Confident Trustee Ltd v Garden and Trees Ltd
[2017] NZCA 578
•8 December 2017 at 10 am
| IN THE COURT OF APPEAL OF NEW ZEALAND |
| CA144/2017 [2017] NZCA 578 |
| BETWEEN | CONFIDENT TRUSTEE LIMITED |
| AND | GARDEN AND TREES LIMITED |
| Hearing: | 7 September 2017 |
Court: | Asher, Courtney and Gendall JJ |
Counsel: | W A McCartney for Appellant |
Judgment: | 8 December 2017 at 10 am |
JUDGMENT OF THE COURT
A The appeal is allowed.
B The statutory demand served by the respondent on the appellant is set aside.
C The order for costs in the High Court in favour of the respondent is quashed.
DThe appellant is entitled to costs in the High Court on a category 2B basis together with any disbursements to be approved by the Registrar.
E The respondent must pay the appellant costs for a standard appeal on a band A basis and usual disbursements.
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REASONS OF THE COURT
(Given by Gendall J)
The appellant, Confident Trustee Ltd (CTL), appeals against a decision of Associate Judge Christiansen in the High Court at Auckland dated 16 March 2017 refusing to set aside a statutory demand served on it by the respondent, Garden and Trees Ltd (Garden and Trees).[1] The statutory demand claimed payment of $21,753.36 described as “the balance cost of services provided under invoice 1057 dated 8 March 2016”.
Background
[1]Confident Trustee Ltd v Garden and Trees Ltd [2017] NZHC 470.
Garden and Trees were contracted by CTL to clear a large 7.3 hectare site prior to earthworks for a residential subdivision development CTL was to undertake there. A contract price quote/estimate for the work of $58,420 was provided on 1 February 2016.
Timing was important. It is accepted by the parties that Garden and Trees had agreed to complete the required work under the contract within three weeks of commencement. CTL says time was of the essence because it had contracted with Cameron Civil Ltd for civil engineering earthworks to commence on the site in mid‑February 2016. Garden and Trees says, however, that when it planned to start the work early in February 2016 CTL advised it that it could not commence due to “consent” not being issued.
Although there is some dispute over what this might have meant, it is accepted now that earlier on 26 January 2016 resource consent for the work on the property had been issued to CTL.
Garden and Trees’ position, however, is that CTL did not advise it until 4 pm on 15 February 2016 that work could commence to clear and remove the vegetation on the site and it commenced work shortly thereafter. CTL says this was clearly not the case. It maintains that Garden and Trees had started work early in February 2016 but it was incapable of fulfilling the contract because its machinery was not suitable and it had insufficient labour to complete the work within the required three-week period. Bearing in mind that crucial and mandatory three-week requirement for completion, this progress was entirely unacceptable.
On 24 February 2016, CTL brought in another contractor to the site, Tree Safe Ltd (Tree Safe) to assist in completing the work.
CTL says that two days later, Garden and Trees refused to carry out any further work and unilaterally left the site. Garden and Trees disputes this and says effectively it was dismissed by CTL at the time so it left. Later, Garden and Trees issued an invoice to CTL for $56,753.36 for what Garden and Trees said was the amount due for work under the charge-up contract actually carried out. Earlier, Garden and Trees had been paid by CTL under the contract an advance payment of $20,000. A further payment of $5,000 was made on 11 February 2016, and another payment of $10,000 followed some time after.
Garden and Trees maintains CTL has never challenged the quality of its work or the price charged for it. It says that CTL has only ever claimed a set-off for a greater amount arising from its claim that Garden and Trees was not able to complete the work within the required three-week period.
In response, CTL says that Garden and Trees unilaterally left the site on 26 February 2016 having completed no more than 40 per cent of the job. The total payments of $35,000 it has made CTL says amount to more than 50 per cent of the $58,420 contract price. In addition to the amounts it paid to Garden and Trees, CTL says it had to pay another $66,684.02 to the second contractor, Tree Safe, to complete the job.
It was not until November 2016 that Garden and Trees issued the statutory demand requiring payment of the $21,753.76, being the amount it had invoiced less the $35,00 already paid by CTL. CTL then applied to set aside this demand.
Later, in January 2017, Garden and Trees issued another invoice to CTL with respect to this contract. This invoice was for $22,996.15. Garden and Trees maintains this related to additional work undertaken including the removal of a shed and concrete pad carried out as part of the contract. Subsequently Garden and Trees issued a second statutory demand based on this invoice (the second statutory demand). CTL has applied to set aside this second statutory demand but that application has been adjourned pending the determination of the present appeal. This appeal relates only to the first statutory demand.
