STYLO MEDICAL SERVICES LIMITED v HUM HOSPITALITY LIMITED [2023] NZHC 463

STYLO MEDICAL SERVICES LIMITED v HUM HOSPITALITY LIMITED [2023] NZHC 463 [16 March2023]IN THE HIGH COURT OF NEW ZEALANDTAURANGA REGISTRYI TE KŌTI MATUA O AOTEAROATAURANGA MOANA ROHECIV-2022-470-154[2023] NZHC 463UNDER Section 241, Companies Act 1993BETWEEN STYLO MEDICAL SERVICES LIMITEDPlaintiffAND HUM HOSPITALITY LIMITEDDefendantHearing: 20 and 23 February 2023Appearances: R O Parmenter for PlaintiffC Harpur for Auckland CouncilR Armitage in personJudgment: 16 March 2023JUDGMENT OF ASSOCIATE JUDGE BRITTAINThis judgment was delivered by me on 16 March 2023 at 10.00 am.Pursuant to Rule 11.5 of the High Court Rules...Registrar/Deputy RegistrarSolicitors / Counsel:Winston Wang & Associates, AucklandR O Parmenter, AucklandRice Spier, AucklandIntroduction[1] The plaintiff, Stylo Medical Services Limited (Stylo), is a creditor of thedefendant, Hum Hospitality Limited (Hum), by virtue of three judgments obtained byStylo against Hum in CIV-2019-404-365 for $106,184.82, $21,968.58 and $16,384.[2] On 14 November 2022, Stylo served a statutory demand on Hum at Hum'sregistered office at 124 Hynds Road, Gate Pa, Tauranga, demanding payment of thejudgment debts. Hum took no steps in respect of the statutory demand.[3] On 8 December 2022, Stylo filed this proceeding seeking an order putting Huminto liquidation (the liquidation proceeding). On 12 December 2022, Stylo servedHum with the notice of proceeding, statement of claim and affidavit verifying thestatement of claim, at Hum's registered office. Hum has taken no steps in respect ofthe liquidation proceeding.Procedural background[4] On 21 December 2022, Stylo advertised the liquidation proceeding in the NewZealand Gazette and the Bay of Plenty Times. The hearing date for the first call of theliquidation proceeding was 3 February 2023 at 10 am, correctly stated in theadvertisements.[5] Prior to the first call of the liquidation proceeding, counsel for Stylo filed amemorandum drawing various matters to the Court's attention, including a potentialconflict on the part of Associate Judge Sussock, who was to hear the matter on3 February 2023.[6] On 18 January 2023, Associate Judge Sussock issued a minute acknowledgingthat she had previously acted for Hum, and making the following directions:(a) The liquidation proceeding would be called in open Court on3 February 2023, but appearances for the plaintiff and the defendantwere excused.(b) On 3 February 2023 the liquidation proceeding would be adjourned to20 February 2023, to be heard by me.(c) A copy of the directions were to be made available to the defendant'sdirector and shareholder, Ms Rosanne Armitage.[7] On 20 January 2023, Auckland Council filed an appearance in support of theapplication for putting Hum into liquidation. Auckland Council is a creditor of Humfor the sum of $11,488.84.[8] On 31 January 2023, Ms Armitage filed four documents:(a) A "First Filing Memorandum" in her capacity as a creditor of Hum,together with a notice of appearance opposing the application forputting Hum into liquidation. The appearance states that Ms Armitageis a creditor of Hum for $2,471,189.58.(b) A "First Filing Memorandum" in her capacity as a shareholder of Hum,together with a notice of appearance opposing the application forputting Hum into liquidation. The appearance confirms thatMs Armitage holds all of the shares in Hum.[9] On 3 February 2023, the liquidation proceeding was called in Court andadjourned to 20 February 2023. Appearances for the plaintiff and defendant wereexcused. The purpose of dealing with the matter in that way was to ensure that anyother party that wished to appear, following advertising of the proceeding, had theopportunity to do so on 3 February 2023. No party appeared.[10] Prior to the call of the liquidation proceeding on 20 February 2023, Stylo andMs Armitage filed further documents:(a) On 7 February 2023, counsel for Stylo filed a memorandum.(b) On 17 February 2023, Ms Armitage filed an application requesting anextension of time to apply to stay or strike out the liquidationproceeding, and an affidavit in support.