BF7 Trading Limited v Extrastaff Limited
[2020] NZHC 544
•18 March 2020
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2019-409-642
[2020] NZHC 544
BETWEEN BF7 TRADING LIMITED
Applicant
AND
EXTRASTAFF LIMITED
Respondent
Hearing: 11 March 2020 Appearances:
K T Dalziel for Applicant
C D Maclaurin for Respondent
Judgment:
18 March 2020
JUDGMENT OF ASSOCIATE JUDGE LESTER
This judgment was delivered by me on 18 March 2020 at 2.30pm pursuant to Rule 11.5 of the High Court Rules 2016
Registrar/Deputy Registrar 18 March 2020
BF7 TRADING LIMITED v EXTRASTAFF LIMITED [2020] NZHC 544 [18 March 2020]
[1] The applicant, BF7 Trading Ltd (“BF7”) applies to set aside a statutory demand issued by the respondent, Extrastaff Ltd, dated 30 October 2019 claiming the sum of
$27,338.09. The statutory demand cross references that amount to four invoices.
[2] As the respondent’s name suggests, it provides labour on a contract basis to its clients. BF7 is also in the business of providing labour to construction sites and the like.
[3] At the beginning of October 2019 there was an oral agreement between the parties where the respondent was to supply appropriately experienced and qualified workers to BF7’s clients building sites. BF7 says it was also a term of the oral agreement that the workers would have their own tools.
[4] Staff were provided by Extrastaff Ltd to BF7 and on 16 October 2019 an invoice for $10,626 was raised. The evidence shows that $8,098 was paid by Extrastaff Ltd in respect of that invoice. The payment is referred to in an email sent by the managing director of the respondent and BF7.
Written terms of trade
[5] On 16 October 2019, BF7 by its director executed a “REQUEST TO OPEN A CREDIT ACCOUNT” form provided by Extrastaff Ltd. Under the heading “REQUEST TO OPEN A CREDIT ACCOUNT” it says, “TERMS OF TRADE AND PERSONAL PAYMENT GUARANTEE ON ACCOMPANIED [sic] DOCUMENT”.
[6] On the form, the reference to a personal guarantee has been struck out and initialled by BF7’s director.
[7] Extrastaff Ltd having noticed a couple of days later that the reference to a personal guarantee had been deleted, called BF7’s director, to complete a guarantee.
[8] On 18 October 2019, Mr Bishop, completed the guarantee. The guarantee is part of the Terms of Trade being the accompanying document referred to in the credit account form. The Terms of Trade contained a clause headed “PRICES AND PAYMENT” of which the following is an extract:
The Client may not set off any payments owed to EXTRASTAFF against any payments owed by EXTRASTAFF to the Client or any claims which the Client may have against EXTRASTAFF. No variation or modification or substitution of these terms by the Client will apply unless specifically accepted by EXTRASTAFF in writing.
[9] As I said, this document was executed by the director of BF7 as a guarantor. Some of the Terms of Trade between BF7 and Extrastaff Ltd were amended by Mr Bishop, two of which were initialled by him. After this document was signed on 18 October 2019, BF7 by its CEO (not the signatory to the guarantee), offered alternative terms of trade by email. It is asserted that those terms were accepted by telephone.
[10] Ms Dalziel, counsel for BF7, accepted that the written Terms of Trade govern the relationship between the parties from the time that document was signed. In my view, that was an appropriate acknowledgment. At no point were the terms proffered by BF7 accepted in writing by Extrastaff Ltd.
Quantum of statutory demand
[11] Ms Dalziel was critical of the amount claimed in the statutory demand. The demand included two invoices totalling $2,749.68 that, while they had been received by BF7, had not become overdue at the time of the statutory demand. The statutory demand also appears to have failed to give a full credit for the $8,098 paid in respect of the 16 October 2019 invoice. I say “appears” as it is not readily apparent how the amount in the statutory demand was made up. While Ms Dalziel accepted that such issues did not invalidate the demand, she submitted that it was indicative of an overly aggressive approach from Extrastaff Ltd.
Acknowledgment of amount due
[12] As the hearing developed, it became clear that the central issue was an acknowledgment by BF7 that it owed an amount to Extrastaff Ltd stated as $10,511.61 including GST, subsequently reduced to $9,900.08.
