Auckland Electrical Solutions Limited v The Warrington Group Limited

[2017] NZHC 366

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2017-404-122 [2017] NZHC 366

UNDER	the Companies Act 1993, Section 290
BETWEEN	AUCKLAND ELECTRICAL SOLUTIONS LIMITED Applicant
AND	THE WARRINGTON GROUP LIMITED Respondent

Hearing:	7 March 2017
Appearances:	N Tabb for the Applicant S Gazley for the Respondent
Judgment:	7 March 2017

ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL

Solicitors:

Natalie Tabb, Auckland, for the Applicant

Steindle Williams Legal (Scott Gazley), Auckland, for the Respondent

AUCKLAND ELECTRICAL SOLUTIONS LIMITED v THE WARRINGTON GROUP LIMITED [2017] NZHC 366 [7 March 2017]

[1]      Auckland Electrical Solutions Ltd applies to set aside a statutory demand served on its registered office on 13 January 2017.  The Warrington Group Ltd seeks payment under the statutory demand of $5,424.00 for an order for costs made in the District Court at Manukau on 4 April 2016.

[2]      The grounds in the application to set aside the statutory demand are that the company, Auckland Electrical Solutions Ltd, has a complete set-off.  It says that it has  issued  proceedings  in  the  Manukau  District  Court  claiming  payment  of

$23,582.24.  It also says that it is not insolvent.

[3]      At the outset of the hearing Ms Tabb sought leave to tender an affidavit that was filed late on 6 March 2017.  I accepted the affidavit and read it, but it really adds little to the case.  I will explain why in the course of giving my decision.

[4]      During the hearing Ms Tabb sought an adjournment.  That was on the basis that there was further information which she wished to place before the court and which was not included in the evidence in support of the original application nor in the affidavit filed yesterday.   It is incumbent on the applicant to place before the court all the evidence it relies on in support of its application in time for the hearing. Adjournments are not granted to allow applicants to provide further evidence which they realise ought to have been placed before the court earlier.  The respondent is entitled to have some certainty whether its statutory demand is to be upheld or not - without delay. There is no good ground for adjourning this application.

[5]      The background to the matter is that the Warrington Group Ltd engaged Auckland Electrical Solutions Ltd to provide electrical services in 2014 and 2015. The total charges came to $83,599.57.  The Warrington Group Ltd paid most of the accounts, but not all.  Eventually, after various credit notes were taken into account, there was an outstanding balance of $8,659.83.  Auckland Electrical Solutions Ltd sued for this sum in the District Court at Manukau under CIV-2015-092-2123.  The statement of claim sought payment of $8,659.83 plus $4,402.86 for collection costs.

[6]      Auckland Electrical Solutions Ltd says that its claim was based on payment claims issued under the Construction Contracts Act when the Warrington Group had not provided any payment schedules or made payments in time.  Believing that there was no basis for resisting its claim, it applied for summary judgment.  The summary judgment application was heard on 1 March 2016.  In a reserved decision of 4 April

2016, Judge J H Lovell-Smith dismissed the application for summary judgment and remitted the substantive proceeding to the Disputes Tribunal.1   She awarded costs to the Warrington Group for $5,124.00.   That is the debt claimed in the statutory demand in this case. Auckland Electrical Solutions Ltd appealed against the decision of Judge Lovell-Smith.   Downs J heard the appeal and dismissed it on 22 September

2016.2    Later he awarded costs on the appeal to Warrington Group Ltd.   He fixed

them at $10,865.55.3  That is not part of the debt in the statutory demand in this case.

[7]      During  2015,  the  Warrington  Group  Ltd  began  a  claim  in  the  Disputes Tribunal.   It sought a declaration that it was not liable for the debt alleged by Auckland Electrical Solutions Ltd.  That claim was put on hold to await the outcome of the proceeding in the District Court.  With the appeal to the High Court out of the way, the way was clear for the Disputes Tribunal to deal with both the claim by the Warrington Group Ltd that it did not owe the debt to Auckland Electrical Solutions Ltd and the claim for payment remitted by the District Court.

[8]      The Disputes Tribunal heard the matter on 9 December 2016.  I am advised that Auckland Electrical Solutions Ltd did not appear at the hearing.  In his decision, the referee recorded that the solicitor for Auckland Electrical Solutions Ltd had sent a letter saying that Auckland Electrical Solutions Ltd considered that the tribunal had no jurisdiction to hear the matter because it fell within the ambit of the Construction Contracts Act.  The solicitor wrote a similar letter that was received by the court the day  before  the  current  hearing.    The  referee  recorded  the  non-appearance  by Auckland Electrical Solutions Ltd.

