Centro Pilgrim Limited v Mathew Barr Motor Group Limited
[2023] NZHC 1522
•19 June 2023
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2023-409-20
[2023] NZHC 1522
UNDER Section 290 of the Companies Act 1993 IN THE MATTER
of an application to set aside a statutory demand
BETWEEN
CENTRO PILGRIM LIMITED
Applicant
AND
MATHEW BARR MOTOR GROUP LIMITED
Respondent
CIV-2023-409-34 BETWEEN
MATHEW BARR MOTOR GROUP LIMITED
ApplicantAND
CENTRO PILGRIM LIMITED
Respondent
Hearing: 16 May 2023 Appearances:
R V Sami for Centro Pilgrim Ltd
J E Bayley for Mathew Barr Motor Group Ltd
Judgment:
19 June 2023
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 19 June 2023 at 3.30 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
CENTRO PILGRIM LTD v MATHEW BARR MOTOR GROUP LTD [2023] NZHC 1522 [19 June 2023]
[1] This judgment deals with competing applications to set aside statutory demands arising out of the same facts, namely:
(a)an application by Centro Pilgrim Ltd (Centro) to set aside a statutory demand issued to it by Mathew Barr Motor Group Ltd (Barr) dated 16 January 2023; and
(b)an application by Barr to set aside a statutory demand issued to it by Centro dated 25 January 2023.
[2] Centro leases premises in Sydenham to Barr pursuant to a lease dated 19 September 2019. The parties also entered into an interdependent agreement (the side agreement) on 18 September 2019 for Centro to make what were described as capital payments back to Barr after payment of the monthly rent. In reality these are rebates of rent. Barr says that in March 2020 the side agreement was varied. This changed the basis upon which the rebates were calculated.
[3] Barr’s position is that Centro has failed to pay the full amount of the rebates under the side agreement as varied, while it has continued to pay the full rent under the lease. It served on Centro a statutory demand dated 16 January 2023 in respect of the amount of the rebates it says is owing.
[4] Centro’s position is that the side agreement was not varied and that it has overpaid the rebates. In the alternative, it argues if the side agreement was varied, it is entitled to relief for contractual mistake. As a counter to Barr’s statutory demand, Centro served its own statutory demand on Barr dated 25 January 2023 in respect of the alleged over-payment.
[5] Centro has applied to set aside Barr’s statutory demand and Barr has applied to set aside Centro’s statutory demand. Both applications were heard together.
[6]The issues are clearly defined and are:
(a)was the side agreement varied as Barr asserts?
(b)if the side agreement was varied, does Centro have an arguable defence to Barr’s demand on the basis that it is entitled to relief for contractual mistake?
(c)should either statutory demand be set aside “on other grounds” in the exercise of the Court’s discretion?
The facts
[7] Centro and Barr entered into a deed of lease dated 19 September 2019 pursuant to which Centro leased to Barr premises comprising units 4 and 5 at 1 Pilgrim Place, Sydenham. The premises are used by Barr primarily in association with the operation of its Nissan dealership which is carried on nearby.
[8] The deed of lease provides for rent payable by Barr of $316,950 plus GST per annum, payable monthly at the rate of $26,412.50 plus GST. The rent is payable on the 1st of each month commencing 1 December 2019. The rent is subject to annual CPI adjustment and there are four yearly market rent reviews.
[9] The parties entered into the side agreement dated 18 September 2019, which counsel accepts is interdependent with the deed of lease, and had a clause reading as follows:
The rental, as per the lease, is $316,950. “Pilgrim” will pay “Barr” (or nominee) the day after the rent is paid, for the term of the lease, a capital payment of $4,296 calculated as follows:
- $316,950 less $240,000 = $76,950 x 67% = $51,557 / 12 = $4,296
- For clarity the payment being returned is a capital payment. (Tax already adjusted)
- At each CPI rent review the capital payment will change as the rent review will increase at a faster rate on the $316,950 than on the $240,000. The monthly capital payment will increase by the accelerated increase:
eg First review 2.5%.
