Xing v WMW Trustees Limited
[2023] NZHC 1332
•31 May 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-002405
[2023] NZHC 1332
BETWEEN ZHONG XING
Plaintiff
AND
WMW TRUSTEES LIMITED
Defendant
CIV-2022-404-002406 BETWEEN
ZHONG XING
PlaintiffAND
LOVE HOMES LIMITED
Defendant
Hearing: 11 May 2023 Appearances:
Plaintiff in Person
R O Parmener for the Defendant
Judgment:
31 May 2023
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 31 May 2023 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors:
Carson Fox Bradley Ltd, Auckland R O Parmenter, Auckland
XING v WMW TRUSTEES LTD [2023] NZHC 1332 [31 May 2023]
[1] WMW Trustees Limited (WMW) and Love Homes Limited (Love Homes) apply to restrain advertising of liquidation proceedings brought against them by Zhong Xing (Mr Xing), and to stay the proceedings.
[2] Mr Xing brings separate, identical liquidation proceedings against WMW and Love Homes on the basis that the companies are presumed to be insolvent having failed to pay a debt demanded in statutory demands served on them on 25 November 2022.1
[3] WMW and Love Homes defend the liquidation proceedings,2 and apply to restrain advertising of and to stay the proceedings on identical grounds.3
[4]Those grounds are that:
(a)they are not indebted to Mr Xing; and
(b)no statutory demand was served on them before the liquidation proceedings were issued.
Legal principles
[5] The Court has the power under r 31.11 and its inherent jurisdiction to stay liquidation proceedings and restrain advertising.4 The relevant principles are:5
(a)The Court has an inherent jurisdiction to stay liquidation proceedings where there is a genuine dispute about the debt.
(b)The inherent jurisdiction is to prevent an abuse of process.
(c)The governing consideration is whether the proceedings suggest unfairness or undue pressure.
1 Statements of claim dated 19 December 2022.
2 Statements of defence dated 10 January 2023.
3 Interlocutory applications filed by WMW and Love Homes dated 10 January 2023.
4 High Court Rules 2016, r 31.11.
5 Nemesis Holdings Ltd v North Harbour Industrial Holdings Ltd (1989) 1 PRNZ 379 (HC); and
Taxi Trucks Ltd v Nicholson [1989] 2 NZLR 297, (1989) 1 PRNZ 390 (CA).
(d)The onus is on the applicant to establish a strong prima facie case of the existence of a genuine dispute on substantial grounds, or that there are clear and persuasive grounds for a stay.
The judgment debt relied on by Mr Xing
[6] WMW, Love Homes and 17 others were purchasers of sections from a company called Green Land Investments Ltd (Green Land). A liability judgment, essentially in favour of the purchasers’ claim for specific performance of the sale and purchase agreements, was delivered on 4 August 2022.6 That judgment sets out the detailed history between Green Land, Mr Xing, the defendants, and the other purchasers.
[7] Green Land raised a counterclaim relating to the fact that some of the purchasers had, even though they had not settled, built homes on the sections, and were in fact living in those homes.
[8]Jagose J deals with Green Land’s counterclaim, saying:7
Last, on Green Land’s claim for trespass damages, necessarily founded on Green Land’s continued possession of the lots, the parties have agreed an annual $19,500 rate per lot. Mr Lowry has specified the periods for which such rates should apply to the trespass lots; Mr Parmenter said in closing he accepted those calculations. I would award damages on this third counterclaim accordingly.
[9] His Honour directed counsel to draft orders for relief reflecting these determinations and including provision for costs. He directed that if such orders were not agreed there should be a remedies hearing. A remedies hearing took place on 1 May 2023. The outcome of that hearing was not to hand at the time of hearing of WMW and Love Homes’ applications to stay, the liquidation proceedings and to restrain advertising.
6 Li v Green Land Investment Ltd [2022] NZHC 1906.
7 At [65].
No debt owed by defendants to Mr Xing
[10] On the day the liability judgment was released, Mr Xing had an order sealed by the Court which recorded para [65] of the judgment as an ‘order’. On 25 November 2022, Mr Xing sent letters of demand to WMW, Love Homes and the other plaintiffs referring to the liability judgment at para [65], stating that Jagose J had awarded trespass damages of $19,500 per annum in favour of Green Land, and demanding that the recipients each pay him $27,513.70, his calculation of the sum owing.
