Ezibuy Limited v Glacier Investments Limited [2020] NZHC 3158 (30 November 2020)

Last Updated: 3 December 2020

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-1753 [2020] NZHC 3158

UNDER	the Companies Act 1993
IN THE MATTER	of a statutory demand served on 11 September 2020
BETWEEN	EZIBUY LIMITED Applicant
AND	GLACIER INVESTMENTS LIMITED Respondent

Hearing:	16 November 2020 (By AVL)
Appearances:	C R Vinnell and C Jolliffe for the Applicant I J Thain for the Respondent
Judgment:	30 November 2020
Reissued:	1 December 2020

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 30 November 2020 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 30 November 2020

Note: This Judgment was re-issued on 1 December 2020 to reflect a change to para [87]. This amendment has been made under the Slip Rule.

EZIBUY LIMITED v GLACIER INVESTMENTS LIMITED [2020] NZHC 3158 [30 November 2020]

• [1] The applicant, Ezibuy Limited (Ezibuy), is a clothing retailer selling both online and from retail outlets.

• [2] The respondent, Glacier Investments Limited (Glacier), had on its own evidence, supplied garments to Ezibuy for over 30 years. Mr Sew Hoy of Glacier described the process by which garments were supplied as involving Glacier meeting with Ezibuy to review clothing samples from which Glacier would take photographs, fabric cuttings and notes. Glacier then discussed the production of those items with its suppliers, the majority being based in China. That process takes some months, from the initial meeting through until the delivery of stock. While the exact timeframes are not agreed, the orders in issue in this case were placed in around October 2019 for delivery early May 2020.

• [3] This proceeding concerns a statutory demand issued by Glacier to Ezibuy in the sum of $1,310,524.88. While in oral submissions some questions were raised by Ezibuy over relatively small sums, the application to set aside the statutory demand proceeded on the basis the amount claimed in the statutory demand was not subject to dispute and the goods to which the debt related were supplied by Glacier to Ezibuy and the amount of the debt has fallen due.

• [4] Ezibuy seeks to have the statutory demand set aside on the grounds that it has a set-off or counterclaim which exceeds the amount of the debt.

Law relating to statutory demands

• [5] Counsel were agreed as to the principles relating to an application to set aside a demand. The applicant must show there is arguably a genuine and substantial dispute as to the existence of the debt; a mere assertion of a dispute is not sufficient. Material short of proof is required to support the claim that the debt is disputed and if such material is available the dispute should normally be resolved through a process other than the statutory demand process. In a challenge to a statutory demand it is not usually possible to resolve disputed questions of fact.¹

1. AAI Ltd v 92 Lichfeld Street Ltd (in receivership and in liquidation) [2015] NZCA 559, [2016] NZAR 559 at [19].

• [6] Both counsel recognised that this case involves a set-off or counterclaim for an unliquidated sum and so the following approach applies:²

It is more difficult if, on the applicant’s side, there is an indisputable liquidated sum, but the other party’s claim is for an unliquidated sum with liability and/or quantum in dispute. Then, in order to impeach the statutory demand and overcome the presumption ... that the company is unable to pay its debts when it has failed to comply with the demand, it must be able to do more than merely assert that there is an available set-off. It must be able to point to evidence before the Court showing that it has a real basis for the claimed set-off and that accordingly the applicant’s claim to be a creditor is, to the extent of the set-off, seriously in doubt. In the words of Buckley LJ in Bryanston Finance Ltd v de Vries (No 2) [1976] Ch 63 at p 78, it must show that there are “clear and persuasive grounds” for the set-off claim. Where this can be done, the party who has issued the statutory demand against the company will be shown to be using the statutory demand and liquidation procedures improperly because there is a “genuine and substantial dispute” about the net amount of the company’s indebtedness...

[emphasis added]

The terms of trade between the parties

• [7] There is, in this case, an element of what is referred to in Burrows, Finn and Todd on the Law of Contract in New Zealand as “the battle of the forms”.³

• [8] On 13 December 2016, Ezibuy’s terms were signed. On 20 December 2016, Ezibuy signed an application for credit to open a credit account with Glacier. The credit account form included a one page Terms of Trade. Ultimately, I do not consider the dispute in relation to which Terms of Trade apply, needs to be resolved to determine this application.

Background to the counterclaim

• [9] At the heart of Ezibuy’s counterclaim is Glacier’s cancellation of the orders placed in October 2019 for delivery to Ezibuy in early May 2020. Ezibuy says Glacier was not entitled to cancel those orders, giving rise to a breach of contract claim, or that Glacier misled it in that regard, initially saying to Ezibuy that the orders were on hold, when in fact they had been cancelled with manufacturers, and Glacier only later

² Covington Railways Ltd v Uni-Accommodation Ltd [2000] NZCA 230; [2001] 1 NZLR 272 (CA) at [11].

3. Jeremy Finn, Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (6^th ed, Lexis Nexis Wellington) at [3.39].

disclosing cancellation to Ezibuy in breach of the Fair Trading Act 1986. Ezibuy says it suffered loss of profits in relation to stock Glacier wrongly failed to deliver, or as a result of it being misled as to the status of its orders.

• [10] As the following review of the correspondence shows, the above is the broadest of summaries of the counterclaim and it is necessary to examine in detail how and when the orders were put on hold/cancelled, what Ezibuy was told in that regard, and what Ezibuy did in response.

