A 2 Z NZ Powercom Limited v Steelcraft Structural Limited

[2024] NZHC 402

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-881

[2024] NZHC 402

UNDER

Section 290 of the Companies Act 1993

IN THE MATTER

of an application to set aside a statutory demand

BETWEEN

A 2 Z NZ POWERCOM LIMITED

Applicant

AND

STEELCRAFT STRUCTURAL LIMITED

Respondent

Hearing:

(On the papers)

Appearances:

N C King for Applicant

G K Holm-Hansen and A J Nisbet for Respondent

Judgment:

29 February 2024

JUDGMENT OF ASSOCIATE JUDGE LESTER

(Costs)

This judgment was delivered by me on 29 February 2024 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

A 2 Z NZ POWERCOM LIMITED v STEELCRAFT STRUCTURAL LIMITED [2024] NZHC 402

[29 February 2024]

[1]                 A 2 Z NZ Powercom Limited (Powercom) unsuccessfully applied to set aside a statutory demand issued against it by Steelcraft Structural Limited (Steelcraft).1

[2]                 As to costs, I said there was no reason why Powercom should not pay costs and ordered it to pay costs on a 2B basis, plus disbursements, as fixed by the Registrar unless Steelcraft sought increased costs. Steelcraft has done so.

[3]                 Steelcraft’s statutory demand was for costs awarded in its favour against Powercom in a judgment of Lang J’s.2 Those costs were awarded as Lang J held Steelcraft  had  issued  a  valid  payment  claim   under   the   Construction   Contracts Act 2002 (the Act) to which Powercom had not issued a valid payment schedule.

[4]                 In the application I determined, Powercom sought to resist the statutory demand for the Court awarded costs on the basis it had an arguable cross-claim arising from what it said was an admission by Steelcraft that liquidated damages for late completion were due pursuant to the building contracting between the parties. Powercom’s cross-claim was based on a statement of defence filed by Steelcraft to   a claim issued by Powercom in the District Court.

[5]                 Steelcraft argued it was not open to Powercom to raise a cross-claim in respect of the unpaid costs, because the combined effect of s 23(2)(a)(ii) and s 79 of the Act was that no counterclaim, set-off or cross-demand could be raised against a costs award made in the course of recovering an amount due, pursuant to an unanswered payment.

[6]                 I dismissed the application as it was not possible to say in terms of s 79(b) of the Act that there was “… not in fact any dispute between the parties in relation to the…” counterclaim, set-off or cross-demand asserted by Powercom against Steelcraft. I determined Powercom’s argument that Steelcraft had acknowledged

1      A 2 Z NZ Powercom Ltd v Steelcraft Structural Ltd [2024] NZHC 187.

2      Steelcraft Structural Ltd v A 2 Z NZ Powercom Ltd [2022] NZHC 2017.

liability for late completion damages was not correct. Firstly, because of the absence of evidence in this proceeding, but also because the statement of defence as a whole in the District Court could not be said to be an admission of part of Powercom’s claim. In the District Court statement of defence, Steelcraft claimed there were oral variations to the contract. Steelcraft argued that the fact such variations were orally approved (the contract requiring the variations to be in approved writing) meant that pursuant to the prevention principle, Powercom could not hold Steelcraft to the contractual completion date when the very reason that date could not be satisfied was the result of variations it had sought.

[7]                 Powercom could not rely on s 79(b) of the Act and indeed, s 79 prevented Powercom from raising the cross-claim.

[8]                 Counsel for Steelcraft argues that Steelcraft is entitled to indemnity costs in opposing the application to set aside its demand under s 23(2)(a)(ii) of the Act. I do not accept that is the case. Sections 23(1) and 23(2) provide:

23Consequences of not paying claimed amount where no payment schedule provided

(1)The consequences specified in subsection (2) apply if the payer—

(a)becomes liable to pay the claimed amount to the payee under section 22 as a consequence of failing to provide a payment schedule to the payee within the time allowed by section 22(b); and

(b)fails to pay the whole, or any part, of the claimed amount on or before the due date for the payment to which the payment claim relates.

(2)The consequences are that the payee—

(a)may recover from the payer, as a debt due to the payee, in any court,—

(i)the unpaid portion of the claimed amount; and

(ii)the actual and reasonable costs of recovery awarded against the payer by that court; and

(b)may serve notice on the payer of the payee’s intention to suspend the carrying out of construction work under the construction contract.

(3)A notice referred to in subsection (2)(b) must state—

(a)the ground or grounds on which the proposed suspension is based; and

(b)that the notice is given under this Act.

(4)In any proceedings for the recovery of a debt under this section, the court must not enter judgment in favour of the payee unless it is satisfied that the circumstances referred to in subsection (1) exist.

[9]                 The “claimed amount” is defined in s 19 of the Act as the amount of payment, specified in a payment claim, said to be due by the payee.

