Hydrotech Limited v Quik-Shot Limited (now 123 Holding Company Limited) [2018] NZHC 2148 (21 August 2018)

Last Updated: 18 September 2018

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2017-409-421 [2018] NZHC 2148

BETWEEN	HYDROTECH LIMITED First Plaintiff DRAIN SURGEONS NZ LIMITED Second Plaintiff
AND	QUIK-SHOT LIMITED (NOW 123 HOLDING COMPANY LIMITED) Defendant

Hearing:	20 August 2018
Appearances:	P Sills for Plaintiffs No appearance by or for Defendant
Judgment:	21 August 2018

REASONS FOR JUDGMENT OF MANDER J

[1] On 20 August 2018, I entered judgment in favour of the plaintiffs in the sum of $378,749.32, together with interest and costs. These are my reasons for doing so.

[2] The plaintiffs, Hydrotech Limited (Hydrotech) and Drain Surgeons NZ Limited (Drain Surgeons), together with a third company, Reline NZ Limited (Reline), are owned by Hydrotech Investments Limited. Collectively they are referred to in this judgment as the Hydrotech Group.

[3] Hydrotech provides water and drainage services for domestic, commercial and local authority clients throughout the country. Drain Surgeons specialises in drainage work for the purpose of both small domestic repairs and larger commercial projects. Reline provides trenchless pipe relining for council and water authorities.

HYDROTECH LIMITED v QUIK-SHOT LIMITED [2018] NZHC 2148 [21 August 2018]

[4] The defendant, Quik-Shot Limited (Quik-Shot), which changed its name to 123 Holding Company Limited after these proceedings were issued, provided trenchless pipe relining services and was based in Christchurch. The director of that company was previously employed by Hydrotech as a relining manager and worked on several relining projects in Christchurch before establishing his own business.

[5] Water and drainage services together with the provision of pipe technologies are often required on the same project, and the Hydrotech Group and Quik-Shot would work together to provide those services on various contracts. Subcontracting arrangements between the companies would include Reline performing the pipe relining as the main contractor and subcontracting specific parts of the pipe relining project to Quik-Shot. In turn, Quik-Shot would subcontract Hydrotech and/or Drain Surgeons to perform particular aspects of that work, including closed circuit television work, flushing of lines before and after relining, and the excavation of the starting point for the purpose of trenchless entry.

[6] Disputes arose between the Hydrotech Group and Quik-Shot in relation to the payment of invoices each issued to the other. As a result of the parties being unable to reach agreement, Hydrotech and Drain Surgeons commenced these proceedings to recover the sum of $378,749.23 which they claimed was the balance owing to them by Quik-Shot. In response, Quik-Shot filed a statement of defence and counterclaim.

[7] In May 2018, Quik-Shot’s former solicitors were granted leave to withdraw. Since that point the defendant has taken no further steps in the proceeding. Associate Judge Osborne directed that if Quik-Shot intended to take any further steps in the proceeding, it was required to appoint a new solicitor and enter a formal appearance.¹ In the absence of Quik-Shot appointing substitute legal representation or having communicated with the Court regarding the apparent abandonment of its defence and counterclaim, the Associate Judge set the matter down for formal proof.

1. Hydrotech Ltd v Drain Surgeons NZ Ltd HC Christchurch CIV-2017-409-421, 18 May 2018; Re G J Mannix Ltd [1984] 1 NZLR 309 (CA).

The claim

[8] The plaintiff companies filed, in support of their claim, an affidavit from the Chief Financial Officer of the Hydrotech Group, Mr Ross Bell-Syer. This provides the evidential basis upon which the plaintiff companies rely to prove their claim.

[9] The dispute between the parties distilled to their respective positions regarding the contested invoices. The pleadings disclose that Quik-Shot took issue with Hydrotech and Drain Surgeons’ claim for payment on three bases:

(a) Quik-Shot did not accept that it received all the invoices issued by Hydrotech and Drain Surgeons and therefore reserved its position regarding the legitimacy of those invoices.

(b) Quik-Shot disputed a number of the invoices received from Hydrotech and Drain Surgeons.