• [11] The key communications in relation to Ezibuy’s orders occurred between 3 March 2020 and 1 May 2020. The starting position is Ezibuy placed orders in late 2019 for garments to be delivered in early May 2020 (the orders).⁴

• [12] The orders were accepted by Glacier. Prior to the orders being placed, Ezibuy had an overdue debt to Glacier of approximately $1,500,000. A payment plan was agreed in July 2019, prompted by an email from Glacier to Ezibuy saying that Ezibuy’s delay in payments was impacting on Glacier’s relationships with its manufacturers in China and Bangladesh.

• [13] By the start of March 2020, Ezibuy was in arrears again. Agreed payment terms were 90 days from the date of delivery to Ezibuy. As at 3 March 2020, Ezibuy accepts it had an overdue balance, that is, beyond 90 days, of $178,000.

• [14] While from late March 2020 to 1 May 2020, Ezibuy asserted that its account with Glacier was within trading terms, Glacier did not accept that. A reconciliation of the balance between Ezibuy and Glacier as to what, in fact, fell due from late March 2020 has not yet been agreed, so it is not possible in this application to determine whether, once the arrears of $178,000 had been paid, Ezibuy’s account was ever current.

• [15] However, the key point is Ezibuy accepts it was in arrears as at 3 March 2020.

⁴ The exact date the orders were placed is disputed, but is not material.

• [16] On 3 March 2020, Ms Rees of Ezibuy sent Mr Sew Hoy of Glacier, an email which listed the following six points under the heading “Notes from our meeting today”:

1. We will reconcile the accounts for Glacier using your info provided to understand where the differences are occurring – finance will provided [sic] this info and Ill feedback [sic] back to you by Friday (accounts to do this recon)

2. You will send me examples of [where] the team are wanting to fine you for late deliveries either due to production issues (coronavirus) or payment issues

3. You will email examples of interest charges on invoices that are overdue.

4. I will confirm with you weekly via email the estimated amounts we will pay Glacier these payments are made on Wednesday and Fridays. Our plan is to get you back to your TT as soon as possible.

5. If you wish to halt production or cancel any orders you have already received from us to reduce your exposure to Ezibuy this is your prerogative. We only ask that you let us (buying team) know which orders will be affected.

6. Richard and I will work with the new team in Sydney to ensure communications are improved and your enquiries to accounts are responded to in a timely manner.\

• [17] Paragraph 5 in the preceding paragraph is central to this application.

• [18] In a separate email of 3 March 2020, Ms Razak of Ezibuy advised Glacier that Ezibuy would not place any new orders with Glacier until it “... can meet payments” and if Ezibuy “... is up to date with payment prior to June 2020 - Ezibuy is welcomed by Glacier to start raising orders on the 90day payment terms”. The email concluded that Ezibuy would be in contact “... to confirm x3 fortnightly payments of $150k by Friday 6 March”.

• [19] Glacier says, and Ezibuy does not dispute, that Ezibuy did not complete the steps set out in the preceding paragraphs.

• [20] On 20 March 2020, Glacier sent the email set out below to Ezibuy (the Hold email). It is not entirely clear on the evidence whether as at 20 March 2020, Ezibuy had paid the $178,000 accepted as overdue or not, as I will refer to below. The email, which is also central to this application, is as follows:

From: Helen Meisner [...]

Sent: Friday, 20 March 2020 3:27 p.m.

To: Marielle Le Couteur [...]

Dear Marielle, Leigh, Katy, Natalia & Noemie, It is with greatest regret we need to advise, that as of today, all Ezibuy bulk deliveries are on hold.

It is unfortunate that the payment contract made with Ezibuy management some weeks ago, to catch up on overdue payments has been reneged on and the amount outstanding continues to increase.

This leaves our hands tied. Over and above it being unwise to increase our risk by incurring even larger outstanding amounts, we quite simply cannot afford to pay for goods and delivery until sufficient payments are received from Ezibuy to enable us to continue with current orders.

For your understanding of the situation, our terms of trade are 90days and there is currently a significant amount overdue beyond that by a further 30days and more. A payment schedule to try to catch-up was agreed and signed between Ezibuy management & Glacier. This payment schedule has not been upheld by Ezibuy.

Now, suppliers are withholding the issue of Original Bill of Lading documents until payments are received. Without these docs, the goods cannot be uplifted from bond.

Helen.

Helen Meisner Production Manager

Glacier Investments Limited

[...address and contact details]

• [21] As I have said, as at the end of March 2020 there was significant disagreement between the parties as to whether Ezibuy was in arrears. As at 25 March 2020, Glacier said Ezibuy was in arrears by $306,216.83. However, Ezibuy, having paid the

$178,000, says it was within the agreed 90 day terms.

• [22] In response to the Hold email, Mr Rees of Ezibuy replied on the following working day, Monday 23 March 2020, in an email which includes the following:

We will commence a review this week of all our commitments with Glacier and work on cancelling orders and shifting production. Lynette and Julia will coordinate this with your team to mitigate both parties risks. Currently our forward commitments with Glacier are showing NZD$2,576,059. Note, the team will require samples back of those PO’s that we cancel. [PO’s being purchase orders]

• [23] The email concluded by referring to the payment of $178,000 and said: “We are also asking all our suppliers to support us in 150+ days terms during this challenging time.” This is a reference to the COVID-19 pandemic. The email also asserted that Ezibuy was within payment terms.

