Jasons Travel Media Limited v Markom PR Limited [2012] NZHC 2332 (12 September 2012)

Last Updated: 16 October 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-3967 [2012] NZHC 2332

UNDER the Companies Act 1993

BETWEEN JASONS TRAVEL MEDIA LIMITED Applicant

AND MARKOM PR LIMITED Respondent

Hearing: On the papers

Counsel: S McAnally for Applicant

R Thompson for Respondent

Judgment: 12 September 2012

_{COSTS JUDGMENT OF ASSOCIATE JUDGE R M BELL}

This judgment was delivered by me on 12 September 2012 at 10:00am

pursuant to Rule 11.5 of the High Court Rules.

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Registrar/Deputy Registrar

Solicitors:

Keegan Alexander (S McAnally) P O Box 999 Auckland 1141, for Applicant

_Email: [e-mail]

Thomas & Co (D B Thomas), DX DP95036 New Lynn West, Auckland 0600, for Respondent

_Email: [e-mail]

Copy for:

Richard Thompson, P O Box 3320 Auckland 1140, for Respondent

_Email: [e-mail]

_{Case Officer:} [e-mail]

JASONS TRAVEL MEDIA LIMITED V MARKOM PR LIMITED HC AK CIV-2012-404-3967 [12 September

2012]

[1] This is a costs decision on the application to set aside a statutory demand. I am dealing with the matter, as Associate Judge Abbott is not available. On 31 July

2012, Associate Judge Abbott recorded that the parties had agreed that the statutory demand should be set aside but had not been able to reach agreement on costs. He gave timetabling directions for submissions as to costs.

[2] The applicant filed its submissions as to costs on 3 August 2012, ahead of the deadline of 14 August 2012. The applicant has filed a memorandum seeking an extension of time beyond the deadline of 28 August 2012. That memorandum sets out the matters which the respondent would wish the court to consider in deciding costs. The applicant filed a memorandum in opposition and that, in turn, has generated a further memorandum from the respondent.

[3] I do not grant the extension. I decide costs now. The respondent has put the matter adequately in its memorandum. The sums in issue are not large. It is inefficient for both parties to spend more time on costs submissions.

[4] The respondent seeks further time in which to provide evidence to show good grounds for issuing the statutory demand. That is not necessary. In favour of the respondent, I assume that it had good grounds for serving the statutory demand. The applicant’s evidence shows that the respondent sent the applicant a print-out of work carried out for the applicant, which formed the basis of the charges. The applicant did not make a timely response up to the stage where the respondent instructed its solicitors over the unpaid debt. I will not make any findings adverse to the respondent on the issue of the demand.

[5] Further, until the applicant instructed the solicitors in this proceeding, it does not appear to have done enough to put the respondent on notice that the debt was disputed. While the applicant did suggest that the dispute go to the Disputes Tribunal, many creditors are justified in treating such proposals with scepticism, as simply being a process to buy time. The respondent’s lawyer gave an invalid ground

for rejecting the Disputes Tribunal, but I assume in favour of the respondent that the decision to serve the statutory demand was not unreasonable.

[6] However, there are two matters that count against the respondent. The first is the claim for costs in the statutory demand. Under s 289(1) of the Companies Act

1993, a statutory demand can only be issued in respect of a debt owing by a company. If a debt is not due at the time of the demand, it cannot be included in a statutory demand and the demand itself cannot be used as the means by which the debt becomes due: Keene v Okere Holdings Ltd.[1] It may be that if the respondent had successfully brought a company liquidation application and the court had awarded costs in favour of it, it would be able to recover the costs of the statutory

demand. That debt would only have fallen due at the time of the liquidation order. It was not due at the date of the demand. Further, the amount claimed in the demand was excessive. Under step 48 of Schedule 3 of the High Court Rules, on the current rates, the amount it would recover for issuing a statutory demand is $398.00. I disapprove of the practice of including claims for costs in statutory demands, when there is no liability for costs. That part of a statutory demand is invalid. It is also objectionable for applying illegitimate pressure.

[7] The second aspect is the respondent’s vacillation during the 10 working days after it served the statutory demand. On 5 July 2012, solicitors for the applicant wrote to the respondent’s lawyer setting out the applicant’s case for disputing the debt in the statutory demand. The letter put the respondent on notice that an application would be made to set aside the statutory demand unless advice was given by 5:00pm on 9 July 2012 that the demand was withdrawn. The respondent was required to “put up or shut up” to say whether it stood by the demand – in which case it would face a setting aside application, or to withdraw it. The answers from the respondent’s lawyer suggested the possibility of settlement, but did not say one way or the other whether the respondent stood by the statutory demand.

[8] The service of a statutory demand causes difficulties when a company wants to contest the statutory demand. The company served with the demand must make

_{an application under s 290 within 10 working days of being served. If it does not}

make its application in time, it may be too late to contest statutory demand. If the company does not comply with the demand, there is a presumption of insolvency.

[9] Applications to set aside demands must be prepared within a limited time. Companies served with demands need to know clearly whether the creditor continues to stand by its demand. A prudent company, served with a statutory demand, will make an application under s 290, unless the creditor clearly signals that it no longer relies on the demand. In this case, the applicant sought a clear answer one way or the other from the respondent, but the respondent did not give it. The respondent’s vacillation meant that the applicant had no choice but to make the present application, even though the respondent appreciated by this stage that it did not have good grounds to support the statutory demand.

[10] I decide costs as follows:

(a) The applicant is entitled to costs, as costs follow the event – r 14.2(a). (b) The proceeding is category 2 for costs – r 14.3(1). Most applications

under s 290 of the Companies Act are category 2. This is a standard application under s 290.

(c) The applicable daily recovery rate is $1990.00 per day, as all steps were taken after the new rates came into force – r 14.4.[2]

(d) For the time allocations under r 14.5, I allow one day for the preparation of the originating application and .2 of a day for the joint memorandum to withdraw the application, a total of 1.2 days under band A.

(e) There are two factors going to an increased award of costs:

(i) Wrongfully claiming costs on the statutory demand –

_{r 14.6(3)(b)(ii);}

(ii) Failing without reasonable justification to admit that the statutory demand was invalid, thereby causing urgent but unnecessary work for the applicant – r 14.6(3)(b)(iii).

I order an uplift of 25 per cent.

(e) I award the applicant costs against the respondent in the sum of

$2985.00 plus disbursements as approved by the Registrar.

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R M Bell
Associate Judge

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[1] Keene v Okere Holdings Ltd (1996) 7 NZCLC 261.034.

[2] High Court Rules r 14.4: FM Custodians Ltd v Pati [2012] NZHC 1902.