Forward Plastics Limited v NZ Distilled Water Limited [2012] NZHC 1503 (28 June 2012)

Last Updated: 3 July 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-8179 [2012] NZHC 1503

UNDER the Companies Act 1993

BETWEEN FORWARD PLASTICS LIMITED Plaintiff

AND NZ DISTILLED WATER LIMITED Defendant

Hearing: 28 June 2012

Counsel: J Strauss for Plaintiff

T J Herbert for Defendant

Judgment: 28 June 2012

_{ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL}

Solicitors:

Garry Pollak & Co, P O Box 1588 Auckland 1140 for plaintiff

Email: [e-mail]

Haigh Lyon Lawyers (Don Harrison) P O Box 119 Auckland 1140, for defendant.

_Email: [e-mail]

Copy for:

Johann Strauss, P O Box 2202 Auckland 1140, for plaintiff

Email: [e-mail]

T J Herbert, P O Box 3320 Auckland 1140, for defendant

Email: [e-mail]

Case Officer:

_Email: [e-mail]

FORWARD PLASTICS LIMITED V NZ DISTILLED WATER LIMITED HC AK CIV-2011-404-8179 [28 June

2012]

[1] This matter follows my decision of 19 June 2012. In that decision I held that any counterclaim that NZ Distilled Water Ltd could make against Forward Plastics Ltd would be for a maximum sum of $1,551.99. I found that NZ Distilled Water Ltd was indebted to Forward Plastics Ltd for a sum of at least $88,253.88.

[2] There was no statutory demand. Given the evidence presented, I found that NZ Distilled Water Ltd had a surplus of current assets over current liabilities, which was sufficient to allow it to pay the debt. I rejected an argument that NZ Distilled Water Ltd was entitled to refuse to pay the debt, even if it had funds in hand that would allow it to pay the debt. I adjourned the matter until today, to allow the director of N Z Distilled Water Ltd to decide whether to enable the company to pay the debt. At paragraph [47] of my decision I said:

[47] If the company remains unable to pay the debt on 28 June 2012, then an order may be made putting the company into liquidation.

I also said that I would decide costs.

[3] Today, Mr Straus has tendered an affidavit from the director of Forward

Plastics Ltd deposing that the debt remains outstanding.

[4] Mr Herbert, for the defendant, has tendered a notice of appeal which is currently being sent to the Court of Appeal. The debt remains unpaid and apparently the company is either without funds to pay or alternatively its director has continued in his position that, even if the debt is due, the company will not pay it. In either case, the company is in a state where it is unable to pay its debts and the ground for the court to appoint a liquidator remains.

[5] If there is to be an appeal to the Court of Appeal, it must be an appeal from a judgment or order of this court.[1] So a question to be considered is whether the decision that was delivered on 19 June 2012 is a judgment or order which can form the basis for an appeal. My decision of 19 June 2012 makes a number of findings,

_{but all it did dispositively was to adjourn the liquidation application until today. The}

decision to adjourn cannot be a basis for an appeal because the adjournment has taken effect and is now spent. That is not a proper basis on which to appeal.

[6] I am reminded of the case Re Alwinco Products Ltd.[2] That case was an appeal to the Court of Appeal when a winding-up application in the High Court in Hamilton was part-heard. The Court of Appeal declined to hear the appeal on the grounds that the appeal was from a ruling only and there was not any effective judgment or order of the High Court on which an appeal could be based. I apply that case here.

[7] While I have made a number of findings, there is nothing of substance by way of a dispositive judgment which could be the basis for an appeal. If the company or its director wish to challenge the findings in my decision of 19 June

2012, they ought to be able to do so by having a judgment of this court to allow my decision of 19 June 2012 to be reviewed on appeal. In other words, an effective review of my decision of 19 June 2012 requires that I should make an appropriate order.

[8] It is also appropriate that I make an order given the company’s continued non-payment of the debt. Accordingly, I make an order that NZ Distilled Water Ltd be put into liquidation. The time of the order is 12:31pm.

