LISTER AND ANOR V S POINER LIMITED HC CHCH CIV-2010-409-000651

LISTER AND ANOR V S POINER LIMITED HC CHCH CIV-2010-409-000651 5 May 2010IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY CIV-2010-409-000651BETWEEN ANDREW ROSS LISTER 123 TRUSTEES LIMITED Plaintiffs AND S POINER LIMITED Defendant Hearing: 4 May 2010 Appearances: D Smith for Plaintiff A J Davis for Defendant M Elliott for Proposed Supporting Creditor Judgment: 5 May 2010RESERVED JUDGMENT OF ASSOCIATE JUDGE DOHERTY Introduction[1] The defendant has applied for orders restraining the plaintiff from advertising liquidation proceedings and for a stay of those proceedings. [2] Mr Elliott appeared on behalf of an intending supporting creditor (r 31.18), indicating that that creditor (Ron Samson) would appear in support of the defendant in any subsequent liquidation hearing, and today supported the defendant's applications. I granted leave to Mr Elliott to appear, noted Mr Samson's position whereupon Mr Elliott withdrew.Applicable principles[3] Rule 31.11 of the High Court Rules empowers the Court to make an order restraining publication of any advertisement required by r 31.9 or any otherinformation relating to that statement of claim and staying any further proceedings in relation to the liquidation. Rule 31.11(2) requires the Court to deal with such application as if it were an application for an interim injunction and provides that if the Court makes an order as sought, it may make it on such terms as the Court thinks just. The rule further provides that nothing in it shall limit the inherent jurisdiction of the Court. [4] The general principles applicable in respect of an application for an order retraining advertising and staying a winding up application were referred to by the Court of Appeal in Taxi Trucks Ltd v Nicholson [1989] 2 NZLR 297. That decision referred to the earlier Court of Appeal decision in Exchange Finance Co Ltd v Lemington Holdings Ltd [1984] 2 NZLR 242 and to the Court of Appeal and Privy Council decisions in Bateman Television Limited (in liq) & Anor v Coleridge Finance Company Ltd [1971] NZLR 794 (CA); [1971] NZLR 297 (PC). The principles were confirmed also in Nemisis Holdings Limited v North Harbour Industrial Holdings Limited (1989) 1 PRNZ 379 and Edge Computers Ltd v Colonial Enterprises Ltd (1996) 9 PRNZ 621. [5] From those authorities I extract the following specific principles as applying to this case: i. A winding up order will not be made where there is a genuine and substantial dispute as to the existence of a debt such that it would be an abuse of the process of the Court to order a winding up. ii. In such circumstances, the dispute, if genuine and substantially disputed, should be resolved through action commenced in the ordinary way. iii. The governing consideration is whether proceeding with an application savours of unfairness or undue pressure.iv. Rule 31.11 directs the Court to deal with the application as if it were an application for an interim injunction and enables the Court to impose terms on any order it makes. v. The onus is on the applicant (defendant) and it must demonstrate "something more" than the balance of convenience considerations applicable in the consideration of an application for interim injunctionThe issue[6] The statutory demand seeks arrears in rent of $71,236.31 which the plaintiff contends is the amount owing at the time of the statutory demand for an agreed amount of arrears of a rent as at 28 October 2009 and incorporating rental debits and payments and other credits since that time. [7] The defendant contends that the proceeding to wind it up brought by the plaintiff are unfair and seek to exert undue pressure, when in reality there is a dispute about the payment of a reviewed rental. [8] The question in this case is whether or not the applicant has shown a strong prima facie case of a dispute as to the water-tightness of a motel complex known as "Drifters Inn Motel", Hanmer Springs and whether the payment of rental at a certain rate is conditional upon the motel being watertight. [9] The defendant's view is that since July 2003 there have been issues as to the water-tightness of the complex. There is no dispute is so and that considerable effort has been made to alleviate the problems. The defendant says that leaks have not been remedied and a condition of acceptance of a 2008 review of rent has been suspended until such time as the water-tight issues have ultimately been resolved. [10] The plaintiff says the water issues have been resolved and these and the issues of rental were dealt with in a compromise arrangement in February 2007, and another in November 2009.