Sakaka Limited v Stewart Germann Law Office [2015] NZHC 2908 (20 November 2015)

Last Updated: 30 December 2018

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2015-404-002196 [2015] NZHC 2908

BETWEEN	SAKAKA LIMITED Applicant
AND	STEWART GERMANN LAW OFFICE Respondent

Hearing:	20 November 2015
Appearances:	E J Werry for the Applicant S Carey for the Respondent
Judgment:	20 November 2015

ORAL JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

SAKAKA LIMITED v STEWART GERMANN LAW OFFICE [2015] NZHC 2908 [20 November 2015]

[1] The applicant applied to set aside the respondent’s statutory demand. The respondent legal firm undertook work for the applicant and has invoiced $23,682.00 of which it says $4,678.80 still remains unpaid and for which it has issued a statutory demand.

[2] The applicant provides two reasons for its setting aside application:

(a) There is a substantial dispute because of “charging discrepancies in regard to two invoices”.

(b) The respondent breached clause 2.1 of its Terms of Engagement (ToE) by not providing an updated fee estimate.

[3] Also it is claimed the statutory demand should be set aside because the respondent did not follow the complaints procedure as set out in its ToE.

[4] Section 290(4) of the Companies Act 1993 enables the Court to set aside a statutory demand if satisfied there is a substantial dispute about whether or not the debt is owing or if for other reasons the Court considers it appropriate to set aside the demand.

[5] Counsel agree the relevant legal principles are well settled. An applicant has the onus of showing there is a “genuine and substantial dispute” that the debt is owed. Mere assertion is not enough.

[6] The applicant pleads the dispute relates to charging discrepancies in regard to two invoices. Mr Masters a director of the applicant has provided two affidavits. The respondent’s evidence is provided by two affidavits from Mr Germann. Mr Masters states that prior to signing the ToE an initial meeting was held on 14 December 2014 during which the applicant requested an estimate of costs from the respondent. The applicant was in dispute with another company.
[7] Mr Masters said he was advised that the cost would be around $20,000 -
$30,000 plus GST and disbursements.

[8] The ToE was signed on 17 December 2014. Four invoices were issued in December 2017 including one from Mr Sorrell a barrister and another from a Ms Fraser a third party secretary. Subsequent invoices issued in January, February and March 2015. On 31 August 2015 the respondent issued the applicant with a letter of demand for payment in that amount for which its statutory demand payment subsequently issued.

[9] In response to the letter of demand Mr Masters emailed Mr Germann stating he had reviewed the charges and had noticed some discrepancies. He noted there had been reference to a costs figure of around $30,000 for the Court injunction preparation work and acknowledged there would be an extra cost to “defend the injunction”. He then noted that the March 2015 invoice for $5,039.20 “is a lot higher for less work done during the period 2 March to 27 March, as compared with the previous invoice for between 21 January to 27 February, when more work was done during that period. Also the previous invoice to this, dated 22 December 2015 also has a lot more done with a lesser amount invoiced in comparison to the 31 March invoice”.

[10] Mr Masters asked whether there had been an oversight error made in relation to the charges invoice to March 2015 as compared to other invoices. It is clear from the rest of his email that Mr Masters acknowledged that the costs of Mr Sorrell would be met separately by the applicant.

[11] In response Mr Germann wrote to Mr Masters and drew his attention to the ToE which he noted stated:

Given that we do not know what attendances will be required of us, we cannot provide you with an estimate of our fee in this matter and will charge pursuant to our Terms (which this project outline is annexed hereto).

[12] Mr Germann agreed having advised Mr Masters that in his experience injunction matters would usually cost in the vicinity of $20,000 to $30,000 plus GST and disbursements. The respondent’s position is no fee estimate was given and that the contract for services was dictated by the ToE.
[13] Mr Werry submits a respondent cannot rely on the ToE that a fee would be on an hourly basis on the one hand, yet on the other, know the retainer was entered into on the basis of a cost representation.

[14] Mr Werry submits the respondent is in breach of clause 2.1 of the ToE which provides:

2.1 Where the project outline sets out an estimated fee range for our attendances on a given matter, please note that such range is an estimate only and only covers for the anticipated work as specifically set out in the project outline. We will endeavour to advise you if it appears that our fee estimate will be exceeded and where we are able, we will provide you with an estimate for the further work required of us.

[15] In response to the respondent’s claim that there was no fee estimate and therefore that clause 2.1 was not engaged the applicant says that had it been advised that the original “fee estimate was likely to be exceeded by upwards of 50 per cent, it would have seriously considered transferring the work back to its previous solicitors”.

[16] Mr Werry submits that even if the respondent had the right to bill for its costs on an hourly rate basis then it should still have informed the applicant that the initial indication of cost was going to be exceeded.

[17] Mr Werry submits the respondent is in breach of the ToE because having received Mr Masters’ 2 September 2015 letter requesting a costs clarification, Mr Germann replied the following day and on the day after that issued the respondent’s statutory demand. Mr Werry submits that by those actions the respondent has ignored clause 4 of the ToE which contemplated providing an opportunity to refer the matter to the Law Society.

Conclusions

[18] It is clear from the applicant’s evidence that the estimate of $20,000 to $30,000 in fees was nothing more than that i.e. an estimate. It was meant to give an indication including the cost of counsels’ fees which clearly Mr Masters has acknowledged required separate consideration and was not part of the respondent’s engagement by
its ToE. Further it is clear Mr Germann informed the applicant it would have to confirm with Mr Sorrell what his fee might be.

[19] The clear evidence is that none of the respondent’s invoices was paid on time. Indeed some were two to six months late. Mr Germann has detailed a raft of excuses by Mr Masters to explain late payments, despite claims that payments would soon be made.

[20] The applicant’s claims of alleged discrepancies are supported by neither detail nor indeed any evidence but rely upon the Court accepting some commitment in relation to the figure of $20,000 - $30,000 indicated prior to the ToE being signed.

[21] Mr Masters deposed he genuinely believed there were discrepancies between the February and March 2015 invoices but gives no reason for the basis of that belief.

[22] The Court agrees with Mr Carey’s assessment that the submissions for the applicant repeat claims that there is a substantial dispute but say nothing about what that dispute is; that claims of discrepancies rely exclusively on a query from Mr Masters which was unfounded from the outset and which has been answered.

[23] The respondent did the work it said it would and no issue has been raised with the quality of that work.

[24] The applicant claims the respondent has itself breached the terms of the ToE. The Court does not agree. No estimate of fees was contained in the ToE project outline and therefore clause 2.1 has not been breached and provides no basis to set aside the statutory demand. There is no clear justification for not allowing the statutory demand to remain in the face of the applicant’s claims of a breach of engagement terms. A recent claim of a wish to refer this matter to the Law Society has come too late. The applicant’s debt is long unpaid and the applicant has had the opportunity to file a complaint had it wished to earlier. Further, service of the statutory demand upon the applicant would not have prevented this being done. It was not.
[25] The application must fail.

[26] The time for complying with the statutory demand shall be extended to 4:00pm, 27 November 2015.

[27] The applicant shall pay the respondent’s costs calculated on a 2B basis. The Court certifies a quarter of a day for today’s hearing time.

Associate Judge Christiansen