The High Court decision
In his decision, Associate Judge Christiansen dismissed the application to set aside the statutory demand finding there was no substantial dispute over the debt, and directed a one-week period for CTL to comply with the demand.
In doing so, Associate Judge Christiansen made a number of findings:
[31] There are some elements of fact which are in dispute. Primarily they concern the engagement of Garden and Trees to do work when relevant consent or approval considerations clearly affected the ability of that work to be undertaken.
…
[34] The evidence strongly suggests that 15 February 2016 was the starting date of Garden and Trees’ services … the consent or approval even for the preliminary vegetation clearance work had not been authorised.
…
[41] In the Court’s view it is clear Garden and Trees’ invoice is a calculation of actual costs and that its earlier estimate did not prevent invoicing for actual costs that were incurred.
…
[49] CTL’s case is not supported by evidence disputing claims that the work invoiced for was done. There was no suggestion of that work not having been done adequately. Courts will usually grant a setting aside application where facts and assessment suggests there are serious questions to be tried. In this case CTL’s focus is about claims that there was a fixed price contract; that Garden and Trees has been adequately paid; and that Garden and Trees brought that arrangement to an end when they withdrew their services.
[50] While it is not this Court’s function at this time to resolve questions of conflict in evidence, nor is it required to accept without question whatever statements may be made.
[51] The Court has already detailed reasons why the evidence of Mr Welch [from Garden and Trees] is to be preferred. The estimate did not include reference to shed clearance or concrete slab removal. Nor is it likely that work would have been requested initially if the vegetation clearance work was required to be done within a tight timeframe — as CLT claims was required.
[52] The evidence of Mr Welch is supported in part at least by the evidence of Mr Gibbons and Mr Pope. On the other hand, and as Mr Jaques [counsel for Garden and Trees] submits CTL has no paperwork, no emails, no records of phone calls to support Mr Yuan’s [from CTL] contentions. Claims of there being no obligation to pay, were not raised until the statutory demands were served, despite frequent requests for payment having earlier been made.
…
[56] Finally, it is clear for reasons already detailed that CTL effectively cancelled its contract with Garden and Trees thereby justifying them leaving the site.
Grounds of appeal
The specific grounds of appeal advanced by CTL here involve claims that:
(a)The number and extent of conflicts of evidence are such that it cannot be said that CTL does not have a credible defence to Garden and Trees’ statutory demand.
(b)The judgment under appeal turns on credibility findings as to witnesses who were not present or cross-examined.
(c)There is no reasonable basis for the High Court’s preferring of the evidence of witnesses for Garden and Trees over the evidence of witnesses for CTL.
(d)A finding central to the judgment that there was no resource consent (or any consent) for the contract works to begin before 15 February 2016 is contradicted by material before the Court.
(e)Associate Judge Christiansen did not apply the correct legal test which is whether CTL had established a fairly arguable basis on which it is not liable on the statutory demand.
Relevant principles
It is clear from s 290(4) of the Companies Act 1993 that a Court may grant an application to set aside a statutory demand if it is satisfied there is a substantial dispute whether or not the debt is owing or is due, or the debtor company appears to have a counterclaim set-off or cross-demand which generally is near to or exceeds the amount of the claimed debt.
The general principles under s 290(4) are well settled:[2]
(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.
Analysis
[2]See for example Carpet Plus 2003 Ltd v A Team Flooring Specialist Ltd HC Auckland CIV‑2008-404-4725, 19 January 2009 at [4]; and Risecorp Investment Trustee Ltd v Staywell Hospitality Management Ltd [2015] NZHC 1277 at [12]–[13].
In the present case we are unable to agree with Associate Judge Christiansen’s conclusion that CTL had not raised a genuine and substantial dispute that the debt in question is outstanding. We find that there are some significant factors that indicate there is a real dispute between the parties here. In reaching this view we have taken into account a number of factors which include:
(a)The largely oral contract between the parties was concluded on or about 1 February 2016 and required the site clearance work to be undertaken as a matter of urgency. This contract had a mandatory three-week completion requirement.
(b)The contract seemed to reflect what was likely to be a price estimate, but arguably could have been a quote of $58,420. This was outlined in an email from Garden and Trees dated 1 February 2016.
(c)All parties accept there was clear urgency under the contract to have the work completed (given that programmed earthmoving works by CTL’s engaged contractors, Cameron Civil, were to follow) with the three-week mandatory timeframe agreed to.
