RASMUSEN POULTRY FARM V WHOLEFOODS BAKERY HC WN CIV-2006-485-1067

RASMUSEN POULTRY FARM V WHOLEFOODS BAKERY HC WN CIV-2006-485-1067 30 June 2006IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV-2006-485-1067IN THE MATTER OF the Companies Act 1993 BETWEEN RASMUSEN POULTRY FARM LIMITED Plaintiff AND WHOLEFOODS BAKERY LIMITED Defendant Hearing: 26 June 2006 (and subsequent affidavits filed by direction of the Court on 27 June and 29 June 2006) Appearances: B M Piper for Plaintiff J Williams for Defendant Judgment: 30 June 2006JUDGMENT OF ASSOCIATE JUDGE D I GENDALL Introduction[1] The plaintiff seeks an order placing the defendant company into liquidation on the grounds that the defendant is unable to pay its debts pursuant to s 241(4)(a) Companies Act 1993 ("the Act"). [2] Although the defendant has filed no formal defence or opposition to the application, before me Mr Williams appeared and on behalf of the defendant opposed the making of any order for liquidation. [3] I heard the present application on 26 June 2006 as part of and following the hearing of a similar application – brought by the Commissioner of Inland Reveueunder CIV-2006-485-625 also seeking an order to place the defendant company into liquidation.Decision[4] The plaintiff served a statutory demand upon the defendant on 1 March 2006. The statutory demand claimed payment of $8,108.09 being an amount said to be outstanding in respect of goods supplied by the plaintiff to the defendant. [5] The defendant took no steps to apply to set aside the statutory demand. Indeed before me counsel for the defendant confirmed that the debt was not disputed. [6] Then on 4 May 2006 the plaintiff commenced the present proceedings by filing a statement of claim and supporting documents in this Court. [7] Section 241(4) states in part:(4) The Court may appoint a liquidator if it is satisfied that – (a) The company is unable to pay its debts [8] Section 287 of the Act provides that a company is presumed (not deemed) to be unable to pay its debts if, amongst other things, the company has failed to comply with a statutory demand. [9] Notwithstanding this, if the debt on which a liquidation application is based is the subject of a genuine dispute of a substantial nature, the Court may refuse a liquidation order or alternatively make an order at least to stay the proceedings. [10] Here, the defendant does not appear to dispute the debt. Its grounds for opposing the liquidation application appear to be twofold: a) An allegation that the plaintiff has not complied with s 288(1) of the Act in that it has not commenced these proceedings within the 30 working day time limit from the last date for compliance with the statutory demand.b) A suggestion that the defendant company is solvent and that it would be unfair to make a liquidation order here. [11] I turn now to consider these two aspects.Section 288(1) of the Act[12] This section states:On an application to the Court for an order that a company be put into liquidation, evidence of failure to comply with a statutory demand is not admissible as evidence that a company is unable to pay its debts unless that application is made within 30 working days after the last date for compliance with the demand.[13] Here the statutory demand was served on 1 March 2006 – an affidavit of service has been filed confirming this. [14] The statutory demand required compliance within 15 working days, that is by about 22 March 2006. [15] A period of 30 working days from 22 March 2006 expires as I see it on or about 8 or 9 May 2006. This is some six weeks from 22 March 2006, taking into account the exclusion of Good Friday, Easter Monday and Anzac Day. [16] Both before me and in the recent affidavit of Mr Michael Kooiman for the defendant dated 29 June 2006, the defendant contends that this 30 working day period from 22 March 2006 runs out on 2 May 2006. This is wrong. The correct expiry date of this period is, the earliest, 8 May 2006. [17] This proceeding was commenced with the plaintiff's statement of claim being filed on 4 May 2006. This was before 8 May 2006 and clearly within the 30 working day period provided for in s 288(1). I find therefore that this section has been complied with. There is nothing in the defendant's defence based upon non- compliance with s 288(1).Defendant company is solvent[18] Before me on 26 June 2006, Mr Williams for the defendant implied that the defendant company was solvent and it would therefore be unfair to make a liquidation order. [19] This was based upon the fact that the defendant company was in the process of purchasing two substantial properties which it had made arrangements to place on the market for sale and once sold counsel for the defendant contended funds would be available to settle the debt in question. [20] Regrettably, however, these submissions overlooked one important aspect. This was that the defendant company in agreeing to buy these two properties for $1.315m and $300,000 respectively from a related company, Underground Construction Limited, had a substantial debt to the vendor and the mortgagees being the unpaid purchase price in each case. It seems that at most deposits of only $5,000 on each purchase contract had been paid. [21] Further, despite the sole director of the defendant, Mr Michael Kooiman, filing affidavits in this and the related liquidation proceeding, he omitted to place before the Court any details of the defendant's financial position to satisfy the Court as to its solvency. Indeed, in the last paragraph (18) of his affidavit of 16 June 2006, Mr Kooiman referred to this solvency issue when he rather curiously stated "I believe that the company is not in fact insolvent as ". It must follow that I can take nothing from this claim. Mr Kooiman appears to acknowledge that reasons for the claim were obviously required but none were provided. This omission was also not remedied in his further affidavit dated 29 June 2006 just filed. [22] For all these reasons I am not satisfied that the defendant has done nearly enough here to satisfy the Court that it is solvent and that an order for liquidation should be refused on this basis.[23] Finally, before me on 26 June 2006, Mr Williams for the defendant contended that this matter should simply be adjourned to enable the defendant company to have an opportunity to settle the debt. [24] The debt which is undisputed by the defendant is significant. It has been outstanding since well before 24 February 2006 when the statutory demand was issued. [25] No application was made to set aside the statutory demand nor has a defence to the plaintiff's claim of any substance been put before the Court. [26] On this basis an adjournment of this matter is not appropriate.Conclusion[27] In conclusion, for the reasons I have outlined above, I am satisfied first that in terms of s 287 of the Act the defendant company must be presumed to be unable to pay its debts and secondly there is no proper reason to refuse the order for liquidation sought by the plaintiff here. [28] Under normal circumstances therefore, an order for liquidation would follow but an order placing the defendant company into liquidation has already been made today, 30 June 2006, under the proceeding CIV-2006-485-625 brought by the Commissioner of Inland Revenue – and noted at [3] above. Had that not occurred then a liquidation order would have been made in the present proceeding. [29] Solely on the basis of that prior liquidation order in CIV-2006-485-625 the present proceeding must be (notionally) dismissed and an order to that effect is made.Costs[30] Costs are awarded to the plaintiff on this proceeding however on a category 2B basis together with disbursements as fixed by the Registrar. _________________________Associate Judge D I GendallSolicitors: Horsley Christie, Wanganui, for Plaintiff Delivered at 3.30pm on Friday 30 June 2006.