(c) On 20 February 2023, Ms Armitage filed a memorandum requestingthat the liquidation proceeding be adjourned "pending proper serviceand so that Stylo can comply with r 31.10 [of the High Court Rules2016] as to the affidavit of evidence being sworn ".[11] When the liquidation proceeding was called on 20 February 2023,Mr Parmenter appeared for Stylo, Ms Harpur appeared for Auckland Council, andMs Armitage appeared in person. Ms Armitage accepted that the substance of thegrounds advanced by her in her application for a stay or strike-out are all of thegrounds that she advances in opposition to Stylo's application for an order puttingHum into liquidation. I proposed to counsel and Ms Armitage that the substantiveliquidation proceeding and the application for a stay or strike-out could be dealt withtogether, requiring a short fixture. All parties agreed. On that basis, I adjourned theproceeding for a 1.5 hour fixture on 23 February 2023 at 10 am.[12] On 23 February 2023, Mr Parmenter, counsel for Stylo, Ms Quinn, counsel forAuckland Council, and Ms Armitage all appeared by VMR. Prior to the hearing, allparties filed written submissions. By consent, Ms Armitage presented her oralsubmissions first, followed by Mr Parmenter and Ms Quinn, with Ms Armitage havinga right of reply. By consent, and pursuant to a direction during the hearing,Ms Armitage filed further written submissions on the issue of the legal test for serviceof a statutory demand under s 387(1)(c) of the Companies Act 1993. Thosesubmissions were received by the Court on 2 March 2023.[13] On 6 March 2023, counsel for Auckland Council filed a brief memorandumresponding to Ms Armitage's submissions dated 2 March 2023, confined to the issueof service of the statutory demand on Hum. Ms Armitage replied with two furthermemoranda, both dated 6 March 2023, which included as attachments variousphotographs of the property at 124 Hynds Road. Finally, Ms Armitage filed an"Updating Memorandum" dated 13 March 2023. I have considered all of thosesubmissions.A snapshot of the litigation between Stylo and Hum[14] Stylo, Auckland Council and Hum have been embroiled in litigation since2014. I will not set out the factual background in full because it has been traversed inseveral decisions of this Court and the Court of Appeal.1 For present purposes, theparties' dispute can be summarised as follows: Hum leased an old Grafton villa fromStylo, fell into arrears in paying rent and made various allegations against Stylo,including pre-contractual misrepresentation and breach of the covenant of quietenjoyment.[15] I will not endeavour to set out a full history of the numerous proceedings andapplications commenced by Stylo and Hum. Suffice to say that this matter has taxedthe Courts on numerous occasions.2 I will, however, mention some aspects of thehistory of the litigation to provide context to this liquidation proceeding.[16] In 2016, Hum commenced CIV 2016-404-636 against Stylo alleging that Humwas induced to enter into the lease by precontractual misrepresentations and allegingthat Stylo had breached the landlord's covenant of quiet enjoyment (themisrepresentation proceeding). Other defendants were added later, includingAuckland Council. On 2 June 2021, Associate Judge Bell ordered Hum to pay $50,000in security for costs in respect of Hum's claim against Auckland Council.3 In addition,Hum was ordered to pay Auckland Council's costs on its successful application forsecurity for costs,4 an amount of $11,688.44. Hum has not paid the security for costs,and as a consequence Hum's proceeding against Auckland Council is stayed.[17] Auckland Council served a statutory demand on Hum to enforce the costs orderof $11,688.84, and subsequently commenced a liquidation proceeding. As at the date1 For a succinct summary, see Hum Hospitality Ltd v Stylo Medical Services Ltd [2022] NZCA 251at [2]–[6].2 For example, some of the previous decisions are listed in Hum Hospitality Ltd v Stylo MedicalServices Ltd [2021] NZHC 1287 at [13], footnote 2.3 Hum Hospitality Ltd v Stylo Medical Services Ltd [2021] NZHC 1287 at [64].4 At [65].of this judgment, that proceeding is extant and awaiting a review byAssociate Judge Taylor of procedural orders made by him on 27 October 2022.5[18] Hum's claims against Stylo in the misrepresentation proceeding remain extant,and the proceeding is awaiting further case management directions. On 14 July 2022,Venning J ordered that Ms Armitage is not to represent Hum in that proceeding.6 Atpresent, Hum is effectively unable to pursue its claims in the misrepresentationproceeding, because the company does not have legal representation.