• [24] Glacier rejected the request for 150 days payment terms in an email sent to Ezibuy on the afternoon of 24 March 2020.

• [25] The request for payment terms of 150 days from receipt of goods was repeated in a further email from Ezibuy sent on the evening of 24 March 2020 in which it referred to New Zealand going into level 4 lockdown that evening. The email sought confirmation by the end of the week that Glacier confirm it agreed to the new payment terms and “[t]hat you are able to continue BAU [business as usual] with our team this included [sic] production order movements etc.?”.

• [26] On 25 March 2020, Glacier sent an email to Mr Sam Spibey of Ezibuy which said:

Hi Sam, While it is true there are some orders on the way, unfortunately at this stage we will not be able to deliver them. Suppliers prefer to have the stock shipped back than to deliver and not be paid for it.

• [27] Mr Spibey then circulated the Hold email to a number of recipients within Ezibuy under the subject line “Glacier Orders on Hold” saying:

Hi all,

Just spoke to Helen at Glacier and she confirmed that anything already on the water will also not belong to us. I quickly spoke to Roger about Glacier orders and their current status last week and his amazing report showed what we were still expecting from Glacier.

Lynette how would you like us to approach managing this?.

[emphasis added]

• [28] On 26 March 2020, Ms Lynette France of Ezibuy, forwarded the email exchange to Ms Meisner of Glacier. The email began:

I appreciate you have been communicating with Dawn Rees on payment issues, however I need to be clear on the production of our future orders. Please continue to work with Dawn on outstanding payments.

My challenge is to continue to manage the production and supply of goods ordered to fulfil the ranges we have created.

• [29] One of Glacier’s manufacturers in China is James Knitwear. On 20 March 2020, Ms Meisner emailed James Knitwear cancelling a number of Ezibuy’s orders because of a combination of factors beyond Glacier’s control. The reasons related to measurements being out of tolerance and late deliveries, in part due to the impact of COVID-19 in China. The email concluded:

We are telling you this immediately so that you do not proceed with further bulk production. We are currently in negotiation with our buyer to try and

save some of the orders of goods on the water.

• [30] The email did not refer to any default by Ezibuy, nor was it copied to Ezibuy. Then, on 27 March 2020, Ms Meisner sent a further email to James Knitwear which began:

Hi James, This email is to re-iterate and ensure you are very clear, that as my email below and Jialins information that ALL orders to Ezibuy that are not yet delivered to the buyer, are cancelled. You should not proceed any further with production or shipping.

Please confirm you understand clearly that this applies to ALL ORDERS.

• [31] The email goes on to refer to difficulties in obtaining payments from Ezibuy.

• [32] As at 20 March 2020, Glacier had informed Ezibuy that its orders were on hold,⁵ and that orders that were on the way were not able to be delivered.⁶ Glacier did not tell Ezibuy that the orders had been cancelled until 1 May 2020.

• [33] The theme of the correspondence through April 2020 is Glacier calling for payment of sums that Glacier considers were overdue, and Ezibuy asserting that it was

⁵ See [20] above.

⁶ See [26] above.

current. To address Glacier’s concerns, Ezibuy made a number of further payments in April 2020 expressly on the basis that it said it was current.

• [34] On 17 April 2020, Ezibuy emailed Glacier seeking an update as to the status of its purchase orders. Glacier replied confirming that it could not provide information about the purchase orders until a further $600,000 was paid.

• [35] On 18 April 2020, Ezibuy renewed its request for an update on purchase orders and, again, Glacier said it would not provide an update unless $600,000 was paid.

• [36] On 22 April 2020, Ezibuy provided Glacier with a reconciliation showing

$267,944 was currently due and that it would be paid on 23 April 2020, and sought a meeting to understand the status of its other orders.

• [37] On 23 April 2020, Ezibuy paid a further $287,426.54 to Glacier.

• [38] On 24 April 2020, Ezibuy emailed Glacier confirming its belief that all outstanding invoices were paid and, again, it sought an update on the purchase orders which, by that stage, were due the following week, that is, early May 2020. Glacier responded with a statement alleging $957,258.95 was overdue. Ezibuy responded the same day pointing out discrepancies in Glacier’s statement and repeating Ezibuy’s belief that it was up to date with payments. Glacier then emailed Ezibuy another statement showing that the overdue amount was in fact $525,486.57, and again, Ezibuy replied pointing out issues with Glacier’s statement.

• [39] Notwithstanding that Ezibuy believed that it was current, it made a further payment of $333,332.69 on 28 April 2020 expressly as a good faith payment.

• [40] As at this time, there was some $400,000 worth of Ezibuy’s orders in a bonded warehouse in Auckland, New Zealand. Ezibuy confirmed it would pay for the

$400,000 worth of stock in the warehouse on 90 day terms and sought an update as to the balance of the orders which, again, Ezibuy was expecting to be delivered at around that time.

• [41] Glacier replied on 1 May 2020 advising simply that “goods” would be delivered on 2 May 2020, but what was delivered was only the $400,000 worth of goods in the bonded warehouse.

• [42] On 1 May 2020, Ezibuy, referring to the balance of the orders (other than those in the bonded warehouse), sought an update in respect of those purchase orders saying:

I have repeatedly asked for this information but have been unable to get a response. These are critical orders for Mothers day sales. Are these orders not going to make todays deliver date?

• [43] The reply sent later that day by Ms Meisner of Glacier was as follows:

From: Helen Meisner ... Sent: 01 May 2020 16:43

To: Steve Gosney

Cc: Donald Sew Hoy ...

