CENTRAL PLATEAU STEEL STRUCTURES LIMITED trading as “CORESTEEL” v DEALERSHIP PROPERTIES LIMITED [2023] NZHC 3213

CENTRAL PLATEAU STEEL STRUCTURES LIMITED trading as "CORESTEEL" v DEALERSHIPPROPERTIES LIMITED [2023] NZHC 3213 [15 November 2023]IN THE HIGH COURT OF NEW ZEALANDROTORUA REGISTRYI TE KŌTI MATUA O AOTEAROATE ROTORUA-NUI-A-KAHUMATAMOMOE ROHECIV-2023-463-45[2023] NZHC 3213UNDER the Companies Act 1993IN THE MATTER OF an application for the liquidation ofDealership Properties LimitedBETWEEN CENTRAL PLATEAU STEELSTRUCTURES LIMITED trading as"CORESTEEL"PlaintiffAND DEALERSHIP PROPERTIES LIMITEDDefendantHearing: 24 October 2023Appearances: James McDougall for the PlaintiffShane Elliott for the DefendantJudgment: 15 November 2023COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLORThis judgment was delivered by me on 15 November 2023 at 3:00pmpursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors:Holland Beckett Law (James McDougall/Melissa Hunia), Tauranga, for the PlaintiffInsight Legal Limited (Hugh K Gladwell), Warkworth, for the DefendantCounsel:Shane Elliott, Blackstone Chambers, Auckland, for the DefendantIntroduction[1] This matter was called before the Court on 24 October 2023. At the hearing,the plaintiff's application was discontinued with leave of the Court as the amountclaimed in the liquidation proceedings had been paid by the defendant.[2] The plaintiff seeks an award of costs on a 2B basis (plus disbursements) againstthe defendant. Counsel for the plaintiff filed a memorandum as to costs dated 20October 2023, and counsel for the defendant filed a reply dated 23 October 2023.Counsel for the defendant's position is that costs should lie where they fall.Background[3] The plaintiff served a statutory demand on the defendant on 27 April 2023 forthe payment of a debt of $198,974.80. On 15 May 2023 the defendant company paidthe plaintiff $140,571.06, leaving a balance owing of $58,403.74 plus interest(the Debt).[4] On 27 June 2023 the plaintiff advised the defendant that the liquidationapplication would be filed without further notice if the Debt was not paid by 30 June2023. On 30 June 2023 the defendant proposed to pay the Debt to the plaintiff'scounsel's trust account, to be held pending resolution of remedial work, whichproposal the plaintiff did not accept.[5] The plaintiff filed the liquidation proceedings on 4 July 2023, which was thelast day liquidation proceedings could be filed based on the statutory demand.[6] The defendant company paid the Debt on 5 July 2023.[7] On 17 July 2023, the defendant was provided a copy of the pleadings and therequest was made to pay the plaintiffs 2B costs and disbursements.[8] The proceeding was served on the defendant's counsel via email by agreementon 8 September 2023.[9] The parties have not been able to agree costs.Plaintiff's submissions[10] Counsel for the plaintiff submits the presumption that a discontinuing plaintiffmust pay costs under r 15.23 of the High Court Rules 2016 is rebutted in this casebecause:(a) the payment of the Debt amounted to a change in circumstancesobviating the need for the proceeding to continue;(b) the plaintiff was the successful party, and the Debt was paid in full afterthe proceedings were issued;(c) costs followed the event;(d) the plaintiff acted reasonably, allowing the defendant until the lastpossible point to pay the debt, and the plaintiff should not have beenrequired to file the liquidation application and would not have done soif the defendant had paid the debt as required on or before 4 July 2023;(e) the plaintiff was put to unnecessary cost and expense in preparing andfiling the liquidation application;(f) it is just and equitable that the plaintiff be awarded costs in this case.[11] Counsel for the plaintiff refers to decisions of Royal Forest & Bird ProtectionSociety of New Zealand Inc. v Northland Regional Council and Davies & Co SolicitorsNominee Company Limited v Yelcich1 as examples of where the presumption in r 15.23has been successfully rebutted by the plaintiff.1 Royal Forest & Bird Protection Society of New Zealand Inc. v Northland Regional Council [2019]NZAR 587; Davies & Co Solicitors Nominee Co Ltd v Yelcich [2013] NZHC 2546.Defendant's submissions[12] Counsel for the defendant submits that the statutory demand issued by theplaintiff was inappropriately issued, as was the liquidation application. He submitsthe Debt was the balance of the purchase price under a construction contract betweenthe parties which was payable on practical completion, and practical completion wasnot achieved due to a number of significant remedial works to be done by the plaintiffwhich were outstanding.[13] Counsel for the defendant submits that the defendant repeatedly communicatedits position to the plaintiff that the purchase price would be paid on completion of theremedial works, and offered to pay funds into the plaintiff's solicitor's trust accountpending completion of the remedial works, which offer was refused by the plaintiff.[14] Counsel for the defendant submits that when it became clear the plaintiffintended to file its liquidation application notwithstanding the genuine dispute inregard to the debt, it paid the outstanding amount of 5 July 2023 to avoid unnecessarylitigation and cost. Counsel submits that the remedial works have not been carried outto date, and the defendant proposes to recover those costs from the plaintiff.[15] Counsel for the defendant submits that once the Debt had been paid, theappropriate course was for the plaintiff to discontinue the proceeding then, and if itwished, to apply for costs but instead the plaintiff allowed the proceeding to languishfor a further three months resulting in unnecessary litigation and costs.[16] Counsel for the defendant submits that this is an example of a statutorydemand/liquidation procedure being used as a means of leveraging collection of adisputed debt and the plaintiff had no genuine belief that the defendant was insolvent.Counsel refers to the decision of Gateway Cargo Systems Limited v Airborne FreightLimited2 as authority for the proposition that it is not permissible to use the statutorydemand procedure for collection of a disputed debt.2 Gateway Cargo Systems Limited v Airborne Freight Limited 16/3/04 CIV-2003-404-7207.Result[17] I am of the view that costs in this proceeding should lie where they fall. Therewas a genuine dispute between the parties as to construction work under theconstruction contract between them and outstanding remedial works. The dispute wascommunicated to the plaintiff by the defendant but nonetheless the plaintiff proceededto issue the statutory demand and then the liquidation proceedings. As theseproceedings should not have been issued in the circumstances of a genuinely disputeddebt, the plaintiff is not entitled to recover costs from the defendant.Order[18] I order that costs in this proceeding lie where they fall...Associate Judge Taylor