[19] From at least 2013, Stylo has made repeated efforts to recover allegedlyoutstanding rent from Hum and to terminate the lease. Ultimately, Stylo wassuccessful in CIV-2019-404-365:(a) On 11 November 2020, Brewer J gave a liability judgment in favour ofStylo (the liability judgement).7(b) On 11 February 2021, Brewer J made an order cancelling the lease andrequiring Hum to vacate the property.8(c) On 20 December 2021, Brewer J gave judgment in favour of Stylo inthe sum of $106,184.82 (the quantum judgment).9 That is one of thejudgment debts that is demanded in the statutory demand in this case.[20] Hum appealed the quantum judgment and applied for a stay of executionpending appeal. The Court of Appeal declined to order a stay of execution, noting thatHum is insolvent:10[7] The second relevant contextual matter is that Hum is insolvent.Ms Armitage confirms in her supporting affidavit that Hum has no incomeand is effectively moribund:5 Hum Hospitality Ltd v Auckland City Council CA54/2023, 3 February 2023 at [5].6 Stylo Medical Services Ltd v Hum Hospitality Ltd [2022] NZHC 1683 at [41].7 Stylo Medical Services Ltd v Hum Hospitality Ltd [2020] NZHC 2969.8 Stylo Medical Services Ltd v Hum Hospitality Ltd HC Auckland, CIV-2019-404-365, 11 February2021 at [10]–[12].9 Stylo Medical Services Ltd v Hum Hospitality Ltd [2021] NZHC 3552.10 Hum Hospitality Ltd v Stylo Medical Services Ltd [2022] NZCA 251.74. The only source of income Hum had was the villa and all the monieswas going back to [Stylo].75. However, I am creative and resourceful, if matters were stayed Icould bring Hum back to life.[8] Hum's liabilities also appear to far exceed its assets. Draft accountssubmitted by Ms Armitage in support of Hum's application for a waiver of the$1,100 filing fee disclose that it traded at a loss of $158,896 in the year to 31March 2021 and had negative equity of $519,443 taking account of currentliabilities at that date of $2,466,803.[21] The Court of Appeal did not overlook that Stylo might seek to place Hum inliquidation if a stay was not granted:[15] If a stay is not granted, the only practical consequence is that Stylomay seek to place Hum in liquidation. However, we were advised that at leastone other creditor, Auckland Council, is currently pursuing winding upproceedings against Hum in any event. On the information available to us,Hum is plainly insolvent. Success on this appeal would not change that and itmay well be that the company should be wound up. Moreover, if there is anymerit in the appeal, which we doubt, the liquidator would be able to pursue it.Ms Armitage has been accorded considerable indulgence in being permittedto file documents and appeal on behalf of Hum. We do not consider thisshould be allowed to continue. There appear to be good reasons why controlof Hum should now be placed in the hands of an independent liquidator.[22] Ms Armitage was not, however, prepared to let matters rest. She subsequentlyattempted to file further documents in CIV-2019-404-365 on Hum's behalf, effectivelyseeking to represent Hum in the absence of legal representation. On 4 July 2022,Toogood J made an order that the Registry should not accept the documents for filingand that no application or memorandum related to CIV-2019-404-365 could be filedwithout the leave of a Judge.11 It appears that the documents that Ms Armitage soughtto file were attempts to relitigate matters already disposed of by Brewer J in theliability and quantum judgments.12 Toogood J held that the documents thatMs Armitage wished to file were an abuse of process.13[23] Ms Armitage was undeterred and proceeded to file "an application for stay byway of interim relief pending appeal against the strike-out decision made on 5 July2022". Venning J dismissed the application, noting that the application by Hum was11 Stylo Medical Services Ltd v Hum Hospitality Ltd HC Auckland, CIV-2019-404-365, 4 July 2022at [19].12 At [12]–[14].13 At [17]."premised on a misapprehension of the impact of