NDP 2010 Limited v RD2 International Limited [2012] NZHC 959 (8 May 2012)

Last Updated: 16 July 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-006549 [2012] NZHC 959

BETWEEN NDP 2010 LIMITED Applicant

AND RD2 INTERNATIONAL LIMITED Respondent

Hearing: 23 January 2012

Counsel: J Frampton for Applicant

A Hansen for Respondent

Judgment: 8 May 2012

RESERVED JUDGMENT OF ASSOCIATE JUDGE SARGISSON (Setting aside Statutory Demand)

This judgment was delivered by me on 8 May 2012 at 4.45 pm pursuant to

Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date ..........................

Solicitors:

White Fox & Jones, PO Box 1353, Christchurch

Heimsath Alexander, PO Box 105884, Auckland City 1143

NDP 2010 LIMITED V RD2 INTERNATIONAL LIMITED HC AK CIV-2011-404-006549 [8 May 2012]

Introduction

[1] The applicant, NDP 2010 Limited, applies for an order under s 290 of the Companies Act 1993 setting aside a statutory demand. The statutory demand, served by RD2 International Limited on 5 October 2011, claims:

(a) Payment of NZ$330,803.21 and US$123,671.08, plus interest, for the supply of fruit concentrate to a company related to NDP 2010 (Natural Dairy Products Limited); and that

(b) NDP 2010 is liable for the payment of those sums under a “contract entered into with the creditor on 18 February 2011.”

[2] NDP 2010 disputes the existence of such a contract. It readily accepts that RD2 is owed the money claimed but applies to set aside the statutory demand on the ground that the debt is owed solely by Natural Dairy Products Limited. Though NDP 2010 and RD2 discussed payment of the debt, NDP 2010 says that there was no concluded agreement that it would assume liability.

[3] The application is opposed.

[4] It seems no order was made extending the time for compliance with the statutory demand when the application was first before the Court on 9 November

2011. But agreement to such an order is implicit in the way the parties have proceeded. Plainly such an order would have been made but for the parties’ oversight, and should now be made. I proceed on that basis and make an order that the time for compliance is extended to the date of this judgment.

Background

[5] NDP 2010 is an asset-holding company and is part of a group of companies referred to as the Natural Dairy Products Group. As a key issue in this case is the identity of the debtor, it is necessary to traverse the corporate history of NDP 2010 and the Group.

[6] The Group traded through Natural Dairy Products of New Zealand Limited until August 2007. After a lacuna in activity, the Group began trading again on 9

April 2008 through Natural Dairy Products Limited. The majority of the shares in that company were held by an asset-holding company, Natural Dairy Products (2007) Limited. Despite this change in trading companies, RD2 continued to make out its invoices to Natural Dairy Products New Zealand Limited.

[7] Around August 2010, Natural Dairy Products (2007) Limited and Natural Dairy Products Limited ran into financial difficulties. The directors decided to recapitalise. Two new companies, NDP 2010 and NDP Trading Limited, were incorporated on 24 November 2010 for this purpose. Natural Dairy Products (2007) Limited sold its assets to NDP 2010 and NDP Trading Limited allegedly took over trading on 1 January 2011. NDP Trading Limited is wholly owned by NDP 2010. Despite no longer holding assets or trading, Natural Dairy Products (2007) Limited and Natural Dairy Products Limited both remain on the Companies Register.

[8] The debt which is the subject of this dispute arose out of the supply by RD2 of a large amount of products to Natural Dairy Products Limited between July and December 2010. In its evidence, RD2 says that at a meeting on 6 October 2010, Mr Thornton (managing director of companies in the Group) assured it that any outstanding invoices would be paid and that, following the recapitalisation, the new business would pay all debts both old and new. This meeting was followed up by an email dated 8 October 2010 sent by Mr Thornton to Mr Honiss, director of RD2, which discussed that there were two groups of potential shareholders undertaking due diligence. Mr Thornton stated:

...As we discussed there are three steps we are pursuing:

1. Surviving “due – diligence”...

2. Getting an agreement formally signed... We would like to think we could have an agreement with the new shareholders signed between the 20th and 30th of October.

3. Addressing the outstanding balance once the capital is received. Once we receive the new capital we will be able to make a very substantial payment towards our account. At this point it is likely to be $300k. This will leave a core debt in the region of $300k ish that we will need time to extinguish. Our plan is for an extra $40- $50k per month to be paid to

you, as soon as our factory is producing the budgeted product, this would be over and above the monthly account due for product received.

When the new business is running we have strong earnings projections in both juice and ice cream, and will be producing a strong cash flow which will allow us to become a good customer of RD2’s as opposed to the tardy customer we are now. We intend to work with you into the future, and like elephants – we have long memories, and will support those who supported us when we needed help.

We are grateful [for] your patience, and acutely aware of the pressure we are causing you. The information given above is given in good faith, however it may alter in terms of dates and the like, depending on circumstances.

[9] It appears that RD2 did not receive any payments for the outstanding balance as at 8 October 2010. Further correspondence took place in October discussing due diligence, the timing of repayments and possible interest payments.

[10] The supply, it seems, continued to Natural Dairy Products Limited after the incorporation of the two new companies, and until December 2010. It appears that RD2 made no supplies to the Group in January 2011, but a letter Mr Thornton sent on 1 February 2011 to RD2 suggests that supply resumed at some point in February

2011, with goods then invoiced to NDP Trading Limited. That letter informed RD2 that the recapitalisation scheme was now complete, stated that “the liabilities of Natural Dairy Products 2007 Limited remain with that company,” proposed a “repayment schedule,” and stated that “the new company will pay for new supplies within 14 days of receipt”.

[11] On 10 February 2011, Mr Honiss and Mr Thornton discussed the terms of repayment by telephone. Six days later Mr Honiss sent a follow-up email to Mr Thornton summarising the outcome of those discussions:

Hi Brent

Please find below a summary of the discussion and agreement with RD2 from our telephone discussion at 1.30 pm on the 10th Feb.

General

− Both parties have a willingness to continue the business relationship.

− ND has been loyal to RD2 and acknowledged the support of RD2. In return RD2 have supported ND with continued supply of juice

concentrates.

− Brent gave a forecast of intended volumes going forward. Requirements were indicated as:

150 – 200 drums Apple/month

60 – 70 drums FCOJ/month

Other juices at similar levels (mango, pineapple, blackcurrant, etc).

− RD2 made a request for more formal forecasting so as to allow uninterrupted supply. This is to be provided by ND monthly.

Financial

− RD2 advised that there was [an] urgent need to agree on a repayment plan for the funds remaining outstanding as of 08 Feb.