Central Bulk Transport Limited v Farmers First Logistics Limited
[2024] NZHC 440
•6 March 2024
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2023-409-335
[2024] NZHC 440
IN THE MATTER of the Companies Act 1993 AND
an application to set aside a statutory demand
BETWEEN
CENTRAL BULK TRANSPORT LIMITED
Applicant
AND
FARMERS FIRST LOGISTICS LIMITED
Respondent
Hearing: 8 February 2024 Appearances:
G A Paine for Applicant
D J C Russ for Respondent
Judgment:
6 March 2024
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 6 March 2024 at 1.15 pm pursuant to rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date:
CENTRAL BULK TRANSPORT LIMITED v FARMERS FIRST LOGISTICS LIMITED [2024] NZHC 440 [6
March 2024]
[1] Central Bulk Transport Ltd (Central) and Farmers First Logistics Ltd (Farmers First) are freight haulage companies. Since August 2022, Farmers First has provided freight haulage services to Central around New Zealand. In turn, Central has moved freight for Farmers First.
[2] Farmers First has issued a statutory demand to Central claiming $100,050. This is the sum of the invoices listed in the statutory demand and issued to Central between 13 January 2023 and 26 April 2023 which Farmers First says are unpaid.
[3] Central applies to set aside the statutory demand pursuant to s 290 of the Companies Act 1993. Central argues:
(a)there is a substantial dispute in relation to the invoices issued by Farmers First as:
(i)the sums charged are excessive and/or not in accordance with agreed rates;
(ii)it has paid some of the invoices; and
(iii)an invoice relied upon by Farmers First did not relate to it; and
(b)it has counterclaims, cross-demands or set-offs against the amount specified in the statutory demand in relation to:
(i)invoices it has issued to Farmers First that have not been paid;
(ii)a truck sold to it which proved to be defective and not fully reconditioned as represented; and
(iii)the unlawful use by Farmers First’s director, Leonard Bourton, of a fuel card in respect of which Central incurred fuel charges of $14,724.72.
[4] Farmers First accepts there were some errors in its invoices, and that one invoice that Central says was paid should be excluded from its demand. It also accepts there are some amounts invoiced to it by Central that may be set off against the sum specified in the statutory demand. However, it says that other matters raised by Central have no merit, and there is unarguably a substantial sum owing to it such that the application to set aside the statutory demand should be dismissed.
The evidence and memoranda following the hearing
[5] Central’s application was supported by affidavits of its director, Christopher Erskine.
[6] An affidavit in opposition to the application of Farmers First’s director, Leonard Bourton, was also filed.
[7] Central also filed an affidavit of Susan Poulot, who says she was an administrator for the Farmers First Group. I can say immediately that the affidavit of Ms Poulot was of no assistance to me as her role was to investigate unpaid invoices unconnected with this matter.
[8] In his affidavit in reply, Mr Erskine raised for the first time that three of Farmers First’s invoices listed in the statutory demand had been paid. This was a bald assertion unsupported by any documentary evidence. I invited Mr Paine to confer with Mr Russ and provide any evidence of the payments. It appears that the discussion I anticipated between counsel did not occur. I received memoranda from them both.
[9] Mr Russ advises that in respect to one invoice it appears his client may have passed a credit note and issued a new invoice to another entity for payment. He advises Farmers First’s position remains that the other two invoices are unpaid.
[10] Mr Paine makes an incorrect assertion that Farmers First is seeking payment of further invoices not the subject of the statutory demand. He raises, for the first time, further invoices said to have been rendered by Central to Farmers First and that these should be set off against the amount claimed in the statutory demand. He also raises yet additional set-offs in respect to “Fuel Interest and Collection Costs”. He provides
spreadsheets said to have been prepared by a “forensic accounting investigating team”, the assumptions underlying which are not clear and which contain obvious errors. In short, Mr Paine, on behalf of Central, seeks to raise new disputes unsupported by evidence.
[11] While it should hardly need saying, I have determined this application only on the basis of the affidavit evidence before me and the concessions made by counsel on their clients’ behalf.
Legal principles
Section 290 of the Companies Act provides:
Court may set aside statutory demand
(1)The court may, on the application of the company, set aside a statutory demand.