Hum's appeal against the orders ofToogood J"14 and that an appeal against Toogood J's decision "does not open the doorto Hum to enable it to revisit matters on appeal which have been finally determinedagainst it, such as the liability decision and Stylo's right to possession of the propertyin issue."15 Venning J noted that it was too late for Hum to seek to challenge theliability judgment.16[24] Hum, by its agent Ms Armitage, then applied to the Court of Appeal, seekingorders restraining Stylo from auctioning the subject property. The Court of Appealrefused to accept the documents for filing.17 The Court of Appeal required any furtherdocuments filed in the Court of Appeal to be by counsel retained by Hum.18 Dobson Jsummarised Ms Armitage's various initiatives in the Court of Appeal to challenge theliability judgment and the quantum judgment, concluding:[22] A recurring feature of Ms Armitage's numerous initiatives, includingthe scope of orders sought by way of interim relief, is a refusal to accept thatHum cannot now seek to challenge Brewer J's original liability judgment.That feature of the steps taken is now at a point that is reasonably characterisedas vexatious.[25] On 29 August 2022, Hum's appeal to the Court of Appeal against the quantumjudgment expired and was deemed abandoned.Ms Armitage's grounds for opposing the liquidation of Hum[26] Ms Armitage, in her capacity as the sole shareholder and a creditor of Hum,opposes Hum's liquidation on the following grounds:(a) The statutory demand was not validly served.(b) The statement of claim, notice of proceeding and affidavit verifying thestatement of claim, were not validly served.14 Stylo Medical Services Ltd v Hum Hospitality Ltd, above n 6, at [24].15 At [25].16 At [26].17 Hum Hospitality Ltd v Stylo Medical Services Ltd CA333/2022, 19 July 2022 at [28].18 At [27].(c) Stylo failed to comply with the rules for advertising the liquidationproceeding.(d) Stylo failed to serve Ms Armitage with other documents filed in theliquidation proceeding.(e) Hum has a set-off that exceeds the debt.(f) There is inadequate proof of the debts that are the subject of thestatutory demand.Service of the statutory demand[27] Stylo conceded that it was required to serve its statutory demand in compliancewith s 387(1)(c) of the Companies Act, which provides:387 Service of documents on companies in legal proceedings(1) A document, including a writ, summons, notice, or order, in any legalproceedings may be served on a company as follows:(c) by leaving it at the company's registered office or address forservice; or[28] Stylo relies on service by a process server, Arthur Twyford. Mr Twyfordprovided a sworn affidavit dated 17 November 2022, confirming that he delivered thestatutory demand to Hum's registered office at 124 Hynds Road, Gate Pa, Taurangaon 14 November 2022. The documents were accepted by Mrs Grace Armitage, whotold Mr Twyford that she was the "usual occupant" of 124 Hynds Road, and the motherof Ms Armitage.[29] Ms Armitage's affidavit evidence is that she did not become aware of thestatutory demand until around 22 November 2022, and that she was unwell at the timeof service.[30] Mr Twyford provided an affidavit in reply, dated 20 February 2023.Mr Twyford's evidence is that during his visit to 124 Hynds Road, Mrs GraceArmitage told him that Ms Armitage was sick in bed and could not come to the door.Mr Twyford says that when he explained the reason for his visit, Mrs Grace Armitageretreated inside the house saying, "I'll have a talk to her". She then returned to thedoor a few minutes later, told Mr Twyford that Ms Armitage was unable to come tothe door, and then accepted the statutory demand without protest.[31] In her submissions, Ms Armitage relied on Associate Judge Doogue's decisionin Richard Zhao Lawyers Ltd v Chen.19 That case was concerned with service on acompany of an application to set aside a bankruptcy notice. The company's registeredoffice was commercial premises.20 However, the company no longer carried onbusiness from the premises, which were occupied by a different business.21 Theapplication to be served was left with an employee of the new business who was onthe premises when the process server attended.22 Associate Judge Doogue held thatthere was no compliance with s 387 because the document had been left with anemployee of a company that was not the defendant company, and there was nocompliance with s 387(1)(c) because the document was not physically left at theregistered office.23[32] Ms Armitage submitted that when Mr Twyford left the statutory demand atHum's registered office, but with her mother, that was a "hybrid" method of serviceand therefore invalid.