Coastal Properties Limited v All Safe Scaffold Limited
[2016] NZHC 3107
•12 December 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2016-404-1745 [2016] NZHC 3107
UNDER the Companies Act 1993 Setion 290 BETWEEN
COASTAL PROPERTIES LIMITED Plaintiff
AND
ALL SAFE SCAFFOLD LIMITED Defendant
Hearing: 12 December 2016 Appearances:
Andrew Gilchrist for Coastal Properties Ltd
J M Skinner for All Safe Scaffold LtdJudgment:
12 December 2016
ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL
Solicitors:
Skinners Law , Mairangi Bay, Auckland, for All Safe Scaffold Ltd
Anthony Thomas, Mangawhai Heads, for Coastal Properties Ltd
Copy for:
Andrew Gilchrist, Auckland, for Coastal Properties Ltd
COASTAL PROPERTIES LIMITED v ALL SAFE SCAFFOLD LIMITED [2016] NZHC 3107 [12 December
2016]
[1] Coastal Properties Ltd applies to set aside a statutory demand by All Safe Scaffold Ltd dated 13 July 2016 seeking payment of $54,372 for equipment leased to Coastal Properties Ltd and invoices submitted.
[2] I am also to hear an application under CIV-2016-404-1685. There All Safe
Scaffold Ltd will apply to set aside a statutory demand of Brendan Coghlan dated
1 July 2016, seeking repayment of advances he made to All Safe Scaffold Ltd. Mr Coghlan is the director and man behind Coastal Properties Ltd. He was at one time a director and shareholder of All Safe Scaffold Ltd but is no longer. As its name suggests All Safe Scaffold Ltd carries on business as a scaffolding company. The man behind it is a Mr Scheib. I have dealt with another dispute involving the same men.1 That was a statutory demand that Mr Coghlan served on Coastal Scaffolding Ltd. Coastal Scaffolding Ltd is a different entity from Coastal Properties Ltd.
[3] In this case, Coastal Properties Ltd applies to set aside the statutory demand on the basis that there is a genuine and substantial dispute as to its liability. It also disputes the amount of the debt in the demand.
[4] The principles the court applies on applications under s 290(4)(a) of the Companies Act 1993 are well established. Mr Skinner helpfully cited parts of the judgment of Associate Judge Doogue in Risecorp Investment Trustee Ltd v Staywell Hospitality Management Ltd:2
[11] I accept the submission of Ms Cooper, for the applicant, that s
290(4) of the Companies Act 1993 provides that 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
1 Coastal Scaffolding Ltd v Coghlan [2016] NZHC 751.
2 Risecorp Investment Trustee Ltd v Staywell Hospitality Management Ltd [2015] NZHC 1277 at [11]-[13].
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.
[12] I also agree with her submission that, in determining whether there is a substantial dispute, the following principles are applicable:3
a)The Court is required to determine if the applicant can show a fairly arguable basis upon which it is not liable for the amount claimed.4
b)The mere assertion of a dispute is not sufficient, some material short of proof is required.
c)It is not usually appropriate to resolve disputed issues of fact on affidavit evidence alone, particularly when issues of credibility arise.
d)The jurisdiction is a summary one and calls for a prompt judgment as to whether there is a genuine and substantial dispute. It is not the task of the Court to resolve the dispute.5
[13] I also consider that counsel for the respondent has correctly stated the following additional considerations that the Court is required to take into account:
a)The onus is on the applicant to show that there is arguably a genuine and substantial dispute as to the existence of the debt;6
b)An applicant must establish that any counterclaim or cross demand is reasonably arguable in all the circumstances;7
c)An applicant seeking to set aside a statutory demand on the basis of a set off for an unliquidated sum:8
…must be able to do more than merely
assert that there is an available set-off.
3 See Paul Heath and Michael Whale (eds) Heath and Whale on Insolvency (online looseleaf ed, Lexis Nexis) at [20.7].
4 Queen City Residential Ltd v Patterson Co-Partners Architects (No 2) (1995) 7 NZCLC 260,936 (HC).
5 See Industrial Group v Bakker [2011] NZCA 142, (2011) 20 PRNZ 413 at [24]-[25].
6 Aladdin's Motor Inn Ltd v Bowcorp Holdings Ltd [2012] NZCA 532 at [23].
7 At [23].
8 Covington Railways Ltd v Uni-Accommodation Ltd [2001] 1 NZLR 272 (CA) at 274-275.
It must be able to point to evidence before the Court showing that it has a real basis for the claimed set-off and that accordingly the applicant’s claim to be a creditor is, to the extent of the set-off, seriously in doubt….it must show that there are ‘clear and persuasive grounds’ for the set-off claim.
d) The Court is not required to:9
… accept without question whatever unvarnished statements may happen to be made on affidavit. The Court is entitled to act in a more robust and commonsense manner. The principles developed in cognate fields such as applications to remove caveats, and opposition to summary judgment apply by analogy.
e)Statutory demands can be allowed to stand in reduced figures representing items not open to dispute.10
[5] I wish to emphasise some of the principles set out by Associate Judge Doogue that the mere assertion of a dispute is not sufficient - some material short of proof is required – and the statement at paragraph [13] (d) that the court is entitled to act in a robust and commonsense manner and will not necessarily accept without question unvarnished statements. That refers back to the well-known statement of
the Privy Council in Eng Mee Yong v Letchumanan:11
Although in the normal way it is not appropriate for a judge to attempt to resolve conflicts of evidence on affidavit, this does not mean that he is 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.