[11] Mr Xing’s statement of claim proceeds on the basis that by failing to respond to these letters of demand, WMW and Love Homes are presumed to be insolvent.8
[12] There are two problems with Mr Xing’s reliance on this sealed order for the purposes of a statutory demand and consequent liquidation proceedings. The first is that there was no final order for the defendants to pay Green Land a sum of money. What Jagose J said at paragraph [65] was that he “would” award damages to Green Land. Under the heading “Remedy”, he said:9
My inclination is to order Green Land’s specific performance of the plaintiffs’ agreements, and the trespassing plaintiffs pay the agreed damages to Green Land.
[13] Final orders were not made. As noted, those orders were to be made on receipt of draft orders to give effect to his liability findings on both the plaintiffs’ specific performance claim and Green Land’s counterclaim, or failing agreed orders, after a remedy hearing. That remedy hearing only took place a short while ago, on 1 May 2023.
[14] Therefore, it was premature of Mr Xing to seal an order in favour of Green Land before final orders for relief were made. There was no final order, and consequently there is no debt.
8 Statements of claim dated 19 December 2022.
9 Li v Green Land Investment Ltd [2022] NZHC 1906 at [67].
[15] The second problem is that Green Land was the counterclaimant in the proceedings described, not Mr Xing. Consequently, any order against WMW, Love Homes, or the other plaintiffs in that proceeding to pay damages for trespass will be in favour of Green Land, not Mr Xing. Mr Xing has no standing to serve a statutory demand on the defendants based on an order in favour of Green Land.
[16] Belatedly, on the day before the hearing of the defendants’ applications to stay and restrain, Mr Xing sought to introduce into evidence a “deed of assignment”. This took the form of an interlocutory application to adjourn the hearing, accompanied by an affidavit exhibiting a signed deed of assignment (written in Chinese) dated 15 December 2022. I heard from Mr Xing on this application at the commencement of the hearing. Mr Xing abandoned his application to adjourn, but sought to rely on the deed of assignment.
[17] Mr Parmenter, for the defendants, objects to this deed being admitted into evidence in this proceeding. It was not referred to in Mr Xing’s statement of claim. There is a passing reference to an assignment in Mr Xing’s notice of opposition to the defendants’ application to stay and restrain, which refers to Mr Xing being an “assignee of the benefit of the judgment”. No details of the alleged assignment are referred to in the notice of opposition. Mr Xing’s affidavit in support of the notice of opposition does not provide any detail of an assignment, and no assignment is produced by him.
[18] Without giving leave for the late evidence to be admitted, I invited Mr Xing to file an affidavit with an English version of the deed of assignment. This was so I could at least understand the nature of the evidence that Mr Xing sought to have admitted. Mr Xing filed an affidavit exhibiting what is said to be an English translation of the deed of assignment dated 15 December 2022. The translation is dated 23 December 2022. In this document Green Land assigns to Mr Xing its interest in the sealed order dated 4 August 2022.
[19] I decline to admit this deed into evidence. Given that WMW and Love Holdings put in issue from the start Mr Xing’s standing to enforce Green Land’s
judgment,10 it is too late for Mr Xing to rely on a purported deed of assignment raised the day before the hearing.
[20] In any event, the deed of assignment does not assist Mr Xing. The deed (Chinese version) is dated 15 December 2022. Mr Xing confirmed at the hearing that this was the date that the deed was executed. The order on which Mr Xing’s letters of demand and these liquidation proceedings relies was sealed on 4 August 2022. The letters of demand were sent on 26 November 2022. Accordingly, even if the deed of assignment was properly produced and admitted into evidence, it cannot change the fact that Mr Xing was not entitled to the benefit of Green Land’s judgment when he sealed the order and sent the letters of demand to the defendants.
[21] A statutory demand is a demand by a creditor in respect of a debt that is due when the demand is issued. Section 289 of the Companies Act 1993 (Act) provides:
289 Statutory demand
(1)A statutory demand is a demand by a creditor in respect of a debt owing by a company made in accordance with this section.