[9]      The Tribunal decided that the Warrington Group Ltd was not liable to pay an amount of $8,632.50 and was entitled to retain that amount out of sums held by its

1      Auckland Electrical Solutions Ltd v Warrington Group Ltd [2016] NZDC 5565.

2      Auckland Electrical Solutions Ltd v Warrington Group Ltd [2016] NZHC 2245.

3      Auckland Electrical Solutions Ltd v Warrington Group Ltd [2017] NZHC 55.

lawyers as stakeholder.  Auckland Electrical Solutions Ltd was entitled to be paid

$27.33 held by the lawyers.  The Warrington Group Ltd has shown that it has paid that sum of $27.33.  That is less than the prescribed amount required for a statutory demand.

[10]     In submissions, Ms Tabb advised that Auckland Electrical Solutions Ltd was intending to apply for a rehearing of the Disputes Tribunal decision.   There was, however, no evidence to that effect.  The decision of the Disputes Tribunal suggests that Auckland Electrical Solutions Ltd may have chosen not to take part in the hearing, given its jurisdiction objection.   There is no suggestion in the evidence anywhere that Auckland Electrical Solutions Ltd was not aware of the hearing and that the decision in its absence was due to some factor which might justify it seeking a rehearing.

[11]     The present position is as follows.   The District Court order for costs of

$5,124.00 still stands.  The Warrington Group Ltd paid the amount ordered by the Disputes Tribunal.  The order for costs on the unsuccessful appeal in this court also stands.

[12]     During 2016 Auckland Electrical Solutions Ltd began a fresh proceeding in the District Court at Manukau under CIV-2016-092-4018.  The statement of claim in that proceeding repeats the allegations in the earlier proceeding.  It is also based on unpaid invoices said to be due under the Construction Contracts Act 2002.   The pleading is identical save in one respect – instead of claiming collection costs of

$4,427.86 that sum has increased to $14,922.41.

[13]     With that new proceeding, Auckland Electrical Solutions Ltd is trying to litigate afresh a matter which had been remitted to the Disputes Tribunal and is now the subject of a final decision of the Tribunal.   The finality of Disputes Tribunal decisions is recognised under s 23 of the Disputes Tribunals Act 1988.  It is not open to Auckland Electrical Solutions Ltd to begin a fresh proceeding in the District Court when the dispute is pending in the Disputes Tribunal.  And the Disputes Tribunal’s final decision on the merits means that the fresh proceeding offends against the principle of res judicata.  Its proceeding is also an abuse of process.  I regard it as

inevitable that the District Court would strike out the proceeding as an attempt to relitigate matters which are the subject of a final decision between the same parties.

[14]     Because  the  new  proceeding  in  the  District  Court  is  bound  to  fail  as breaching the principle of res judicata, it cannot provide a genuine set-off, counterclaim or cross-demand under s 290(4)(b) of the Companies Act 1993.  That ground of the application must accordingly fail.

[15]     Auckland Electrical Solutions Ltd also opposes the statutory demand on the ground that it is not insolvent.   Its evidence is perfunctory.   There is no detailed accounting evidence that would provide assurances as to its solvency.  Solvency is not by itself a stand-alone ground for setting aside a statutory demand.4

[16]     Although it was not stated in the application, Auckland Electrical Solutions Ltd also relies on the “other grounds” limb of s 290(4).   That gives the court a discretion.  But the discretion is exercised narrowly.  It requires the court to consider whether it would be unjust for the presumption of insolvency to arise if there is non- compliance with the statutory demand.

[17]     In support, Ms Tabb submitted that Auckland Electrical Solutions Ltd had properly relied on the Construction Contracts Act and had a clear entitlement to payment of its invoices.  That submission missed the point because it did not take proper account of the fact that whatever the position might be under the Construction Contracts Act, there had been subsequent court decisions which led, ultimately, to the decision of the Disputes Tribunal on the substantive merits of the dispute. That is a final decision.  There is no basis for not upholding the statutory demand because Auckland Electrical Solutions Ltd is disappointed at not having the principles under the Construction Contracts Act upheld.   I am not satisfied that there is any basis under s 290(4)(c) for setting aside the statutory demand.   That is, if the statutory demand is not set aside, it would not be unjust to allow the presumption as to

insolvency to arise.

4      AMC Construction Ltd v Frews Contracting Ltd [2008] NZCA 389, (2008) 19 PRNZ 13.

[18]     Accordingly, I am satisfied that there is no basis for setting aside the statutory demand and I dismiss the application.

[19]     I am required to consider what orders to make under s 291 of the Companies Act.  This is not a case where the court should order the immediate liquidation of Auckland Electrical Solutions Ltd.   It should be given the opportunity to comply with the demand.

[20]     I make an order that Auckland Electrical Solutions Ltd is to pay the sum of

$5,424.00 no later than 22 March 2017.   If it does not pay that sum, Warrington Group  Ltd  may  apply  for  Auckland  Electrical  Solutions  Ltd  to  be  put  into liquidation.

[21]     I order Auckland Electrical Solutions Ltd to pay costs to Warrington Group

Ltd in the sum of $5,798.00 plus disbursements of $160,00.00 a total of $5,958.00.

………………………............

Associate Judge R M Bell