Yang v Bushpark Property Development Limited
[2012] NZHC 2848
•30 October 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2008-404-4823 [2012] NZHC 2848
UNDER the Declaratory Judgments Act 1908
BETWEEN PEI CHI YANG, HSIU MEI SU AND LK TRUSTEE (NO 19) LIMITED
Plaintiffs
ANDBUSHPARK PROPERTY DEVELOPMENT LIMITED Defendant
Hearing: 30 October 2012
Counsel: GM Illingworth QC for plaintiffs
NH Malarao for defendant
Judgment: 30 October 2012
JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for leave to continue proceeding]
Solicitors: Loo & Koo, PO Box 99 687, Auckland 1140
Meredith Connell, PO Box 2213, Auckland 1140
YANG, SU AND LK TRUSTEE (NO 19) LIMITED V BUSHPARK PROPERTY DEVELOPMENT LIMITED HC AK CIV-2008-404-4823 [30 October 2012]
[1] The plaintiffs apply for leave to continue this proceeding.
[2] The application is made pursuant to s 248(1)(c) of the Companies Act 1993. Section 248(1)(c) provides:
248 Effect of commencement of liquidation
(1) With effect from the commencement of the liquidation of a company,—
…
(c) Unless the liquidator agrees or the Court orders otherwise, a person must not—
(i) Commence or continue legal proceedings against the company or in relation to its property; or
(ii) Exercise or enforce, or continue to exercise or enforce, a right or remedy over or against property of the company:
[3] This proceeding was filed on 24 July 2008 and included an application for summary judgment.
[4] The proceeding arises out of a contract in relation to a property at Karaka. The plaintiffs as vendor agreed to sell to the defendant company as purchaser the property. The essential terms were as follows:
(a) The purchase was $6.9 million inclusive of GST;
(b)The deposit was $1.03 million, representing 15% of the purchase price;
(c) Settlement was to be on 11 February 2008.
The agreement was based on the seventh edition of a form of agreement prepared by the Real Estate Institute of New Zealand and the Auckland District Law Society.
[5] Settlement did not occur. The summary judgment application was called before me on 14 November 2008. The minute recorded on the file at that time was as follows:
Judgment on liability is entered on basis that plaintiffs elect to proceed on the alternative prayer for relief. Adjourned for a two hour quantum hearing at a date to be fixed by the Registrar. Costs are reserved.
[6] In the plaintiffs’ statement of claim they recorded the following prayers for
relief:
THE PLAINTIFFS CLAIM
1.An order that the Defendant specifically perform the agreement for sale and purchase by paying the balance due according to its terms;
2.Alternatively an order that the Defendant specifically perform the agreement for sale and purchase on an interim basis such that it pays the balance of the purchase price due pursuant to the agreement after deduction of the sum of $2.54 million. That the sum of $2.54 million to be held in an independent trust account pending the final determination of the matter;
3.Interest, either in terms of the agreement for sale and purchase, or in accordance with the Judicature Act 1908 for such period as this Honourable Court thinks fit;
4. Costs.
And as an alternative cause of action:
1.At the Plaintiffs’ election, either a declaration pursuant to the Declaratory Judgments Act 1908 of the Plaintiffs’ entitlement to forfeit the deposit or damages in lieu of specific performance and/or forfeiture;
2.Interest for such period on such amount as the Honour Court thinks fit and either in accordance with the agreement or in accordance with the Judicature Act 1908;
3. Costs.
[7] My recall, and this was confirmed by counsel, was that the plaintiffs advised the Court of an election to proceed with a claim for damages in lieu of the claim for specific performance. It is for that reason that a quantum hearing was set and a date requested from the Registrar for it.
[8] A date for the quantum hearing was set for 7 May 2009. Prior to that hearing, however, the defendant company was placed into liquidation by order of this Court on 27 March 2009. The effect of that order was to bring into play s 248(1)(c) of the Companies Act 1993 and, no doubt, was the reason why the quantum hearing did not proceed.
[9] The next development occurred when the liquidators of the defendant company, on 30 April 2009, made demand on the plaintiffs for $345,000. That is the difference between 10 per cent of the purchase price retention referred to in clause
9.4(b)(i) of the agreement for sale and purchase, and the 15 per cent deposit that was actually paid by the defendant company to the plaintiffs on 27 February 2007. That claim was resisted. Proceedings were issued by the liquidators against the plaintiffs. Those proceedings came on for hearing before Collins J on 23 and 24 April 2012.
