Wildlife Pictures Limited v Busch [2014] NZHC 992 (13 May 2014)

Last Updated: 9 June 2014

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

CIV-2012-488-169 [2014] NZHC 992

BETWEEN	WILDLIFE PICTURES LIMITED Applicant
AND	CRAIG BUSCH Respondent

Hearing:	13 May 2014
Appearances:	Mrs P Busch (as agent for the Applicant) with V Deobhakta (McKenzie friend) N C King for Respondent
Judgment:	13 May 2014

_{ORAL JUDGMENT OF ASSOCIATE JUDGE BELL}

Solicitors:

Webb Ross McNab Kilpatrick, Whangarei, for Respondent

Copy for:

Noel King, Barrister, Otahuhu, Auckland, for Respondent

WILDLIFE PICTURES LIMITED v BUSCH [2014] NZHC 992 [13 May 2014]

[1] Wildlife Pictures Ltd applies to set aside a statutory demand served on it by Mr Craig Busch. Before I deal with the merits of the application, there are some procedural matters that need to be addressed.

Representation of Wildlife Pictures Ltd

[2] Wildlife Pictures Ltd has a director, Megan Busch. Before that the director of the company was Mrs Patricia Busch. She has appeared for the company today. The company has not been represented by a lawyer. The usual rule is that if a company is to appear in court and take part in a proceeding it must be represented by a lawyer. In rare cases the courts allow exceptions to that. This is one of those exceptional cases.

[3] Wildlife Pictures Ltd is one of the companies which was formerly under the control of Mrs Patricia Busch. It was formed so that she and her son, the respondent Mr Busch, could make money from making and distributing wildlife pictures. This proceeding is one of many that have arisen out of differences between Mrs Busch and her son. The result of that dispute and of Mrs Busch’s participation in her son’s wildlife park in Whangarei, is that Mrs Busch herself has become bankrupt. She has been disqualified from holding any company directorships. She has been unable to carry on business. She is now some 70 years of age or more. Effectively, Wildlife Pictures Ltd is bereft of any means. The company is insolvent, but whether it owes any money to Mr Busch is still to be determined.

[4] Given these circumstances, if I were to insist on applying the rule in GJ Mannix Ltd,¹ that would mean that the company would no longer be able to be heard in support of its application to set aside the statutory demand. Given the choice between no representation of Wildlife Pictures at all and whatever support can be given by Mrs Busch, I took the view that justice required that Mrs Busch be allowed to be heard in support of the application. I accept that she has been authorised to appear on behalf of the company by her daughter.

[5] There are two other matters that have assisted Mrs Busch. This application was to have been heard two years ago. At that stage the company was represented by counsel, who had prepared submissions for the hearing. I have benefited from reading those submissions. In addition, Mrs Busch has also had a McKenzie friend, Mr Deobhakta. Mr Deobhakta has acted appropriately as a McKenzie friend in helping Mrs Busch with the application.

Earlier statutory demand

[6] In 2011, Mr Busch served another statutory demand on Wildlife Pictures Ltd.² On that application, I held that the statutory demand was invalid because it did not adequately identify the debt, but I did not rule on the substantive merits of the dispute between the parties as to the statutory demand. This case concerns a second statutory demand based on the same debt but the statutory demand in this case clearly identifies the debt so that it does not suffer the defect that invalidated the earlier statutory demand. My earlier decision to set aside that statutory demand has not stood in the way of Mr Busch issuing a fresh statutory demand, nor does it stand

in the way of Wildlife Pictures Ltd contesting the new statutory demand.

Time to comply extended

[7] When this application first came before me in 2012, I made an order under s

290(3) of the Companies Act 1993 extending the time to comply with the statutory demand pending further order of the court. The effect of that is that the statutory demand has been kept alive in the meantime. That means that the time for beginning a liquidation application under s 288(1) of the Companies Act has not started to run.

Time taken to hear this application

[8] This application was first set down for hearing in 2012. The statutory demand was served on 5 March 2012. The application was properly made in time – within the 10 working days required under s 290 of the Companies Act. Mr Busch responded promptly. The matter was set down for hearing on 12 May 2012 but

I adjourned the hearing. That decision was part of the measures I ordered to put litigation between Mrs Busch and her son on hold.