Subject: FW: Glacier – Orders at Auckland Bonded warehouse TO BE OURCHASED

Hi Steve. Donald and Jialin are currently working through forward orders now and will get back to you with details as soon as they are able. (our past few days have been taken up with trying to get the available stock to you quickly the stock has now been loaded. Just under 120cbm of goods and has been a huge challenge to get cleared and delivered all at once).

I can however advise that due to Ezibuy cancelling more than 29,000 units of mostly finished goods, just at the start of lockdown, (26^th & 31^st of March) “effective immediately” and without discussion, and delayed payment of previous deliveries we are not able to deliver all orders.

The orders had already been cancelled for 5 weeks when you advised you wanted them after all so it is only those that had already been shipped that we are able to deliver. Obviously those that were not on a boat already at the time they were cancelled, were not shipped.

Suppliers were so shocked by the cancellations that they stopped shipment of other orders too.

These cancellations of finished goods combined with previous late payment issues and the new insistence on even longer payment terms by Dawn Rees many of our devastated suppliers have now said they have suffered too much loss already and can no longer afford the risk of supplying Ezibuy and refuse to continue production or shipment of Ezibuy orders.

Regards Helen Helen Meisner

Production Manager

Glacier Investments Limited [... address and contact details]

• [44] The reference to cancelling more than 29,000 units of mostly finished stock refers back to the email Ms France sent Ms Meisner on 26 March 2020, referred to in part at [28] above. In that email, Ms France said:

Given there is now 27k units that have passed the due date, I will be actioning order cancellations for the attached styles given the goods were not released and is [sic] likely to be held further due to the current lockdown. I also appreciate Helen has stated your suppliers would rather have the stock back.

• [45] Ms Meisner’s reference back to this cancellation was, in my view, disingenuous. There was no response in the evidence from Ms Meisner to Ms France cancelling the 27,000 units said to have passed their due date. Ezibuy’s Terms of Trade expressly permit it to reject goods not supplied in accordance with the terms of the contract. The terms of the contract include delivery, with time for delivery being made of the essence in Ezibuy’s Terms.

• [46] In any event, it is clear that Glacier had cancelled Ezibuy’s orders for delivery at the end of March 2020 and only informed Ezibuy of the cancellation on 1 May 2020. The issue in this application is whether Glacier’s actions found an arguable counterclaim by Ezibuy for loss of profits in respect of the stock, the subject to the cancelled orders.

Ezibuy’s argument

• [47] Ezibuy says Glacier was not entitled to cancel its orders as Ezibuy was not in arrears at the time of cancellation.

• [48] As at 20 March 2020, the date Glacier cancelled at least some of Ezibuy’s orders with James Knitwear, Glacier says Ezibuy was in arrears. Ezibuy did not clear the $178,000 it accepts was overdue as at 3 March 2020 until later in March 2020. Ezibuy says on 27 March 2020, it paid a further $237,521.73 to Glacier, being slightly more than what was due in the 61-90 day category.

• [49] In his written submissions, Mr Vinnell, counsel for Ezibuy, says that Ezibuy was current as at 20 March 2020, having paid $178,000 to Glacier by 19 March 2020. In Mr Gosney’s first affidavit at para 21, he refers to the Hold email and then at para 22, he says:

Ezibuy maintains that by 23 March 2020 its ledger with Glacier was current and that only $215,000 was in the 61-90 day stage. Glacier had been paid the overdue $178,000 amount by 23 March 2020.

(my emphasis)

• [50] In Mr Gosney’s second affidavit, he says the $178,000 was paid between 4 March 2020 and 19 March 2020, hence the uncertainty as to when the $178,000 was paid in full. In any event, the offer to put orders on hold, or to cancel orders, was not expressed to only be available while Ezibuy was in arrears, but was made for the broader purpose of giving Glacier the option of reducing its overall exposure to Ezibuy.

• [51] Ezibuy says that because it was, at least by 23 March 2020 up to date in its payment terms, Glacier was not entitled to cancel all orders Ezibuy had placed with it.

• [52] Ezibuy refers to the terms of the 3 March 2020 email set out at [16] above, and to the fact that at para 5 it draws a distinction between Glacier being able to halt production on the one hand and to it cancelling orders on the other. Ezibuy says Glacier recognised the distinction between the halting of production and the cancelling of the orders as the Hold email, set out at [20 ] above, refers to Ezibuy’s bulk deliveries being on hold and not cancelled. (It was not suggested that there was anything material in the reference being to both deliveries as opposed to all purchase orders).

• [53] While Glacier did not inform Ezibuy of the cancellation of its orders until 1 May 2020, on 13 April 2020 James Knitwear contacted Ezibuy directly and provided Ezibuy with a copy of the email it had received on 27 March 2020 from Glacier cancelling all orders. Ezibuy says, however, that as at 13 April 2020, it did not have visibility of the extent to which Glacier had cancelled all of its orders from all suppliers.

• [54] Ezibuy says it has a claim against Glacier under s 193 of the Contract and Commercial Law Act 2017 (CCLA) which provides a buyer has, against a seller, a right to claim damages for non-delivery if the seller wrongfully neglects or refuses to deliver the goods to the buyer. The section provides that the measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events,

from the seller’s breach of contract. A claim for damages would also lie, Ezibuy says, under the terms of its Purchase Terms which also include a general indemnity.

