Aspire MK Trustee Limited v Stuart Hendry Builders Limited

[2017] NZHC 2862

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2017-409-000741 [2017] NZHC 2862

UNDER

the Companies Act 1993

IN THE MATTER

of an application to set aside a statutory demand

BETWEEN

ASPIRE MK TRUSTEE LIMITED Applicant

AND

STUART HENDRY BUILDERS LIMITED

Respondent

Hearing:	21 November 2017 (Determined on the papers)
Counsel:	H C Matthews and R A Kay for Applicant D M Lester for Respondent
Judgment:	21 November 2017

COSTS JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1]      On 13 September 2017 the applicant, Aspire MK Trustee Limited (Aspire) filed an application to set aside a statutory demand which had been issued against it by Stuart Hendry Buildings Limited (Hendry) on 29 August 2017.   The statutory demand was issued in respect of unpaid invoices for building work carried out at the home  of  Mr  and  Mrs  Featherstone,  owned  by Aspire.    The  sum  claimed  was

$53,330.65.

[2]      After the proceedings were served the statutory demand was withdrawn and the application to set it aside was dismissed, with costs reserved.  Aspire applies for

ASPIRE MK TRUSTEE LTD v STUART HENDRY BUILDERS LTD [2017] NZHC 2862 [21 November 2017]

costs on a 2B basis with an uplift of 50 per cent; Hendry says that there should not be an award of costs, but that if costs are awarded there should not be an uplift.

[3]      The starting-point is that the application was withdrawn, and costs should follow the event.   However, Hendry makes a number of points in support of its position.  First it says that although at the time the notice was issued, various issues in relation to the work undertaken by Hendry had been raised, these had not been quantified.   Secondly, and following on from that, when the complaints were quantified in the form of an independent report commissioned by Aspire and produced in an affidavit from Mr Featherstone which was filed on 13 September and served  shortly  thereafter,  there  still  remained  a  sum  of  nearly  $9,000  due  and payable.  From this, Hendry says that by the time the notice was issued a set-off had not  been  demonstrated,  as  quantification  (an  essential  element),  was  lacking. Finally, Hendry says that an email sent by Aspire’s solicitors on 11 September 2017, just before the application to set aside was filed, does not advance matters.  I will refer to this email again shortly.

[4]      This case arises from a building contract.  The experience of this Court, and the broader practice of the law show that building contracts are a breeding ground for disputes of fact.  Sometimes these will arise from faulty workmanship or inadequate prior notice of likely cost.  Sometimes they will arise from an earlier bad experience on the part of customers.  Frequently they arise from a void between the expectations of a customer and those of a builder.  In the present context, the point is that when consideration is being given to issuing a notice under s 289 to recover sums claimed to be owing under a building contract, warning bells should ring loudly.   If that occurred in this case, they certainly should have been heeded.

[5]      On  27  March  2017,  when  a  good  deal  of  the  required  work  had  been undertaken at Aspire’s property, Mrs Featherstone wrote an email to Stuart Hendry in which she set out, by bullet point, no fewer than 12 issues in relation to work carried out on an ensuite and walk-in wardrobe.   This followed Mr Hendry leaving a certificate of completion in the kitchen of the home for Mr and Mrs Featherstone to sign.  Mrs Featherstone indicated that once the 12 points had been “sorted” she and her husband would be happy to sign off on the ensuite and walk-in wardrobe.  She

also raised other issues in relation to work carried out on five doors elsewhere in the house, which had evidently also been changed, but according to her not adequately so.

[6]      It  seems  that  discussions  followed,  because  on  3  May  Mr  and  Mrs Featherstone wrote a letter to Hendry raising a number of issues.  The letter is nearly five pages long.   The “main concerns” raised in the letter included wide-ranging criticism of project management and, as Mr and Mrs Featherstone put it, a lack of responsibility by Hendry in relation to the contract.   It also raised seven issues in relation to the work carried out refurbishing the ensuite, with four items in that area of the house remaining to be finished.  It raised concerns, again, in relation to the internal doors which had been replaced, and in relation to refurbishment of the laundry.  On this point four issues which had been unsatisfactory during the course of this work were raised, and four points of outstanding work were set out.

[7]      In relation to kitchen modifications, three concerns on the running of the contract  were  raised,  as  were  three  outstanding  items  of  work.    On  the  main bathroom refurbishment, four concerns in relation to the running of the contract were raised and four outstanding items were listed.  The same pattern appears in relation to the entry foyer, the downstairs toilet and the upstairs toilet.   There is also a complaint about damage done to the stairway and upstairs hallway where it is said that the walls and ceiling had been dented and scuffed.

[8]      Mr Hendry replied briefly with the suggestion of a site meeting.   Plainly matters were not resolved because Hendry was left with unpaid invoices and Aspire had to turn to an independent building consultant to assess its concerns.  The report of this building consultant was commissioned on 25 May 2017, just three weeks after Mr Hendry’s reply to the Featherstone’s lengthy letter.

[9]      The  report  is  comprehensive,  covering  over  50  pages.     It  is  dated

12 September.  By then the notice under s 289 had been issued.

[10]     Given the correspondence between the parties in March and May I am left in no doubt that it was inappropriate that a notice be issued under s 289 to recover a

debt.   There is no valid basis in my view on which an opinion could have been formed that there was no dispute of any substance between Hendry and Aspire.  To the contrary, that dispute had been fully set out at the beginning of May.   If, as appears to be the case, issues were not resolved at the meeting which Mr Hendry suggested, the correct course was for proceedings to be issued.   Indeed, although there is no mention of this by counsel, the statutory procedure in the Construction Contracts Act would have led to earlier adjudication on liability for payment, even though it may have left for resolution by other means some or all of the substantive

matters raised.1

[11]     The solicitors for Aspire sent an email to the solicitors for Hendry flagging the existence of a dispute on 11 September, but it does not add anything material to the clear exposition of that dispute from months earlier.

[12]     For  these  reasons Aspire  is  entitled  to  costs.    On  this  proceeding,  it  is appropriate costs be in Category 2 with Band B applied.  The remaining question is whether there should be an uplift as sought.  In my opinion there should be.  In my view Hendry issued a notice under the Companies Act which entirely lacked merit, based on established authority to the effect that a notice will be set aside if it is shown that there is a substantial dispute.  It is not an answer to this to point out that the result of the independent report was that a sum of about $9,000 remained to be paid. At most this shows that Aspire could have paid more to Hendry than it did, but the extent of its concerns as outlined in fulsome correspondence squarely put the onus back on Hendry to respond by an appropriate means, not by utilising a debt collection procedure appropriate only for situations where there is no dispute.

[13]    The costs incurred by Aspire are $8,625 including GST but excluding disbursements.  An award of costs on a 2B basis with a 50 per cent uplift would

amount to $6,690.  In my opinion this is appropriate.

1      I note, in passing, that the tax invoices which are produced as exhibits to Mr Featherstone’s

affidavit are not described as payment claims.

Outcome

[14]     Hendry  will  pay  to  Aspire  costs  in  the  sum  of  $6,690  together  with disbursements, being a filing fee of $540 and a service fee of $115.

J G Matthews

Associate Judge

Solicitors:

White Fox & Jones, Christchurch. Brandts-Giesen McCormick, Rangiora.