(2)The application must be—
(a)made within 10 working days of the date of service of the demand; and
(b)served on the creditor within 10 working days of the date of service of the demand.
(3)No extension of time may be given for making or serving an application to have a statutory demand set aside, but, at the hearing of the application, the court may extend the time for compliance with the statutory demand.
(4)The court may grant an application to set aside a statutory demand if it is satisfied that—
(a)there is a substantial dispute whether or not the debt is owing or is due; or
(b)the company appears to have a counterclaim, set-off, or cross- demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or
(c)the demand ought to be set aside on other grounds.
(5)A demand must not be set aside by reason only of a defect or irregularity unless the court considers that substantial injustice would be caused if it were not set aside.
(6)In subsection (5), defect includes a material misstatement of the amount due to the creditor and a material misdescription of the debt referred to in the demand.
(7)An order under this section may be made subject to conditions.
[13] The principles that apply when the Court is exercising the discretion under s 290(4) of the Companies Act are well established and were confirmed by the Court of Appeal in Confident Trustee Ltd v Garden and Trees Ltd.1 In summary:
(a)The onus is on the applicant to show there is a fairly arguable basis on which it is not liable for the amount claimed. The task for the Court is not to resolve the dispute but to determine whether there is a substantial dispute that the debt is due.
(b)The mere assertion a dispute exists is not sufficient. Material short of proof is required to support the claim that the debt is disputed. If such material is available, the dispute should normally be resolved by means of ordinary civil proceedings.
(c)If a counterclaim, cross-demand or set-off is suggested, an applicant must establish that this is reasonably arguable in all the circumstances.
(d)It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise unless such evidence is contrary to the available documents or earlier statements made by the parties.
[14] Notwithstanding that grounds for setting aside a statutory demand have been made out, the Court retains a residual discretion to refuse to set aside a statutory demand but it would only be a rare case where such a discretion was exercised.2
1 Confident Trustee Ltd v Garden and Trees Ltd [2017] NZCA 578 at [16].
2 Manchester Securities Ltd v Body Corporate 172108 [2018] NZCA 190, [2018] 3 NZLR 455 at [49].
[15] Mr Russ referred to AAI v 92 Lichfield Street Ltd (in rec & liq), where the Court of Appeal summarised the onus on an applicant as:3
What the applicant must show is that the dispute it raises has substance; the applicant must explain to the court what the dispute is; and the dispute so shown must be a real and not a fanciful or insubstantial dispute. The Court must bear in mind that it is operating in the summary jurisdiction, with the accompanying disadvantages that brings for any applicant. The Court must also keep in mind the requirement that what is intended to be a summary hearing should not be converted into a full-blown trial.
[16] He submits also that the Court may take a robust and realistic approach where the facts warrant it.4 In Attorney-General v Rakiura Holdings Ltd, Grieg J said:5
In a matter such as this it would not be normal for a judge to attempt to resolve any conflicts in evidence contained in affidavits or to assess the credibility or plausibility of averments in them. On the other hand, in the words of Lord Diplock in Eng Mee Yong v Letchumanan …, the Judge is not bound:
to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be.
[17] With those principles in mind, I now turn to consider the matters raised by Central in support of its application.
Farmers First’s charges
Incorrect or excessive charges
[18] Mr Erskine says there was agreement reached between him and Mr Bourton as to the rates for loads taken from Central’s customer, Pan Pac, at Milburn to the North Island (Huntly), and for loads ex-Christchurch to the North Island.
[19]His evidence is:
[7]A trip from Pan Pac (Milburn) to the North Island was agreed to be charged at the sum of $6,200 plus FAF (a 10% charge) plus G.S.T.
3 AAI Ltd v 92 Lichfield Street Ltd (in rec & liq) [2015] NZCA 559, [2016] NZAR 1338 at [22] (footnote omitted).
4 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
5 Attorney-General v Rakiura Holdings Ltd (1986) 1 PRNZ 12 (HC) at 14, applied in Koura Mining Ltd v Geotech Ltd [2016] NZHC 1926.
[8]As Central Bulk Transport Limited were organizing [sic] the loads and had the contracts, $800 of the $6,200 would be paid to Central Bulk Transport Limited with Farmers First keeping the balance.
[9]If the load was ex Christchurch to the North Island, then I would receive $2,620 plus G.S.T. for transporting the goods from Milburn to Christchurch when they would be taken by Farmers First.