• [55] Further, Ezibuy claims Glacier engaged in misleading and deceptive conduct in breach of s 9 of the Fair Trading Act 1986 (the Act). The basis for this claim is Glacier’s failure to inform Ezibuy that it had cancelled its orders and its subsequent conduct in response to Ezibuy’s request for information regarding its orders.

• [56] Ezibuy’s position is that Glacier was saying one thing to its suppliers and another thing to its buyers.

• [57] It is necessary to consider each cause of action. Before doing so, I address Ezibuy’s reliance on the following clause from its Terms of Trade:

12 Force Majeure

We reserve the right to defer the date of delivery or payment or reduce the volume of the Goods ordered if we are prevented from or delayed in the carrying on of our business due to circumstances beyond our reasonable control.

• [58] Ezibuy says it was not in arrears once it cleared the $178,000. It also requested supplies and agreed to 150 days terms as a resulted of the COVID-19 pandemic which it says it was entitled to do pursuant to the above clause.

• [59] On this issue, I accept Mr Thain’s submission (counsel for Glacier) that at no time prior to 1 May 2020 did Ezibuy seek to invoke cl 12. All its references to 150 days payment terms were framed as requests to suppliers to agree to extended terms – which Glacier did not accept. Assuming cl 12 is enforceable, Ezibuy would need to have relied on it to require Glacier to extend payment terms. In any event, given the terms of the 3 March 2020 emails, I do not see cl 12 as having any relevance. Rather than seek to rely on any rights created by cl 12, Ezibuy committed to bring itself back within trading terms and gave Glacier the hold/cancel option.

Breach of contract

• [60] Glacier’s Terms of Trade provide “Glacier Investments Ltd may cease to provide any goods and/or grant further credit while any overdue amounts are owing.”
• [61] However, Mr Thain’s primary argument is based on the email of 3 March 2020 referred to at [16] above, hence it not being necessary to resolve the “battle of the forms”.

• [62] Mr Thain says, and I accept, that para 5 of the email of 3 March 2020 represented Ezibuy granting to Glacier the right to reduce Glacier’s exposure to Ezibuy by halting production or cancelling orders already received. Mr Thain seeks to characterise the balance of para 5, that is, “[w]e only ask that you let us (buying team) know which orders will be affected” as no more than a request. Mr Thain submits that Ezibuy only asked that Glacier let Ezibuy Buying Team know which orders would be affected – the implication being Glacier was free not to agree that request.

• [63] In my opinion, such is not a reasonably tenable construction of the email. In substance, Ezibuy granted to Glacier an option to halt production or cancel orders on the condition that Glacier advise Ezibuy of which orders were affected. The idea that Ezibuy was agreeing to Glacier having such ability, but without having to inform Ezibuy of the affected orders, is entirely uncommercial.

• [64] Mr Thain’s response is that Glacier did comply with Ezibuy’s request, in that on 20 March 2020 Glacier advised Ezibuy that all of its orders were on hold.

• [65] Mr Thain makes the point that the invitation to halt production or cancel orders is not expressed in the email of 3 March 2020 to apply only while Ezibuy is in arrears. His submission is that the offer was to allow Glacier to reduce its overall exposure to Ezibuy.

• [66] Mr Thain develops his argument by saying that as at the end of March 2020, Ezibuy was aware that all of its orders were on hold and that it had not received any information about the status of its orders from Glacier, at least none to suggest that the hold had been released.

• [67] The terms of the email of 3 March 2020 do not set out what was to occur before Glacier would be obliged to lift the hold on production. Again, Mr Thain’s point is

that the halt in production is not expressed to apply only until Ezibuy’s account was up to date.

• [68] In short, Glacier submits it cannot have breached its contract to supply stock when Ezibuy gave it the right to halt orders on 3 March 2020. Having exercised that right, Glacier says it never agreed to lift the hold so as to reinstate an obligation to supply Ezibuy, or led Ezibuy to believe it would do so. Further, Mr Thain submits nothing in the Hold email suggests Glacier would agree to deliver any further goods at any further time.

• [69] I do not agree with that submission – placing an order on hold is different from an order being cancelled. Glacier opting for advising that orders were on hold, as opposed to cancelled, carried with it the possibility that the hold would be lifted, but I accept Mr Thain’s alternative submission that the preconditions for the hold being lifted were not stated. Ezibuy at no time requested that the hold be lifted or enquired as to the precondition it would have to meet in that regard.

• [70] Mr Gosney, in his reply affidavit, referring to the Hold email “[w]hen Dawn Rees advised Glacier that Ezibuy was within its payment terms (on 23 March 2020) it was assumed that any hold on Glacier deliveries would be lifted”. Mr Gosney, however, does not suggest this assumption was brought about by anything told to him by Glacier.

