BDM Grange Limited v Trimex Pty Limited [2014] NZHC 1865 (8 August 2014)

Last Updated: 30 September 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-404-003183 [2014] NZHC 1865

BETWEEN	BDM GRANGE LIMITED Plaintiff
AND	TRIMEX PTY LIMITED Defendant

Hearing:	On the papers
Appearances:	L Turner for the Plaintiff M Morrison for the Defendant
Judgment:	8 August 2014

JUDGMENT AS TO COSTS OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on

08.08.14 at 4:30pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

_{Date...............}

BDM GRANGE LIMITED v TRIMEX PTY LIMITED [2014] NZHC 1865 [8 August 2014]

Costs application upon successful application to set aside the defendant’s

statutory demand

[1] This proceeding was filed in the outcome of the plaintiff’s application to set aside the defendant’s statutory demand. On 17 September 2013 the parties filed a joint memorandum confirming that the defendant had withdrawn its statutory demand.

[2] This proceeding concerns that matter which was the subject of the parties’ statutory demand dispute. By this proceeding the plaintiff claims recovery of a “termination fee” allegedly payable under a distribution agreement dated 23 October

2007, in the sum of $3,778,228.

[3] In its defence the defendant says the parties’ relationship was never one of partnership but rather that they operated under a distribution agreement pursuant to which the plaintiff was appointed as the defendant’s distributor in New Zealand of various cosmetic and beauty products supplied to the plaintiff by or through the defendant; and that the ‘agreement’ dated 23 October 2007 was a draft and its provisions were never agreed to.

[4] The defendant has filed counterclaims against the plaintiff. It says the plaintiff owes it the sum of $1,537,643 for ‘royalty fees’; that the plaintiff has made false representations to third parties in business relationships with the defendant constituting injurious falsehood; and that the plaintiff has made false misrepresentations to third parties constituting Fair Trading Act misleading and deceptive conduct.

[5] There remains an issue between the parties in connection with claims for costs upon the withdrawal of the statutory demand. Counsel filed memoranda as to costs in October 2013. For reasons unclear those have only recently been referred to me. I apologise for any misunderstanding that may have arisen in that outcome.

[6] The defendant’s position is that costs should lie where they fall or alternatively any costs due by them should be fixed on a category 2B basis.

[7] The plaintiff claims costs ought to be fixed on an indemnity basis.

Background

[8] The parties’ business relationship endured from 1984 to 2012 and involved the distribution of beauty care products in New Zealand. Financial issues caused the disruption and eventually the end of their business relationship.

[9] The submissions of each side focus upon whether it was reasonable or appropriate for the defendant to issue a statutory demand seeking recovery of the sum of $619,586. The defendant says that amount had been acknowledged by the plaintiff as being due and owing and the defendant was careful not to make any other demand in respect of debts which were in dispute.

[10] When the statutory demand was served the plaintiff indicated there was a dispute about whether there was a partnership between the parties. The plaintiff’s position was that in the outcome it would be shown that any debt owed to it would exceed any amount owed to the defendant.

[11] In that regard the plaintiff wrote to the defendant through solicitors in June

2013 requesting the statutory demand be withdrawn or that indemnity costs would be claimed.

[12] The plaintiff says that despite this warning the defendant maintained the integrity of its demand which forced the plaintiff to bring its application to set aside that demand. The plaintiff says given the prescribed time limitations, its setting aside application had to be done with urgency.

[13] It appears from a review of papers available for the Court’s consideration that a primary key point advanced concerned the nature of the relationship between the parties – a matter addressed in length by the extensive affidavit evidence filed. As noted earlier the summary of matters raised upon the plaintiff’s new proceeding focuses very much upon the nature of the parties’ business relationship. The plaintiff’s position is that the defendant’s denial of a partnership relationship was a

claim never before proffered in the history of the parties’ association but that it seems to have arisen anew in order to take tax positions that had become available.

[14] The defendant’s submission is that it has at all times considered that the partnership argument could not succeed; and that the statutory demand was not withdrawn because the partnership argument was regarded as having any merit. Rather it was only withdrawn when the plaintiff’s affidavits for the first time, the defendant says, provide evidence that the terms of the parties’ distribution agreement required that on termination of that agreement the defendant was to pay the plaintiff the sum of $3,778,228 being a sum that exceeded the due debt.

[15] The defendant says it then immediately recognised that the termination payment argument was not capable of determination in the context of a statutory demand setting aside application.

Considerations

[16] There is no evidence of improper or unnecessary action by the defendant in the issue of its statutory demand. At face value there appears to be a genuine dispute regarding the nature of a business arrangement that served the parties for about 28 years before termination arrangements were forced to be addressed.

[17] It seems that once extensive evidence had been given the defendant appropriately conceded the statutory demand should be withdrawn.

[18] It is clear from the extensive submissions filed by counsel that the essential nature of the parties’ business relationship is very much up for contention. Counsel for the defendant has provided extensive and forceful submissions in support of his client’s position in relation to that business arrangement. The Court considers it quite clear that the evidence provided on behalf of the defendant indicates the prospect of a strong contest when this matter goes to trial.

^Decision

[19] This is not an appropriate case for costs to be ordered to lie where they fall. Although the parties’ dispute remains to be fought keenly that is no reason to refuse an order for costs.

[20] There is a degree of commerciality in the decision to sue one’s former business partner even if in that end it should become clear both sides are at odds regarding the nature of that business arrangement. In those circumstances the party that has initiated the claim should bear some consequence when it concedes it must revert to the more formal proceedings process.

[21] The Court fixes costs payable to the plaintiff on a 2B scale basis, together with disbursements. Regarding disbursements the Court does not agree to the claim for reimbursement of Mr Chapman’s fees. The amount and utility of those fees are

_{better left for assessment upon the plaintiff’s substantive proceeding.}

Associate Judge Christiansen