[20] Mr Erskine also says that from 13 March 2023, and then again at the end of March 2023, the amounts charged by Farmers First were increased without reference to him and that he took the matter up with Mr Bourton’s “admin people”. He annexes to his first affidavit an email sent by Mr Bourton to a staff member, dated 19 May 2023, that there were to be no credits or price adjustments for Central without his say so. There is nothing in the email that refers to any challenge to Farmers First’s invoices by Mr Erskine.
[21] Mr Bourton accepts there were some agreed rates, although not the rates Mr Erskine says were agreed. He acknowledges some invoices rendered to Central were incorrect. He also says Farmers First’s charges were discussed with Central, were transparent and in accordance with industry practice. He provides an explanation for each of Farmers First’s invoices and says that recalculating the invoices using what Mr Erskine says were the agreed rates, the balance owed to Farmers First is $90,666 including GST.
[22] In his second affidavit, Mr Erskine says to his knowledge, and after making enquiries of other trucking firms, he considers it clear there is “no usual industry charging practice” and everybody charges what they consider the market will bear.
[23] Mr Erskine’s evidence is unsatisfactory in several respects. First, Mr Erskine does not say what is owing to Farmers First if its invoices were calculated on the basis he asserts.
[24] Mr Erskine’s evidence is also ambiguous. In respect to the Milburn-to-Huntly route, it is not clear whether he says Farmers First was to charge according to the formulae (6,200 x 1.25) – (800 x 1.15); or (6,200 – 800) x 1.25; or even (6,200 x 1.10) x 1.15 – (800 x 1.15). In respect to the Christchurch-North Island route, he does not
say what Farmers First was to charge, only what was to be deducted from its charges for the credit of Central.
[25] Also, Mr Erskine does not produce any invoices rendered by Farmers First in accordance with the rates he says applied. The parties were dealing with each other since August 2022 and if, as he says, the relationship between them had worked well there would be such invoices.
[26] In respect to invoices for routes other than Milburn to Huntly and ex-Christchurch to the North Island, while he says there is no “usual industry charging practice” he does not explain why exactly the amounts charged by Farmers First were excessive. To the contrary, in several instances he says Farmers First invoices have been paid, so it can be inferred the charges were accepted.
[27] Mr Erskine also overlooks, and does not specifically respond to, Mr Bourton’s evidence that while some charges were based on standard industry practice with a discount applied, all charges were discussed with Central.
[28] In addition to all this, at the hearing Mr Paine advised that taking into account Central’s challenges to Farmers First’s charges, the amount of the invoices in the statutory demand would be around $83,000 plus GST. That is a greater sum than Mr Bourton arrived at when recalculating Farmers First’s invoices.
[29] However, out of an abundance of caution I have recalculated the invoices claimed by Farmers First in the statutory demand, applying the charges Mr Erskine says were agreed. Depending upon which formulae in [24] is applied, the amount of those invoices would be either $89,622, $88,902, or $90,459 (including GST in all cases) in accordance with the table in Schedule A.
Payment of invoices
[30] In his first affidavit, Mr Erskine makes no mention of Central having paid any of the Farmers First invoices that are the subject of the statutory demand. In his reply affidavit, he says three of the invoices have been paid. These were invoices 1292,
1319 and 1347. He provides no documentary evidence of payment, and no further evidence of payment has been provided since the hearing.
[31] For its part, Farmers First says invoices 1319 and 1347 remain unpaid but that it is prepared to accept that invoice 1292 should be excluded from the statutory demand.
[32] Subject only to the concession made in respect to invoice 1292, I do not consider that Central has provided sufficient evidence to raise a fairly arguable issue that it has made payment of invoices that are the subject of the statutory demand.
The invoice Central says does not relate to it
[33] In his first affidavit, Mr Erskine says one of Farmers First’s invoices, being number 1326 dated 6 April 2023 for $8,280, was not owed and was unrelated to Central.
[34] Mr Bourton says the invoice relates to freight moved from Milton to Huntly, which was a Central freight route. He says Farmers First does not move freight for any other clients between those locations and the invoice has never been challenged. He also provides a proof of delivery document, confirming the collection of freight from Central’s customer in Milton.
