Bew Properties 2021 Limited v Rosco Ice Cream Limited

[2023] NZHC 1310

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2023-485-53

[2023] NZHC 1310

UNDER

the Companies Act 1993

IN THE MATTER

of an application to set aside a statutory demand pursuant to s 290 of the Companies Act 1993

BETWEEN

BEW PROPERTIES 2021 LIMITED

Applicant

AND

ROSCO ICE CREAM LIMITED

Respondent

Hearing:	On the papers
Appearances:	M Holland for Applicant M Wolff for Respondent
Judgment:	29 May 2023

JUDGMENT OF ASSOCIATE JUDGE SKELTON

[Costs]

Introduction

[1]                 In this proceeding, the applicant sought an order setting aside a statutory demand served on it by the respondent. On 1 May 2023, the respondent’s statutory demand was withdrawn by consent. This leaves the issues of costs to be determined on the applicant’s redundant application to set aside the statutory demand.

[2]                 The parties have been unable to agree on costs and have filed memoranda. Each party seeks an award of costs against the other on the basis that it is the successful party.

BEW PROPERTIES 2021 LIMITED v ROSCO ICE CREAM LIMITED [2023] NZHC 1310 [29 May 2023]

Background

[3]                 On 3 February 2023, the respondent served the applicant with a statutory demand for $180,192.44. The statutory demand related to two invoices:

(a)Invoice  1054  for  $114,526.01,  which  fell  due  for  payment  on   15 December 2022;

(b)Invoice  1082  for  $65,667.43,  which  fell   due  for   payment   on  30 December 2022;

[4]                 On 15 February 2023, the applicant’s solicitors wrote to the respondent’s solicitors advising that they were instructed to apply to set aside the statutory demand. This was on the basis that the respondent had a set off in the sum of $60,599.58 for sums due from the applicant, it disputed the amount of $43,000.80 (a portion of invoice 1082), and it would pay the balance of $76,593.06. The letter did not say when the amount of $76,593.06 would be paid, but the letter required the respondent to withdraw the statutory demand by “unequivocal written correspondence” by 11am on Thursday 16 February 2023 otherwise the application to set aside the statutory demand would be made.

[5]                 The respondent did not withdraw the statutory demand and, on 17 February 2023, the applicant applied to have the statutory demand set aside. After the application was made, the following occurred:

(a)on 3 March 2023, the respondent filed its notice of opposition, followed by an affidavit in support of its notice of opposition on 6 March 2023;

(b)on 10 March 2023, the respondent filed its affidavit in reply and paid the $76,593.06 to the respondent;

(c)on 21 March 2023, the matter was called in the banco list; and

(d)on 28 April 2023, in a memorandum of counsel to the Court, the respondent advised that it intended to withdraw the statutory demand either by consent or with leave.

Relevant cost principles

[6]                 The principles governing the Court’s discretion to award costs are well established. 1

[7]                 Questions of costs are ultimately a matter of discretion, the overall objective being to achieve an outcome that best meets the interest of justice. However, the discretion is not unfettered; it is qualified by the applicable costs rules, rr 14.2–14.10 of the High Court Rules 2016, and must be consistent with established principles. In particular, the fundamental principle applying to the determination of costs is that costs follow the event and should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the proceeding or interlocutory application.2

[8]                 The Court may order a party to pay increased costs where the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or a step in it. An example of this is failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under r 14.10 or some other offer to settle or dispose of the proceeding.3 Essentially, increased costs may be awarded where there is a failure by the paying party to act reasonably.4

Applicant’s position

[9]                 The applicant submits that it is the successful party because, if the Court had set aside the statutory demand it would be the successful party, and the outcome should be no different where the respondent has withdrawn the statutory demand before the hearing.

[10]             The applicant says that the originating application only concerned the disputed sum (being the set off sum and disputed amount totalling $103,600.38) and, on filing

1      High Court Rules 2016, r 14.1; Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [7] and [16]; Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 (CA) at [21]–[24] and [28]; and Mansfield Drycleaners Ltd v Quinny’s Drycleaning (Dentice Drycleaning Upper Hutt Ltd) (2002) 16 PRNZ 662 (CA) at [27].

2      High Court Rules, r 14.2 (1).

3      Rule 14.6(3)(b)(v).

4      Rule 14.6(3)(b); and Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].

the originating application, the respondent had comfort that payment of the balance of

$76,593.06 was certain and the respondent should have then withdrawn the statutory demand or consented to it being set aside.

[11]             The applicant claims scale costs on a 2B basis plus disbursements in the total sum of $5,798.00. The applicant also seeks an uplift for the lack of response to the 15 February letter, or, in the alternative, for steps after the payment of $76,593.06 on 10 March.

Respondent’s position

[12]The respondent seeks scale costs and disbursements in the total sum of

$6,324.00.

[13]             The respondent says the statutory demand was a necessary step to enable the respondent to enforce the debt owing to it. It says that it was the successful party because the originating application to set aside the statutory demand was destined to fail or was wholly without merit, and it has been put to the cost of responding to the application unnecessarily.

[14]             The respondent says that the fact that the statutory demand was eventually withdrawn is irrelevant, and it was only withdrawn for practical reasons to facilitate resolution of the outstanding matters between the parties.

Applicant’s reply

[15]             The applicant submits that it is not appropriate for the respondent to argue the merits of the application to set aside the statutory demand, and by withdrawing the statutory demand the applicant ceded the right to argue the merits of the case.

Discussion

[16]             I agree with the applicant that it is not necessary or appropriate for the Court to assess the merits of the redundant application to set aside the statutory demand in this case.5

5      Powell v Hally Labels Ltd [2014] NZCA 572 at [23]–[24]; and N-Tech Ltd v Abooth Ltd [2012] NZHC 1167 at [99].

[17]             The key point regarding costs is the fact that, having been served with the statutory demand on 3 February 2023, the applicant did not write to the respondent putting forward its position and proposal until 15 February, and did not pay the undisputed amount of $76,593.06 at that time, or indicate when the sum would be paid.

[18]             In the circumstances, the respondent could not reasonably be expected to have withdrawn the statutory demand by 16 February and the applicant must bear its costs of filing the originating application on 17 February.

[19]             Even after the originating application was filed, although it was conceded that the $76,593.06 was due and David Stewart deposed that the applicant would pay that sum, there was still no indication as to when the sum would be paid. It was reasonable for the respondent to protect its position by filing its notice of opposition on 3 March and affidavit on 6 March.

[20]             The applicant paid the $76,593.06 on 10 March, but the respondent did not advise that it intended to withdraw the statutory demand until 28 April. I consider that the respondent must bear the  costs  incurred  by  the  parties  on  steps taken  after 10 March, in particular the costs of the mentions hearing on 21 March. However, there is no basis for any uplift on the applicant’s costs on steps taken after 10 March.

Result

[21]             I therefore find that the applicant should pay the respondent’s costs for filing its notice of opposition and supporting affidavit on a category 2B basis ($4,780), but the sum of $478 should be deducted for the applicant’s costs of appearance at the mentions hearing on 21 March 2023.

Associate Judge Skelton

Solicitors:

Hazelton Law, Wellington for Applicant Morrison Kent, Wellington for Respondent