- Increase on $316,950 is $7,924pa and the increase on $240,000 is
$6,000pa. The difference is $1,924 or $160pm. The new monthly capital payment will increase from $4,296 to $4,456.
[10] The side agreement also provided Barr with a first right of refusal in the event that Centro wished to sell the premises.
[11] The intention of the parties was that the effective annual rent payable by Barr under the lease was to be $240,000 plus GST and that would be achieved by Barr paying the rent of $316,950 per annum on the face of the lease with Centro making rebates back to Barr. It will be noted the rebates were described as a “capital payment (Tax already adjusted)”. This is a matter of significance in what follows.
[12] The evidence is that from the commencement of the lease until March 2020 Barr paid Centro a net amount for rent accounting for the rebates, rather than the full rent as specified in the deed of lease. Thereafter payments were physically made both ways by Barr and Centro to achieve the effective rent.
[13] Around March 2020, the parties were alerted to the fact that the rebates had to be treated as taxable in the hands of Barr, rather than being a “capital payment (Tax already adjusted)”. As a result, on 17 March 2020, there was a teleconference to discuss what would be done about this. There is a dispute about who attended the teleconference to which I shall return.
[14] Barr says at that teleconference the parties agreed to alter the manner of calculating the rebates from that set out in the side agreement in order to achieve the effective rent of $240,000. Mr Barr describes what was agreed as follows:
Because the Rebate would be taxable, it was agreed the Rebate would need to be paid without tax adjustment. Indeed, [Barr] would otherwise be paying more than the agreed effective rental of $240,000. The monthly Rebate amount therefore became $5,412.50 (being the $316,950 less the $240,000 divided over a 12 month period). This equated to a monthly Rebate of
$7,374.38 after adding GST.
[15] The matters discussed and agreed at the 17 March 2020 meeting were recorded in an email sent by a director of Centro, Glen Stapley, to several recipients on 17 March 2020. Relevantly for present purposes, and consistent with Mr Barr’s evidence, Mr Stapley recorded:
Rent to be paid by Nissan1 to Centro Pilgrim Limited $30,374.38. (Inc) This payment is to be made on the 1st of April 2020 and monthly thereafter.
Nissan is to Invoice Centro Group Limited $7,374.38 (inc) each month being rent.
1 The reference to Nissan is clearly a reference to Barr which, as noted, operates a Nissan dealership.
Payment of this to be made on the 3rd of each month.
[16] Following this meeting, Barr began invoicing Centro for the rebates at the amount it says was agreed on 17 March 2020.
[17] Subsequently, as the rent payable under the lease was CPI adjusted, there were corresponding increases in the amount of the rebates. Barr invoiced Centro each month for the rebate and was paid without question.
[18] At some stage during 2020 differences developed between the directors of Centro, Mr Stapley and Andrew O’Neil. As a result, Mr Stapley ceased to be a director of Centro from November 2020. As far as Barr was concerned these developments had no effect on its lease arrangements and the rent and rebates continued as before.
[19] It was not until July 2022 that Centro raised as an issue that it had overpaid the rebates. How this arose is instructive. In June 2022, Mr O’Neil advised Barr that Centro intended to sell the premises and spoke to an agent about this. In email correspondence, Mr Barr reminded Mr O’Neil that Barr had a first right of refusal under the side agreement. As a result of disputes that arose in relation to that issue, on 4 July 2022 Mr O’Neil wrote to Mr Barr advising that Centro had overpaid the rebates and intended to make demand for the overpayment.