[9] I brought the proceedings to a temporary halt to see whether the overall differences between Mr and Mrs Busch could be resolved. I was keen to see whether the matter could be sorted out by alternative dispute resolution. My hopes that the parties could resolve matters did not come off, and the differences continued. In the end, matters were overtaken by Mrs Busch’s adjudication in bankruptcy. The effect of the bankruptcy was to end much of the litigation. As a result of her adjudication in bankruptcy the Official Assignee not only succeeded to causes of action held by Mrs Busch but also took over the shareholding in two of her companies – Zion Wildlife Gardens Ltd and Country Developments Ltd. Those companies have either been removed from the register or placed have been placed in liquidation so their proceedings came to an end.

[10] There are still some proceedings alive. Wildlife Pictures Ltd and Primal Productions Ltd have a counterclaim for breach of intellectual property rights in some of the proceedings. Mrs Busch also has personal claims for distress which she has claimed in another proceeding and this proceeding has remained alive. In my minute of 25 March 2014, I gave directions for this proceeding to be heard today.

The statutory demand

[11] The statutory demand is addressed to Wildlife Pictures Ltd and says:

As at the 28^th February 2012 you owe Craig Busch the creditor NZ$21,000.11 (the debt) being money loaned to the company as per attached general ledger printout from Wildlife Pictures Ltd marked as ‘A’ as per the attached balance sheet of Wildlife Pictures Ltd as at 31 March 2009 that you have signed and dated 9 April 2010 marked as ‘B’.

[12] Attached to the statutory demand are extracts from the general ledger and the statement of financial position as at 31 March 2009.

[13] The general ledger shows a loan made by Mr Busch on 19 February 2007 for

$20,000 and a second loan by Mr Busch on 26 March 2007 for $1,000.11 making a total of $21,000.11, the amount of the debt claimed. Similarly, the statement of

financial position shows, amongst the current liabilities, the advance by Craig Busch for $21,000. Because it is shown as a current liability, the debt can be regarded as due and payable.

[14] The application to set aside the statutory demand is made on two grounds:

(a) Under s 290(4)(a) of the Companies Act, that there is a substantial dispute whether the debt is payable.

(b) Under s 290(4)(b), that Wildlife Pictures Ltd has a claim against Mr

Busch which equals or exceeds the amount in the statutory demand.

Is there a genuine dispute as to the debt claimed in the statutory demand?

[15] The test is that the company only needs to show that there is a genuine dispute. If there are matters of fact which can be genuinely disputed, the validity of the debt should not be decided on a setting aside application. It is inappropriate that the alleged debt be used to create a presumption of insolvency. That is because there may be good grounds for resisting payment because liability is disputed.

[16] As regards the debt for $21,000.11, there is no real dispute as to the company’s indebtedness to Mr Busch. The company has, after all, recorded the debt in its own financial records, both in the ledger for 2007 and in its statement of financial position signed by Mrs Busch as director for the year ending 31 March

2009. In her submissions today, Mrs Busch did not submit that the debt was not payable. However, that does not dispose of matters.

Does Wildlife Pictures Ltd have a counterclaim under s 290(4)(b)?

[17] It is relevant to record the circumstances in which the debt came to be incurred, at least as put by Mrs Busch. At the stage when Mr Busch was credited as having lent the money to the company, both Mr and Mrs Busch were in harmony, at least to some extent. Mr Busch had been working in the wildlife park at Gray’s Road, Kamo, Whangarei. He had been credited with a bonus of $20,000 and also with a further bonus of about $1,000. Those credits were applied by way of a loan to

Wildlife Pictures Ltd. Mrs Busch says that the intention was that those funds would used to buy equipment for Wildlife Pictures Ltd. The equipment is shown in the schedule of fixed assets of Wildlife Pictures Ltd. These show that the total purchase price of the equipment was $28,225. Amongst the evidence are records of payments said to be for the equipment, payments by credit cards and the like.

[18] The evidence of Mrs Busch is that Mr Busch used this exclusively. Later, there was a parting of the ways. She says that when Mr Busch left the wildlife park, he took the film equipment with him and has had it ever since. While she does not express it in legal terms as a cause of action, her position is that Mr Busch is accountable to Wildlife Pictures Ltd for the eight items of equipment which were purchased with the proceeds of Mr Busch’s loan. That is the basis for Wildlife Pictures Ltd’s claim against Mr Busch for that equipment.