• [71] A further difficulty is that whatever an accurate reconciliation may now show was the status of the account between Ezibuy and Glacier to have been, Ezibuy knew from 20 March 2020 to 1 May 2020 that Glacier considered Ezibuy to remain in arrears, so it would have been aware that Glacier would not be lifting the hold. It cannot be enough for the hold to be lifted that Ezibuy simply had to assert, or even demonstrate on its own reconciliation, that it was current. Ezibuy does not say it made its assumption known to Glacier. It is noteworthy that in the emails in which Ezibuy asserts its account was current, it did not say, words to the effect, “now we are current please confirm the hold on our orders is lifted”. Albeit, I accept that Ezibuy sought updates on its orders.
• [72] As to the email of 3 March 2020, Mr Vinnell submitted that Ezibuy having cleared the $178,000 arrears, made it clear that Ezibuy wanted to continue to do business with Glacier and to work with it on potential shipping dates et cetera. The difficulty with this submission is that Glacier did not agree to lift the hold or respond positively to the invitation to work on shipping dates. Indeed, on 25 March 2020, Glacier sent the email referred to at [26] confirming that orders on the water were also cancelled and Ezibuy, in its email of 23 March 2020 to Glacier, referred to it working “... cancelling orders and shifting production.”. Mr Spibey’s internal email of 25 March 2020, referred to at [27] above, was under the subject line “Glacier Orders on Hold”, as was the email Ms France sent to Glacier on 26 March 2020 – the very time Mr Gosney says he assumed the hold had been lifted.

• [73] The short point is, Ezibuy’s submissions do not explain how it was that the hold was agreed to be lifted. We are back to Ezibuy saying it assumed it would be lifted when it became current with its payments, but again, that assumption is not based on representations from Glacier. The fact is Glacier was asserting Ezibuy remained in arrears and therefore in breach of what Ezibuy assumed was the precondition for the hold to be lifted. It is said that silence is inherently equivocal. Ezibuy knew that Glacier was not responding to its requests for an update. On one view of it, Ezibuy’s repeated requests for updates indicates it knew the situation was uncertain. It knew the hold had not been lifted and it knew it did not have correspondence with shipping dates et cetera. Despite Ezibuy being aware of the hold, it appears to have assumed that delivery dates and the like would remain unaffected.

• [74] Given Ezibuy had actual knowledge from 13 April 2020 that the James Knitwear orders had been cancelled, it is not clear to me how Ezibuy can say it assumed that the hold had been lifted as a result of having (it says) brought its account up to date by 23 March 2020. Given the time it takes from the placement of orders to delivery, learning on 13 April 2020 that on 27 March 2020 Glacier cancelled the James Knitwear orders for delivery in May 2020, it was not merely a case of the hold being lifted, but of a cancelled order being reinstated.

• [75] On the material that has been produced, Ezibuy has not satisfied me that it has a reasonably arguable case for breach of contract in relation to non-delivery of product

by Glacier. While there remains an issue as to the exact contents of the Terms of Trade resulting from the “battle of the forms”, such is overtaken by the terms of the 3 March 2020 email. No agreement to lift the hold was made. The obligation to supply was suspended by Glacier pursuant to the option granted to it on 3 March 2020.

• [76] As Glacier’s contractual obligation to meet the orders placed in October 2019 was suspended, before it could be liable in contract, an obligations to supply had to be resurrected. No such agreement was made – nor alleged by Ezibuy – the high point being its own assumption – not communicated to Glacier – that the hold would be lifted.

The Fair Trading Act 1986

• [77] The alternative basis advanced for Ezibuy’s counterclaim is that Glacier failed to advise Ezibuy that Glacier had cancelled its orders, which was conduct that was likely to mislead or deceive giving rise to liability under s 9 of the Act.

• [78] I am satisfied that Ezibuy has established it is at least reasonably arguable that Glacier’s conduct was in breach of s 9 of the Act for the following reasons:

(a) As I have already found at [62] above, the terms of the email of 3 March 2020 giving Glacier the option to cancel orders or place them on hold required Glacier on taking up that option to inform Ezibuy which of its orders would be affected. Glacier failed to meet that obligation.

(b) Glacier informed Ezibuy on 20 March 2020 that its orders were on hold when, on the same day, it cancelled some of those orders that Glacier had placed on Ezibuy’s behalf with James Knitwear.

(c) When Glacier cancelled the balance of Ezibuy’s orders with James Knitwear on 27 March 2020, it failed to inform Ezibuy of that cancellation. Glacier, being under an obligation to inform Ezibuy as to the status of Ezibuy’s orders which Glacier elected to cancel or place

on hold, means its silence in the face of that obligation was conduct likely to mislead.

(d) Not all of Ezibuy’s orders were with James Knitwear and at some point Glacier cancelled Ezibuy’s orders with other suppliers and, again, Glacier did not inform Ezibuy.

(e) In response to a number of direct questions from Ezibuy as to the status of its orders, Glacier failed to provide an answer until 1 May 2020. It is at least arguable in the face of a direct enquiry, that it had an obligation to correct its advice that the orders were on hold.

• [79] Mr Sew Hoy, on behalf of Glacier, does not offer a good – indeed any – explanation for the incorrect advice that orders were on hold, when some where cancelled, or why he did not inform Ezibuy of their cancellations. His position that Ezibuy, in the email of 3 March 2020, only asked to be kept informed, is without merit.

• [80] However, for Ezibuy to establish it has a reasonably arguable counterclaim under the Act, it must go on to show that there are “clear and persuasive grounds” for the other elements of a cause of action under the Act. Ezibuy must demonstrate that it was in fact misled by the conduct, and that it was reasonable for it to have been misled by that conduct and finally, demonstrate causation and a proper basis for its damages calculation. I deal with those elements in reverse order.

Damages calculation

• [81] The damages calculation is presented on a loss of profits basis. Ezibuy says Glacier failed to deliver stock worth $1,200,000. Ezibuy mitigated its loss by sourcing some product directly from factories and paying air freight to get the stock delivered. The cost of the undelivered stock that was not able to be replaced was almost

$720,000. Ezibuy’s evidence starts with the retail value of the undelivered stock, and applying a discount and deducting the cost price from the retail, gives a loss of profit figure of $1,358,785.