[10] Several causes of action were included in the statement of claim. What is important, however, is that his Honour gave judgment on the first cause of action only in favour of the defendant company against the plaintiffs and ordered, that the plaintiffs pay $345,000 to the defendant company.
[11] That judgment is currently the subject of an appeal and a cross-appeal.
[12] An issue was raised before me as to whether the plaintiffs were entitled to set-off the amount of their yet unquantified claim from the judgment entered by Collins J. It is not necessary that I decide that question, nor is it appropriate, because, clearly, that is a matter that would have to be determined at trial.
[13] In short, therefore, the plaintiffs and the defendant company have judgments against each other arising out the sale and purchase contract. They are the following:
(a) The plaintiffs’ liability judgment, with quantum yet to be determined in respect of damages for breach of contract arising from the failure to settle; and
(b)The defendant company’s judgment against the plaintiffs in respect of a proportion of the deposit that was paid in respect of the same contract.
[14] The liquidators’ position is that leave should not be given to continue the plaintiffs’ proceeding at this stage. What the plaintiffs should do is to file a proof of debt in respect of their claim.
[15] In Fisher v Isbey I summarised the factors which the Court routinely takes into account in determining whether leave should be given to continue with a proceeding pursuant to s 248(1)(c) of the Companies Act 1993.[1] Those matters are the following:
[1] Fisher v Isbey (1993) 13 PRNZ 182 (HC).
(a) The Court has a discretion whether to grant leave;
(b)It is a cardinal principle that there must be equality among various creditors, and the bringing of proceedings should not produce a comparative advantage to any particular creditor;
(c) The assets of the company should not be dissipated in wasteful litigation, particularly if there is a more convenient method for determining the claim. The onus is on the party seeking leave to satisfy the Court that leave should be given;
(d)The Court must determine whether it is appropriate for the creditors’ claims to be proved in the liquidation, or whether leave should be given to allow the claims to be established by way of civil proceedings;
(e) The appropriate test is that the Court must be satisfied that the proposed claim is not clearly unsustainable. The Court should not
examine the merits of the case.
[16] In the course of counsel’s helpful submissions I canvassed the possibility of my adjourning this application to enable the plaintiffs to file a proof of debt with the liquidators. In his affidavit in opposition, Mr Levin, one of the liquidators, deposed:
The liquidators have maintained that the filing of a proof of debt by the plaintiffs is an adequate means of proving their loss in this case.
[17] The claim is one for damages. The approach which a liquidator is authorised to follow in such case is set out in s 307 of the Companies Act 1993 which provides as follows:
307 Claim not of an ascertained amount
(1) If a claim is subject to a contingency, or is for damages, or, if for some other reason, the amount of the claim is not certain, the liquidator may—
(a) Make an estimate of the amount of the claim; or
(b) Refer the matter to the Court for a decision on the amount of the claim.
(2) On the application of the liquidator, or of a claimant who is aggrieved by an estimate made by the liquidator, the Court shall determine the amount of the claim as it sees fit.
[18] Having regard to that position, I put to both counsel that an appropriate course to follow in this case would be for me to adjourn the current application and to allow a proof of debt to be filed and a decision made by the liquidators. That course could be adopted without prejudice to the positions adopted by the parties. The advantage in it is that it may well make unnecessary any trial as to damages in respect of this proceeding. It will not, of course, address an issue between the parties, namely as to whether any judgment obtained by the plaintiffs can be set-off against the judgment which the defendant has against the plaintiffs. But that matter could not be resolved in this proceeding in any event and would have to be the subject of further applications under the Companies Act 1993.
[19] When I weigh the above matters up I reach the conclusion that it is premature, at this stage, to make a final determination of the application under s 248 and that the appropriate course is for me to adjourn the application on the understanding that a proof of debt will be filed and considered and a decision given by the liquidators in respect of it.
[20] Counsel helpfully conferred and gave me a timeframe within which that course could occur. That timeframe provides for the plaintiffs to file their proof of debt with supporting material with the liquidators by 14 November 2012 and for the liquidators to give their decision in relation to that material by 5 December 2012.
[21] Accordingly, I proceed on the basis that the proof of debt will be filed in accordance with the time indicated and that the decision will be given by the liquidators also within the time indicated. On that basis, I adjourn the application for a telephone conference call with counsel at 9am on 18 December 2012. The purpose of that call is to see whether or not an order is still required under s 248(1)(c) of the Companies Act 1993 and, if so, having regard to the further steps taken, whether further affidavit evidence is required to bring the Court up to date with the current position.
[22] I reserve costs in relation to the hearing before me today.
JA Faire
Associate Judge
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