeper, Wendy Wang of Clear Sky Accounting, emailing him a copy of the notice.
24 Phoenix Organics Ltd v RD2 International Ltd (2003) 9 NZCLC 263,380 at [26].
25 DNZ Forest Products 2009 Ltd v Logic Forest Solutions Ltd [2018] NZHC 1214.
26 Auravale Industries Ltd v Shalimar Knitwear Ltd (1999) 8 NZCLC 262,074.
27 Bryanston Finance Ltd v De Vries (No 2) [1976 Ch 63 at 78, as cited in Covington Railways Ltd v Uni-Accommodation Ltd [2001] 1 NZLR 272 (CA) at [11].
28 Covington Railways Ltd, above n 27.
29 Affidavit of Service of Karl Kenneth Francis Lewis sworn 21 October 2020.
30 Affidavit Paul Alexander affirmed 9 November 2020 at [3].
He explains that he changed the registered office of Epsom Woods effective from 8 July 2020. That is neither here nor there as there is no suggestion that the documents were not served at the correct registered office of the company. Epsom Woods submits that on becoming aware of the proceedings on 5 November 2020, it promptly filed the present application three working days later, on 9 November 2020.
[17] I am sceptical about aspects of this explanation. Epsom Woods must have been aware that Waitakere Farms would file liquidation proceedings if it failed to respond to the statutory demand. Gault J directed that Epsom Woods pay the judgment debt within 15 working days. He also directed that Waitakere might file an application for liquidation if Epsom Woods defaulted. In view of these facts, Epsom Woods’ failure to inform its bookkeeper to expect the proceedings or monitor its registered office is difficult to understand. As is the absence of an affidavit from the bookkeeper confirming the explanation. However, I am prepared to give Epsom Woods the benefit of the doubt and conclude that it has provided an explanation, albeit one that is not wholly convincing.
Does Epsom Woods have an arguable defence?
[18] The defence pleaded by Epsom Woods in its draft notice of defence is that “there is no balance owing after taking into account the debt owed by the plaintiff of
$36,984 for trees, $1,255.80 for transit royalty, $5,000 for property damage, costs of
$575 and contribution toward resource consent costs of $18,000.”
[19] Mr Hayes for Epsom Woods conceded at the hearing that in terms of establishing its arguable defence, Epsom Woods relies only on the damages for harvest of the trees on Lot 323 ($36,984 including GST)31. That was a sensible concession as the other claims do not withstand scrutiny. First, the claim to a transit royalty lacks credibility as Epsom Woods does not own Lot 323 or the forestry right (the alleged agreement only gives it a right to the timber). Further, Mr Waldegrave for Waitakere has given evidence that the contractors did not extract any logs over Lot 323 and provided photos to confirm this. Second, the alleged $5,000 of damage to a shed is
31 Affidavit of Paul Alexander affirmed 18 December 2020 at [3] gives the figure as $32,160 plus GST.
unsupported by evidence as to where the shed is located or how that value is quantified. Both Mr Duncan and Mr Waldegrave say that the shed was on Lot 1 and belonged to Waitakere Farms. Epsom Woods has not disputed this evidence. Third, Mr Leslie’s costs associated with his expert evidence cannot be claimed from Waitakere Farms. At best, Epsom Woods might be able to recover these costs if it is successful in this application and is entitled to costs. Fifth, there is no explanation given for why work done by Peter Mawhinney as Forest Trustee in Environment Court proceedings between Peter Mawhinney and Auckland Council is payable by Waitakere Farms. Mr Duncan has confirmed that Waitakere Farms has never contracted with Mr Mawhinney or Forest Trustee.
[20] So, whether Epsom Woods has established an arguable counterclaim against Waitakere Farms depends on its claim for compensation for the wrongful harvest of its trees. That depends on three questions.
Did Epsom Woods own the trees?
[21] For this application, Paul Alexander, director of Epsom Woods filed two affidavits. The first addresses the circumstances around service of the liquidation proceedings on the company. The second addresses Epsom Woods’ counterclaim against Waitakere Farms. It provides supporting evidence to verify the number of trees allegedly wrongfully harvested by Waitakere Farms; and the value of the harvest. It does not provide any evidence to corroborate Epsom Woods’ claim that it owned the trees.
