ADM Partners Limited v Al Saffaf HC Auckland CIV-2011-404-4254

[2011] NZHC 1362

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-4254

UNDER  the Companies Act 1993

BETWEEN  ADM PARTNERS LIMITED Applicant

ANDHUSAIN AL SAFFAF Respondent

Hearing:         10 August 2011

Counsel:         K Kuang for Applicant

No appearance for Respondent

Judgment:      10 August 2011

ORAL JUDGMENT OF ASSOCIATE JUDGE ABBOTT

Solicitors:

Meredith Connell (MT Davies/K Kuang) P O Box 2213 Auckland 1140, for Applicant

Email:   [email protected]

Case Officer:      [email protected]

ADM PARTNERS LIMITED V HUSAIN AL SAFFAF HC AK CIV-2011-404-4254 10 August 2011

[1]      This is the first call of this application, in which the applicant company (an accounting practice) applies to set aside a statutory demand issued by the respondent, Mr Al Saffaf, a former client.

[2]      The application was served on the respondent on 19 July 2011, in accordance with orders for substituted service.  He has taken no steps.

[3]      In the absence of any opposition, counsel for the applicant seeks an order in terms  of  its  application  (setting  aside  the  demand),  and  also  for  costs.    The application for costs as presented to the Court (in the form of a memorandum for this hearing) roughly equates (it is slightly less) to actual costs incurred by the applicant, other than in preparing the memorandum for this hearing and counsel’s appearance today.  For that reason, counsel sought the costs only on a scale 2B basis.  However, the claim for costs as presented includes a claim under item 1 of schedule 3 of the High Court Rules (which has a time allowance of three days for commencing the proceeding).  This should properly be a claim under item 25 which provides for a commencing originating applications such as this application to set aside a statutory demand.  On that basis, the claim for costs on a scale 2B basis will be reduced by a sum in the order of $3000.

[4]      In light of this change to the claim, counsel has also invited the Court to consider increasing the claim for costs.  The basis for doing so is that there was no legal basis for the respondent to have made his demand.  He was invited to withdraw it but did not do so.  Even then, the demand itself was procedurally deficient (it did not nominate a place for payment) and as a consequence of that and the respondent not making himself available for service of this application, the applicant has had to go to the extra cost of applying for substituted service.

[5]      I  have  read  the  affidavit  of  the  applicant’s  director,  Marie  Finnigan,  in support of the application.   I accept that the statutory demand was issued without merit.  It appears to allege shortcomings in the advice provided by the applicant to the respondent in undertaking preparation of GST returns on his behalf.  I can see no

reasonable basis, on the evidence put forward by Ms Finnigan, for him to take that position.   It would seem that any difficulty he has had over his GST returns are entirely a consequence of his own failure to provide complete and honest instruction to the applicant.  However, I do not need to go that far in any finding for the purpose of  the  present  application  for  costs.    If  the  respondent  wished  to  pursue  this complaint (which I note was not made before the demand was issued, some three months after the applicant ceased to act) he should have done so by bringing a proper claim for breach of contract or negligence, whichever he believed was appropriate. That is not a claim for a liquidated sum which could found a statutory demand.

[6]      Apart from the fact that he issued the demand inappropriately, I take into account the fact that he did not bother to comply with the requirements for such a demand, nor to take into account the potential consequences for the applicant (if it did not immediately apply to set the demand aside, it faced the statutory presumption of insolvency, and the prospect of an application for liquidation).  I am satisfied from the evidence provided by Ms Finnigan that the applicant is not insolvent, and that it was  entirely  appropriate  that  it  should  have  brought  this  application  to  set  the demand aside.

[7]      Weighing all of these factors, I consider that this is an appropriate case for an award of increased costs on the basis that the respondent has contributed unnecessarily to the time or expense of the proceeding, including the need for the applicant to apply for substituted service.

[8]      I make the following orders:

(a)       The statutory demand is set aside.

(b)The respondent is to pay the applicant costs on a scale 2B basis, increased by 25 per cent, together with disbursements as fixed by the Registrar.

........................................

Associate Judge Abbott