BOULDING PLANNING (OTAGO) LTD V AZUSA STREET LTD T/A AZUSA STREET TRUSTS HC HAM CIV 2008-419-000423

BOULDING PLANNING (OTAGO) LTD V AZUSA STREET LTD T/A AZUSA STREET TRUSTS HC HAM CIV 2008-419-000423 30 June 2008IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY CIV 2008-419-000423UNDER the Companies Act 1993 BETWEEN BOULDING PLANNING (OTAGO) LIMITED Plaintiff AND AZUSA STREET LIMITED T/A AZUSA STREET TRUSTS Defendant Hearing: 30 June 2008 Counsel: KI Bond for plaintiff Appearance: Mr W Phillips, a director of the defendant company Judgment: 30 June 2008 at 1120(ORAL) JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application to put defendant company into liquidation and appoint a liquidator]Solicitors: Carlisle Dowling, Private Bag 6021, Napier, plaintiff And To: WK Phillips, Azusa Street Ltd, 180 Whatawhata Road, Hamilton, defendant[1] The plaintiff applies to place the defendant company into liquidation and appoint a liquidator. [2] The application is made in reliance on s 241(4)(a) of the Companies Act 1993, namely, that the defendant company is unable to pay its debts. [3] Section 287 provides the statutory basis for inability to pay debts. It provides:287 Meaning of "inability to pay debts"Unless the contrary is proved, and subject to section 288 of this Act, a company is presumed to be unable to pay its debts if— (a) The company has failed to comply with a statutory demand; or (b) Execution issued against the company in respect of a judgment debt has been returned unsatisfied in whole or in part; or (c) A person entitled to a charge over all or substantially all of the property of the company has appointed a receiver under the instrument creating the charge; or (d) A compromise between a company and its creditors has been put to a vote in accordance with Part 14 of this Act but has not been approved.[4] Section 288 of the Companies Act 1993 provides:288 Evidence and other matters(1) On an application to the Court for an order that a company be put into liquidation, evidence of failure to comply with a statutory demand is not admissible as evidence that a company is unable to pay its debts unless the application is made within 30 working days after the last date for compliance with the demand. (2) Section 287 of this Act does not prevent proof by other means that a company is unable to pay its debts. (3) Information or records acquired under section 178 of this Act or, if the Court so orders, under section 179 of this Act, may be received as evidence that a company is unable to pay its debts. (4) In determining whether a company is unable to pay its debts, its contingent or prospective liabilities may be taken into account. (5) An application to the Court for an order that a company be put into liquidation on the ground that it is unable to pay its debts may be made by a contingent or prospective creditor only with the leave ofthe Court; and the Court may give such leave, with or without conditions, only if it is satisfied that a prima facie case has been made out that the company is unable to pay its debts.[5] The instructing solicitor for the plaintiff invites the Court to accept the following as proof of inability to pay debts, and I quote from the memorandum that has been filed:3(i) Certificate of Judgment or Order certifying Judgment obtained by Default in the District Court at Tauranga on 24 December 2007, which Judgment totals NINETEEN THOUSAND, EIGHT HUNDRED AND SIXTY FIVE DOLLARS AND SEVENTY NINE CENTS ($19,865.79), the amount of the Plaintiff's claim. (ii) Affidavit of TRACY LYN RYDER (hereinafter referred to as "Ms Ryder") sworn 5 June 2008 attesting that the Defendant Company was forwarded a copy of the Default Judgment on 7 January 2008 with a Letter of Demand demanding payment of the Judgment sum.[6] The letter which demanded payment provides:RE: BOULDER PLANNING ( OTAGO) LTD – 196856We refer to the above and the fact that Boulder Planning (Otago) Ltd has obtained a Judgment against Azusa Street Ltd in the District Court for the sum of $19,865.79. Unless satisfactory arrangements are made to clear this account by return, we can proceed as follows: 1. Issue a Distress Warrant to effect the seizure of goods and sell them to satisfy the debt. 2. Place a Charging Order over any Real Estate the company may have an interest in and force the sale of same. 3. Apply for an Order, which will attach to any monies owed to Azusa Street Ltd to enable Azusa Street Ltd to freeze those funds. 4. Proceed to have Azusa Street Ltd placed into Receivership. Although we have the right to proceed as indicated, we are offering you a final opportunity to resolve this issue. The action above will substantially increase the amount outstanding by way of inclusion of additional court and legal costs and those costs will be recovered from your company. To negate these consequences, a payment slip is attached at the bottom of this letter to be returned with your remittance.[7] That letter does not meet the definition of a statutory demand provided by s 289 of the Companies Act 1993. [8] Section 289 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 of this Act, 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 longer period as the Court may order.[9] This is the second call of this proceeding. The plaintiff has not established that the defendant is unable to pay its debts. As there is currently no evidential basis which would justify my appointing a liquidator and placing this company into liquidation, I strike the proceeding out. [10] The defendant company has not been represented by counsel. In these circumstances, it is not appropriate that an order for costs should be made consequent upon the striking out of this proceeding. [11] The defendant company must realise, however, that this judgment does not set aside the judgment which is referred to in the papers and which was issued in theDistrict Court at Tauranga on 24 December 2007. _____________________ JA Faire Associate Judge