[20] Mr O’Neil’s email to Mr Barr of 4 July 2022 makes clear the relationship between the dispute over the sale of the premises and Mr O’Neil’s decision to assert the rebates were overpaid. He wrote:
Mat,
I am amazing disappointed with your actions to simply send the side agreement off to the agents without as much as a phone call. I can only come to the conclusion that this was motivated to bring down the price in the tender process, so you thought that you might be able to trying and use your first right of refusal … Now the side agreement is now in the public forum I intend to hold you to all the terms of it. It’s stated that Centro Pilgrim Ltd should repay you $4296.00 per month, but in fact I have been repaying you $7847.15 for about 3 years plus making a difference of over repaid approximately $3551.15 x 36 = $127,841.40. I will issue a demand for this amount and all issues an arrears notice/default notice under the lease on the lease as you are now
$127,841.40 in arrears and I will being send this to Nissan, New Zealand and head office Nissan Japan and Mitsubishi New Zealand and BMW New Zealand as I now have nothing to hide by not putting this in the public forum.
As you decided you have nothing to loose in putting the other contract in a public arena.
Your annual rent with no return is $281,000.00 as per terms of your contract attached.
So moving forward we will both need to adhere to the contract conditions that you have chosen to put in the public arena, I did try and call you to discuss before it come to this, but you didn’t answer nor returned my call.
Not sure how to move forward any other way Mat.
[21] While Barr continued to pay its rent, Centro stopped paying the rebates after August 2022. Faced with this position, Barr issued its statutory demand to Centro on 16 January 2023. The demand was issued for what Barr says is the amount of the unpaid rebates in accordance with the variation to the side agreement.
[22] Centro did not accept its liability for the amount of Barr’s demand. On 19 January 2023, Centro’s lawyers wrote to Barr’s lawyers indicating that they considered Barr had issued the notice as a tactic to draw Centro into unnecessary litigation. So as not the be “bullied” Centro intended to “deploy similar tactics” and would issue its own statutory demand. The solicitors acknowledged “their belief that” the likely outcome would be that a Judge would direct the dispute be resolved by ordinary proceedings in the usual manner, but this did not deter them from the course they had indicated.
[23] Barr did not withdraw its statutory demand and Centro’s application to set it aside followed on 30 January 2023.
[24] Centro issued its own statutory demand to Barr on 25 January 2023. Centro’s statutory demand requires payment of what it says is the amount of the overpaid rebates. The amount claimed under the demand was $132,852.30, however Centro has since recalculated the amount that it alleges is owing as $27,803.56.
[25]Barr applied to set aside Centro’s statutory demand on 3 February 2023.
The law
[26] The relevant statutory provisions dealing with the issue of statutory demands and applications to set them aside are ss 289 and 290 of the Companies Act 1993. These provide:
289Statutory demand
(1)A statutory demand is a demand by a creditor in respect of a debt owing by a company made in accordance with this section.
(2)A statutory demand must
(a)be in respect of a debt that is due and is not less than the prescribed amount; and
(b)be in writing; and
(c)be served on the company; and
(d)require the company to pay the debt, or enter into a compromise under Part 14, or otherwise compound with the creditor, or give a charge over its property to secure payment of the debt, to the reasonable satisfaction of the creditor, within 15 working days of the date of service, or such longer period as the court may order.
290Court may set aside statutory demand
(1)The court may, on the application of the company, set aside a 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.
…
[27]The principles that apply to applications under s 290(4)(a) are as follows:2
2 Confident Trustee Ltd v Garden and Trees Ltd [2017] NZCA 578 at [16]; and Brookers
Insolvency Law & Practice, (online ed, Thomson Reuters) at CA290.02.
(a)The onus is on the applicant seeking to set aside the statutory demand to show that there is arguably a genuine and substantial dispute as to the existence of the debt. The Court’s task is not to resolve the dispute but to determine whether there is a substantial dispute that the debt is due.
(b)The mere assertion that a dispute exists is not sufficient. Material short of proof is required to support the claim that the debt is disputed.
(c)If such material is available, the dispute should normally be resolved first in ordinary civil proceedings before any statutory demand is issued.
(d)If a counterclaim, cross-demand or set-off is suggested an applicant must establish that this is reasonably arguable in all the circumstances.
(e)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.