[35] In his reply affidavit, Mr Erskine does not respond to Mr Bourton’s evidence in any substantive way, except to say the amount of the invoice was disputed because it was charged at the wrong rate. I take that as an acknowledgement that, contrary to his earlier evidence, Mr Erskine now accepts the invoice does indeed relate to Central.
Invoices issued to Farmers First that have not been paid
[36] In his first affidavit, Mr Erskine produces 11 invoices he says are owed to Central amounting to $50,652.97 plus GST. In fact, the $50,652.97 is a GST inclusive figure.
[37] Several of these invoices, amounting to $21,858 (invoices 0011, 0047, 0058, 0077, and 0078), are not addressed to Farmers First but to other companies.
[38] The invoices also include invoice 0124 for $14,724.72 in respect to fuel card charges.
[39] In his second affidavit, Mr Esrkine attaches duplicates of some invoices that are annexed to his first affidavit but no further invoices.
[40] Mr Russ accepts for present purposes that some invoices issued to Farmers First can be set off against the amount specified in the statutory demand. However, Farmers First is not responsible for invoices issued by Central to companies other than Farmers First. Mr Erskine is aware there are a number of companies within the Farmers First Group. He provides no explanation as to how Farmers First is responsible for payment of invoices rendered to other companies.
[41] I also do not accept, for the reasons that appear below, that Farmers First has any responsibility for the fuel card charges.
[42] I accept Central can set off against the amount specified in the statutory demand the sum of Central’s invoices addressed to Farmers First attached to Mr Erskine’s affidavit ($28,794.97) less the fuel card charges ($14,724.72), being a balance of $14,070.25.
The truck claim
[43] Central asserts a claim for damages against Farmers First in respect to a truck sold to it that Mr Erskine says proved to be defective. The evidence provided is sparse.
[44]In his first affidavit, Mr Erskine’s evidence in relation to this claim is:
12. … Mr Bourton is also aware that there is a substantial dispute with respect to a truck he sold to Central Bulk Transport Limited claiming it to have been fully reconditioned which has proved quite expensively so, not to be the case.
[45]In his affidavit in reply, Mr Erskine again refers to this issue. His evidence is:
19.Farmers First did in fact a sell a Scania truck to Central Bulk. It seems to have been sold by Farmers First Livestock Limited, another of the Bourton companies, so Mr Bourton is being somewhat, in my view, precious in arguing that Farmers First did not supply a truck when clearly a Farmers First company did.
20.The truck, however, is subject to separate proceedings which are in the course of preparation.
…
35.Finally, putting into perspective the truck argument which is alleged to be with Farmers First Livestock Not [sic] Farmers First Logistics but all the companies of Mr Bourton have the same director/shareholder namely himself. Mr Bourton himself in his affidavit refers all the time to Farmers First without being specific.
[46] Mr Erskine provides no detail of how it is said the truck was defective, nor has he identified the nature of any loss or damage suffered nor quantified such loss or damage. There is no evidence from any other person to support this claim that the truck was defective. It is not sufficient for Mr Erskine to make vague and unsubstantiated assertions.
[47] In addition, I am satisfied that any such claim is not arguable as against Farmers First as Central did not purchase the truck from it but from a separate company, Farmers First Livestock Ltd. That this is the case is clearly known to Mr Erskine.
[48] Mr Bourton has attached to his affidavit the invoice for the sale of the truck to Central by Farmers First Livestock Ltd, and also an agreement signed by Mr Erskine and a Rhys Jones on behalf of Central whereby Farmers First Livestock Ltd made a loan to Central to assist towards the deposit in respect of the purchase of the truck.
[49] Although Mr Erskine says in his first affidavit that there is “impending litigation” in respect to the truck purchase, it appears no proceedings have been issued.
[50] Central does not have an arguable claim against Farmers First in respect to the truck.
The fuel card
[51] Mr Erskine says in his first affidavit that Mr Bourton has used Central’s Allied Petroleum (Allied) fuel card without authorisation. His evidence in relation to this is as follows:
23.[Mr Bourton] rang asking what the fuel card number was and as I was using one of his trucks so he could fill the truck up to load it for my driver for the following week. I foolishly gave hm [sic] the pin number.
24.I checked the fuel statement for the month and noted that it was being used in the North Island and I did not have a truck in the North Island.