[22] The sum of the evidence Epsom Woods relies on to establish that it owned the trees is:
(a)Evidence from Mr Joe Duncan, director of Waitakere Farms, that his project manager had confirmed that up to 25 stumps appeared to have been removed from the forestry block adjoining the boundary line, possibly ten more on the steep incline.32
32 Affidavit of Joe Duncan sworn 10 April 2020 at [33].
(b)An email from Mr Peter Mawhinney dated 21 March 2019 in response to a letter from Waitakere Farms’ solicitor, stating that the trees had been sold. No further explanation is given.
(c)A transcript of a hearing in the Environment Court which records Ms Low, for Waitakere Farms, submitting that Peter Mawhinney’s claimed forestry right over Lot 323 derives from an estate and leasehold under lease 878988.1.
(d)The agreement of sale and purchase of the trees dated 27 November 2018, which comes into evidence as an exhibit to Mr Duncan’s affidavit. Mr Hayes sent the agreement to Ms Low after Michael Hunwick, Epsom Woods’ solicitor, wrote to Ms Low on 22 March 2019 asserting that Epsom Woods owned the trees together with associated access rights, having purchased them from Sixty-Six Auckland. After repeated requests for evidence to support this claim, Mr Hayes provided the agreement to Ms Low on 23 September 2019.
[23] Of these, (a) and (c) are irrelevant to the question of whether Epsom Woods owned the trees. The email at (b) is a bald assertion. The agreement at (d) is curious in a number of ways. It records the vendor as being Sixty-Six Auckland Limited, holder and registered proprietor of forestry right 8601968.3 over part of Lot 323 (and another forestry right). Yet the historical Certificate of Title for the property, which Ms Low took me to, records this forestry right being transferred to both Peter William Mawhinney and Sixty-Six Auckland Limited on 18 July 2013.33 The agreement for sale of the timber to Epsom Woods is signed by Anthony Mawhinney for Sixty-Six Auckland Limited as vendor (and owner of the forestry right). Peter Mawhinney is not named as vendor and has not signed the agreement. The agreement does not define the forestry right or identify the trees that are the subject of the right. It is unclear how the trees could be sold but the forestry right remain with Sixty-Six Auckland Limited and Mr Mawhinney.
33 Bundle of Pleadings dated 29 March 2021 at 125.
[24] As Gault J observed, these features raise real questions about what was transferred to Epsom Woods and by whom. The answers to these questions may affect the quantum of Epsom’s claim, if only part of the standing timber that is the subject of forestry right 8601968.3 was transferred.
[25] Waitakere Farms has asked Epsom Woods to explain the nature of its claimed ownership of the trees; and in the statutory demand proceeding Epsom Woods was given the opportunity to file further evidence in support of its application. It did not to do so. The uncertainty around the effect of the agreement was a factor in Gault J’s decision to decline to set aside the statutory demand.34
[26] This deficiency in the evidence has not been remedied by Epsom Woods here. In fact, there is a glaring lack of evidence from Epsom Woods on this key issue. All the Court has is the agreement, put into evidence by Waitakere Farms, with no-one from Epsom Woods swearing an affidavit adopting or even referring to it. Neither Peter Mawhinney nor Andrew Mawhinney (as director of Sixty-Six), who apparently hold the forestry right over Lot 323, have given evidence verifying the sale of the trees to Epsom. On the Epsom Woods side, Mr Alexander does not even refer to the agreement and the extent of his evidence on the point is to say, “The Plaintiff has removed logs owned by us while harvesting along the boundary.” This is in the context of Epsom Woods being on notice of the fact that ownership is contested; and having the opportunity to file evidence on the point.
[27] I remind myself that Epsom Woods is not required to prove its counterclaim. It must only establish a reasonably arguable case. But I find that it has not even met that low threshold on this key point.
Did Waitakere Farms harvest the trees?