(f)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.3
The applications
[28] While there are competing applications to set aside the statutory demands, both relate to the rebates and specifically whether Centro has overpaid or underpaid them. That issue depends upon whether the side agreement was varied in March 2020 as Barr contends, and as Mr Stapley recorded in his email of 17 March 2020. Centro’s application was first in time and I will deal with it first.
3 Manchester Securities Ltd v Body Corporate 172108 [2018] NZCA 190, [2018] 3 NZLR 455 at [49].
Centro’s application
[29] Centro’s application advances two grounds for setting aside Barr’s statutory demand as follows:
1[Centro] has served the respondent with a [counter or cross demand] section 289 statutory demand dated 25 January 2023 (“[Centro’s] Demand”).
2[Centro] has a counterclaim, set-off, or cross demand and the amount specified in [Barr’s] Demand is less than the amount of the counterclaim, set-off or cross demand (in [Centro’s] Demand) is less than the prescribed amount.
[30] The first matter relied upon is not a ground to set aside a statutory demand and the second matter does not capture Centro’s case accurately. In his written submissions, Mr Sami identified three grounds in support of the application which can be summarised as:
(a)the terms of the original side agreement should stand as the variation is not binding upon Centro;
(b)if the variation of the side agreement is binding, Centro seeks relief for mistake under ss 22, 25 and 28 of the Contract and Commercial Law Act 2017; and
(c)the Court should exercise its discretion to set aside the demand on other grounds.
Variation of the side agreement
[31] In support of its primary submission that the side agreement was not varied, Centro relies upon the evidence of its director, Mr O’Neil, that he was not present at the telephone conference on 17 March 2020. He deposes that Mr Stapley was in control of the financial affairs of Centro at the time, including negotiations with Barr, and that it was only after Mr Stapley’s departure from the company that he began dealing with the side agreement dispute with Barr.
[32] Mr O’Neil also deposes that he cannot understand why Mr Stapley would have agreed to Centro taking on Barr’s tax obligation when his role was to act in the best interests of Centro and he considers, “on reflection”, that Mr Stapley agreed to this for reasons relating to the separating of the business relationship between him and Mr O’Neil and to create problems after Mr Stapley’s departure from the company. He says:
It was only after consulting an accountant, it was brought to my attention, that the inflated Rebate sum was to [Barr’s] advantage and to [Centro’s] detriment.
It was never [Centro’s] intention to agree to terms that did not pass on any benefit to [Centro] (it makes no commercial sense, i.e., why would [Centro] agree to essentially cost itself 33% of a taxable income for a 10-year lease?).
[33] Mr O’Neil also says that Barr was in breach of the lease because it had failed to carry out improvements to the premises, and in breach of the side agreement by failing to maintain gardens and keep a right of way free of rubbish and stones.
[34] Centro also relies on the expert evidence of an accountant, Glynis Carter, who expresses her view as to the reasons why the side agreement was put in place and that the change in the accounting treatment of the rebates would have enhanced Barr’s tax position. She goes on to calculate that there is a balance owing by Barr to Centro of
$27,803.56.
[35] In my view there is nothing in any of these matters. Centro has not raised an arguable case that the side agreement was not varied, as Barr alleges, for the following reasons.
[36] First, from March 2020, when Barr says the side agreement was varied, until July 2022, the parties conducted themselves on the basis that the side agreement had been varied without Centro ever raising any issues about that.
[37] Next, Mr Stapley was a director of Centro, and Mr O’Neil confirms he was the director responsible for financial matters and specifically for dealing with Barr on behalf of Centro.4 Clearly, he had authority to bind Centro and Mr O’Neil does not
4 Companies Act, s 18(1)(c).
suggest otherwise. I understood Mr Sami accepted that on the evidence Mr Stapley had authority to bind Centro to the variation of the side agreement.