[6] I refer to a decision of the English High Court, Re Lord Cable which deals with the need for proof in applications for interim injunctions. What was said there
also applies in applications under s 290 of the Companies Act. Slade J said:12
9 United Homes (1988) Ltd v Workman [2001] 3 NZLR 447 (CA) at [34].
10 At [46]; 21st Century Investments Ltd v ANZ National Bank Ltd [2011] NZCA 548 at [39].
11 Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341.
12 Re Lord Cable [1977] 1 WLR 7 (Ch), at 19-20.
I add one further observation in relation to the evidentiary position. The American Cyanamid decision may have led prospective plaintiffs to the belief, perhaps partially justified, that it is not necessary for them to adduce in support of a motion for an interlocutory injunction affidavit evidence of such a precise and compelling nature as might have been required before that decision. Nevertheless, in my judgment it is still necessary for any plaintiff who is seeking interlocutory relief to adduce sufficiently precise factual evidence to satisfy the court that he has a real prospect of succeeding in his claim for a permanent injunction at the trial. If the facts adduced by him in support of his motion do not by themselves suffice to satisfy the court as to this, he cannot in my judgment expect it to assist him by inventing hypotheses of fact upon which he might have a real prospect of success.
[7] Applications under s 290 have to be prepared, filed and served within tight and very strict time limits. For the lawyer, that means that instructions are often taken in haste and time to prepare affidavits to set out an applicant’s case fully is limited. Sometimes the pressure of time means that short-cuts have to be taken to ensure that the proceeding is filed and served in time. Notwithstanding that, once an application is filed, an applicant has the opportunity to add further evidence in support of its case.
[8] I mention these matters because on this application I have found that in some respects the case for Coastal Properties Ltd does not go further than assertion and falls short of plausible evidence.
[9] The debt that All Safe Scaffold Ltd claims is for $54,372 for scaffolding supplied to Coastal Properties Ltd between 15 September 2014 and 11 November
2015. Mr Scheib, the director of All Safe Scaffold Ltd, has attached to his affidavit a statement dated 14 July 2016 which lists the invoices running between September
2014 and November 2015. Each invoice is identified, the charge on each invoice is listed and there is a total, being the amount set out in the statutory demand. The invoices are in hard copy. Each time an invoice was sent, All Safe Scaffold Ltd sent an email to the following address: [email protected]. The invoice number was identified and the invoice was attached to the email. The text of the email typically said this (or some variation):
Please contact us immediately if you are unable to detach or download your invoice. Prompt payment would be most appreciated. Thank you.
Anyone receiving that email would understand that a demand was being made for payment.
[10] In his affidavit on behalf of Coastal Properties Ltd Mr Coghlan says that there is a dispute as to the amount of the debt. He attaches to his affidavit statements Coastal Properties Ltd received from All Safe Scaffold Ltd between 1 September
2014 and 3 February 2016. The last statement shows a balance owing of
$28,065.59. Mr Coghlan says that no additional scaffolding was hired after
11 November 2015, and he has not seen any additional invoices. He therefore believes that the maximum amount that could be claimed is $28,065.59. He does not contest the fact that Coastal Properties Ltd did receive scaffolding from All Safe Scaffold Ltd.
[11] As an additional ground, he says that his company’s indebtedness to All Safe Scaffold Ltd was to be taken into account against the indebtedness of All Safe Scaffold Ltd to him personally under his current account with that company. That current account arises from the time when he was a shareholder with the company. He has exhibited a document by a Mr Rogers which purports to be a summary of analysis of shareholders’ advance accounts and inter-company accounts as at
31 March 2015. It is for two companies – All Safe Scaffold Ltd and Albany Scaffolding Ltd. The copy in evidence is distressingly opaque - many of the numbers are difficult to read. However I note that this was obviously prepared after March 2015. I understand Mr Rogers to be an accountant who was formerly engaged to prepare accounts for the companies, although I understand that he was not involved in preparing finalised financial statements after March 2014. Nevertheless the document does set out a proposed summary of position, even if it was not formally adopted. Mr Coghlan relies on that statement to say that according to Mr Rogers’ calculations he was owed $296,974.64.
[12] At paragraph 12 of his affidavit Mr Coghlan says:
There were a series of discussions between myself and Mark Scheib – the first of which was about 18 months ago - where it was agreed that the scaffolding charges due by the applicant will be met by transferring any sum due to my shareholder advance account, and thus reducing the sum that the
company owes to me. This would mean that no sums were to be due by the applicant to the respondent.