[9] I appoint Messrs Paul Graham Sargison and Simon Dalton as liquidators. There is an order approving their rates of remuneration on the usual terms.

[10] I also join Anthony William Gillion as a defendant. The purpose of adding him as a defendant is to ensure that there is another party to this proceeding who can conduct an appeal in his own right. That is because there can be no assurance that an independent liquidator who owes his appointment to the liquidation order would himself run an appeal against the liquidation decision. Here I refer to the decision of

Woodhouse J in Buxton v Mainline Contracting Ltd,[3] and my decision in Aotearoa

_{Kiwifruit Export Ltd v ANZ National Bank Ltd.}[4]

[11] Mr Herbert has resisted the orders I have just made. He says that the company is solvent and still trading, and he points to the difficulties that will arise if the company were put into liquidation and in particular if staff had to be laid off. I balance those considerations against the plaintiff’s entitlement to be paid. It is a creditor of the company. It has been held out of its money for a substantial period of time, nearly two years.

[12] There is a way by which both interests can be protected. That is to allow the company to be put into liquidation but then to consider whether there ought to be a stay pending the appeal. I intend to hear whether there should be a stay pending the appeal. That hearing will be at 10:00am on Wednesday, 4 July 2012. It will take place by way of a telephone conference as I will be sitting in Whangarei.

[13] I direct that the liquidators are to carry out a prompt investigation of the affairs of the company to give a first impression report to the court:

[a] as to the financial position of the company; and

[b] as to the prospects of the company being able to continue trading pending the appeal; and

[c] if it is to be kept trading, as to what arrangements should be put in place.

[14] Mr Herbert has reminded me that I found that the company had funds on hand to pay the debt due to the plaintiff. I made that finding based solely on the evidence that I was presented with in the hearing. It is not necessarily the case that the financial position of the company now is the same as I was given showing the position of the company at 31 March 2012. The only evidence I had on which I could rely were management reports. A fuller investigation may show the financial position of the company to be different from what was shown in the management reports. An independent liquidator can help the court with that. I would be grateful if the liquidator could file his report in time for the hearing. That means that I would require the report by early afternoon on Tuesday, 3 July 2012.

[15] Forward Plastics Ltd also seeks costs on the proceeding. Mr Strauss has not provided a schedule of costs he is seeking. Costs are to be awarded to Forward Plastics Ltd on the 2B scale. The plaintiff is reminded that the hearing on 13 June

2012 took place when the costs for category 2 were $1880 per day. The hearing today has been under the new scale, where the amount is $1990 per day. The costs claimed for that will reflect the change in the rates in the meantime.

[16] There has been further discussion. There is the question what should happen to the company between now and the hearing next Wednesday. It is within the liquidators’ powers to decide what should happen to the company in the meantime. The liquidators will have to bear in mind that a possible decision on Wednesday is that a stay would be imposed. I would urge the liquidators not to do anything that would prejudice the position of the company in case a stay is ordered. I also bear in mind that Mr Strauss submitted that the liquidator had already given instructions that he was prepared to contemplate that the company would remain trading, at least in the short term.

[17] For the hearing on Wednesday, I would be grateful if counsel could file memoranda in advance of the hearing. Obviously they will have to do so at short notice because they will have only just received a report from the liquidator. To allow the matter to be dealt with efficiently, it is appropriate to dispense with formalities. I do not require formal applications and formal notices of opposition.

[18] I trust that counsel will be able to confer and agree costs. If not, I will also fix costs next Wednesday.

R M Bell
Associate Judge

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[1] Section 66 Judicature Act 1908.
[2] _{Re Alwinco Products Ltd [1985] 1 NZLR 710.}
[3] _{Buxton v Mainline Contracting Ltd HC Auckland CIV-2010-404-1224, 22 October 2010.}

[4] Aotearoa Kiwifruit Export Ltd v ANZ National Bank Ltd [2012] NZHC 151.