[13] In a letter sent by BF7 to Extrastaff Ltd which crossed with the statutory demand, BF7 said at that stage it looked like it owed $10,511.61. That letter continued:
You have now gone behind our back and approached our clients directly causing BF7 financial loss. We are currently working through a process as to how much of a loss this has caused us. Once we have done this we will come back to you, deduct the amount which is owed to [BF7] and a payment will follow after that.
[14] Accordingly, BF7’s position was that while it acknowledged an amount was owed, it considered it had a right to set-off a claim against Extrastaff Ltd.
[15] Two difficulties with the alleged counterclaim exist. The first is the no set-off clause referred to above at [8].1 The second issue is that the alleged counterclaim/set-off is unquantified. A counterclaim or set-off in this context must be quantified before it can be relied on as an answer to a debt claimed in a statutory demand.2
[16] The Court must be able to determine from the material provided that the amount of set-off claimed is more than the amount claimed in the statutory demand.3
[17]The affidavit in support of the application sworn 14 November 2019 states:
The applicant is currently quantifying damages as the loss is not just the build but also ongoing maintenance.
[18] No further material in respect of quantification has been put forward and accordingly the material provided does not allow the assessment referred to at [16] to be made.
[19] That left BF7 having acknowledged that at least $9,900.08 was due with but its basis for not paying that sum being invalid. Firstly, it sought to raise a set-off
1 Browns Real Estate Ltd v Grand Lakes Properties Ltd [2010] NZCA 425, (2010) 20 PRNZ 141.
2 Datasouth Holdings Ltd v Melco Sales (NZ) Ltd, HC Christchurch M41/96, 17 May 1996; Sunglass Hut New Zealand Ltd v Amtrust Pacific Properties Ltd HC Auckland, N1710/02, 24 June 2003; Manchester Securities Ltd v Body Corporate 172108 [2018] NZCA 190, [2018] 3 NZLR 455.
3 Manchester Securities ltd v Body Corporate 172108, above n 2 above.
contrary to its agreement not contained in the Terms of Trade and secondly, the set-off/counterclaim was unquantified.
The balance of the statutory demand
[20] When BF7 received the invoices referred to in the statutory demand it promptly raised concerns it had with their accuracy:
(a)there was the claim that time had been invoiced for workers who had turned up on site when their attendance had been cancelled;
(b)there was a claim that invoices included incorrect hours, or in fact when no labour was supplied, or had been charged at incorrect rates; and
(c)there was a further claim that some of the time sheets upon which the invoices were based were false.
[21] Counsel who appeared for Extrastaff Ltd acknowledged these factual issues were not capable of being resolved in this context. There is something to Ms Dalziel’s point that the applicant’s concerns in respect of the invoices were raised immediately upon receipt. This is not a case, as is sometimes seen, of disputes only being raised once pressure is brought to bear for payment.
Resolution – opportunity to pay
[22] Ms Dalziel submitted if I got to the point where I considered the $9,900.08 could not be validly disputed by her client, that it was appropriate to give her client time to pay.
[23] Accordingly, the application to set aside the statutory demand is adjourned to 10.00am on Thursday 2 April 2020. If the $9,900.08 has been paid in cleared funds prior to that date, then the application to set aside will be granted in respect of the balance of the statutory demand. If the $9,900.08 has not been paid in cleared funds by 2 April 2020, then pursuant to s 291(1)(b) of the Companies Act 1993 the
application to set aside will be dismissed in respect of that sum (but granted as to the balance) and an order will be made putting BF7 Trading Ltd into liquidation.
[24]Costs will be dealt with on 2 April 2020.
Solvency
[25] BF7 also sought to rely on solvency. I do not consider the evidence of solvency produced to be satisfactory. It was not independent. No bank statements showing actual funds available were produced. Extrastaff Ltd had referred to decisions against BF7 in the Employment Relations Authority which it said were unpaid. BF7 did not reply to that evidence. When BF7 tabled its evidence of solvency, Extrastaff Ltd in reply referred to additional recent Employment Relation Authority judgments recording unpaid debts owed by BF7. While Ms Dalziel said they came in reply, the reality is that BF7 knew Extrastaff Ltd was alert to the possibility of unpaid judgments, such being publicly searchable. In my view BF7 should have not only replied to the evidence of some four unpaid Employment Relation Authority judgments but headed off the most recent judgments.
[26] I do not consider that the evidence provided by BF7 was sufficient to establish solvency.
Associate Judge Lester
Solicitors:
Mortlock McCormack Law, Christchurch Neilsons Lawyers, Auckland
Copy to counsel:
Kathryn Dalziel, Barrister, Christchurch
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