25.It seems that the fuel card was being used without my authority and indeed my knowledge by Leonard Bourton. I have now cancelled it and reported the theft to the Police. Annexed hereto and marked with the letter “F” is a copy of the incident report that the Police have.
[52] There are two documents attached to that affidavit in relation to this allegation. One document is the invoice rendered by Central to Farmers First dated 3 June 2023 for fuel card costs totalling $14,724.72.
[53] The second document is an incident report submitted online by Mr Erskine to the police dated 21 June 2023, reporting that his fuel card was stolen by Mr Bourton and used to obtain fuel against his account. He wrote:
i was rang by lennard bourton asking what my fuel card number was, as i was using one of his trucks. so he could fill the truck up to load it for my driver for the following week. so gave him the pin number for the card. I checked my fuel statement for the month and noticed that it was being used in the north island and i didn’t have a truck in the north island. [sic]
[54] In the same report Mr Erskine refers to the incident having occurred at Ray Emery Drive, Auckland Airport and between 12 am on 18 April 2023 and 12 am on 10 June 2023.
[55] In his affidavit, Mr Bourton denies the use of Central’s fuel card, notes the seriousness of the allegation and observes that while the police report says the offending occurred at Auckland Airport there is, to his knowledge, no Allied fuel station at Auckland Airport. He also says neither Central nor Mr Erskine have
provided copies of the invoices received from Allied that relate to the alleged fraudulent use of the fuel card.
[56] Mr Erskine responds to this in his reply affidavit by exhibiting photographs provided by Allied, which he says are security camera footage from truck stops in Levin, Ward and Taupo. He says there is an Allied truck stop at Auckland Airport and, “it is clear … notwithstanding Mr Bourton’s assertions there has been fuel paid for with Central Bulk’s fuel card … but used wrongly by Mr Bourton’s company(s)”.
[57] Mr Erskine also exhibits to his affidavit an Allied tax invoice, presumably intended as confirmation of the fuel purchases made to Central’s account. This simply records three transactions where diesel was purchased on the account of Central at Taupo on two occasions on 20 June 2023, and once at Hastings on 21 June 2023. The time of each transaction is recorded.
[58]Mr Erskine summarises his position in his reply affidavit as follows:
34.The fuel card allegation is I accept very serious but certainly the fuel charges levied against my company were not authorized [sic] by my company. Mr Bourton had my fuel card which I had given to him to enable him to do a contract for us in the South Island, there no [sic] was need for that card to have travelled to the North Island.
[59] As Mr Russ submits, to understand and assess Mr Erskine’s allegations of fraudulent use of the fuel card a chronology is useful. It is as follows:
(a)3 June 2023 — invoice 0124 for $14,724.72 from Central to Farmers First for alleged fuel card use;
(b)15 June 2023 — Farmers First serves statutory demand;
(c)20 June 2023 at 8:20:30 — fuel valued at $256.84 purchased in Taupo;
(d)20 June 2023 at 8:23:46 — fuel valued at $91.58 purchased in Taupo;
(e)20 June 2023 at 19:42:42 — fuel valued at $346.36 purchased in Taupo;
(f)21 June 2023 at 18:02:48 — fuel valued at $179.80 purchased in Hastings;
(g)21 June 2023 at 11.57 am — online complaint made to police by Mr Erskine; and
(h)30 June 2023 — Allied Petroleum statement that is attached to Mr Erskine’s reply affidavit is issued.
[60] I accept Mr Russ’ submissions that the evidence provided by Mr Erskine does not support the allegation of fraudulent use of the fuel card for the following reasons:
(a)The Allied statement has four line items showing purchases on Central’s account in the North Island totalling only $874.58, when the amount claimed is $14,724.72.
(b)The Allied statement is incomplete.
(c)The police report made by Mr Erskine alleges offences occurring between 18 April 2023 and 10 June 2023 at Auckland Airport. The statement from Allied records transactions on 20 and 21 June 2023 and relate to transactions in Taupo and Hastings.
(d)The photographs annexed to Mr Erskine’s affidavit show Farmers First trucks at Taupo, Levin and Ward, not Auckland. The photographs are of no relevance, showing only that there were trucks that visited Allied fuel depots in Taupo, Levin and Ward.
(e)The photographs are not date stamped.