• [82] Glacier, in its reply, pointed out that some fixed costs had not been deducted and Ezibuy in its reply evidence adjusted the figure to a loss of profit figure of

$1,342,283.

• [83] Accordingly, the loss of profit calculation is on the contractual measure, that is, the amount required to put Ezibuy in the position it would have been in had the contract been performed, that is, had the stock been delivered.

• [84] The measure of damages under the Act was confirmed by the Court of Appeal in Zurich Australian Insurance Ltd v Withers, where the Court said:⁷

Damages awarded under s 43 of the FTA for loss caused by a breach of s 9 are assessed on a compensatory or restorative basis. The wronged party is entitled to reimbursement of all expenditure wasted in changing its position in reliance on the misleading or deceptive conduct. This measure is analogous to the tortious measure, not to the contractual measure of a lost expectation for a failure to perform a material representation. The appropriate monetary award is the amount necessary to put the wronged party in the same position as it would have been but for the wrong. The position to be restored is that which would have existed without the misrepresentation.⁸

• [85] While Mr Thain did not expressly challenge this cause of action on the grounds that the wrong measure of loss had been adopted, in substance, his argument covered the same grounds. He submitted there was no evidence as to what Ezibuy would have done had it been informed at the outset that its orders had been cancelled. In short, as Mr Thain put it, what difference did the month of April 2020 make? Mr Thain submitted the onus was on Ezibuy to demonstrate what it could have done differently if it had known at the end of March 2020 that its orders had been cancelled. A finding of misleading and deceptive conduct of itself was not enough to found a counterclaim. Ezibuy had to demonstrate the consequences of the misleading conduct. In short, Mr Thain submitted that if, on 20 March 2020, Glacier’s email had said all orders were cancelled, there is no evidence that Ezibuy could have done anything different.

• [86] Mr Thain emphasised that on this issue the onus was on Ezibuy to demonstrate clear and persuasive grounds existed for each element of the set-off. His submission

⁷ Zurich Australian Insurance Ltd v Withers [2016] NZCA 618, [2017] 2 NZLR 745 at [36].

8. Cox & Coxon Ltd v Leipst [1998] NZCA 202; [1999] 2 NZLR 15 (CA) at 23 and 26, applied in Harvey Corporation Ltd v Barker [2002] NZCA 34; [2002] 2 NZLR 213 (CA) at [13] and [19]; Narayan v Arranmore Developments Ltd [2011] NZCA 681, (2012) 13 NZCPR 123 at [49].

was that, if anything, the time lag between the placing of the orders and their delivery suggests that if the email of 20 March 2020 had advised Ezibuy that the orders had been cancelled, the outcome for Ezibuy would have been no different.

Reliance

• [87] Mr Thain also submitted that whether Ezibuy knew the orders were on hold or cancelled, it knew there were no further supplies from Glacier until Glacier agreed to lift the hold on the orders and, as already discussed, at no point did Glacier do that. Accordingly, Ezibuy did nothing in reliance of receiving the Hold email.

The direct contact from James Knitwear

• [88] On 13 April 2020, Ezibuy was contacted directly by James Knitwear. James Knitwear informed Ezibuy of Glacier’s cancellation of Ezibuy’s orders and sought to supply the orders which, it seems, were largely complete directly to Ezibuy. Ezibuy did not accept the direct approach, referring to its relationship with Glacier.

• [89] That Ezibuy on 13 April 2020 learnt that at least some of its orders had been cancelled rather than being on hold, must cast doubts on the reasonableness of Ezibuy relying on Glacier’s statement that the orders were only on hold.

• [90] In any event, after 1 May 2020, Ezibuy did buy stock directly from James Knitwear and incurred the air freight cost of the stock being delivered to New Zealand, being $26,543.15. However, I have no way of knowing whether the stock could have been delivered by sea freight in a timely way, had Ezibuy been told that all orders were cancelled either on 20 March 2020 or on 27 March 2020 when the balance of the James Knitwear orders were cancelled.

• [91] Ms Rees email of 23 March 2020, referred to at [22] above, referring to Ezibuy commencing a review of its commitments with Glacier and to working on cancelling orders with Glacier and shifting production, also speaks against Ezibuy’s reliance being reasonable. Indeed, the question must be, exactly what did Ezibuy do in reliance on being told the stock was on hold rather than cancelled, other than to assume if its account was current that the hold would be lifted?
• [92] There is no explanation as to why the review in shifting production, referred to by Ms Rees, did not occur. Glacier is not responsible for Ezibuy’s assumption that the hold would be lifted. It seems Ezibuy took no positive steps after receiving the Hold email, other than to continue to make payments albeit of some amounts it believed had not yet fallen due and to enquire about the status of its purchase orders without getting a reply from Glacier, other than Glacier deferring a response.

• [93] Mr Vinnell, in his reply submissions said, had Ezibuy been told the orders had been cancelled rather than on hold, it could have advanced shifting of production and the other steps referred to in Ms Rees’ email of 23 March 2020. There was nothing stopping Ezibuy taking those steps following the Hold email. Ms Rees’ email of 23 March 2020 states as much, indeed, it states such was commencing. Ezibuy does not say that email was a bluff to prompt Glacier to soften its stance, nor does it say that had it been told the orders were cancelled, it could have arranged supplies from other manufacturers in time to meet the deadline of the beginning of May 2020.