[33] For Stylo, Mr Parmenter relied on the subsequent decision of Hinton J inDenize Trustee Company Ltd v Waimauri Ltd.24 That case was concerned with serviceof a notice under s 119 of the Property Law Act 2007, by leaving the notice at thecompany's registered office, which was a residential property. The directors of thecompany no longer resided at the property. The notices were handed to the occupant,who told the person serving the notice that the directors of the company to be servedno longer resided at the address.2519 Richard Zhao Lawyers Ltd v Chen [2015] NZHC 3230.20 At [14].21 At [14].22 At [15].23 At [26]–[27].24 Denize Trustee Company Ltd v Waimauri Ltd [2020] NZHC 1718, (2020) 21 NZCPR 247.25 At [12]–[14].[34] Hinton J did not challenge Associate Judge Doogue's conclusion inRichard Zhao Lawyers but disagreed with his analysis, stating:[29] Without departing from the Associate Judge's conclusion I disagreewith his analysis. I agree with Mr Chisholm that s 387(1)(c) had beencomplied with in that the documents were left at the premises, regardless oftheir having been handed to a third party. That is a common-sense constructionof the section. Any further analysis around the detail or efficacy of the serviceprocess should then have formed part of a second stage inquiry. Myimpression from the judgment is that the Judge was not aware that he had aresidual discretion to determine that service was not valid.[30] As a matter of ordinary practice, handing a document to a personencountered inside the premises of a company's registered office, at leastwhere that person appears to have some connection to those premises, isleaving that document there. It would be strange, as Mr Grove accepted, if thatwere non-compliant, when service can be effected by leaving documents onthe ground; throwing them down at a person's feet; leaving them on a counteror table in front of the person; pushing documents through a letter box;wedging them under a door; or affixing them to a front door or front gate.[31] The position is likely to be different where documents are handed toa third party on their way out of the premises of a registered office, orotherwise to someone clearly having no connection to the premises (such as adelivery person, a party guest, or the like). It may be in such a casethat s 387(1)(c) is not complied with.(footnote omitted)[35] Hinton J held that s 387(1) requires a two-stage approach: first, determiningwhether there is technical compliance with s 387;26 and second, whether a residualdiscretion should be exercised to hold that service should not stand due to amiscarriage of justice.27 The second stage of the assessment might involve aconsideration of the following matters:28(a) whether any shortcomings in the 'efficacy' of service are attributableto honest mistake or ignorance or, conversely, sharp or otherwisedeliberate conduct on the part of the notice giver;(b) where the address for service contained multiple premises, whetherthe notice-giver left the documents at the part of the address actuallyin use by the recipient company;(c) whether there was a sufficient connection between a person to whomthe documents were handed and the address for service;26 At [21].27 At [35]–[36].28 At [37].(d) whether the recipient company's unreasonable actions, especially anydelinquency in registering a new address for service, have renderedachieving 'effective' service impossible or impracticable; and(e) the consequences for the recipient company if relief is not granted,and the seriousness of those consequences for the recipient company.