(f)The photographs are time stamped but those times do not match any of the transactions on the Allied statement. They also indicate that the transactions took place on a Monday, whereas none of the transactions recorded on the Allied statements occurred on a Monday.
(g)The invoice issued by Central for fuel charges is dated 3 June 2023, is for an amount that does not reconcile with the Allied statement and predates the transactions on that statement.
(h)The police report refers to the card in question having been cancelled, yet that report was made at 11.57 am on 21 June 2023 and the last transaction recorded on the Allied statement was at 6.02 pm that day.
(i)While in his online police report Mr Erskine says he did not become aware of the alleged theft until he checked the statement from Allied, the Allied statement covers the period 1 June to 30 June 2023 and therefore cannot have been issued before 30 June 2023. Mr Erskine cannot have relied on the statement when lodging the police complaint nine days earlier.
(j)The police complaint was not made until 21 June 2023, after service by Farmers First of the statutory demand.
[61] I do not accept an arguable issue has been raised that Mr Bourton unlawfully used Central’s fuel card. Further, on the evidence filed, in my view counsel should not have advanced the allegation against Mr Bourton that has been made.6
Summary of the position
[62] For the reasons set out above, I am satisfied there can be no dispute that Central is indebted to Farmers First in at least the sum of $63,101.75 made up as follows:
(a)the amount owing on Farmers First’s invoices specified in the statutory demand as I have recalculated them on the most advantageous basis to Central: $88,902;
(b)less invoice 1292: $11,730; and
6 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, r 13.8.1
(c)less the amount of Central’s invoices addressed to Farmers First but excluding the invoice for the fuel card: $14,070.25.
Defects in the statutory demand
[63] As an additional matter, Mr Paine submits that the statutory demand was defective because the amount specified was excessive, and it should therefore be set aside and Farmers First required to issue a new statutory demand for the correct amount.
[64] A defect or irregularity in a statutory demand is not of itself sufficient reason for the demand to be set aside unless substantial injustice would result.7 A defect includes a material misstatement of the amount due or a material misdescription of the debt referred to in the demand.8
[65] In Bateman Television Ltd v Coleridge Finance Co Ltd, it was held that, although there may be a bona fide dispute concerning the precise indebtedness of a debtor, if it is clear there is sufficient owing to found a petition and the company is insolvent an order would be made.9
[66] Similarly, in HSK Trading Ltd v Carter Building Supplies Ltd, Associate Judge Bell said:10
[15] Notwithstanding that decision, there is an established practice of setting aside a statutory demand only to the extent that it is defective. In United Homes (1988) Ltd v Workman the Court of Appeal partially set aside statutory demands. They were upheld only to the extent that they were based on valid debts. In Herbert Construction Co Ltd v Carter Holt Harvey Ltd, a statutory demand for $404,317 was set aside, except to the amount of $65,600. Just as in that case, the court may hold that some parts of the debt claimed by Carters may be sound, even if other parts are contestable. There is no injustice to a company in requiring it to pay the uncontested part of a statutory demand to see whether a presumption of insolvency will arise.
7 Companies Act 1993, s 290(5).
8 Companies Act 1993, s 290(6).
9 Bateman Television Ltd v Coleridge Finance Co Ltd [1969] NZLR 794 (CA).
10 HSK Trading Ltd v Carter Building Supplies Ltd (t/as Carters) [2021] NZHC 1897 (footnotes omitted).
[67] However, in contrast, in Moorhouse Panel & Spray Ltd v The Energy Savings Co Ltd Associate Judge Lester considered that the applicant had raised an arguable dispute as to the existence of the debt but said: 11
[51] Even if I had not reached that view, I would have been minded to set the statutory demand aside given I consider that the extent to which it is overstated is significant. I remind myself that ss 290(5) and (6) of the Companies Act 1993 provide that a material mis-statement of the amount due can only result in a demand being set aside if substantial injustice would be caused if the statutory demand was not set aside.
[52] An applicant faced with statutory demand of just over $6,000 may well, despite the ill feeling between the parties, have sought to achieve a commercial outcome. One could well make the same comment about a statutory demand for just over $10,000 but the smaller the amount, the greater the imperative for a commercial outcome. Where the statutory demand here was overstated by a significant proportion (over 40 per cent), I consider that overstatement was material and created a risk of substantial injustice by making a commercial solution less likely.
