In a bind, with Auckland property developer June Xu stalling on payment, civil engineers Cato Bolam found they could not force her company into liquidation for non-payment of a $304,000 debt because it was replaced with security registered over one of her projects; a security that may be of little value as increasing secured mortgage debt owed financiers ranks ahead.
The High Court was told Ms Xu’s Mansion Rear Ltd employed Cato Bolam Consultants Ltd in late 2023 to make a covid-19 fast-track planning application for a proposed property development on Pooks Road at Ranui in West Auckland.
She signed Cato Bolam’s terms of trade which required payment of monthly invoices with Cato entitled to caveat title to Mansion Rear’s land if payments were in arrears.
The scope of work was agreed; Cato Bolam’s fee was not.
Cato provided an estimate, with an agreement fees would be based on an hourly charge-out rate. Specifically, all fees had to be paid before Cato lodged the necessary resource consent application.
Ms Xu became aware resource consent approval was unlikely. Within five weeks of having Cato start work, she had a legal opinion from her lawyers that for the project as intended there was a low chance of consent being granted. Her lawyers did comment that material prepared for any consent would still have some economic value, potentially forming the basis of any future application to change the district plan.
She encouraged Cato to continue with the work, paying some invoices.
The crunch came when Cato was ready in late 2023 to lodge her resource consent application with Auckland Council.
Ms Xu pleaded cashflow difficulties, asking for time to pay outstanding invoices. It was agreed to part-payment of $180,000, with the balance deferred, and Cato to take a mortgage over the Pooks Road development. The resource consent was lodged.
It was all downhill from there: resource consent was refused; Ms Xu did not pay $180,000 as promised and disputed the level of fees charged.
Cato lodged caveats over two blocks of land owned by Mansion Rear on Pooks Road and sued to put Mansion Rear into liquidation for non-payment. The effect of lodging caveats is to block any further dealing with land.
Cato subsequently lifted its caveat on one of the two blocks of land, after given assurances there was sufficient equity in the remaining block to cover the debt claimed.
In the High Court, Associate Judge Paulsen stayed liquidation of Mansion Rear Ltd.
Taking security over Mansion Rear’s land substituted for the unpaid unsecured debt. This unpaid debt was no longer grounds to force Mansion Rear into liquidation.
Cato Bolam Consultants Ltd v. Mansion Rear Ltd – High Court (30.09.25)
25.209