[38] In so far as Mr O’Neil suggests that Mr Stapley was motivated to create problems upon his departure from the company, I note that the separation of their business affairs occurred several months after the variation of the side agreement and Mr O’Neil’s view seems most implausible. In any event, Mr Stapley’s motivations are a matter between him and Centro. In addition, while Centro’s case is that Mr Stapley’s evidence should be given little or no weight because he is now in litigation with Mr O’Neil, nowhere does Mr O’Neil identify what parts of Mr Stapley’s evidence are incorrect.
[39] I also do not accept that Mr O’Neil was unaware of the variation agreement or that he did not agree to it. While in summary proceedings of this kind the Court will be slow to determine genuine disputes of fact, the evidence is overwhelming that Mr O’Neil knew and agreed to vary the side agreement.
[40] The evidence satisfies me that Mr O’Neil was present at the 17 March 2020 telephone conference. His evidence that he was not present is contrary to the evidence of both Messrs Barr and Stapley, as well as Mr Stapley’s 17 March email (intended as minutes of the meeting) which identify Mr O’Neil as present, and which were sent to him. It is notable that Centro does not produce any evidence from other people attending the meeting supporting Mr O’Neil.
[41] Further, in the lead up to the 2021 CPI review of Barr’s rent, there was email correspondence between Mr O’Neil and Barr in which the CPI increase was agreed and the amount of the rebate was calculated. In an email of 12 October 2021 Mr O’Neil wrote to Mr Barr and Barr’s Financial Controller:
Hi Guys,
As you know I inherited this complexed capital return system which I think I have got my head around it. I have attached my working for your comments, please. I see the agreement was that I was returning it tax paid but this has changed along the way which im ok with.
[42] The evidence of Ms Carter does not assist Centro in relation to the question whether the side agreement was varied. She does not purport to give any evidence about that issue. Her evidence as to the reasons why the parties entered into the side agreement are speculation, and her calculation as to an amount owing by Barr to Centro is based upon the original terms of the side agreement and takes no account of the variation. However, to the extent that Ms Carter confirms that the manner in which the rebate was to be “tax adjusted” under the side agreement did not reflect how lease inducements were “ordinarily” treated, her evidence supports Barr’s position that there were good commercial reasons why the side agreement was varied.
[43] I am therefore satisfied there was a variation to the side agreement in the manner that Barr alleges that was binding on Centro.
Mistake
[44]Section 24(1) and (2) of the Contract and Commercial Law Act 2017 provides:
24Relief may be granted if mistake by one party is known to another party or is common or mutual
(1)A court may grant relief under section 28 to a party to a contract if,
(a) in entering into the contract,
(i)the party was influenced in the party’s decision to enter into the contract by a mistake that was material to that party, and the existence of the mistake was known to the other party or to 1 or more of the other parties to the contract; or
(ii)all the parties to the contract were influenced in their respective decisions to enter into the contract by the same mistake; or
(iii)the party and at least 1 other party were each influenced in their respective decisions to enter into the contract by a different mistake about the same matter of fact or of law; and
(b) the mistake or mistakes resulted, at the time of the contract,
(i)in a substantially unequal exchange of values; or
(ii)in a benefit being conferred, or an obligation being imposed or included, that was, in all the circumstances, a
benefit or an obligation substantially disproportionate to the consideration for the benefit or obligation; and
(c) in a case where the contract expressly or by implication provides for the risk of mistakes, the party seeking relief (or the party through or under whom relief is sought) is not obliged by a term of the contract to assume the risk that that party’s belief about the matter in question might be mistaken.
(2)The relief may be granted in the course of any proceeding or on application made for the purpose.
…
[45] Centro’s submission is that it was influenced to enter into the variation of the side agreement by a mistake.5 The argument advanced was that the variation disadvantaged Centro resulting in an unequal exchange of values6 or conferred a benefit on Barr that is, in all the circumstances, substantially disproportionate to the consideration provided in return.7
[46] First, it was not clear from counsel’s written submissions what the mistake was that is said to have influenced Centro to enter into the variation of the side agreement. From my discussion with Mr Sami, I understand him to submit, broadly, the mistake was as to the effects the variation would have upon Centro’s tax liability.