(footnotes omitted)[36] Service was upheld on the basis that there was technical compliance withs 387(1)(c) and, on the facts of that case, no miscarriage of justice.29[37] In this case, the statutory demand was left with Ms Armitage's mother, wholives at 124 Hynds Road with Ms Armitage, and who could reasonably be expected topromptly draw the demand to Ms Armitage's attention. If Mr Twyford's evidence isaccepted, then the obvious inference is that Ms Armitage was made aware of thestatutory demand on 14 November 2022.[38] The photographs of 124 Hynds Road produced by Ms Armitage depict a typicalresidential dwelling. The photographs do not depict any signage which might suggestany separation of the property. The property is comprised in one certificate of title andis one unit for rating purposes.[39] Hum had until 28 November 2022 to file an application to set aside thestatutory demand. Even if Ms Armitage's evidence is accepted, and she only becameaware of the demand around 22 November 2022, she still had approximately fourworking days to file an application to set aside the statutory demand. Moreover,throughout the long history of litigation between Stylo and Hum, and particularly sinceMs Armitage has been representing Hum, Ms Armitage has shown a propensity andan ability to file applications in courts on short notice.[40] I find that the statutory demand was validly served on Hum on 14 November2022, when it was left at Hum's registered office. Allowing service to stand does notresult in any miscarriage of justice.29 At [33] and [38]–[40].[41] Ms Armitage's alternative submission is that if service was valid, then servicewas ineffective as a result of s 392(2) of the Companies Act, which provides:392 Additional provisions relating to service(2) A document is not to be deemed to have been served or sent ordelivered to a person if the person proves that, through no fault on theperson's part, the document was not received within the timespecified.[42] Section 392(1) includes provisions which deem service in the case ofdocuments that are posted, sent by fax or emailed. Section 392(2) applies when thosedeeming provisions are relied upon. That is not the case here. Accordingly, s 392(2)does not assist Ms Armitage.Service of the statement of claim, notice of proceeding and affidavit verifying thestatement of claim[43] Mr Twyford served Hum with the statement of claim for putting Hum intoliquidation, the notice of proceeding and the affidavit verifying the statement of claimon 12 December 2022, by handing the documents to Ms Armitage at Hum's registeredoffice at 124 Hynds Road. There is no issue as to service.Service of other documents filed in the proceeding[44] In her "First Filing" memoranda dated 31 January 2023, Ms Armitage advisedthat documents could be served on her by email to her nominated email address. Fromthat date forward, Stylo and Auckland Council could serve any documents that wererequired to be served on Ms Armitage by email to that address. Ms Armitage'ssubmission that other documents filed by Stylo were not validly served on her, wasbased on her misunderstanding that documents such as the statement of advertisingwere required to be served on her by some form of personal service. For example, thestatement of claim was emailed to Ms Armitage on 8 December 2022, a matter that Iwill return to. Ms Armitage cannot complain that she did not receive a copy.Advertising the liquidation proceeding[45] Rule 31.10 of the High Court Rules 2016 (HCR) provides:31.10 Restriction on advertising of proceeding(1) No person may, unless the court otherwise directs, publish anyadvertisement required by rule 31.9 or any other information relatingto the statement of claim until at least 5 working days after the dateon which the statement of claim is served on the defendant company.(2) Subclause (1) does not apply when a statement of claim has been filedby the defendant company.[46] Under the rule, Stylo was prohibited from advertising before 20 December2022.[47] On 8 December 2022, Mr Parmenter sent an email to Ms Armitage whichincluded as attachments the statement of claim, notice of proceeding, affidavit ofservice of the statutory demand and affidavit verifying the statement of claim. Thatemail was copied to Ms Quinn and Mr Colenbrander, both solicitors employed byAuckland Council. Ms Armitage submitted that Stylo breached r 31.10 by advertisingthe liquidation proceeding to Auckland Council by sending the email on 8 December2022. Mr Parmenter accepts that when he copied his email of 8 December 2022 to theCouncil solicitors, it constituted advertising for the purposes of r 31.10.