(d)The resource consent for development work on this site was issued on 26 January 2016. It may have been that informal “approval” was needed from the Auckland Council before several pine trees standing not on CTL’s site but on a neighbouring Council reserve were removed. However, there seems little doubt from the evidence that Garden and Trees began work on the site itself (including vegetation clearance work), as they were allowed to, from early February 2016.
(e)There was a site meeting on 15 February 2016 which included representation from Cameron Civil by its managing director, Mr Wilson, who attended at that time. The purpose of this meeting was to plan for the further site development work which Mr Wilson says was expected to commence soon after 15 February 2016. Mr Wilson went on to say in his evidence, however, that this could not happen because of the parlous condition of the site with substantial vegetation and trees still to be cleared. And, both independent parties at the 15 February 2016 meeting, Mr Wilson from Cameron Civil and Mr Pope from the Council, confirmed in their evidence that vegetation clearance across the majority of the site had already commenced at that point.
(f)On 24 February 2016 CTL employed the other contractor, Tree Safe, on the site because of what it said were the delays on the part of Garden and Trees in completing the work. That new contractor, it appears, attacked the clearance work with great urgency, as the evidence of Mr Wilson of Cameron Civil and Mr Pope from the Council confirmed.
(g)CTL says that Garden and Trees was paid a sufficient amount totalling $35,000 for the work it had completed, comprising only about 40 per cent of the total required, prior to termination of its contract on or about 24 February 2016. Given the amount of work done, it is at least arguable that this was sufficient payment. The subsequent engagement of Tree Safe to complete the work, at a further cost to CTL exceeding $66,000, would tend to support this conclusion.
(h)As to the disputed question over whether CTL effectively dismissed Garden and Trees when the other contractor, Tree Safe, arrived on site on 24 February 2016, or whether instead Garden and Trees unilaterally left the site, the evidence on that is equivocal, and needs to be tested on the basis of all the evidence.
(i)CTL contends that Garden and Trees brought to the site insufficient labour and inadequate machinery and, therefore, was quite incapable of completing the work in the short timeframe agreed to. Although Garden and Trees disputes this claim, evidence from Mr Yuan and independently from Mr Wilson provides support for the contention.
(j)It is a matter that raises a question as to the bona fides of Garden and Trees that almost one year later in January 2017 it belatedly issued a further invoice to CTL for $22,996.15 followed by the second statutory demand for work said to be carried out under the original contract. On its face, the invoice appeared to show charges for the same items.
With all these matters in mind we are of the clear view that, notwithstanding Associate Judge Christiansen’s conclusions to the contrary, this is a case where significant material conflicts of evidence were before the Court. Disputed questions of fact needed resolution here before it could be said that there was a genuine and undisputed debt in existence.
As we have indicated, there are significant issues as to the quantum of damages claimed. We say this bearing in mind two matters. First, amounts which would now total about $57,000 are claimed by Garden and Trees for what CTL says was only about 40 per cent of completed original contract work (and this excludes Garden and Trees’ second statutory demand for a further $22,996.15). Secondly, a substantial additional amount of something in excess of $66,000 was incurred by CTL to have the work completed after 24 February 2016 by the second contractor, Tree Safe.
An issue has arisen, too, over removal by Garden and Trees of a shed and a concrete pad from this site sometime between early February and 15 February 2016. It is claimed by Garden and Trees this was outside the original clearance contract and amounts charged to CTL for this work were additional. This issue, however, is outside matters relevant to the present application to set aside the first statutory demand. Mr Welch in his affidavit, in addressing this aspect on behalf of Garden and Trees, deposes:
I have issued Jeff [Mr Yuan] and the Applicant an invoice for this work separately and it does not form part of the Statutory Demand at the centre of this application.
(Emphasis added.)
Result
We cannot agree with Associate Judge Christiansen’s finding that CTL had not raised a genuine and substantial dispute as to the existence of the debt or a counterclaim which exceeded amounts that may have been due. As we have set out there are substantial conflicts in the evidence, and there are arguable inherent problems in the claim, and the amount claimed. The true position cannot be resolved in the context of this setting aside application.
Accordingly, the appeal is allowed. The whole of the High Court judgment, including the costs order, is set aside. The result is that the statutory demand is set aside.
The appellant is entitled to costs in the High Court on a category 2B basis together with any disbursements to be approved by the Registrar.
The respondent must pay the appellant costs for a standard appeal on a band A basis and usual disbursements.
Solicitors:
Carson Fox Legal, Auckland for Appellant
Aurora Law Limited, Waiuku for Respondent
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