• [94] Ezibuy’s willingness to pay Glacier sums that Ezibuy believed were not due, suggests that Ezibuy did not see itself as having the option of going elsewhere for production. Even when Ezibuy learnt on 13 April 2020, directly from James Knitwear, that its orders with that supplier had been cancelled rather than being on hold, Ezibuy continued to make payments to Glacier of amounts Ezibuy believed were not yet due.

• [95] Mr Gosney says, Ezibuy “acted in reliance on the orders, and the notification of cancellation occurred after the items were published in catalogues.” If the items were placed in catalogues before the Hold email, then Ezibuy was already committed to the publication or at least there is no evidence it could have cancelled or amended the catalogue. If it was after, then Ezibuy made that commitment knowing the orders were on hold. It comes back to Ezibuy assuming it could get the hold lifted.

• [96] Mr Vinnell, in reply on this issue, also referred to an email Ms France sent to Ms Meisner on 26 March 2020. In that email, Ms France says “[m]y challenge is to continue to manage the production and supply of goods ordered to fulfil the ranges we have created.” No doubt Ms France was facing such a challenge, but this email does not take Ezibuy’s case any further, in that it does not indicate what steps Ezibuy was

taking, or refraining from taking, on the strength of being told the orders were on hold rather than cancelled. The difficulty for Ezibuy is there is no evidence that if it was told its orders were cancelled and not on hold, that it could have sourced stock from elsewhere or otherwise reduced its loss.

• [97] Given the short time between the Hold email and the start of May 2020, at some point, in practical terms, the hold became tantamount to a cancellation, or at least the passage of time meant it became practically impossible for the hold to be lifted and the goods produced and delivered to New Zealand on time for delivery at the start of May. There is no evidence that with urgency, or with the paying of a premium or the like, that goods could have been substituted for the cancelled orders. The exception is, as I have said, the issue of the air freight of the cancelled but manufactured stock. Again, that Ezibuy persisted with Glacier after, on what from Ezibuy’s point of view, was an incorrect insistence by Glacier that Ezibuy pay hundreds of thousands of dollars not yet due, suggests Ezibuy did not have the option to drop Glacier and go elsewhere.

• [98] I queried with Mr Thain whether Ezibuy had lost the opportunity to go to other suppliers as a result of not being told of the cancellations. I accept his submission that Ms Rees’ email of 23 March 2020 shows that Ezibuy was aware of its options in that regard. The inference is open that being so aware, and then not placing orders elsewhere, that it was not possible for Ezibuy to replace the stock in the timeframe available.

• [99] However, the short point is, at the end of the day the onus was on Ezibuy to give evidence of what it did in reliance on the advice that the orders were on hold rather than cancelled or of the opportunity it lost because of that misleading conduct. To the extent that such evidence might arguably exist, or to the extent that inferences can be drawn from the evidence before the Court as to what might have been done by Ezibuy, there remains no separate quantification of loss engaging with the measure of damages that applies to the Act. The fundamental issue for Ezibuy in respect of the Fair Trading Act claim is that the only loss calculation before the Court is not on the correct basis.
• [100] It follows while there was at least arguably misleading conduct by Glacier, the applicant has not demonstrated to the standard referred to at [6] that it has a set-off or counterclaim arising from such conduct.

Solvency

• [101] Ezibuy, in its notice of opposition, asserted that it was solvent. Glacier, in its opposition, noted the absence of evidence from Ezibuy that it was solvent. To meet that criticism, Ezibuy has paid the amount claimed in the statutory demand into its solicitor’s trust account.

• [102] However, in its written submissions, Ezibuy did not advance the proposition that such a payment alone would be enough to lead to the statutory demand being set aside.

• [103] McGechan on Procedure provides:⁹

Evidence of solvency by itself will not generally justify the setting aside of a demand where there is no good reason for non-payment: Walter Larson & Sons Ltd v Department of Corrections [2006] NZHC 463; (2006) 18 PRNZ 55 (HC); AMC Construction Ltd v Frews Contracting Ltd [2008] NZ CA 389 (208) [2008] NZCA 389; 19 PRNZ 13.

• [104] I have concluded that Ezibuy does not have a “good reason for non-payment”. The fact it has paid the funds into trust is not of itself sufficient to result in the demand being set aside.

• [105] However, the fact that the funds have been paid into trust means it is appropriate that Ezibuy be given time to pay the debt or make any other application it thinks appropriate in the circumstances.

• [106] Accordingly, there is an order that unless the amount in the statutory demand is paid within 10 working days of the date of this Judgment, that Glacier shall be entitled to proceed with its winding up proceedings of Ezibuy. Time for compliance with the statutory demand is therefore extended for 10 working days.

⁹ Andrew Beck (ed) McGechan on Procedure (online ed, Thomson Reuters) at [HR31.11.10(2)].

Costs

• [107] I did not hear argument on costs, but on the strength of what I have heard to date, there seems no reason why costs should not follow the event on a 2B basis. If the respondent does not file a memorandum as to costs (not more than five pages in length) within five working days, then the order in respect of costs shall be that Glacier is entitled to costs on a 2B basis together with disbursements as fixed by the Registrar.

Associate Judge Lester

Solicitors:

Anthony Harper, Christchurch DLA Piper, Auckland