[11] The defendant's point is that any agreement by way of compromise, as to amounts of rental payable and when they were payable, was predicated on the basis that the complex would be made watertight. The defendant says they are still not so.Discussion[12] The defendant has not overcome the evidential onus that is upon it because of the following facts: i) There was a settlement of various issues recorded in an agreement dated 27 April 2007. That agreement records the background to disputes that the premises had suffered several weather-tightness and other structural issues during the term of the lease and that the tenant had not kept up-to-date with rent payments under that lease. The settlement included: 1. the landlord would make good the leaks in a manner recommended by Mr Don Frame of House Care Limited. Mr Frame had provided a report as to the complex the month before; 2. the landlord would reduce the rental to $9000 (including GST) per month from the date of the agreement until the recommendations of Mr Frame had been fully carried out to his satisfaction; and thereafter the rent would change to the "amount set by the most recent rent review". 3. the agreement was expressed to be in full and final settlement "of all known liability between the parties as at the date of this agreement". It went on to say "For the avoidance of doubt, it does not cover any further undiscovered building issues affecting Drifters Inn."ii) A firm of engineers (Sinclair Knight Merz) were engaged by the plaintiff to oversee the completion of any work recommended by Mr Frame. iii) Following the April 2007 agreement the representatives of the defendant continued to complain about leaking. The plaintiff addressed the leaks. Some of those took time to resolve. iv) The plaintiff purported to increase the amount of rent payable in accordance with the rent review mechanism in the lease. v) Rental remained in arrears. vi) On 16 December 2008 Mr Frame inspected the complex and reported "all known water tightness issues have now been rectified". vii) On 28 October 2009 the defendant, through its solicitors, offered to pay a certain sum in full and final settlement of the then arrears, confirmed the defendant would thereafter pay the full amount of the reviewed rental on time and deal with the arrears by additional weekly payments of $3000. Solicitors for the plaintiffs accepted that arrangement provided: a formal deed of rent review was signed and the defendant advised a date by which a copy of its 2009 accounts would be available. The arrangement was concluded on 5 November 2009. Neither the offer from the defendant's solicitors nor the concluded agreement was conditional on any water-tightness issues being resolved. viii) Mr Frame inspected the property in December 2009, and in a report of February 2010 concluded the water-tightness issues had been rectified.ix) In response to further complaints from the defendant, Mr Frame completed another inspection of the property on 12 March 2010. He identified minor leaks. He made two recommendations to rectify. Mr MacDonald of Sinclair Knight Merz is of the view that both of the recommended actions are "minor and both are on the exterior of the motel. Neither interferes with the operation of the motel." x) Draft accounts provided by the defendant show the defendant made a loss for each of the financial years ending 31 March 2008 and 2009. [13] The defendant is stuck with the bargain it made in November 2010. The November 2009 compromise was at the instigation of the defendant and on its terms (save for the inconsequential conditions of the plaintiff). Never was it expressed to be subject to, or made on the understanding that, there were to be conditions fulfilled by the plaintiff as to weather-tightness. In any event, the evidence of the engineer (Mr MacDonald) is that any remaining leaking issues are minor and would not affect the running of the motel. [14] On the evidence available there is no substantial dispute as to the fact that any arrears of rental and current rental ought to be paid. The plaintiff is entitled to take the view that the defendant is unable to pay the amount set out in the statutory demand. There is nothing about this proceeding that smacks of unfairness or undue pressure. [15] There are no other matters to take into account in assessing "the balance of convenience". The fact Mr Samson supports the defendant is something he can pursue in any hearing of the statement of claim. [16] The applications are dismissed. [17] I confirm the hearing date of 17 May 2010 at 10.30 a.m. remains.[18] There is no reason why costs should not follow the event. They are awarded to the plaintiff on a schedule 2B basis with disbursements as set by the Registrar. ______________________ Associate Judge Doherty