[19] There are two responses from Mr Busch. First, he denies taking the equipment; and second, he points to the accounts of the company and says that the company has claimed depreciation against that equipment in its books so as to reduce the amount of the claim. The written-down value of the equipment is now negligible.

[20] First, Mr Busch’s denial that he took the equipment. On that, there is a conflict between Mrs Busch and Mr Busch. Mrs Busch was able to show some support for her assertions that he had the equipment. She tendered a photograph, to which Mr King did not object, of Mr Busch in Africa. That he was in Africa was clear given that the photograph showed a recently killed rhinoceros. Mr Busch was holding a film camera which Mrs Busch identified as having come from the wildlife park in Whangarei, as part of the equipment that she says belonged to Wildlife Pictures Ltd.

[21] In relation to the earlier statutory demand, Mr Busch had also denied taking the equipment. But for that proceeding, he conceded part of the debt – the value of the equipment after it had been written down. The fact that he was prepared to make that concession suggests that at least at that stage he recognised that there was a genuine dispute as to whether he had the equipment. In applications to set aside

statutory demands, the court is not able to resolve disputed questions of fact. It is, to my mind, at least plausible that Mr Busch did take the equipment. His denial is not, by itself, enough to allow me to find conclusively against Wildlife Pictures Ltd. I find that Wildlife Pictures Ltd has at least an arguable case that Mr Busch is in some way accountable at law for having taken and had the use of the film equipment since it was first acquired in 2006/2007.

[22] The second point is that the equipment has been written down in the books. Mr King also submits that if the company had a genuine belief that it had a claim against Mr Busch for the equipment, it would have contra’d its claim against the loan recorded as owing to Mr Busch in the accounts of the company.

[23] There are two answers to that. The first is that as between the company and Mr Busch, it is irrelevant how the company deals with the equipment in its own books. Perhaps I can explain the matter this way. Let us suppose a debtor owes money to a company and the company wants to pursue recovery. If the company believes that it is unlikely to obtain recovery from the debtor, it may therefore write the debt off in its own books. Notwithstanding that, it is still entitled to pursue the debtor for the debt. It would be no defence to the debtor to say that the company has written the debt off in its own books. That is irrelevant to its liability. In a similar way, the fact that Wildlife Pictures Ltd has treated the film equipment as an asset of its own and has written it off, does not count against it being able to maintain a claim against Mr Busch for his having had the use of the equipment since the date of purchase.

[24] I also note that the company did try to deal with the matter in its financial statements. In its financial statements for the year ending 31 March 2010 there is a note dealing with fixed assets which says:

A number of assets listed in the fixed asset register have been removed from the company and are subject to legal action. The relevant authority has ordered these assets to be returned. But this had not yet occurred at the date of the signature of these financial statements. These financial statements that have been prepared on the basis that these assets will be returned for use in the future.

[25] It seems that the accountant who has prepared that has been careful not to make any defamatory statements about Mr Busch, but has wanted to set out in the accounts the fact that while these are assets of the company they were not currently in the control of the company. That, at least, shows in some way that the company has dealt with the equipment in its accounts. The fact that the company has claimed depreciation is neither here nor there in establishing liabilities between Mr Busch and Wildlife Pictures Ltd.

[26] The film equipment had an initial value of $28,000. It is not clear at the moment what would be the relevant date for measuring the value of the equipment in a claim by the company against Mr Busch. But it is conceivable that with the depreciation rates used in the accounts the equipment may have been worth more than $21,000 when Mr Busch started to have exclusive use of that equipment. It is arguable for the company that its claim against Mr Busch in respect of that film equipment may be for an amount that exceeds the debt in the statutory demand.

[27] For these reasons I find that Wildlife Pictures Ltd has made out its case for a counterclaim under s 290(4)(b) of the Companies Act 1993. Wildlife Pictures Ltd has succeeded on that part of its application under s 290. I make an order setting aside the statutory demand served on the company on 5 March 2012.

Costs

[28] I make no order as to costs. The company has not been represented by a lawyer in this hearing and therefore cannot recover costs for today. It did have the assistance of a lawyer at an earlier stage. But, against that, the company did not comply with the directions I gave to file submissions for this hearing. The matter therefore balances out. I make no orders for costs either way.

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Associate Judge R M Bell