[48] Ms Armitage submitted that the principal reason behind the rule was to providea company served with a liquidation application the opportunity to discharge the debt,if undisputed, before advertising takes place. Ms Armitage submits that Hum suffereddamage as a result because Hum continues to serve its community in Tauranga and inother areas, but no specifics were provided.[49] Mr Parmenter submitted that Hum did not suffer any prejudice as a result ofthe breach, for the following reasons:(a) advertising had previously occurred in Auckland Council's liquidationproceeding against Hum;(b) publication was limited to two of Auckland Council's solicitors;(c) Hum's judgment debts to Stylo were already well known to AucklandCouncil and Auckland Council is a supporting creditor in thisproceeding; and(d) Hum has taken no steps in this proceeding.[50] The prohibition on advertising is to provide the company served with anopportunity to discharge the debt, or to apply to restrain advertising before it takesplace. Any plaintiff who ignores the prohibition is at risk of having the liquidationproceedings struck out as an abuse of process.30[51] In NZPS Ltd v Evolo Ltd,31 the liquidation proceeding was advertised in breachof a Court order restraining advertising. The breach was inadvertent, due to anoversight on the part of the newspapers.32 A breach of a Court order is a more seriousmatter than a breach of the High Court Rules.33 Accordingly, Venning J struck out theliquidation proceeding, noting that advertising a liquidation proceeding is potentiallyhighly prejudicial to a defendant company, and that it is difficult to quantify particularprejudice.34[52] In Body Corporate 162791 v Mid City Apartments Ltd, a prohibition onadvertising had been breached, however, the Court declined to strike out theliquidation proceeding.35 The plaintiff's non-compliance was accidental.36 The Courttook into account that the grounds in support of a set-off or a counterclaim by thedefendant had already been examined by the Court in the proceeding in whichjudgment was entered against the defendant.37 The defendant had also filed a separateproceeding against the plaintiff, which was stayed as a result of non-compliance withan order for security for costs.3830 Body Corporate 162791 v Mid City Apartments (2004) 17 PRNZ 289 (HC) at [15].31 NZPS Ltd v Evolo Ltd [2013] NZHC 2309.32 At [11].33 At [23].34 At [18] and [25].35 Body Corporate 162791 v Mid City Apartments, above n 30.36 At [16].37 At [16].38 At [16].[53] Stylo breached the requirements of r 31.10 by providing a copy of theliquidation proceeding to Auckland Council on 8 December 2022. Under r 1.5(2)(b)and r 1.9(1) of the HCR, the Court may cure that procedural defect. I accept that it isappropriate to do so in this case because there was no prejudice caused to Hum by thebreach.[54] The early publication was confined to Auckland Council, a judgment creditorof the defendant. Auckland Council had already commenced its own liquidationproceeding against Hum. Hum has taken no steps in this proceeding and Hum did notseek to restrain advertising in this proceeding.Hum's alleged set-off or counterclaim[55] Stylo has satisfied the statutory requirements for obtaining an order puttingHum into liquidation and is prima facie entitled to the order, subject to the Court'sdiscretion as to whether a liquidation order should be made. In exercising thatdiscretion, the Court must be mindful of the general principle that to enforce agenuinely disputed debt by liquidation may constitute an abuse of process.39[56] This general principle is manifest in the procedure governing liquidations, forexample:(a) Section 290 of the Companies Act provides the Court with a discretionto set aside a statutory demand if it is satisfied that there is a substantialdispute whether or not the debt is owing, or there is a counter claim,set-off or cross demand that exceeds the debt.(b) Where there is no application to set a statutory demand aside, and thedefendant company seeks to rebut the presumption of insolvency byestablishing a set-off.4039 Cummins v Body Corporate 172108 [2021] NZCA 145, [2021] 3 NZLR 17 at [20] citing Re BayoilSA [1999] 1 WLR 147 (CA) at 156.40 Yan v Mainzeal Property and Construction Ltd (in rec and in liq) [2014] NZCA 190 at [80].