[28] Waitakere Farms accepts that, despite taking a careful approach along the boundary, it unwittingly harvested some trees from alongside the boundary with Lot 323.35
34 Epsom Woods Ltd v Waitakere Farms Ltd [2020] NZHC 2283 at [26]
35 Affidavit of Jeremy Dirk Waldegrave sworn 5 February 2021 at [14] and [22].
Does the value of the harvested trees off-set the uncontested sum owed to Waitakere to less than $1,000?
[29] The undisputed sum Epsom Woods owes to Waitakere Farms is $39,117.02. Epsom Woods says that the total amount of their loss for the tree harvest is $32,160 plus GST, which is $36,984.36 So, even if Epsom Woods proved that $36,984 was the correct approximation of its loss for the harvested trees, it would not off-set the undisputed debt it owes to Waitakere Farms to within $1,000; rather, it would bring it down to $2,133.
[30] That Epsom Woods’ claimed loss is more than $1,000 less than the undisputed debt it owes to Waitakere Farms is dispositive of this issue. However, for completeness, I set out why I do not consider Epsom Woods to have a reasonably arguable case that its loss for the tree harvest even amounts to the claimed sum of
$36,984.
[31] There are two relevant factors: the number of trees; and the value of those trees.
[32] In relation to the number of trees, Epsom Woods has produced further evidence to that which was before Gault J in the statutory demand proceeding. Mr Alexander puts in evidence a letter from a registered surveyor, Mr Smith of Parallax, which estimates, by counting stumps, that 84 trees were harvested in one area (Area B) and 471 in another (Area A).37 However, and importantly, the report acknowledges that the 471 were harvested over two periods.
[33] Epsom Woods also relies on the evidence of Mr C Leslie, forestry expert, who says that 134 trees were removed (estimated to have generated 321.6 tonnes): 84 having been removed left of pegs 3 – 5, and 50 from between pegs 4 – 7.38
36 Draft Notice of Defence, April 2021, at [10]; Affidavit of Paul Alexander affirmed 18 December 2020 at [3]; Letter of Mr Leslie dated 18 December 2020, annexure A to Affidavit of Paul Alexander affirmed 18 December 2020.
37 Affidavit of Paul Alexander affirmed 18 December 2020, annexure C.
38 Affidavit of Paul Alexander affirmed 18 December 2020, annexure A.
[34] I find Epsom Woods’ evidence on the relevant number of trees unconvincing. Neither Mr Smith nor Mr Leslie have committed to their views in an affidavit. Their evidence is internally inconsistent, with Mr Smith counting 84 trees in one area and
471 in another, while admitting that the 471 were harvested over two periods. Mr Leslie bases his valuation of a different number again: 134 trees. This is against the backdrop of Epsom earlier writing to Waitakere Farms stating that it had counted the stumps of 95 trees.39 In that letter, Epsom wrote that only 45 of those 95 trees came from the area left of pegs 3 – 5. There is no explanation offered for how that number jumped from 45 to 84 by the time of Mr Leslie’s calculation.
[35] In contrast, Waitakere Farms has adduced evidence, including photos, to show that it only harvested a single row of trees along the boundary, 35 at the most.40 Mr Waldegrave, who supervised the harvest, says that Waitakere did not harvest any trees at all from the area identified by Mr Leslie as Area A (from which he says 471 trees were cut). He exhibits a photograph which shows the trees still in place in Area A after Waitakere’s harvest. Mr Duncan says that the harvest in Area A can only be a later harvest carried out by Mawhinney interests. He attaches an email from Mr Alexander of Epsom Woods dated 11 November 2019 informing him of the impending harvest and requesting access. An email from Peter Mawhinney dated 5 December 2019 refers to tidying up after the recent harvest on Lots 323 and 324.
[36] Mr Waldegrave challenges the expertise of Mr Leslie, stating that he interviewed him for a graduate role two years ago and Mr Leslie was not selected.41
[37] Epsom Woods had the opportunity to file reply evidence to that of Mr Duncan and Mr Waldegrave responding to the deficiencies noted but it did not do so.