[68] Mr Paine’s submission that, here, the statutory demand should be set aside cannot be easily dismissed when Farmer’s First’s invoices contained errors, and the amount claimed in the statutory demand was overstated for several reasons. However, against that I am satisfied that there is a large amount owing that cannot be disputed which distinguishes this case from Moorhouse. Further, Central has never sought a commercial solution with Farmers First. Rather, Central has raised several matters in this proceeding to defeat the demand without evidence and which are devoid of merit.
[69] There was no reason, in my view, why Central should not have been able to determine for itself what was owing to Farmers First and made payment of it. I can therefore see no injustice in setting aside the statutory demand only in part and requiring Central to make payment of the amount that, in my view, is incontestable. Mr Paine did not identify how a substantial injustice would arise from adopting that approach, and it is Central’s position that it is solvent and in a position to make payment of what is due. In those circumstances, I consider it should be required to do so.
11 Moorhouse Panel & Spray Ltd v The Energy Saving Co Ltd [2019] NZHC 1804.
Result
[70]The statutory demand is set aside, except for the sum of $63,101.75.
[71]Under s 291 of the Companies Act, Central is to pay Farmers First the sum of
$63,101.75 within 10 working days of this judgment. If it does not do so, Farmers First may apply to have Central put into liquidation.
[72] I regard Farmers First as having been successful and that costs should follow the event. It is entitled to costs on a 2B basis plus reasonable disbursements as fixed by the Registrar.
O G Paulsen Associate Judge
ADDENDUM:
This morning at 9.36 am, and after counsel had been advised my judgment would issue at 11.00 am, Mr Paine forwarded an email to the Registry with a bundle of invoices and other documents. The email stated, “As per memorandum”. There was no memorandum attached.
Mr Paine sent a further email to the Registry at 11.16 am advising the respondent had gone into receivership and attaching a short memorandum advising that the documents provided related to the spreadsheets to which I refer at [10] of the judgment.
The emails received today simply highlight the unsatisfactory way the applicant has presented its case. The documents provided are not in evidence and Mr Paine has not
made any application on behalf of his client to adduce further evidence. They therefore do not alter the conclusions I have reached in this judgment.
O G Paulsen Associate Judge
Solicitors:
Shona Cumming Law, Dunedin Kearney & Co, Christchurch
SCHEDULE A
Invoice number
Statutory demand
(15 June 2023)
Calculation No. 1
Calculation No. 2
Calculation No. 3
INV-0907
$1,840.00
$1,840.00
$1,840.00
$1,840.00
INV-1249
$7,360.00
$6,830.00
$6,750.00
$6,923.00
INV-1250
$7,360.00
$6,830.00
$6,750.00
$6,923.00
INV-1251
$7,360.00
$6,830.00
$6,750.00
$6,923.00
INV-1252
$7,360.00
$6,830.00
$6,750.00
$6,923.00
INV-1281
$5,175.00
$4,117.00
$4,117.00
$4,117.00
INV-1287
$1,610.00
$1,610.00
$1,610.00
$1,610.00
INV-1292
$11,730.00
$11,730.00
$11,730.00
$11,730.00
INV-1305
$8,280.00
$6,830.00
$6,750.00
$6,923.00
INV-1307
$8,280.00
$6,830.00
$6,750.00
$6,923.00
INV-1315
$8,280.00
$6,830.00
$6,750.00
$6,923.00
INV-1319
$4,830.00
$4,830.00
$4,830.00
$4,830.00
INV-1326
$8,280.00
$6,830.00
$6,750.00
$6,923.00
INV-1374
$4,025.00
$4,025.00
$4,025.00
$4,025.00
INV-1391
$8,280.00
$6,830.00
$6,750.00
$6,923.00
Total
$100,050.00
$89,622.00
$88,902.00
$90,459.00
Calculation No. 1 applies to the Milburn to Huntly route: (6200 x 1.25) – (800 x 1.15) = $6,830.00.
Calculation No. 2 applies to the Milburn to Huntly route: (6,200 -800) x 1.25 = $6,750.00.
Calculation No. 3 applies to the Milburn to Huntly route: (6,200 x 1.10) x 1.15 – (800 x 1.15) =
$6,923.00.
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