(2)A statutory demand must—
(a)be in respect of a debt that is due and is not less than the prescribed amount; and
(b)be in writing; and
(c)be served on the company; and
(d)require the company to pay the debt, or enter into a compromise under Part 14, or otherwise compound with the creditor, or give a charge over its property to secure payment of the debt, to the reasonable satisfaction of the creditor, within 15 working days of the date of service, or such period as the court may order.
[Emphasis added].
[22] As Mr Xing is not a creditor of the defendants, and nor was there a debt due, the purported demands sent to the defendants on 25 November 2022 are a nullity.
10 Statements of defence dated 10 January 2023. .
No statutory demand served
[23] The so-called “statutory demands” issued by Mr Xing do not meet the requirements of s 289 of the Act in other ways. First, the demands were not in respect of a debt due when the demands were issued, for the reasons I have already explained.
[24] Second, a statutory demand must be served on the creditor company in a way that complies with s 387(1) of the Act, which provides:
387 Service of documents on companies in legal proceedings
(1) A document, including a writ, summons, notice, or order, in any legal proceedings may be served on a company as follows:
(a)By delivery to a person named as a director of the company on the New Zealand register; or
(b)By delivery to an employee of the company at the company’s head office or principal place of business; or
(c)By leaving it at the company’s registered office or address for service; or
(d)By serving it in accordance with any directions as to service given by the court having jurisdiction in the proceedings; or
(e)In accordance with an agreement made with the company; or
(f)By serving it at an address for service given in accordance with the rules of the court having jurisdiction in the proceedings or by such means as a solicitor has, in accordance with those rules, stated that the solicitor will accept service.
[25] In this case, Mr Xing sent an email to the defendants (and others) attaching a “letter of demand”. These emails do not meet the requirements of s 387(1) of the Act.
[26] Third, the letters of demand do not comply with s 289(2)(d) by informing the companies of their options, being to pay the debt, enter into a compromise, or give a charge within 15 working days of the date of service. Relatedly, the letter does not give 15 working days between the date of the demand and the date required for full payment.
[27] For these reasons, the statutory demand is not a statutory demand in terms of s 289 of the Act.
[28] In his notice of opposition, Mr Xing purports to rely on an “updated letter of demand under s 289”, dated 1 February 2023. In his affidavit filed in support of that notice of opposition, Mr Xing exhibits an email from him to Mr Parmenter attaching two “updated letters of demand … by way of service”. The attached statutory demand remedies the failure to comply with s 289(2)(d) in the previous letters of demand, but otherwise still fails to meet the requirements of s 289. It was not served on the defendants according to s 387(1) of the Act and was not in respect of a debt that was due when it was sent. In any event, Mr Xing had by this stage commenced liquidation proceedings based on the letters of demand dated 25 November 2022, and these “updated” demands are irrelevant.
Result
[29] The applications to have WMW and Love Holdings placed into liquidation cannot proceed on their current basis. The statutory demands on which the proceedings rely are a nullity.
[30]Accordingly, I order:
(a)the proceedings are stayed until further order of the Court;
(b)the plaintiff is restrained from publishing an advertisement or any other information relating to the statements of claim in the proceedings until further order of the Court;
(c)unless Mr Xing files amended statements of claim and amended evidence with an alternative basis for the proceedings within 10 working days, the proceedings will be struck out.
Costs
[31] The defendants have been successful and should be paid their costs. Mr Parmenter suggests that there are grounds for indemnity costs but prefers to take a pragmatic approach and seek scale costs based on a quarter-day hearing. He seeks 2B costs for WMW, the “nominal” applicant, and 2A costs for Love Homes, where
there are separate documents or attendances. I consider that a reasonable basis for the assessment of costs.
[32]Accordingly, I order:
(a)costs in favour of WMW Trustees Limited of $9,918.50, together with the filing fee for the statement of defence of $110, the application $200, scheduling fee $640, sealing fee $50, and 50% of the cost of the bundle at $211.75.
(b)costs in favour of Love Homes of $1,912 together with the filing fee for the statement of defence of $110, the application $200, scheduling fee $640, sealing fee $50, and 50% of the cost of the bundle at $211.75.
Associate Judge Gardiner
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