[47] There is no evidence that Centro made any such mistake. Mr Stapley, who Mr O’Neil says agreed to the variation, has sworn two affidavits in the proceeding in which he confirms Mr Barr’s evidence and makes it quite clear there was no mistake in relation to tax.
[48]In his first affidavit Mr Stapley says:
In particular, [Centro] and [Barr] agreed in early 2020 that the Rebate under the Side Agreement would be paid to [Barr] without any tax adjustment. This was necessary to give effect to the agreed effective rental.
[49]In his second affidavit Mr Stapley says:
In particular, the agreed change in accounting treatment in early 2020 whereby the Rebate would be paid to [Barr] without any tax adjustment reflected what
5 Contract and Commercial Law Act 2017, s 24(1)(a)(i).
6 Section 24(1)(b)(i).
7 Section 24(1)(b)(ii).
we decided to be the correct accounting treatment. It enabled [Centro] to treat the Rebate as tax deductible and ensured the agreed effective initial annual rental of $240,000 was achieved.
[50] In referring to the CPI rent and rebates adjustments that were negotiated by him in October 2021, Mr O’Neil says that he would never have agreed to it had Barr’s financial controller clearly outlined to him the disadvantage that it would cause Centro which was only brought to his attention by “an accountant”. It is not clear why Barr is responsible to look after Centro’s interests or who the accountant is that is referred to. Regardless, the evidence satisfies me that the variation of the side agreement was known by both parties to be correcting a mistaken assumption that the rebates would be regarded as capital payments for tax purposes. Related to this, as noted above, Ms Carter’s evidence is to the effect that such payments would “ordinarily” be treated in a manner consistent with the evidence of Barr and Mr Stapley.
[51] In addition, there is no evidence, apart from Mr O’Neil’s bald assertion, that the variation in fact resulted in any obligation (or detriment as Mr O’Neil puts it) to Centro. Ms Carter does not say this is the case, and the only evidence before me about the matter is from Mr Barr, to which no objection was taken, that while the variation required Centro to make larger rebate payments, they would reduce its tax liability and there would be no change in Centro’s net position. However, I should emphasise that I do not need to rely upon Mr Barr’s evidence given the absence of anything to support Mr O’Neil’s position.
[52]I find that Centro has no arguable case to relief based on mistake.
Other grounds
[53] While Mr Sami argues that Barr’s statutory demand should be set aside on other grounds, his submissions in this regard focused on the issue of mistake. He did not attempt to convince me that any of the other matters Mr O’Neil raised concerning the completion of improvements, the maintenance of gardens or complaints about use of a right of way, were a basis for the Court to exercise its discretion to set aside Barr’s statutory demand. He was correct not to do so.
[54] In Commissioner of Inland Revenue v Chester Trustee Services Ltd, Tipping J noted:8
… the general policy of the Act that insolvent companies should be put into liquidation, if a creditor seeks such an order, should not be departed from lightly. To justify such departure, there must be some other factor, be it policy, principle or simply the justice of the particular case, which outweighs the prima facie entitlement of the creditor to an order putting the insolvent company into liquidation. If the focus is on the justice of the particular case the discretion must always be exercised on a principled basis and not on some ad hoc perception of what individual justice might require. All cases involving s290(4)(c) must in the end come down to a judgment by the Court as to whether the creditor’s prima facie entitlement is outweighed by some factor or factors making it plainly unjust for liquidation to ensue.
[55] None of the matters raised in Mr O’Neil’s evidence come close to satisfying me that the individual justice of this case requires me to make an order setting aside Barr’s statutory demand.
The orders to be made.
[56] Under s 291 of the Companies Act, upon dismissing an application to set aside a statutory demand, I 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.
[57] It follows from what I have said above that Centro’s application to set aside Barr’s statutory demand must be dismissed and I will make an order that Centro is to pay the amount of the demand, in default of which Barr may apply for a liquidation order.
