Cambridge on the Avon Limited v Smartlift Systems Limited

[2018] NZHC 175

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2017-409-000929 [2018] NZHC 175

UNDER	the Companies Act 1993
IN THE MATTER	of an application to set aside a statutory demand dated 13 November 2017
BETWEEN	CAMBRIDGE ON THE AVON LIMITED Applicant
AND	SMARTLIFT SYSTEMS LIMITED Respondent

Hearing:	16 February 2018
Appearances:	D W Grove for Applicant H M Cassin for Respondent
Judgment:	16 February 2018

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

on dismissal of setting aside application

[1]     The Court is called upon to make orders flowing from the applicant’s abandonment of its application to set aside a statutory demand.

Background

[2]      The opposed application of Cambridge on the Avon Limited (Cambridge) to set aside a statutory demand was to have been heard on 14 February 2018. The Court had imposed a timetable whereby Cambridge’s submissions were to have been filed by 30 January 2018 and those of the respondent, Smartlift Systems Ltd (Smartlift), by

7 February 2018.

CAMBRIDGE ON THE AVON LIMITED v SMARTLIFT SYSTEMS LIMITED [2018] NZHC 175 [16

February 2018]

[3]      Mr Grove for Cambridge filed a memorandum on 8 February 2018 inviting the Court to strike out the application “due to evidential issues”.  Mr Grove accepted that costs and disbursements would follow the event and that other directions would follow consequentially upon the dismissal of the application.

[4]      Mr Cowan for Smartlift immediately filed a memorandum setting out his calculation of costs on a 2B basis and disbursements.  He asked the Court to order payment of default interest under s 291(1)(a) Companies Act 1993. He asked that the Court order full payment within three working days (from 8 February 2018).

[5]      I excused the attendance of counsel from the scheduled hearing and instead convened a hearing by telephone conference to hear submissions on consequential orders.

[6]      At the conclusion of that hearing, I adjourned to a later date to enable counsel to finalise some figures and other details.

Costs and disbursements

[7]      The proceeding is appropriately classified as a Category 2 proceeding.1   For the most part, the reasonable time is appropriately determined by reference to band B,2 but with some alteration for less time-consuming attendances.

[8]      The schedule to this judgment sets out the appropriate calculations of costs and disbursements (and interest calculations) as provided by Ms Cassin. An order for costs of $9,366.00 will therefore be made.   The disbursements incurred by Smartlift (exclusive of GST) were not challenged. An order for payment of disbursements for

$310 will be made.

The Court’s powers

[9]      Smartlift asks the Court to use the additional power provided under s 291(1)(a) Companies Act 1993, which provides:

1      High Court Rules, r 14.3(1).

2      High Court Rules, r 14.5(2).

291 Additional powers  of court on application to set aside statutory demand

(1)       If, on the hearing of an application under section 290, the court is satisfied that there is a debt due by the company to the creditor that is not the subject of a substantial dispute, or is not subject to a counterclaim, set-off, or cross-demand, the court may—

(a)       order the company to pay the debt within a specified period and that, in default of payment, the creditor may make an application to put the company into liquidation; or

(b)       dismiss the application and forthwith make an order under section 241(4) putting the company into liquidation,—

on the ground that the company is unable to pay its debts.

[10]     I adopt my observation in Norwich Properties Ltd v Mark Gray Architect, in which I said:3

[68]     The “debt due” under s 291(1) is not required by the terms of the legislation to be the very debt identified in the statutory demand. It is enough that there is “a debt due by the company to the creditor”.

…

[71]      I am satisfied  that  it  was  within  the  intention of  Parliament,  as expressed in s 291, that interest on a debt could be the subject of a s 291(1)(a) order. It is a “debt”, and if the Court were not to treat it as a qualifying debt, a creditor could be forced from time to time to issue fresh statutory demands in relation to liabilities accruing under the same contract when the debtor delays payment.

The debt due

[11]     Smartlift’s statutory demand was issued for a sum of $91,290.16 which was the balance due and owing on a levelling work contract undertaken for Cambridge on a Christchurch property.

[12]     There is no longer any dispute that that sum was and remains owing.

