CONTACT ENERGY LTD V GREAT WESTERN LAND LTD HC AK CIV-2010-404-5808

CONTACT ENERGY LTD V GREAT WESTERN LAND LTD HC AK CIV-2010-404-5808 18 November 2010IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV-2010-404-5808IN THE MATTER OF the Companies Act 1993 BETWEEN CONTACT ENERGY LIMITED Plaintiff AND GREAT WESTERN LAND LIMITED Defendant Hearing: 18 November 2010 Appearances: Mr D T Broadmore for plaintiff Mr J Nguy for defendant Judgment: 18 November 2010(ORAL) JUDGMENT OF LANG J [on costs]Solicitors: Buddle Findlay, Auckland Jesse & Associates, Auckland[1] In this proceeding Contact Energy Limited ("Contact") seeks to place Great Western Land Limited ("Great Western Land") in liquidation. The proceeding has its genesis in debts that Great Western Land owes to Contact Energy pursuant to an electricity supply agreement that the parties entered into in January 2010. [2] The proceeding has an unusual procedural background. It is necessary to set that out in order to understand the issue that I am now required to determine.Background[3] As is usually the case, the liquidation proceeding was preceded by the service of a statutory demand on the registered office of Great Western Land. That occurred on 26 July 2010, when Contact served a statutory demand requiring Great Western Land to pay the sum of $4,748.23 in respect of electricity supplied up to 21 July 2010. [4] Great Western Land failed to comply with the demand, and as a result Contact became entitled to file an application for an order that it be placed in liquidation. It filed its statement of claim on 31 August 2010, and the proceeding for listed for first call on 13 October 2010. [5] When the proceeding was called before the Associate Judge on 13 October 2010, counsel for Great Western Land produced evidence that his client had paid the debt earlier that morning. The proceeding was therefore adjourned to 3 November 2010 to confirm that the payment had been made. [6] When the proceeding was called before me on 3 November 2010, counsel for Contact advised me that the cheque had been dishonoured. On that basis Contact sought an order placing Great Western Land in liquidation. At that point counsel for Great Western Land produced a bank cheque for the sum of $4,748.23, being the amount claimed in the statutory demand. [7] That was not, however, the end of the matter because earlier, on 1 November 2010, Contact had filed an amended statement of claim in which it asserted thatGreat Western Land was indebted to it in the sum of $22,665.79. That sum comprised the amount claimed in the statutory demand, a bond of $7,000 that Great Western Land had been requested to pay under the supply agreement and the cost of further electricity supplied since the debt that was the subject of the statutory demand had been incurred. [8] Counsel for Great Western Land advised me that his client wished to file a statement of defence to the amended statement of claim. I therefore adjourned the proceeding to 16 November 2010 for a defended hearing. [9] When the matter was called on that date, counsel for Great Western Land indicated that he was in a position to provide Contact with a bank cheque in the sum of $10,931.56. That sum comprised the cost of the electricity that Contact had supplied to Great Western Land since the debt that was the subject of the statutory demand had incurred. He submitted that matters were now at an end, and that Contact could not prove that the sum of $7,000 was owing in respect of the bond. [10] A further important point emerged during the hearing on 16 November. This arises from the fact that Contact has been anxious to sever its business relationship with Great Western Land. It maintained that it had sought on numerous occasions to obtain access to Great Western Land's premises in order to disconnect the power supply, but had been unable to do so. For that reason I adjourned the proceeding to today's date on several conditions. [11] First, I directed that Great Western Land was to hand over the bank cheque of $10,931.56 to counsel for Contact. Secondly, I directed that counsel were to facilitate Contact gaining access to Great Western Land's premises on 17 November 2010 for the purpose of disconnecting the power supply. I then re-listed the matter for mention before me today. [12] When the proceeding was called today, counsel confirmed that the bank cheque for $10,931.56 had been handed to counsel for Contact on 16 November. Secondly, counsel confirmed that Contact had gained access yesterday to Great Western Land's premises and had been able to disconnect the power.[13] Counsel for Contact advised me today that, by the time the power was disconnected, Great Western Land had incurred further charges totalling $2,793.08 in respect of the supply of electricity. In addition, Great Western Land was liable to pay Contact a disconnection fee of $125. Counsel for Great Western Land accepts that these sums are owing and has today provided counsel for Contact with a bank cheque for the sum of $2,793.08. [14] Contact has filed an affidavit by its legal counsel in which she has annexed a number of documents including the supply agreement. Other documents annexed to the affidavit make it clear that at some stage Contact had also requested Great Western Land to pay the bond of $7,000. The deponent confirms, however, that the bond is no longer required because of the fact that the power has now been disconnected from Great Western Land's premises. Presumably, the fact that payment has now been made in full for all electricity supplied also renders the bond largely nugatory. The important point, however, is that Contact's legal counsel confirms that the bond is not now required. [15] Great Western Land accepts that costs should be payable on a 2B basis together with disbursements as fixed by the Registrar. Contact disagrees. It maintains that the supply agreement required Great Western Land to pay costs on a solicitor/client basis when those costs were incurred for the recovery of outstanding electricity charges. Contact has apparently incurred costs totalling approximately $10,000, and it maintains that Great Western Land is liable to pay these in full.Should the company be placed into liquidation?[16] Contact asks the Court to place Great Western Land in liquidation because of the fact that it continues to owe money to Contact in the form of the outstanding legal costs. It points out that jurisdiction to make the order arose when Great Western Land failed to comply with the statutory demand served upon it on 26 July 2010. It says that the events that have occurred since that time confirm that Great Western Land is insolvent and that other creditors may be at risk.[17] Generally speaking, once the amount owing to a creditor is paid in full the Court will not place a company in liquidation. It will dismiss the proceeding, but make an order for costs against the defendant. That, in turn, is enforceable in the same way as the original debt. [18] I take the view that the amount currently outstanding as claimed in the statement of claim has been paid. This comprises the cost of the electricity that Contact has supplied to Great Western Land, together with the disconnection fee. The bond is no longer an issue because the power has been disconnected. I do not consider that it would be appropriate to place Great Western Land in liquidation because it has not paid the costs of this proceeding.Costs[19] The issue now becomes the extent to which I should make an award of costs. Costs on a Category 2B basis would normally be awarded. I accept, however, that Contact has a contractual right to recover its actual and reasonable costs on a solicitor/client basis. Contact has not, however, provided any details of how those costs are made up. For that reason Great Western Land has had no opportunity to assess whether or not those costs are reasonable. [20] For this reason I propose to reserve the question of costs at this stage. I refrain from making an award of costs on a Category 2B basis, because that would not finally resolve all outstanding issues between these parties. If I made an award on that basis, I have no doubt that a further dispute would arise regarding the quantum of Contact's costs. It seems to me that the parties should be given the opportunity in the first instance to reach agreement regarding this issue. If they cannot do so, I will determine the issue on the basis of such material as the parties wish to place before me. [21] I therefore dismiss the liquidation proceeding but formally reserve the issue of costs.[22] The parties are to liaise over the next seven days in an effort to resolve the quantum of costs. If they cannot do so, counsel for Contact is to file a memorandum with a short supporting affidavit seeking the costs award that it considers to be appropriate. That is to be the subject of a response by Great Western Land within seven days thereafter. Counsel for Contact may file any memorandum in reply seven days after it receives a response from Great Western Land. I will then determine the issue of costs on the papers. Lang J