X & Tom Holding Limited v Sky Buildings Limited
[2023] NZHC 3355
•23 November 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-000633
[2023] NZHC 3355
BETWEEN X & TOM HOLDING LIMITED
Plaintiff
AND
SKY BUILDINGS LIMITED
Defendant
Hearing: 6 November 2023 Appearances:
A Peat for the Plaintiff
No appearance by or for the Defendant
Judgment:
23 November 2023
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 23 November 2023 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors:
Pidgeon Judd Law, Auckland A J Steel, Auckland
X & TOM HOLDING LTD v SKY BUILDINGS LTD [2023] NZHC 3355 [23 November 2023]
Introduction
[1] The plaintiff, X & Tom Holding Limited (XTHL), applies for an order appointing a liquidator to the defendant company, Sky Buildings Limited (Sky). The application is based on an expired statutory demand for amounts Sky is said to owe XTHL, by way of liquidated damages under five cancelled residential construction contracts.
[2]At the hearing of this application today I made the following orders:1
(a)Sky Buildings Limited is put into liquidation.
(b)Stephen Khov and Kieran Jones are appointed liquidators. The rates of remuneration of them and staff working under their supervision and control are as set out in their consent dated 18 October 2023. The liquidators are to apply at the conclusion of the liquidation for approval of their overall remuneration.
(c)XTHL will be paid costs on a 2B basis of $11,233.00 plus disbursements of $1,017.99.
[3]I now give my reasons.
Factual background
[4] The facts are set out in XTHL’s statement of claim and deposed to by Bingxiong Xiao, the sole director and shareholder of XTHL, and Saimei Zhu, his personal assistant.
[5] On or about 23 December 2020, XTHL and Sky entered into a construction contract in respect of subdivision works to be carried out on land at Knights Road, Rosedale, Auckland (Subdivision Contract).
1 At 11:55 am.
[6] On or about 25 March 2021, XTHL and Sky entered into five separate construction contracts for the construction of new residential dwellings on that land (Construction Contracts).
[7]The Construction Contracts contained terms that:
(a)The expected completion date (the date by which Sky reasonably believed Practical Completion of the works would be achieved) was 31 October 2021.
(b)Sky agreed to compensate XTHL for losses arising from delay at a rate of $2,000 plus GST for each week of delayed completion.
[8] As at 31 October 2021, Practical Completion of the works had not been achieved under the Construction Contracts.
[9] On or about 10 February 2023, XTHL, by its solicitors, gave notice cancelling the Construction Contracts and gave notice under cl 119(c) of the Subdivision Contract.
[10] On or about 3 March 2023, XTHL, by its solicitors, gave notice cancelling the Subdivision Contract.
[11] XTHL claims that Sky is indebted to it in the sum of $770,500 (the Debt) by way of liquidated damages, being $2,000 per week plus GST per Construction Contract for the period of 1 November 2021 to the date of cancellation of the Construction Contracts on 10 February 2023, totalling 67 weeks.
[12]On 17 February 2023, XTHL served Sky with a statutory demand for
$782,000.00 under ss 286 and 289 of the Companies Act 1993 (the Act). The statutory demand was served on Sky at its registered office and address for service.2
2 Affidavit of S Zhu at [3] and Exhibit A.
[13] The demand required Sky to pay the sum to XHTL within 15 working days of service.
[14] The 15 working days lapsed, and Sky had not paid the sum demanded, nor entered into a compromise under Part 14 of the Act, or otherwise compounded with XHTL or given a charge over its property to secure payment of the sum, to the reasonable satisfaction of XHTL.
[15] On 11 April 2023, XHTL filed a notice of proceeding and statement of claim in this Court for an order placing Sky in liquidation. The claim is based on Sky’s failure to respond to the statutory demand.
[16] Sky filed a statement of defence dated 26 April 2023. In this statement of defence Sky disputes the Debt, contending that XHTL is liable to Sky for sums under the Construction Contracts due to variations requested by XHTL and delays caused by XHTL that caused additional costs. Sky further contends that it is solvent and carrying on its business and able to pay its debts as they fall due.
[17] At the first call of this proceeding, a timetable was agreed by which Sky was to file and serve any affidavits in support of its defence by 23 June 2023, with XHTL to have four weeks to file and serve evidence in reply.3 As a consequence of Sky’s instruction of new counsel in July 2023, and it not having by then filed any evidence, the timetable was amended to provide that Sky would have until 25 August 2023 to file and serve any affidavits in support.4
[18] Sky did not comply with the timetable directions. It has not filed any affidavits deposing to the facts contained in its statement of defence.5
[19] As a result, the application proceeds on the unchallenged evidence before the Court from XTHL.
3 Memorandum of counsel dated 25 May 2023, with orders made by consent.
4 Minute of Associate Judge Brittain, 27 July 2023.
5 Prior to the hearing Sky’s solicitor on the record filed an interlocutory application for an order that they cease to be the solicitor on the record, as they had been unable to reach Sky for several months and had no instructions. An order was made on 3 November 2023.
Legal principles
[20] A creditor of a company may apply to this Court for a company to placed into liquidation.6 The Court may exercise its discretion to place a company in liquidation if satisfied that:7
(a)the company is unable to pay its debts;
(b)the company or the board of the company have persistently or seriously failed to comply with the Act;
(c)the company, or one or more of its directors or shareholders have intentionally provided the Registrar of Companies with inaccurate information;
(d)the company, or one or more of its directors or shareholders has persistently or seriously failed to comply with duties under the Act or the Financial Reporting Act 1993;
(e)the company does not comply with the essential requirements in s 10 of the Act; or
(f)it is just and equitable that the company is put into liquidation.
[21] A company that has failed to comply with a statutory demand is presumed to be unable to pay its debts.8 The presumption is rebuttable.9 To rebut the presumption, the company must present cogent evidence of solvency.10
Should liquidators be appointed?
[22] Having failed to comply with the statutory demand, Sky is presumed to be unable to meet its debts. Sky has not provided any evidence to displace that
6 Companies Act 1993, s 241(2)(c)(iv).
7 Section 241(4).
8 Section 287.
9 Heron’s Flight Ltd v NZ Properties International Ltd [2012] 1 NZLR 424 (HC) at [23].
10 Duffill Watts Ltd v Mogans Homes Ltd HC Auckland CIV-2009-404-1483, 28 May 2009 at [28].
presumption. It has not lodged any amounts into trust. It has not put any information concerning its financial position before the Court.
[23] I am satisfied therefore that the Court has jurisdiction to appoint a liquidator under s 241(4)(a) of the Act.
[24] While the Court has a residual discretion as to whether to place a company that is unable to pay its debts into liquidation, companies that are clearly insolvent should not be allowed to continue to trade.11 Permitting a company to continue to trade while insolvent poses a risk to existing and potential creditors.
[25] Sky has not presented any evidence to corroborate its defence that the Debt is disputed and that it is owed money by XHTL. Consequently, Sky has not persuaded the Court to exercise its residual discretion to not make an order for liquidation.
Associate Judge Gardiner
11 Bank of New Zealand Ltd v Rada Corporation Ltd [1989] 1 NZLR 750 (CA) at 757.
0
0
0