(c) Section 310 of the Companies Act provides for mutual credits and set-offs in a liquidation.[57] In the present case, the grounds of set-off or counterclaim put forward byMs Armitage on behalf of Hum amount to an alleged equitable set-off, on the basis ofGrant v NZMC Ltd, where the Court of Appeal said:41The principle is, we think, clear. The defendant may set-off a cross-claimwhich so affects the plaintiff's claim that it would be unjust to allow theplaintiff to have judgment without bringing the cross-claim to account. Thelink must be such that the two are in effect interdependent: judgment on onecannot fairly be given without regard to the other; the defendant's claim callsinto question or impeaches the plaintiff's demand. It is neither necessary, nordecisive, that claim and cross-claim arise out of the same contract.[58] I am satisfied that alleged set-offs raised by Ms Armitage on Hum's behalf donot render the liquidation of Hum an abuse of process. Hum is no longer able tochallenge the liability judgment or the quantum judgment in CIV 2019 404-365. Thisincludes challenges to the quantum judgment based on the Court's findings on GST,insurance and rates payable under the lease. All of these matters are subject to issueestoppel.[59] Hum's claims against Stylo based on misrepresentation were described byAssociate Judge Bell as "weak".42 The Judge considered that Hum's claims for abreach of the covenant of quiet enjoyment had "reasonable prospects".43 However,there is no evidence as to the nature of any damages suffered. Hum is unable toprogress that claim because to do so it must engage solicitors and it does not have thefinancial means to do so.[60] If Hum's claims against Stylo for misrepresentation or breach of the covenantof quiet enjoyment have merit, then a liquidator has the option of pursuing thoseclaims. The liquidator has the advantage of being able to access litigation funding, oralternatively, Ms Armitage has the option of entering into a funding arrangement withthe liquidator, in her capacity as a creditor of Hum. If Ms Armitage is indeed a creditorof Hum for the sum of $2,471,189.58, then Ms Armitage will be the major creditor in41 Grant v NZMC Ltd [1989] 1 NZLR 8 (CA) at 12–13.42 Hum Hospitality Ltd v Stylo Medical Services Ltd, above n 3, at [26].43 At [34].the liquidation and therefore able to exercise the rights available to her under theCompanies Act.Hum is insolvent[61] Dr Shen Tat Ooi, a director of Stylo, provided an affidavit sworn on16 February 2023 confirming that the three judgment debts that are the subject of thestatutory demand remain unpaid. On 23 January 2023, Stylo's solicitor provided acertificate confirming that the debt which is the subject of the statutory demandremains unpaid, and undertaking to advise the Court if that position changed. Duringthe hearing on 23 February 2023, Ms Armitage confirmed that Hum has not paid thejudgment debts demanded in the statutory demand.[62] During the hearing on 23 February 2023, Mr Parmenter advised the Court thatif the Court intends to put Hum into liquidation, then he will file an updated solicitor'scertificate when the matter is called in open Court for that purpose.[63] I am satisfied that there is prima facie evidence that the judgment debtsdemanded in the statutory demand remain unpaid. I am satisfied that Hum is insolventand unable to pay its debts. It is appropriate that Hum is put into liquidationResult[64] I grant leave to Ms Armitage to file her late application for orders staying orstriking out the liquidation proceeding.[65] The application by Ms Armitage for orders staying or striking out theliquidation proceeding is dismissed.[66] Stylo's application for an order under s 241(4) of the Companies Act 1993,putting the defendant into liquidation, will be made when the proceeding is called inopen Court on 21 March 2023 at 2.15 pm. I direct that on that date the plaintiff file anupdated solicitor's certificate when the matter is called.[67] The question of costs will be dealt with when the proceeding is called on 21March 2023 at 2.15 pm..Associate Judge Brittain