OLD MONEY FAMILY TRUST V GLOBAL INVESTMENT TRUST LIMITED HC AK CIV-2005-404-2900

OLD MONEY FAMILY TRUST V GLOBAL INVESTMENT TRUST LIMITED HC AK CIV-2005-404-2900 21 December 2005IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV-2005-404-2900BETWEEN OLD MONEY FAMILY TRUST Plaintiff AND GLOBAL INVESTMENT TRUST LIMITED Defendant Hearing: 21 December 2005 Appearances: R O Parmenter for Plaintiff C Walker for Defendant Judgment: 21 December 2005(ORAL) JUDGMENT OF ASSOCIATE JUDGE DOOGUESolicitors: Ruby Law, P O Box 11061, Hamilton Fax: (07) 858-3351 – R O Parmenter Gilbert Walker, P O Box 1595, Auckland Fax: (09) 374-1111 – C Walker[1] This morning I have been hearing a claim by the plaintiff to put the defendant into liquidation. [2] The plaintiff on the 5 April 2005 served a statutory demand on the defendant. The statutory demand alleged that the defendant owed the plaintiff $450,000. There was sparse evidence adduced to prove the claim in the first round of the affidavits in this proceeding. Essentially it came down to Mr Hoffman's required affidavit verifying statement of claim. The plaintiff therefore put its case on the basis that it served a notice of claim for $450,000. That amount had not been paid, therefore the defendant company must be taken to be unable to pay its debts. [3] Since that time further affidavits have been filed including the affidavit by Mr McLoughlin, an expert accountant, whose affidavit I have already considered in my earlier ruling. It suffices to say that there has been a progressive scaling back of the amount that the plaintiff now claims to be able to prove as due and owing. The final position reached by counsel in his submissions for the plaintiff is that there was a sum of $86,000 owing. That is not conceded by the defendant. The defendant says that such sums as were paid to it by the plaintiff were subject to an agreement and the effect of all of that was that the amounts advanced are not due and owing. In any event the defendant says it has a cross claim against the plaintiff and finally the defendant says that there is express evidence that it is able to pay its debts. [4] I believe that the application can be disposed of on a fairly narrow ground. Mr Walker, for the defendant, referred me to the authority of Re First Fifteen Holdings Ltd 4 NZCLC 64, 108, a judgment of Wylie J. In that case, the Judge was considering a case where the petitioning creditor proceeded by way of a notice under s 218(a) of the Companies Act 1955. I understand that it is common ground between counsel in this case that the substance of that provision is the same as the one under which the application in the present case is made. That is to say that a presumption of insolvency follows from a non-compliance with a statutory notice requiring payment. In Re First Fifteen Holdings Ltd I note the amount claimed in that case was a sum of $14,178.62. The amount that the creditor was ultimately able to show was owing was in the order of $5,850. There was a substantial discrepancy betweenthe amount therefore in the statutory notice and the amount of the debt that was due and payable. [5] Mr Walker compares the facts in that case with this case and says that the disparity between the amount in the statutory demand and this case is even greater than it was in Re First Fifteen Holdings Ltd. In his judgment Wylie J said that where there has been a substantial disparity between the large sum which was the subject of the notice and the lesser sum that is able to be proved, it is not a case necessarily of the greater including the lesser. He said that the purpose of the notices was to give an alleged debtor fair and adequate notice of what is due so that it can reach a decision what it must do to avoid the consequences of failing to meet the demand for payment. In the case before him the Judge concluded that the petitioner had not complied with the statutory demand provision as the amount claimed in the notice was not the sum that was actually due, and that accordingly there never had been a valid statutory demand which the defendant had failed to comply with. He said that as the statutory demand was the sole basis for the application to wind up the company that application must be denied. [6] I agree that in this case the reasoning in Re First Fifteen Holdings Ltd is fully applicable to the facts here. It would be wrong to accord to the notice in this case the statutory consequences of the company to be deemed to be insolvent. In any event, if I am wrong about that, there is evidence here which does suggest that the company is able to pay its debts. Another possibility and basis upon which judgment could be given for the defendant is that it would be wrong to exercise the discretion to place the company in liquidation where there has been a misuse of the statutory notice procedure as I find there has been in this case. [7] On those grounds, therefore, the claim by the plaintiff is dismissed.Costs[8] The plaintiff has submitted that I might consider making an order in excess of scale having regard to the fact that the plaintiff has not complied properly with the statutory notice of procedure. That is one factor, I agree, that is relevant on thematter of costs. Against that Mr Parmenter has conducted the case for the plaintiff responsibly and has saved court time. I do not consider that this is an appropriate case to exceed the scale and there will be an order for costs payable to the defendant on a 2B basis. ____________________ J P Doogue AJ