Cafe Brioche Limited v Affin Trustee Limited [2014] NZHC 459 (13 March 2014)

Last Updated: 26 March 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-404-005201 [2014] NZHC 459

BETWEEN CAFE BRIOCHE LIMITED Applicant

AND AFFIN TRUSTEE LIMITED Respondent

Hearing: By memoranda

Appearances: C T Patterson/E Grove for applicant

C V Sumpter for respondent

Judgment: 13 March 2014

_{JUDGMENT OF ASSOCIATE JUDGE ABBOTT}

This judgment was delivered by me on 13 March 2014 at 2.30pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date...............

Solicitors:

Lateral Lawyers (S Rohde), Auckland

Wilson McKay (D J Clark/C V Sumpter), Auckland

Counsel:

C T Patterson, Auckland

CAFE BRIOCHE LIMITED v AFFIN TRUSTEE LIMITED [2014] NZHC 459 [13 March 2014]

[1] This application to set aside a statutory demand was dismissed after the respondent (Affin) withdrew the demand prior to the first call of the application.

[2] The applicant (Café Brioche) has applied for costs incurred in bringing the application. It says that Affin ought to have been aware before issuing the demand both that any debt was payable by another party, and that there was a known dispute over the debt.

[3] Affin opposes the request for costs. It says that costs should lie where they fall given that it had a proper basis for issuing the demand and Café Brioche did not raise its grounds of opposition in response to Affin’s formal demands, but simply filed the application to set aside. It contends that the costs could have been avoided if it had informed it of the grounds before filing the application.

[4] For the reasons I will now give, I decline to make any order as to costs: they are to lie where they currently fall.

Background

[5] Affin issued a statutory demand against Café Brioche claiming $40,000 as a debt due under a contract for re-fitting commercial premises, for use as a café. The

$40,000 represented the balance of a contract price for the work as quoted by Affin.

[6] Café Brioche applied to set aside the demand, contending that it did not owe the debt, and that, in any event, the debt was disputed. It said that Affin’s contract was with Reem Group Ltd, an associated company (having a common director, Mr M Alhardan), apparently working under some arrangement with Café Brioche. It also said that there are a substantial number of defects in the work, which Affin has not remedied.

[7] After being served with the application, Affin informed Café Brioche that it withdrew the demand.

The arguments regarding costs

[8] Café Brioche seeks an order for costs on a scale 2B basis. It says it should not have had to bring the application to set aside, because Affin knew, or ought to have known, that the contract was with Reem (so that any debt was owed by it), and that there was an on-going dispute over remedial work.

[9] Affin opposes any order for costs, and invites the Court to let costs lie where they fall. It relies on the following matters:

(a) It was told by Mr Alhardan, after it submitted its last contract claim, that Affin should invoice Café Brioche, rather than Reem.

(b) The alleged defects were not raised until Affin made demand for its last payment under the contract; prior to that Mr Alhardan had been promising payment.

(c) It had never been given details of the alleged defects.

(d) There had been discussions between the parties, which it believed had resolved matters (and made that known to Mr Alhardan in email correspondence in October 2013).

(e) It had issued the statutory demand after Café Brioche had failed to respond to a letter from Affin’s solicitors on 27 November 2013, requesting payment within a week, and advising that steps would be taken to recover the debt (which could include a statutory demand) if payment was not made.

(f) Café Brioche did not contact it after issue of the demand to raise either of its allegations (that it was not the party owing the debt, and that there were continuing disputes over remedial work). In

particular, the contention that Café Brioche was not the correct party

_{was raised for the first time in the application to set aside.}

Discussion

[10] It is not appropriate on an application for costs that I endeavour to determine the substantive disputes. Nevertheless, I accept that Affin had some grounds to believe that Café Brioche was the party responsible for the debt. There is no evidence to suggest that Mr Alhardan raised this point at any time after he sent an email to Affin on 24 May 2013 requesting Affin to invoice Café Brioche. Secondly, although Affin was given a detailed defects list in mid May 2013, there is evidence that the parties had meetings to try to resolve matters and that a potential compromise was reached in September 2013, under which most of the debt was still to be paid.

[11] Further, Café Brioche did not raise its grounds for contesting the demand in response to the letter from Affin’s solicitors prior to the demand being served, and did not then seek withdrawal of the demand (on those grounds) before filing its application. Given that Affin withdrew its demand reasonably promptly after being served with the application, I accept that it is more likely than not that it would have withdrawn the demand had those matters been raised before the application was filed.

[12] I accept that there is only a brief window of time in which to take steps to bring an application to set aside a demand. However, if Café Brioche had taken steps promptly (in terms of instructing its solicitors) I consider that there would have been time to have sought withdrawal of the demand before incurring the costs of the application. I infer that by the time Café Brioche took legal advice it was too late to take that step. I also infer that it was only at that point that the issue over the true debtor emerged (the quotation was not expressly addressed to either Reem or Café Brioche, although I accept that the payment instructions which appear to have been provided with the quotation indicate that payment was to be made by Reem).

Decision

[13] In the circumstances of this case, I decline to make any order for costs. Costs are to lie as they fall.

Associate Judge Abbott