[13]     It is also undisputed that, by the express terms of the contract, default interest accrued at 2.4 per cent per calendar month on outstanding invoices. The interest which

has accrued to today’s date, as calculated in Ms Cassin’s schedule is $13,771.77.

3      Norwich Properties Ltd v Mark Gray Architect [2015] NZHC 994.

[14]     I am satisfied that the debt due and owing by Cambridge to Smartlift today (inclusive of interest) is $105,061.93.  An order will be made in terms of s 291(1)(a) of the Act in relation to that debt.

Time for payment

[15]     It is the Court’s view that Cambridge, by reason of the aborted setting aside hearing and of these further hearings on consequential orders, has had reasonable time to pay the debt.

[16]     That conclusion is underscored by evidence given by Cambridge’s director, David Stewart Henderson.   Mr Henderson exhibited evidence of Cambridge’s financial position, Mr Henderson exhibited an email from Cambridge’s solicitors stating that the firm held $250,000 (part of a loan advance) in their trust account to cover costs associated with the Christchurch development.  The email added that the solicitor needed the lender’s authority before he could use the funds to make any payment.

[17]     Mr Henderson nonetheless referred to that email in his affidavit in support of the setting aside application.  Having referred to the $250,000 funds, he added in his affidavit:

These funds are available to pay the amount sought [by Smartlift], and the costings have previously been approved by the funders.

[18]    Mr Henderson’s additional evidence was calculated to lead the Court to understand that the funds were immediately available for release (by reason of the lender’s prior approval).

[19]     It transpires that that was not the case.  Mr Grove has explained that release approval is still awaited from Cambridge’s funder but that arrangements are in place so payment can definitely be made from the trust account funds by Friday, 23 February

2018.

[20]     Having regard to the funds held in trust and Mr Henderson’s evidence, I

initially indicated to Mr Grove that I was likely to specify a very short period (say 48

hours) in which Cambridge was to pay the debt.  On Mr Groves’ further enquiries, he informed me from the bar that, notwithstanding Mr Henderson’s evidence, there was indeed a requirement for fresh approval from the funder to release the funds held in trust.  In these circumstances, the order I make will provide to Cambridge the period to 23 February 2018 which Mr Grove confirms will be sufficient to have the debt cleared.

Orders

[21]     I order:

(a)      The application to set aside the respondent’s statutory demand is dismissed;

(b)The applicant shall pay to the respondent the costs and disbursements of the application which I fix in the sum of $9,676.00;

(c)      The applicant shall pay to the respondent the debt due and owing by the applicant to the respondent ($114,737.93 comprising contractual debt of $105,061.93 and costs and disbursements of $9,676.00) by noon on

23 February 2018 and, in default of that payment, the respondent may make an application to put the applicant into liquidation.

Associate Judge Osborne

Solicitors:

Cavell Leitch, Christchurch Aspiring Law, Wanaka Barrister

Daniel Grove Barrister, Auckland

SCHEDULE A

Cambridge on the Avon Limited v Smartlift Systems Limited CIV-

2017-409-929

Updated schedule of costs, disbursements and interest:

Statutory demand (dated 13 November 2017)                 $91,290.16

HCR Schedule 3	Description	Time (days)	Costs ($2,230 per day)
48	Issuing statutory demand	0.2 days	$446.00
38	Filing opposition to originating application and affidavit	2.0 days	$4,460.00
12	Appearance at call over on 14 December 2017	0.2 days	$446.00
40	Preparation of written submissions	1.0 days	$2,230.00
36	Preparing and filing memorandum of counsel regarding timetable (5 February 2018) (2A)	0.2 days	$446.00
36	Preparing and filing memorandum of counsel regarding costs (8 February 2018) (2A)	0.2 days	$446.00
12	Attendance on teleconference (14 February 2018) (2A)	0.2 days	$446.00
12	Attendance on teleconference (16 February 2018)(2A)	0.2 days	$446.00
Total Costs	$9,366.00

Schedule of disbursements

Process servers fee for service of statutory demand	$200.00
Ministry of Justice filing fee opposition to application	$110.00

Total costs and disbursements  $9,676.00

Updated interest calculation  $13,771.77

At the contractual rate of 2.4% per month

For the period 7 August 2017 – 16 February 2018

Total amount due and owing at 16 February 2018

inclusive of costs and disbursements  $114,737.93