Kum Fu Stainless Steel Kitchen Equipment Limited v Little Republic NZ Limited [2021] NZCA 451 (9 September 2021)

Last Updated: 16 September 2021

IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA

CA63/2021 [2021] NZCA 451

	BETWEEN	KUM FU STAINLESS STEEL KITCHEN EQUIPMENT LIMITED Appellant
	AND	LITTLE REPUBLIC NZ LIMITED Respondent

Hearing:	1 September 2021
Court:	Kós P, Mander and Palmer JJ
Counsel:	A M Swan for Appellant T J Herbert for Respondent
Judgment:	9 September 2021 at 9 am

JUDGMENT OF THE COURT

1. The application to amend the notice of appeal is granted.
2. The appeal is dismissed.

100. The appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.

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REASONS OF THE COURT

(Given by Palmer J)

• [1] This is a commercial dispute over $13,828.50 and a costs award of $20,000. On 9 March 2020, Little Republic NZ Ltd (Little Republic) accepted a quote by Kum Fu Stainless Steel Kitchen Equipment Ltd (Kum Fu) to provide and install kitchen equipment for a new restaurant. In May and June 2020, Little Republic raised concerns about the work not being done as required. From June to August 2020, the parties disagreed about what was to be done and on what terms. Kum Fu was prepared to do the remedial work but wanted to be paid what it said it was owed under the contract. Little Republic wanted remedial work done, its legal costs paid, a 10-year guarantee and for Kum Fu to take responsibility for any non‑compliant works discovered. On 27 July 2020, Kum Fu said the remedial work had been done and sought full payment. Little Republic sought originals of the PS3 Producer Statement, warranty and completion certificates. Kum Fu refused to provide them unless and until it was paid in full. On 26 August 2020, Kum Fu served a statutory demand on Little Republic for payment of $13,828.50. A subsequent inspection by an expert for Kum Fu revealed two aspects of the work were not compliant with the contract: the fans were not the required distance apart; and the fans did not have speed controls. Kum Fu remedied the first of those matters and offered a credit of $300 (plus GST) in lieu of remedying the second.
• [2] Little Republic applied to the High Court to set aside the statutory demand. On 21 December 2020, Associate Judge Sussock held there was no question that there was a substantial dispute between the parties as to whether the debt was owing.^[1] Accordingly, she set aside the statutory demand under s 290(4)(a) of the Companies Act 1993 (the Act). She did not allow the demand to stand in reduced figures.^[2] She observed there was evidence that Little Republic had an arguable counterclaim justifying setting aside the demand under s 290(4)(b) as well, but did not determine that.^[3] The Judge subsequently awarded indemnity costs and disbursements of $20,000 to Little Republic because Kum Fu acted improperly and unnecessarily in opposing the application.^[4]
• [3] Kum Fu appeals. We give leave to enlarge the appeal to include the costs award, there being no prejudice to Little Republic. Mr Swan, for Kum Fu, submits that there was no dispute between the parties when the statutory demand was served, that Kum Fu was entitled to the payment it sought and that there was no evidential basis for an arguable counterclaim by Little Republic.
• [4] There was clearly a substantial dispute between the parties at the time the statutory demand was served. The dispute concerned what sum was owing and also, by inference, whether the remedial works had been satisfactorily completed. There was an even more substantial dispute about those issues at the time the Associate Judge determined, under s 290(4)(a) of the Act, “there is a substantial dispute whether or not the debt is owing or is due”.^[5] By then, it was clear the work contracted for had not been done. It is not clear Kum Fu was entitled to the payment it sought. The Associate Judge was correct to set aside the statutory demand. The application should not have been opposed. It was open to her to award indemnity costs against Kum Fu.

Result

• [5] Accordingly, we dismiss the appeal. The appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.

Solicitors:
Auckland Property Legal Service, Auckland for Appellant
Forest Harrison Lawyers, Auckland for Respondent

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^[1] Little Republic New Zealand Ltd v Kum Fu Stainless Kitchen Equipment Ltd [2020] NZHC 3478 at [47].

^[2] At [46].

^[3] At [47].

^[4] Little Republic New Zealand Ltd v Kum Fu Stainless Kitchen Equipment Ltd [2021] NZHC 1836

^[5] See Substantive judgment, above n 1, at [35] and [47].