Leisurecom (NZ) Limited v W M T Construction Taranaki Limited [2018] NZHC 3172 (5 December 2018)

Last Updated: 12 December 2018

IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY I TE KŌTI MATUA O AOTEAROA NGĀMOTU ROHE

CIV-2018-443-64 [2018] NZHC 3172

UNDER	section 290 of the Companies Act 1993
IN THE MATTER	of an application to set aside a statutory demand
BETWEEN	LEISURECOM (NZ) LIMITED Applicant
AND	W M T CONSTRUCTION TARANAKI LIMITED Respondent

Hearing:	27 November 2018
Appearances:	S Gloyn for applicant No appearance for respondent
Judgment:	5 December 2018

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1] This is an undefended application pursuant to s 290 of the Companies Act 1993 for an order setting aside a statutory demand dated 28 September 2018 and served on the applicant by the respondent the same day.

[2] The applicant commenced this proceeding on 12 October 2018. The originating documentation, notice of application and affidavit evidence in support, was served on 12 October 2018. An affidavit of service is on the Court file. Service was effected by email as provided for in the respondent’s statutory demand.

LEISURECOM (NZ) LIMITED v W M T CONSTRUCTION TARANAKI LIMITED [2018] NZHC 3172

[5 December 2018]

[3] The respondent took no formal step in response. In particular no notice of opposition was filed and served. It is on that basis that I describe the application as being undefended. I record that the respondent’s solicitor, Mr Michael Taia, on the day before the hearing, e-mailed to the Court a memorandum asking that the hearing be adjourned. That is not a proper response. It left the respondent unrepresented and the application undefended.

[4] Given the undefended nature of the application I do not propose to go into detail in this judgment.

[5] However, it is necessary, for reasons which will become apparent, and which relate to costs, to describe some aspects of the background.

[6] Leisurecom engaged either a firm by the name of Liberty Homes or a company by the name of Liberty Homes Ltd (I will refer to the entity – whether a partnership or a company – as “Liberty”) to carry out certain construction work.

[7] Subsequently, Liberty found itself in financial difficulty and approached Leisurecom with a view to restructuring their contractual arrangements. It would seem that an attempt was made on behalf of those involved with Liberty to transfer the contractual arrangements to a new entity, the respondent, WMT. This would have required a novation agreed to by all three parties, Leisurecom, Liberty and WMT. The evidence is that nothing of that sort occurred. Those involved with Liberty simply crossed out the name Liberty in the contractual documentation and wrote in the name WMT.

[8] Then, in mid 2018, a dispute arose between Leisurecom and those involved with Liberty or WTM in relation to certain invoices rendered to Leisurecom. Leisurecom’s view – rightly or wrongly – was that it was being overcharged.

[9] When the parties were unable to sort matters out WMT served a statutory demand dated 18 July 2018. Mr Taia was acting for WMT at the time and Mr Gloyn for Leisurecom. The evidence is that Mr Gloyn raised three issues with Mr Taia in relation to his client’s statutory demand:

• (a) first, the legitimacy of the various invoices which had been rendered;

(b) second, the entity with which Leisurecom originally entered into a contractual arrangement;

(c) third, whether Leisurecom had any contractual arrangement with WMT.

[10] The upshot was that the statutory demand was allowed to expire, and no winding up proceedings were commenced.

[11] The underlying dispute was never resolved. Replacement invoices were issued by WMT. When these were not paid, WMT served the statutory demand that is the subject matter of the present application.

[12] In my view, the application being undefended, Leisurecom is entitled to the order it seeks setting the statutory demand aside. Although I make that order primarily on the basis that the application is undefended, the affidavit evidence persuades me that Leisurecom has a genuine defence to the underlying claim in any event.

[13] I reach no final views in relation to the legitimacy or otherwise of the invoices or what is claimable by the partnership, the company or WMT, as it is unnecessary for me to do so.

[14] The next question concerns costs.

[15] Against the background I have described, Leisurecom seeks increased costs. Mr Gloyn does not submit that the case itself would justify costs in excess of those available on a 2B basis. But he submits, with some force in my view, that, given the additional costs incurred by Leisurecom in having to deal with the first statutory demand (that are obviously not claimable in this proceeding) and then having to deal with this proceeding there is a case for an increased costs award. I agree. Costs are of course quintessentially a matter for the Court’s discretion. This is a case in which the applicant has been put to additional costs seemingly in circumstances where that was unjustified and inappropriate, and close to an abuse of process. In my assessment,
it would be appropriate to direct a 50 per cent uplift in the costs to provide Leisurecom with a modest contribution to the additional costs it has incurred.

[16] That leaves one last issue. Mr Gloyn submits (essentially against the possibility that WMT is not good for a costs award), that I should make that award against WMT’s director, a Mr David Towers. I am not prepared to do so. Mr Towers is not of course a party to this proceeding. He has taken no part of it and has not been represented. Whilst I accept that the evidence suggests that he has been behind WMT’s actions in serving a statutory demand and causing Leisurecom to incur costs in dealing with them, if a cost award were to be made against him personally I would wish to give him an opportunity to be heard.

Conclusion

[17] I make the following orders:

(a) The statutory demand dated 28 September 2018 served by WMT Construction Taranaki Ltd on Leisurecom (NZ) Ltd is set aside;

(b) The respondent is to pay the applicant costs calculated on a 2B basis, with a 50 per cent uplift, together with disbursements which may be fixed by the Registrar.

Associate Judge Johnston

Solicitors:

Bytalus Legal, Auckland for applicant