(c) Quik-Shot appeared in its statement of defence to contest Hydrotech and Drain Surgeons’ position regarding a number of its invoices. The plaintiff companies maintained those issues had been resolved with Quik-Shot.

[10] Because I only have available to me the uncontested sworn evidence of Mr Bell-Syer, I am obliged to proceed on the basis of his testimony.

Invoices sent to Quik-Shot

[11] The Hydrotech Group’s invoices were sent to Quik-Shot by email. It does not accept Quik-Shot’s contention that those emails were not received by it. Undelivered or “bounced” emails would have resulted in an email notification back to Hydrotech. None were received. Mr Bell-Syer deposed that the Hydrotech Group companies have not experienced communication issues with any other customers regarding invoicing. He believes all the invoices were sent, in accordance with the Hydrotech Group’s usual practice, and received.
[12] Mr Bell-Syer observed that if there was any difficulty or confusion regarding the invoicing it arose from Quik-Shot’s own internal communications and processes, which he considers there is some basis to believe were unreliable. In support of that view, he cited Quik-Shot’s new accounts payable administrator, in September 2016, having to require copies of documents that had already been provided to Quik-Shot on two previous occasions in May of that year.

[13] In the absence of any evidence from Quik-Shot identifying particular invoices that it did not receive from Hydrotech or Drain Surgeons, I proceed on the basis the invoices were rendered and received.

Disputes regarding Hydrotech and Drain Surgeons’ invoices

[14] Quik-Shot did not dispute Drain Surgeons’ invoices which total $17,675.45. Those invoices have been paid in full.

[15] Hydrotech issued invoices in the total sum of $715,810.68.² Mr Bell-Syer deposed that Quik-Shot raised disputes regarding a number of invoices issued by Hydrotech which totalled $102,441.68.³ It requested further copies of those invoices. These were provided on 11 November 2015. After the provision of these copies, Quik- Shot did not engage in any further correspondence with Hydrotech regarding those invoices. In particular, it did not provide reasons for disputing them or any supporting information.

[16] In the absence of any evidence upon which to legitimately dispute these invoices or the work to which they relate, Quik-Shot stands in debt to Hydrotech for the amounts claimed, less payments accepted to have been made by Quik-Shot in the sum of $106,552.78. The outstanding amount stands at $609,257.90.

² $589,858.47 between 23 June to 2 October 2015 and $125,952.21 after 2 October 2015.

³ Those invoices are 6001523, dated 20 July 2015, for $39,246.88; 6001527, dated 20 July 2015,

for $53,449.24; 6001618, dated 31 July 2015, for $8,576.70; and 6001762, dated 31 August 2015, for $1,168.86.

Disputes regarding Quik-Shot’s invoices

[17] On 21 May 2015, Mr Bell-Syer made inquiries of Quik-Shot regarding arrangements for the payment of Quik-Shot’s invoices totalling $61,338.47 which had become due for payment by Reline. Quik-Shot at that time owed Hydrotech
$67,906.13. In the absence of a response from Quik-Shot, Mr Bell-Syer set off the amount of $56,637.15 from the amount owed to Hydrotech to satisfy Quik-Shot’s invoice 0165 for $46,988.40; reduce invoice 0150 by $3,454.68, leaving a balance outstanding on of $1,029.72; and reduce invoice 0166 by $6,194.07, leaving a balance outstanding owed to Quik-Shot of $3,671.60. On 22 May 2015, the $1,029.72 on invoice 0150 was paid.

[18] In relation to invoice 0238 of 20 July 2015, issued by Quik-Shot in the sum of
$52,610.53, Mr Bell-Syers’ evidence is that after one of the directors of Hydrotech discussed the invoice with Mr Fowler it was agreed the invoice was to be reduced to
$19,107.15. This was because a number of deliverables had not been provided by Quik-Shot to support the invoice, and some variations included in the invoice had not been approved. Accordingly, the original invoice sum of $52,610.53 was reduced by
$33,508.38.