[38] In relation to the value of the trees, Waitakere Farms says the average net profit over the whole harvest was $44.69 per tonne.42 Mr Waldegrave has put in evidence the Stumpage Report for Lot 1 showing the actual profit derived after subtracting costs
39 Letter of Mr Hayes dated 12 September 2019, annexed to Affidavit of Joe Duncan sworn 10 April 2020 at 21.
40 Affidavit of Jeremy Dirk Waldegrave sworn 5 February 2021 at [16].
41 Affidavit of Jeremy Dirk Waldegrave sworn 5 February 2021 at [19].
42 Affidavit of Jeremy Dirk Waldegrave sworn 5 February 2021 at [23].
(logging, cartage, management fee, NZFO levy) from the actual yield of eight different grades of tree.43
[39] Conversely, Mr Leslie says that the value of the trees removed was $100 per tonne, which is a figure he arrives at by averaging export log prices for three different grades of tree in May 2019 and subtracting costs (harvesting and cartage). 44
[40] Again, I find Epsom Woods’ evidence on the value of the harvested trees unconvincing. Mr Leslie’s calculations as to the value of the trees are based off export prices for three different grades of tree, and his calculations as to the cost per tree factors in only harvesting and cartage. Against Waitakere’s Stumpage Report, which averages the value of the eight grades of tree actually present on Lot 1 at the time of harvest, and also takes overhead costs into account, Mr Leslie’s valuation is unpersuasive.
[41] I find that Epsom Woods does not have a clear and persuasive case that the value of the harvested trees amounts to $36,984 – a figure which, in any case, does not off-set to within $1,000 the undisputed $39,117.02 it owes to Waitakere Farms.
[42] I have concluded that Epsom Woods has not established an arguable defence for two reasons: it has not established an arguable case that it owned the trees harvested; and it has failed to establish the value of the harvest exceeds or off-sets the undisputed sum owed to Waitakere Farms to below $1,000. On that basis I decline to exercise my discretion to grant Epsom Woods an extension of time to file a statement of defence.
[43] It is not necessary for me to go on and consider the other factors. However, I will record my conclusions.
Is Epsom Woods insolvent?
[44] There is a line of High Court authority for the proposition that while not always decisive, the insolvency of the company is a strong factor against the exercise
43 Affidavit of Jeremy Dirk Waldegrave sworn 5 February 2021, annexure G.
44 Affidavit of Paul Alexander affirmed 18 December 2020, annexure A.
of the discretion to grant leave to file a late defence to an application to place a company in liquidation.45
[45] Epsom Woods accepts that the failure to comply with the statutory demand gives rise to a presumption of insolvency. It has not attempted to rebut that presumption by pleading or adducing any evidence to prove that it is solvent.
[46] In view of that, this case is akin to that of Fresh Cut Flowers, where the first basis for the decision not to grant leave is that the defendant company has not presented an arguable defence; and fact that the defendant is insolvent provides a further issue mitigating against granting leave.
Overall justice
[47] Standing back, I am satisfied that the overall justice supports the conclusion that Epsom Woods should not be granted leave to file a statement of defence. Epsom Woods’ purported defence is plainly without merit, it will not off-set the undisputed sums claimed by Waitakere Farms in any case, it has advanced the same counterclaim argued before with Gault J albeit with more evidence, but the evidence is still ridden with gaps and inconsistencies.
Result
[48] Epsom Woods’ application for an extension of time to file a statement of defence is dismissed.
[49] Epsom Woods will pay Waitakere Farms’ costs on a 2B basis, plus reasonable disbursements.
45 Khurana Trustee Ltd v Castle Backpacker K Road Ltd [2021] NZHC 1315 at [19]–[24] ; Body Corporate 62780 v Health Distributors (Holdings) Ltd [2018] NZHC 1717 at [24]; FV Aluminium 2011 Ltd v Firma Construction Co [2020] NZHC 1385; Matthew Mini Coaches Ltd (in liq) v Scotch Myst Ltd [2019] NZHC 3015.
[50] Waitakere Farms’ application to place Epsom Woods in liquidation will be called in the liquidation list on 16 July 2021 at 10.00 am. Epsom Woods should be prepared for the application to be determined at that call.
Associate Judge Gardiner
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