Dennis & Leo Brady Construction Limited v ECTCH Limited

[2022] NZHC 598

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-002397

[2022] NZHC 598

UNDER

the Companies Act 1993

BETWEEN

DENNIS & LEO BRADY

CONSTRUCTION LIMITED
Applicant

AND

ECTCH LIMITED

Respondent

Hearing:	11 February 2022
Appearances:	K T Glover for the Applicant T Bowler for the Respondent
Judgment:	29 March 2022

COSTS JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 29 March 2022 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date.......................................

Solicitors:

Blackwood Legal, Pukekohe Neilsons, Auckland

K Glover, Auckland

DENNIS & LEO BRADY CONSTRUCTION LTD v ECTCH LTD [2022] NZHC 598 [29 March 2022]

[1]  On 7 December 2021, the applicant, Dennis & Leo Brady Construction Limited (Brady) applied to set aside a statutory demand served on it by the respondent, ECTCH Limited (ECTCH) on 30 November 2021. The ground for setting aside the statutory demand was that Brady had a counterclaim against ECTCH for a greater amount than the demand. Leo James Brady, director of Brady, swore an affidavit in support of the application to set aside the statutory demand.

[2]The application was due for first call on 11 February 2022 at 11.45 am.

[3]                  On 10 February 2022, ECTCH filed a notice of opposition to the application to set aside the statutory demand and an affidavit in support by Ritash Mani, director of ECTCH. ECTCH stated in the notice of opposition that the statutory demand was withdrawn by ECTCH before Brady filed its application to set aside (and before Mr Brady swore his affidavit in support). Further, that the dispute relating to the statutory demand was resolved by way of agreement between the parties, and Mr Brady had partly performed the terms of that settlement agreement.

[4]                  Mr Bowler, appearing for ECTCH, conveyed that he only became aware that the matter was being called in the statutory demand list on 9 February 2022.

[5]                  I ordered that the application to set aside the statutory demand was discontinued with the leave of the Court.

[6]                  Both parties sought costs on the discontinuance. Brady sought scale 2B costs from ECTCH. ECTCH sought increased and/or indemnity costs from Brady. I heard oral submissions.

Submissions on costs

[7]                  Mr Bowler argued that Brady should pay ECTCH’s costs because ECTCH unambiguously withdrew the statutory demand before Brady filed the application to set aside. Thus, the application was unnecessary and resulted in ECTCH incurring wasted costs associated with filing a notice of opposition and affidavit.

[8]                  Mr Bowler relied on an email he sent to Brady’s solicitor, Peter Montagna, on 6 December 2021 marked “without prejudice save as to costs”. Mr Glover objected to this email being admitted as evidence because it is legally privileged. I will read the email, and the other “without prejudice save as to costs” emails, as it is necessary for me to do so to determine the question of costs.

[9]                  The context for the email was that the parties were in dispute about whether they had reached a settlement of the issue to which the statutory demand related. ECTCH contended that they had reached an agreement on 29 November 2021, and Mr Brady had made a part-payment pursuant to the terms of the settlement. Brady did not agree that a settlement agreement had been reached and demanded the return of Mr Brady’s payment.

[10]              In the 6 December 2021 email, Mr Bowler maintains that the matter was “settled by way of agreement”. He then went on to say, “Accordingly, and irrespective of the position set out above, we confirm that the statutory demand is withdrawn”. ECTCH refused to return Mr Brady’s funds, as its position was that the payment was made pursuant to that settlement.

[11]                   ECTCH relies on this statement as an “unequivocal” withdrawal of the statutory demand. Furthermore, it points to an email from Mr Bowler to Mr Glover dated 9 December 2021, again marked “without prejudice save as to costs”, in which Mr Bowler acknowledged receipt of the application to set aside and supporting affidavit. Mr Bowler stated that ECTCH remained of the view that the matter was settled on the grounds previously set out to Mr Montagna, and:

In any event, we emailed your instructing solicitor on Monday advising that the statutory demand was withdrawn (irrespective of whether or not there was a binding settlement).

[12]              In this email, ECTCH indicated that it would consent to Brady having leave to discontinue its application with no issue as to costs if the application was withdrawn immediately.

[13]              Mr Bowler also refers to an email he sent to Mr Montagna dated 14 December 2021, in which he reiterated that “The withdrawal of the statutory demand was

unequivocal”. He put Mr Montagna on notice that ECTCH would seek indemnity costs if Brady continued with the application to set aside.

[14]              Mr Glover submitted that the withdrawal of the statutory demand was equivocal and was presented as being dependent on Brady’s acceptance that there had been a settlement by agreement. The email from Mr Bowler was sent on 6 December 2021 at 1.15 pm, and the deadline for Brady to file and serve an application to set aside was 7 December 2021. Accordingly, the clock was ticking.

[15]              Furthermore, ECTCH was refusing to repay Mr Brady’s funds, and Brady was concerned that if it did not file an application to set aside the statutory demand, it would be treated as having conceded that ECTCH could retain Mr Brady’s payment.

[16]              Mr Glover also emphasises that the statutory demand should not have been issued in the first place and was an abuse of process. Mr Brady has put in evidence of correspondence from Brady to ECTCH on 10 November 2020, resent on 1 December 2020, in which Brady demanded from ECTCH payment of unpaid invoices totalling

$728,612. Former counsel for ECTCH responded on 18 December 2020, to which the solicitor for Brady replied on 18 January 2021. There was no further substantive response or communication from ECTCH until the statutory demand was served on 23 November 2021. Mr Glover submitted that it was a clear abuse of process for ECTCH to serve the statutory demand without first corresponding with Brady; and in the context of Brady’s obvious substantial counterclaim.

[17]              Mr Glover also submitted that it was not necessary for ECTCH to file and serve a notice of opposition and affidavit if it had indeed unambiguously withdrawn the statutory demand. ECTCH could simply have filed a memorandum of counsel confirming the position.

Discussion

[18]              I find that ECTCH wrongly issued the statutory demand and is therefore not entitled to costs from Brady on the discontinuance. Plainly Brady considered it had a much more significant claim against ECTCH, which it had put to ECTCH in some detail in correspondence. It was not appropriate for ECTCH to serve Brady with a

statutory demand in these circumstances, especially without first writing to Brady and giving notice of its intention to formally demand the sum if Brady did not pay. But for ECTCH’s purported withdrawal of the statutory demand before Brady’s application was filed, Brady would be entitled to its costs.

[19]              However, I find that there was a clear enough indication from ECTCH on 6 December 2021 that it had withdrawn the statutory demand.

[20]              While the word “Accordingly” suggests a connection with the preceding argument about settlement, the sentence continues, “and irrespective of the position set out above, we confirm that the statutory demand is withdrawn”. I consider it sufficiently clear from the statement that ECTCH had withdrawn the statutory demand. Certainly, it would have provided Brady with a firm basis for deflecting any subsequent liquidation application by ECTCH, if ECTCH took such a step after expiry of the time for Brady to apply to set aside the demand.

[21]              It appears that Brady may have been motivated to file the application to set aside to make it clear that that settlement was not agreed, and the demand ought not to have been issued. They are not valid reasons to file an application to set aside a statutory demand if the statutory demand has already been withdrawn.

[22]              For these reasons, I make no order for costs in favour of Brady. The result is that costs will lie where they fall.

Associate Judge Gardiner