CAFFE ITALIANO MAJORIBANKS LIMITED V CAFFE ITALIANO WELLINGTON LIMITED HC WN CIV-2011-485-877

CAFFE ITALIANO MAJORIBANKS LIMITED V CAFFE ITALIANO WELLINGTON LIMITED HC WN CIV-2011-485-877 28 July 2011IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYCIV-2011-485-877UNDER the Companies Act 1993IN THE MATTER OF an application to set aside a statutorydemandBETWEEN CAFFE ITALIANO MAJORIBANKSLIMITEDApplicantAND CAFFE ITALIANO WELLINGTONLIMITEDRespondentCIV-2011-485-878AND UNDER the Companies Act 1993IN THE MATTER OF an application to set aside a statutorydemandBETWEEN SERIO IMPORT LIMITEDApplicantAND CAFFE ITALIANO WELLINGTONLIMITEDRespondentHearing: 28 July 2011Counsel: PSJ Withnall for the ApplicantsJ A Langford for the RespondentJudgment: 28 July 2011ORAL JUDGMENT OF MACKENZIE J[1] These are two applications to set aside statutory demands issued by the interim liquidator of the respondent company. The respondent and both applicant companies are associated in that Mr Apostolakis and Mr Guiroli are both directors and shareholders of the respondent and Mr Guiroli is a director and shareholder of each of the applicants.[2] A dispute had arisen in relation to the affairs of the respondent which led to an application by Mr Apostolakis to put the respondent company into liquidation on the just and equitable ground and there was an associated application for appointment of an interim liquidator. That application was granted by Associate Judge Gendall on 30 March 2011 and his reasons were given on 1 April. He noted that there had been an application for liquidation relying on the just and equitable ground and that there had been a breakdown in the relationship between Mr Apostolakis and Mr Guiroli. Mr Withnall informed me from the Bar that subsequently a winding up order was made in respect of the respondent and the interim liquidator is now the liquidator.[3] On 15 April 2011 the then interim liquidator issued statutory demands against each of the companies. Against Caffé Italiano Majoribanks Limited he made demand for the sum of "$234,000, the particulars of which are the amount owing as per the Caffé Italiano Wellington Limited (interim liquidator appointed) financial statements dated 31 December 2010". In the case of Serio Import Limited, the demand claimed the sum of "$127,898, the particulars of which are the amount owing as per the Caffé Italiano Wellington Limited (interim liquidator appointed) financial statements dated 31 December 2010".[4] The applicants apply to set aside the statutory demand. There is one ground which is common to both applications and that is that the issuing of the statutory demand was the beyond the powers of the interim liquidator under s 246 of the Companies Act 1993, in that the powers of the interim liquidator are limited to those necessary for the purpose of maintaining the value of the assets owned or managed by the company and that the present demands do not fall within those powers. I donot consider it appropriate to examine that matter in detail on this application because it seems to me that it is inextricable linked, on the facts of this case, to the other grounds which are raised.[5] Those other grounds are that in the case of Caffé Italiano Majoribanks Limited the sum of $234,000 does not represent a debt which is owing to the respondent. The interim liquidator has filed an affidavit to which he annexes copies of the accounts and also a letter apparently from Mr Guiroli, on behalf of the applicant company, stating that the accounts do not correctly set out the position between the two companies.[6] In the case of Serio Import Limited, the applicant's position is set out in theaffidavits in support of its opposition, which is that the entries which appear in the accounts of the respondent company reflect a transaction which had been intended to be entered into between the two companies. One aspect of that transaction was that Serio Import Limited would assume liability for a loan owing by Caffé Italiano Wellington Limited to the Bank of New Zealand in the amount of $140,000. The sum claimed of $127,898 is a balance which includes that $140,000 liability.[7] I am satisfied that both of the demands must be set aside as being ill-founded. They are based upon entries in the accounts of the respondent company. Accounting entries do not create debts; it is the transactions which the accounting entries reflect which create debts. In this case there is no evidence adduced by the interim liquidator to establish the basis of the claimed debt beyond the accounting entries themselves so I consider that there is an insufficient basis for the issue of the demands. Furthermore, it is clear from the evidence that there is a substantial dispute as to whether or not the accounting entries are correct. That is a dispute which will need to be resolved, but the mechanism of a winding-up petition is clearly not the appropriate vehicle for the resolution of a factual dispute of this nature.[8] For these reasons I am satisfied, as I have indicated, that both statutory demands must be set aside.[9] There will be an order for costs in respect of each of the applicants on a 2B basis. That order will be against the respondent. I make no order against the interim liquidator who would in any event be entitled to reimbursement from the assets of the respondent for any liability incurred."A D MacKenzie J"Solicitors: Ian Hay, Wellington for the Applicants (Counsel: PSJ Withnall, Barrister, Wellington).Clark Boyce, Christchurch for the Respondent.