BODY CORPORATE 63891 v CORSAIR PRODUCTS LIMITED [2018] NZHC 1702

BODY CORPORATE 63891 v CORSAIR PRODUCTS LIMITED [2018] NZHC 1702 [10 July 2018]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-A-TARA ROHECIV-2018-485-145[2018] NZHC 1702UNDER the Companies Act 1993IN THE MATTER of an application to liquidateCorsair Products Limited pursuant tos 241(4)(a) of the ActBETWEEN BODY CORPORATE 63891PlaintiffAND CORSAIR PRODUCTS LIMITEDDefendantHearing: 9 July 2018Appearances: M Riordan for plaintiffM W Anderson for defendantJudgment: 10 July 2018JUDGMENT OF ASSOCIATE JUDGE JOHNSTON[1] In this proceeding the plaintiff, Body Corporate 63891, seeks an order for thewinding up of the defendant, Corsair Products Ltd.[2] The background can be outlined briefly.[3] The plaintiff is the body corporate of a complex in which the defendant is aunit title holder. For reasons which I am told are complex and which have developedover a long period of time, but which are ultimately irrelevant, the defendant fellbehind on the payment of body corporate levies so that by 13 December 2017 it wasindebted to the plaintiff in the sum of $11,594 for such levies. On that date the plaintiffserved a statutory demand pursuant to s 289 of the Companies Act 1993 for thatamount plus costs of $22,138. A total demand of $33,732. The defendant had15 working days to apply to set the statutory demand aside. It did nothing. In anaffidavit sworn on 24 April 2018 the defendant's director, Mr Tony Graham, said thathe did not receive the statutory demand until 15 December 2017, by which time therewas only a week before the court closed for the year and that because it was the holidayseason he did not have time to attend to the statutory demand. Needless to say, thatexplanation is not a satisfactory one.[4] On 1 February 2018 the plaintiff commenced this proceeding for an orderwinding the defendant up on the grounds of its insolvency. To establish insolvencythe plaintiff relied on the statutory presumption arising from s 288 of the Act followingon from the defendant's failure to meet the statutory demand.[5] The defendant entered a defence on 20 March 2018. In its defence it acceptedthat it had owed the $11,594 in body corporate levies, but questioned its liability forcosts of $22,138. The points raised in relation to these costs included:(a) the plaintiff had not raised any costs issues with the defendant prior tothe service of its statutory demand;(b) the invoices in question were raised by the plaintiff's solicitors againstthe plaintiffs and not against the defendant;(c) the plaintiff had not raised any invoices in respect of costs against thedefendant;(d) at least one item of costs appeared to relate to something unconnectedwith the plaintiff's claim against the defendant for levies;(e) the costs appear to include travel time and Mr Graham could not seehow travelling would be involved;(f) the costs — or some proportion of them — might relate back to anearlier dispute between the parties which was settled on the basis thateach party would bear its own costs.[6] Insofar as evidence of solvency is concerned the defendant accepts that it mustestablish its solvency, given that it did not meet the statutory demand or take steps inrelation to it. In order to do so Mr Graham, in the affidavit already referred to,deposed:(a) as the director of the company he was able to aver that the companywas not insolvent;(b) the company was essentially a property holding company and the valueof the two properties it held exceeded the indebtedness secured overthem by something approaching $150,000 so that it was not insolventfrom a balance sheet perspective;(c) the company's operating account was in credit to the tune of about$25,000;(d) the company had paid the outstanding levies of $11,594.[7] Since Mr Graham's first affidavit was filed and served, things have moved on:(a) first, simply by reason of the effluxion of time, further levies havebecome due to the plaintiff by the defendant which have been paid;(b) second, and critically, the defendant company has paid $22,000 to itssolicitors and consents to an order being made by the court that itssolicitors, Thomas Dewar Sziranyi Letts, are to hold those fundspending further order of this Court of any other court or tribunal havingjurisdiction over the dispute between the parties as to costs claimed bythe plaintiff.[8] Mr Riordan for the plaintiff and Mr Anderson for the defendant very helpfullyfiled written submissions so that at the hearing, it was possible to focus very quicklyon the key issues.[9] I am grateful for the assistance I received from both of them.[10] In the end, having reviewed the evidence and heard from Mr Riordan andMr Anderson, I have reached the following conclusions.[11] First, I am satisfied that the defendant has discharged its obligation ofdemonstrating that it is not insolvent. It is common ground that it has a positivebalance sheet position. It has demonstrated by paying the levies which were due as atthe date of the commencement of this proceeding, and those which have since becomedue, and paying the amount of the fees claimed by the plaintiff to its solicitors, that itis able to meet its obligations as they fall due.[12] I am also satisfied that there is a genuine dispute about how much, if any, ofthe fees claimed by the plaintiff against the defendants are due. For a start, feestotalling over $20,000 in respect of bankruptcy proceedings strike me as surprisinglyhigh. The plaintiff accepts that the claim was to some extent at least overstated as aresult of error. The defendant has raised other issues. In short, there is a genuinedispute about the fee component of the plaintiff's claim which in my judgment needsto be dealt with — most probably by the commencement of proceedings by theplaintiff in the District Court (although counsel tell me that the matter could belitigated in the Tenancy Tribunal).[13] For those reasons I dismiss the plaintiff's claim.[14] In doing so, by consent, I order that the defendant's solicitors hold the moniespaid to them pending agreement between the parties or further order of this Court orany other court or tribunal having jurisdiction in the matter.[15] That leaves costs. As I indicated to counsel during the course of the hearingmy preliminary view, subject to hearing further from them, is that the plaintiff isentitled to recover costs from the issue of the statutory demand bearing in mind thatthe defendant simply ignored that demand. However there may be matters aboutwhich I am unaware (and indeed Mr Anderson signalled as much). Accordingly, Ireserve costs and direct that:(a) the plaintiff file a memorandum as to costs (no more than 3 pages)together with a schedule of costs claims within 5 working days;(b) the defendant file a memorandum in response (again, no more than 3pages) within a further 5 working days.[16] I will deal with costs on the papers.Associate Judge JohnstonSolicitors:Morrison Mallet, Auckland for the plaintiffThomas Dewar Sziranyi Letts, Lower Hutt for the defendant