Development Construction Limited v MacKenzie

[2022] NZHC 2400

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-1311

[2022] NZHC 2400

BETWEEN

DEVELOPMENT CONSTRUCTION LIMITED
Applicant

AND

DEAN MACKENZIE

Respondent

Hearing:	By memoranda
Appearances:	B Martelli for Applicant Respondent in person
Judgment:	20 September 2022

JUDGMENT OF LANG J

[on costs]

This judgment was delivered by me on 20 September 2022 at 10.30 am, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date……………

Solicitors:

HC Legal Ltd, Auckland

DEVELOPMENT CONSTRUCTION LTD v MACKENZIE [2022] NZHC 2400 [20 September 2022]

[1]                  In this proceeding Development Construction Limited (DCL) sought an order setting aside a statutory demand served upon it by the respondent, Mr Mackenzie. DCL paid the amount owing under the statutory demand after filing the proceeding. I therefore made an order by consent setting the statutory demand aside when the proceeding was first called on 26 August 2022.

[2]                  I am now required to determine the issue of costs. Each party seeks an award of costs against the other on the basis that it was the successful party.   DCL says   Mr Mackenzie should never have issued the statutory demand and that it is entitled to costs because it succeeded in obtaining the order it sought. Mr Mackenzie contends he was justified in serving the statutory demand, and that he succeeded in obtaining payment of the sum sought in the demand.

Background

[3]                  The statutory demand sought payment in the sum of $9,337. This represented costs this Court awarded against DCL after it failed to obtain an order sustaining a caveat it had registered against Mr Mackenzie’s property. The order for costs was sealed on 17 June 2021. Thereafter Mr Mackenzie sought unsuccessfully to obtain payment of that sum from DCL.

[4]                  By July 2022 DCL had still not satisfied the order for costs. Mr Mackenzie sent a statutory demand to DCL by post on 8 July 2022 using the services of an online company known as “Click Send”. DCL denies receiving the statutory demand by post and there is no evidence to confirm that it ever did.

[5]                  On 26 July 2022 Mr Mackenzie re-served the statutory demand by sending it to DCL’s email address. DCL acknowledges receiving the statutory demand on that date. It therefore had until midnight on 9 August 2022 either to pay the amount claimed in the statutory demand or to apply to set the demand aside.

[6]                  Mr Mackenzie believed that his earlier service by mail was effective and that the time for complying with the statutory demand expired on 4 August 2022.   On    5 August 2022 he sent an email to the Registry attaching an application for an order placing DCL in liquidation. The Registry did not process the application or allocate it

a file number because Mr Mackenzie failed to pay the prescribed filing fee. However, Mr Mackenzie sent a copy of his email to the Court to DCL’s director, Mr Thomas Bilkey. DCL then endeavoured to file a statement of defence to the application. This has never been processed because the liquidation application did not proceed further due to non-payment of the filing fee.

[7]                  On 8 August 2022 DCL filed the present proceeding seeking an order setting the statutory demand aside. It claimed that it had a counterclaim or set-off against Mr Mackenzie. This was the subject of a claim that was being considered by the Building Disputes Tribunal (the Tribunal) under the provisions of the Construction Contracts Act 2002 (the CCA). The Tribunal released its determination on 4 August 2022, holding that Mr Mackenzie was required  to  pay  DCL  the  sum  of  $56,575.29.  Mr Mackenzie paid this sum to DCL within two working days of receiving the adjudicator’s decision as required under the CCA. The funds left his bank account on 8 August 2022, the same date on which DCL filed the present proceeding.

[8]                  Two days later, on 10 August 2022, DCL paid the amount claimed under the statutory demand. This prompted Mr Mackenzie to consent to the statutory demand being set aside when DCL’s application was first called.

Issues

[9]Two issues arise:

(a)Should either party be required to pay the costs of the present proceeding?

(b)Should Mr Mackenzie be required to pay costs on the liquidation proceeding?

Decision

Should either party be required to pay the costs of the present proceeding?

[10]              Mr Mackenzie was clearly entitled to serve the statutory demand on 26 July 2022 because DCL had failed, for more than a year, to pay the order for costs.

However, he did so in the knowledge that DCL had a counterclaim against him based on the claim being considered by the Tribunal.

[11]              Once Mr Mackenzie paid the sum the Tribunal found to be owing to DCL, the counterclaim was extinguished. DCL acknowledges it received the payment from  Mr Mackenzie at 5.55 pm on 8 August 2022, several hours after it had filed the present proceeding.  DCL did not pay the amount owing under the statutory demand until   10 August 2022.

[12]              Mr Mackenzie did not advise DCL either that he proposed to pay the sum awarded by the Tribunal on 8 August 2022 or that he had made the payment. Instead, he sent an email to DCL’s counsel on the evening of 4 August 2022 stating that he intended to apply to have the whole of the Tribunal’s decision set aside. He did not provide any advice to the contrary over the next four days. As a result, DCL had little option but to file the present proceeding. At the time that it did so DCL had a valid counterclaim against Mr Mackenzie that significantly exceeded the amount claimed in the statutory demand. This remained the case until DCL received the payment from him later that evening. It follows that DCL was fully justified in filing the present proceeding and is entitled to an award of costs in its favour on a category 2B basis for doing so. It is also entitled to disbursements as fixed by the Registrar.

[13]              Mr Mackenzie should also have withdrawn the statutory demand, or consented to it being set aside, when he received payment of the amount claimed in the demand on 10 August 2022. Had he done so, DCL could have filed a notice of discontinuance and it would not have been necessary for the proceeding to be called on 26 August 2022. Mr Mackenzie failed to take either of those steps and it was necessary for me to set the demand aside when it was called on that date.

[14]              I therefore consider Mr Mackenzie should pay costs on a category 2B basis on steps taken after 10 August 2022. I award costs for filing and serving the memorandum prior to first call of the proceeding (at .4 of a day) together with costs for appearance at the hearing on 26 August 2022 (at .2 of a day). I do not award preparation costs for the mention on 26 August 2022 because they are included within preparation of the memorandum. The first call of an originating application to set

aside a statutory demand does not require preparation of the kind necessary before the first case management conference in a general civil proceeding.

The liquidation proceeding

[15]              Mr Mackenzie attempted to file the liquidation proceeding prior to the point at which the time for complying with the statutory demand expired. However, the liquidation proceeding never got off the ground because Mr Mackenzie failed to pay the prescribed filing fee. It should therefore not have been necessary for DCL to file a statement of defence to that proceeding.

[16]Costs in relation to the liquidation proceeding are to lie where they fall.

Lang J