[13] What Mr Coghlan is trying to describe, lawyers would recognise as a form of novation. That is, there are two debts – the debt owed by Coastal Properties Ltd to All Safe Scaffold Ltd, and a further debt by All Safe Scaffold Ltd to Mr Coghlan. What he is describing is an arrangement made amongst these three parties, negotiated between Mr Coghlan and Mr Scheib, under which All Safe Scaffold Ltd would release Coastal Properties Ltd from the debt in return for Mr Coghlan releasing All Safe Scaffold Ltd from its debt to him for the amount of the debt owed by Coastal Properties Ltd to All Safe Scaffold Ltd.
[14] The difficulty I have is that there is no persuasive evidence that I should take this contention of an agreement seriously. Mr Coghlan’s evidence amounts only to assertion and does not go beyond that. He says that the discussions took place “about 18 months ago”. He swore the affidavit in July 2016. That would put the conversations at the end of 2014 or the beginning of 2015. Significantly, the document prepared by Mr Rogers which he relies on does not take that debt into account. The invoices sent by All Safe Scaffold Ltd requested payment. They include invoices sent after the date of the alleged arrangement. Yet there is no evidence that Mr Coghlan suggested that the debt for the scaffolding supplied was not otherwise payable. In other words, if there were really an arrangement of sorts as described by Mr Coghlan, I would expect him to complain about being invoiced for charges and requested for payment, if in fact there were a genuine arrangement between him and Mr Scheib that the debt be taken off his current account with All Safe Scaffold Ltd. His evidence really amounts to a generalised assertion without anything in it which could persuade me to take the matter seriously.
[15] In submissions, Mr Gilchrist made the point that these were just oral discussions; the best anyone can do is say that there were oral discussions; with the passage of time Mr Coghlan could not be expected to remember any better; and on that basis the dispute ought to be litigated by a standard civil proceeding. Frankly, if Mr Coghlan cannot apply his memory accurately on a setting-aside application to give greater detail about the discussions, nothing is going to be gained by giving him
the opportunity of giving evidence in court because that will not improve the position for him.
[16] Mr Scheib denies the arrangement but in determining whether there is a substantial dispute I have regard to Mr Coghlan’s evidence alone, disregarding what Mr Scheib says. It is simply unpersuasive and does not go beyond assertion.
[17] There is the amount of the account. There is some confusion between the statements which Mr Coghlan has attached to his affidavit and the invoices which Mr Scheib has attached to his affidavit. The invoices reflect actual transactions – that is, the delivery of scaffold to development sites of Coastal Properties Ltd. Nowhere in his evidence does Mr Coghlan deny that those supplies occurred. There is, nevertheless, an inconsistency between the statements and the invoicing. While the invoices describe actual transactions, the statements do not. I have no difficulty accepting that the invoices are adequate evidence of supplies having been made with particular charges and an indebtedness having arisen as a result. At no stage does Mr Coghlan suggest that any payments were made in reduction of the debt. Instead he runs his novation argument against it - which I have found is not plausible. The result is that the actual indebtedness by Coastal Properties Ltd for scaffolding supplied between 15 September 2014 and 11 November 2015 is the sum of
$54,372.60.
[18] Very much as an afterthought, in his reply affidavit Mr Coghlan alleged that there was another company, Coastal Properties (Orewa) Ltd, and the true debtor was that company, not Coastal Properties Ltd. His affidavit does refer to a company registration number but in my judgment his evidence falls short of even establishing the independent existence of that other company. At a minimum, I would expect him to produce persuasive evidence that that other company had been incorporated, such as a copy of a certificate of incorporation or an extract from Companies Office records, which can be easily downloaded from the Companies Office website.
[19] All the statements which Mr Coghlan has attached to his primary affidavit were addressed to Coastal Properties Ltd, not to Coastal Properties (Orewa) Ltd. The matter was raised only in a reply affidavit. It is unsatisfactory to raise the
allegation, “It is not this company it is another” when the other company is not adequately identified, its existence is not adequately proved and the matter is raised only in a reply affidavit raising a new defence which All Safe has not had the opportunity to address. I am unable to take seriously the assertion of another company being the true debtor.
[20] The upshot is that I am satisfied that Coastal Properties Ltd is properly indebted to All Safe Scaffold Ltd for $54,372.60 for scaffolding supplied between September 2014 and November 2015. It has not established to an arguable standard that it has a defence by way of the novation described in Mr Coghlan’s evidence.
[21] Accordingly I dismiss the application to set aside the statutory demand. Under s 291 of the Companies Act I order Coastal Properties Ltd to pay All Safe Scaffold Ltd $54,372.60 by 31 January 2017. In the absence of payment, All Safe Scaffold Ltd will be entitled to bring a liquidation application against Coastal Properties Ltd.
[22] Costs are category 2 in favour of All Safe Scaffold Ltd. I encourage counsel to confer. If they cannot agree, memoranda may be filed.
………………………............
Associate Judge R M Bell
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