[58] Mr Bayley notes that since the statutory demand was issued Centro has continued in its refusal to pay the rebates and that at the time of the hearing, the debt had grown from $56,059.77 (as specified in the statutory demand) to $89,708.17.
8 Commissioner of Inland Revenue v Chester Trustee Services Ltd [2003] 1 NZLR 395 (CA) at [3].
Mr Sami confirmed in a memorandum filed after the hearing that Centro has not made any rebate payments since August 2022. The amount owing will have grown further since the hearing.
[59] In reliance upon LJS Management Ltd v Amirco Ltd (In Liq) Mr Bayley submits I have the power to order Centro to pay an amount greater than that claimed in the statutory demand, failing which Barr will be at liberty to put Centro into liquidation. In that case, Associate Judge Bell said:9
… Likewise, I see no reason why the Court cannot also find that the amount of the debt is higher than the amount in the statutory demand. At the s 291 stage, the statutory demand is spent. In most cases, the time within which an applicant can rely on the failure to comply with the statutory demand under s 288(1) is long gone. Instead, at the s 291 stage, the Court is making its own decision as to the amount of the debt which is undisputed. Where undisputed liabilities have accrued since the service of the statutory demand, I see no reason why the Court cannot take these into account.
[60] I asked Mr Bayley if he had any other authority supporting the approach taken by Associate Judge Bell in LJS Management Ltd v Amirco Ltd (In Liq). He was not aware of any such authority. I have not come across any decisions where the approach taken has been followed or even discussed.
[61] In the absence of such authority, I have made my own assessment that I am not going to follow the approach of Associate Judge Bell. There are three reasons for this. First, as a matter of construction, I believe the words “the debt” in s 291(1)(a) can only refer to a debt that was the subject of the statutory demand in respect of which the application under s 290 is made. Second, I consider the construction I prefer is consistent with the approach taken generally in the High Court on these applications. Third, I consider there is a significant risk of unfairness to an applicant applying to set aside a statutory demand to not only have to show that they can impeach the demand but also other debts which may have arisen since the demand was issued.
9 LJS Management Ltd v Amirco Ltd (In Liq) HC AK CIV-2010-404-2931, 30 August 2010, at [37].
Barr’s application
[62] The second matter is Barr’s application to set aside Centro’s statutory demand. Centro’s statutory demand required payment of an amount said to be due and owing “in respect of the overpaid ren[t] owing to [Centro] pursuant to the agreement dated 18 September 2019”. In fact what was being referred to was the alleged overpayment of the rebates, not rent.
[63] Centro’s demand proceeds on the basis the side agreement was not varied. For the reasons already given, I am satisfied that it was varied and Centro did not overpay the rebates. It follows that Barr has satisfied me that the amount claimed in the statutory demand is not due and owing and the statutory demand must be set aside.
[64] I note, also, that Barr raised as an additional ground that the issue of the statutory demand was an abuse of process because Centro was aware the amount claimed was disputed. It is a concern the statutory demand was issued as a tit-for-tat measure to demonstrate that Centro would not be bullied. In circumstances where Centro’s solicitors considered the likely outcome would be that both statutory demands would be set aside, Centro’s decision to issue its demand appears to have served no purpose. To my mind, that was an inappropriate use of the statutory demand procedure.
Result
[65]Centro’s application to set aside Barr’s statutory demand is dismissed.
[66]Barr’s application to set aside Centro’s statutory demand is granted.
[67] There shall be an order that Centro is to make payment to Barr of the amount claimed in the statutory demand of $56,059.77 within five working days of the date of this judgment, failing which Barr may apply to liquidate Centro.
[68] Barr is entitled to its costs on both applications. Counsel are to confer and if they cannot agree on costs then they may file memoranda and costs will be determined on the papers. Memoranda should be no longer than five pages.
O G Paulsen Associate Judge
Solicitors:
Godfreys Law, Christchurch Rhodes & Co, Christchurch
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