INTERNATIONAL INVESTMENT & FINANCIAL PLANNING LTD V CHEEKY LIL MONKEE AUCKLAND LTD HC AK CIV 2006-404-1629

INTERNATIONAL INVESTMENT & FINANCIAL PLANNING LTD V CHEEKY LIL MONKEE AUCKLAND LTD HC AK CIV 2006-404-1629 4 May 2006IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2006-404-1629IN THE MATTER OF an application pursuant to Section 290 of the Companies Act 1993 BETWEEN INTERNATIONAL INVESTMENT AND FINANCIAL PLANNING LIMITED Plaintiff AND CHEEKY LIL MONKEE AUCKLAND LIMITED Defendant Hearing: 4 May 2006 Appearances: R.N. McIlroy for Applicant M.L. Clark for Respondent Judgment: 4 May 2006 at 5pmCOST JUDGMENT BY ASSOCIATE JUDGE D.H. ABBOTT [REASONS FOR JUDGMENT ON COSTS]Solicitors: Shieff Angland, PO Box 2180, Auckland Vallant Hooker & Partners, PO Box 47088, Ponsonby, Auckland[1] The applicant seeks an order that a statutory demand served on it by the respondent be set aside. [2] The application to set aside had its first call in the Statutory Demands List before me at 11.45am today. [3] Ms Clark advised me that the respondent has withdrawn the demand. The only issue between the parties is over a claim by the applicant for costs. [4] After hearing counsel, I made an order that the respondent was to pay costs to the applicant on a 2B basis with disbursements as fixed by the Registrar. I said I would give my reasons in writing.Background[5] The statutory demand was issued by the respondent's solicitors on the respondent's behalf. It is dated 13 March 2006. It demands payment of $148,000 said to be due to the respondent under an agreement for sale and purchase dated 17 May 2005. [6] The demand was received by a director of the applicant, Haiming Zhu on Friday, 17 March 2006. It was delivered to him by courier at an address other than the company's registered office at that time. Mr Zhu says in an affidavit in support of the application that the applicant had stopped operating from the registered office in August 2005. It appears that a change of registered office may not have taken place until 23 March 2006. Mr Zhu says he could not be certain whether the demand had been served at the registered office at some point between 13 March and 17 March as he does not know who or what now operates from that address. [7] The application to set aside was filed and served on 27 March 2006. This was just within the 10 working days allowed, on the assumption that the demand could have been served on 13 March 2006.[8] In his affidavit Mr Zhu asserts that the sale and purchase agreement was a sham, was not acted upon, and could not have been acted upon (the landlord of the business premises having re-taken possession under the lease). Mr Zhu asserts that the sham agreement was drawn up to try to assist the respondent to resist a claim for re-entry for non-payment of rent and to resist claims by a previous owner of the business. [9] The applicant has also filed evidence showing that the Registrar of Companies gave public notice on 23 February 2006 of his intention to remove the respondent from the Register of Companies because he was satisfied that it had ceased to carry on business, and that the respondent was struck-off the Register on 24 March 2006. There is no evidence before the Court, and no suggestion from counsel for the respondent, that the respondent has been restored to the Register or that any steps are being taken to achieve that.Opposing arguments[10] The applicant seeks costs on the basis that the debt was clearly a matter of dispute and the application was necessary and properly made. He also submitted that it was an abuse of the process to serve the notice whilst it was in the process of being struck-off. [11] The respondent opposed an order for costs on the grounds that there was no indication of dispute at the time that the demand was issued. Counsel also submitted that the applicant could have responded to a letter explaining the basis for the claim (served with the statutory demand and also dated 13 March 2006) rather than go to the expense of issuing the application to set aside.Discussion[12] The statutory demand appears to have been issued, without any antecedent correspondence, nine months after the "agreement" was allegedly to have been settled.[13] Given the short period allowed for filing of the application, and the uncertainty regarding service on the registered office, I do not consider it unreasonable for the applicant to have filed its application rather than engage in correspondence with the respondent. That is all the more so given the apparent absence of any raising or explanation of claim prior to the letter served with the statutory demand. [14] I am satisfied that there is a basis for the dispute raised by the applicant. There is support for this view in the decision not to contest the application. It is further supported by the lack of any explanation of the difference between the sum claimed in the demand ($148,000) and the sum shown as the purchase price in the "sham agreement" ($56,500). [15] In my view the dispute should have been identified before issue of the statutory demand, and the demand should not have been issued. I also have misgivings about a demand which is issued when striking-off is imminent. I suspect that the respondent did not instruct its solicitors fully.Decision[16] In all circumstances, I consider that the applicant is entitled to costs against the respondent of and incidental to its application to set aside the statutory demand. Those costs are to be fixed on a 2B basis. Disbursements are to be confirmed by the Registrar. _______________________________Associate Judge D.H. Abbott