[10]             In its statutory demand, Steelcraft was not demanding a “claimed amount”, the demand  was  for  the  costs  awarded  by  Lang J,  to  which  it  was  entitled  under  s 23(2)(a)(ii) of the Act.

[11]             The costs of recovering the s 23(2)(a)(ii) costs awarded by Lang J are not costs recoverable pursuant to that section of the Act. Section 23(2)(a)(ii) of the Act entitles the issuer of a payment claim to costs on recovering the claimed amount — the reference to “that Court” in s 23(2)(a)(ii) is to the Court where the issue of the payment claim obtained judgment for the “claimed sum”.

[12]             In the alternative, Steelcraft seeks increased costs under the High  Court Rules 2016 (the Rules).

[13]             Steelcraft submits that Powercom is liable to pay increased costs under r 14.6 of the Rules, as Powercom contributed unnecessarily to the time or expense of the proceeding by taking an unnecessary step or pursuing an argument that lacks merit.

[14]             Steelcraft notes the application to set aside the demand did not detail any specific basis for setting aside the demand. It also notes that Powercom failed to provide any evidence of its cross-claim, other than annexing the statement of claim filed in the District Court against Steelcraft. It is said Powercom only pursued one substantive  argument  at  the  hearing,  effectively  abandoning  all  other   arguments — that is, the argument under s 79(b) of the Act. I am not sure that

abandoning arguments itself warrants increased costs, albeit the point might be that they were abandoned late in the piece.

[15]             Steelcraft submits the s 79(b) argument lacked merit because of the absence of any evidence in support of its claim and, in summary, that Powercom misconstrued the effect of the statement of defence as it sought to create an admission from the defence without taking the statement of defence as a whole.

[16]             Mr King, counsel for Powercom, submits indemnity costs are not warranted as Powercom’s conduct could not be said to be “exceptionally bad behaviour” warranting indemnity costs. I agree. The very fact that counsel conferred to limit argument to the s 79(b) ground with other arguments being abandoned stands against the granting of indemnity costs.

[17]             Mr King submits there has been no previous decision on the effect of s 79(b) of the Act. While that may be the case, the decision did not turn on a need for a detailed interpretation of s 79(b), it turned on the fact that on a proper construction of Steelcraft’s statement of defence, it did not amount to an admission for the purposes of s 79(b).

[18]The hearing on 12 February 2024 was a brief one. Indemnity costs of

$21,757.50 are sought. I am not prepared to award indemnity costs. Scale costs with a 50 per cent uplift bring scale costs to $10,038.00.

[19]             I consider the decision to pursue the s 79(b) argument was an argument that lacked merit given it was based solely on Steelcraft’s statement of defence which could not, in my view, reasonably be said have been an admission by Steelcraft that Powercom had admitted at least part of Powercom’s liquidated damages claim for late completion.

[20]             I am satisfied that a 50 per cent uplift on scale costs is warranted. Mr King, in his memorandum of costs, did not take issue with the scale costs calculation annexed as Schedule 2 to the memorandum of counsel for Steelcraft dated 26 February 2024, nor was any issue taken with the disbursements claimed of $348.39 (excluding GST).

[21]Accordingly, there is an award of costs against A 2 Z NZ Powercom Ltd in

Steelcraft Structural Ltd’s favour in the sum of $10,386.39 (including disbursements).

[22]             Steelcraft’s counsel sought an order that, unless the amount in the statutory demand is paid  forthwith,  there  be  an  order  pursuant  to  s 291  of  the  Companies Act 1993 putting Powercom into liquidation.

[23]Section 291 of the Companies Act 1993 provides:

291 Additional powers of court on application to set aside statutory demand

(1)If, on the hearing of an application under section 290, the court is satisfied that there is a debt due by the company to the creditor that is not  the  subject  of  a  substantial  dispute,  or  is  not  subject  to  a counterclaim, set-off, or cross-demand, the court may—

(a)order the company to pay the debt within a specified period and that, in default of payment, the creditor may make an application to put the company into liquidation; or

(b)dismiss the application and forthwith make an order under section 241(4) putting the company into liquidation,—

on the ground that the company is unable to pay its debts.

(2)For the purposes of the hearing of an application to put the company into liquidation pursuant to an order made under subsection (1)(a), the company is presumed to be unable to pay its debts if it failed to pay the debt within the specified period.

[24]             The jurisdiction to make an order placing Powercom into liquidation can only be exercised in the course of an application to set aside a statutory demand, not in     a costs judgment following that ruling.

[25]             Steelcraft’s submissions sought that, pursuant to s 291(1)(a), Powercom be given five working days to pay the demand failing which Steelcraft may apply to have Powercom liquidated. I now make that order.

Associate Judge Lester

Solicitors:

Sinisa Law, Auckland (for Applicant) Hesketh Henry, Auckland (for Respondent)

Copy to counsel:

N King, Barrister, Auckland (for Applicant)