[19] On 2 October 2015, a meeting was held at the Christchurch branch of Hydrotech to discuss the issues between the parties regarding Quik-Shot’s invoices. Mr Bell-Syer attended this meeting together with the directors of Hydrotech and the directors of Quik-Shot. A detailed discussion took place about the various invoices.

[20] As at the date of the meeting, Quik-Shot had issued invoices to Reline for a total sum of $619,404.92. Hydrotech disputed a number of the invoices because they were for unapproved variations. Mr Bell-Syer’s evidence is that a director of Quik- Shot, Mr Carl Fowler, accepted these invoices should be voided, namely: 0204, dated 2 July 2015, for $112,866.47; 0205, dated 2 July 2015, for $50,457.22; and 0206, dated 2 July 2015, for $20,596.50.

[21] Mr Bell-Syers’ evidence was that agreement was also reached in respect of a number of other invoices. Hydrotech disputed invoice 0226 of 1 August 2015. It was agreed at the meeting the rates in the invoice were incorrect and that it should be
reduced to $155,337.67. After discussing invoice 0261, dated 25 September 2015, for
$3,485.08, it was accepted this was valid and correct.

[22] Mr Bell-Syers’ evidence is that adjustments were made to a further two invoices issued by Quik-Shot. Invoice 0187, in the sum of $35,667.22, was reduced by $9,098.46 to $26,568.76 because of work undertaken that was neither requested nor required. In respect of invoice 0095, Mr Belly-Syer deposed that the original invoice in the sum of $4,036.50 was reduced as a result of a 50 per cent credit requested by Hydrotech and accepted by Quik-Shot, leaving a remaining balance of
$2,018.25. This was paid on 6 March 2015 but was not credited to Hydrotech in reduction of the balance of the amount owed to Quik-Shot.

[23] On 14 September 2016, Mr Bell-Syer sent an email to Quik-Shot providing a full and detailed reconciliation of the net position between the parties. One of those worksheets was based on Quik-Shot’s statement of 31 October 2015, showing a total balance owed to it of $619,404.92. Beneath Quik-Shot’s statement, Mr Bell-Syer noted the adjustments and deductions that had been made to the various invoices, as I have previously outlined them. This left a total balance owed to Quik-Shot in the sum of $230,513.67. Apart from a variation of a few dollars, this is the sum pleaded as the outstanding sum owed by Reline to Quik-Shot which, for the purpose of the plaintiff companies’ claim, should be deducted from the sum Quik-Shot owes to the Hydrotech Group.

[24] After the reconciliation was sent to Quik-Shot there was further discussion and communication between Mr Bell-Syer and a director of Quik-Shot but no resolution was achieved. Mr Bell-Syer deposed that the final amount that Hydrotech owed to Quik-Shot on the various invoices it issued was $230,508.67

Conclusion

[25] Having read the affidavit of Mr Bell-Syer and the submissions of Mr Sills on behalf of the plaintiff companies, I am satisfied that they have substantiated their claim to be paid for the work undertaken and invoiced to Quik-Shot. Accordingly, I find on the evidence as follows:

• (a) Quik-Shot owes the sum of $609,257.90 to Hydrotech.

(b) Reline owes the sum of $230,508.67 to Quik-Shot.

(c) The net amount outstanding owed by Quik-Shot to the Hydrotech Group is $378,749.23.

[26] Quik-Shot has not contested the plaintiff companies’ claim and has failed to pursue its counterclaim which is accordingly dismissed.

[27] There will therefore be judgment in favour of the plaintiff companies in the amount of $378,749.23. Hydrotech acknowledges that it holds retentions of $39,963 which may be applied to reduce the amount owed by Quik-Shot to Hydrotech to
$338,786.23.

[28] The plaintiffs are entitled to interest, pursuant to s 87 of the Judicature Act 1908, at the rate of five per cent per annum on the sum of $338,786.23, calculated from the date the last invoice issued to the defendant fell due for payment, namely 20 January 2016.

Costs

[29] The plaintiffs are entitled to costs on a 2B basis, in accordance with the schedule they have filed. There will be an order for costs in the sum of $18,063 and disbursements exclusive of GST of $1,217 in their favour.

Solicitors:

Hornabrook MacDonald, Auckland