Dive Otago Limited v Mulford Holdings Limited
[2014] NZHC 2607
•22 October 2014
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
CIV-2014-412-000090 [2014] NZHC 2607
UNDER the Companies Act 1993 IN THE MATTER
of an Application to set aside a Statutory
DemandBETWEEN
DIVE OTAGO LIMITED Applicant
AND
MULFORD HOLDINGS LIMITED Respondent
Hearing: 22 October 2014 Appearances:
K J Jarvis and N Graham for Applicant
D R Tobin for RespondentJudgment:
22 October 2014
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
on statutory demand
[1] This case raises a single issue – was there a contract between the applicant and the respondent?
The subject matter of the contract
[2] Dive Otago operates a dive training facility, including a dive pool, in
Dunedin. It leases the premises from one John Darling (the landlord).
[3] In 2013 Dive Otago wanted the dive pool repaired. It obtained a quote for the repair work from Mulford which is a specialist painting, water-proofing and
DIVE OTAGO LIMITED v MULFORD HOLDINGS LIMITED [2014] NZHC 2607 [22 October 2014]
flooring contractor. The work proceeded without a signed acceptance of the quotation by Dive Otago. Mulford completed the works over a three week period in January/February 2014. Mulford then sent an invoice for the quoted sum ($36,756.30 including GST).
[4] Dive Otago has refused to pay the account.
[5] Mulford then issued a statutory demand, which Dive Otago applies to set aside.
[6] The central allegation of Dive Otago in its application is:
The Applicant’s landlord engaged the Respondent to perform the Work (the
Contract) and as such was responsible for payment for the Work.
[7] Following on from that allegation, Dive Otago says that it did not accept the quote or otherwise enter into a contract with Mulford for the performance of the work.
Statutory demand – the principles
[8] The Court’s jurisdiction to set aside a statutory demand is contained in s 290
Companies Act 1993, and I refer specifically to the basis upon which the Court may grant an application as contained in s 290(4) which reads:
290 Court may set aside 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.
[9] For the purposes of this hearing I adopt as a general approach to the exercise of this jurisdiction these five principles:1
As to s 290(4)(a) –
· The applicant must show that there is arguably a genuine and substantial dispute as to the existence of the debt.
· The mere assertion that the dispute exists is not sufficient. Material short of proof is required to support the claim that the debt is disputed.
· If such material is available the dispute should normally be resolved other
than by means of proceedings in the Court’s Companies Act jurisdiction.
As to s 290(4)(b) –
· An applicant must establish that any counterclaim, cross demand or set- off is reasonably arguable in all the circumstances.
As to both ss 290(4)(a) and (b) –
· It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise.
[10] The residual discretion under s 290(4)(c) – whereby the court finds that the demand ought to be set aside on other grounds – is a residual discretion which enables the court to do justice between the parties. As Tipping J indicated in Commissioner of Inland Revenue v Chester Trustee Services Ltd,2 the exercise of the discretion comes down to the Court’s judgment as to whether the creditor’s prima facie entitlement to liquidate the company is outweighed by some factor making it
plainly unjust for liquidation to occur.
1 For this formulation of the applicable principles, I acknowledge the editors of Company and
Securities Law (looseleaf ed, Brookers) at [CA 290.02(1)].
2 Commissioner of Inland Revenue v Chester Trustee Services Ltd [2003] 1 NZLR 395 (CA).
[11] Applying those principles to this case, Dive Otago will be entitled to have the statutory demand set aside if there is an arguable case either that –
(a) It was the landlord who entered into the contract for the pool work; or
(b) Dive Otago itself did not enter into the contract.
Dive Otago’s case on the facts
[12] Dive Otago’s case was supported by the affidavit of its director, David
Watson, and its marketing manager, Virginia Watson.
[13] Mr Watson explains that he obtained Mulford’s quote for the work at a time
when the current term of Mulford’s lease was coming to an end (expiring
1 November 2013). He explains the context of obtaining the quote namely because Dive Otago was obliged under the lease to advise the landlord of any defects in the property.
[14] Mr Watson says that he sent Mulford’s quote on to the landlord soon after receiving it. He says that in an oral discussion with the landlord around
28 November 2013 the landlord agreed to pay for the work required to repair the pool.
[15] Mr Watson next refers to a conversation with Mulford’s managing director,
Barrie Clydesdale, about the timeframes for closing the pool for repairs.
[16] Mr Watson says that when Mr Clydesdale asked him to sign the job acceptance form attached to the quotation, he advised him that he had sent it to the landlord for completion because the landlord was paying for the work. He says that he explained to Mr Clydesdale that the landlord had lost the quote, whereupon Mr Clydesdale said that he would send another copy of the quote (to Mr Watson) but that he (Mr Watson) did not receive another copy.
[17] He says that on around 6 January 2014, he was again asked by Mr Clydesdale to sign the job acceptance form and return it to him. Mr Watson says that he
explained to Mr Clydesdale that he had not received the further copy of the quote and asked him to send it again. He says that Mr Clydesdale then sent him the requested copy of the quote and the job acceptance form which he (Mr Watson) posted on to the landlord.
[18] Mr Watson deposes:
I did not accept the quote or sign the job acceptance form because the contract was to be between the Landlord and the Respondent. The Applicant did not enter into a contract with the Respondent.
[19] Mr Watson immediately goes on to state that Mulford then commenced the work on or around 13 January 2014, with the work taking approximately three weeks to complete.
[20] He deposes that when Dive Otago received the invoice from Mulford around
25 February 2014 he forwarded the invoice on to the landlord for payment.
[21] Mr Watson produces a letter from the landlord to Dive Otago dated 20 March
2014 in which the landlord says:
We have received the account for the pool refurbishment and now need to finalise your renewal so we can process it for payment.
[22] Mr Watson says that when Mr Clydesdale called him to ask for payment of the invoice, he was surprised that it had not been paid by the landlord and told Mr Clydesdale that the invoice was the landlord’s to pay, not Dive Otago’s. He says he told Mr Clydesdale to follow the issue up with the landlord.
[23] Mr Watson states that in early May 2014 Mr Clydesdale rang his wife, Mary, who is Dive Otago’s administrator and demanded payment of the invoice within seven days.
[24] Mr Watson instructed Dive Otago’s solicitors to send a letter to Mulford,
which was done on 16 May 2014. The solicitors stated:
This is not Dive Otago’s invoice to pay. I am instructed that Mulford Holdings Limited was engaged by the landlord to undertake repairs to the landlord’s pool.
[25] Email correspondence followed in which Mr Clydesdale responded that Mulford had been engaged by Dive Otago, with Mr Watson being the person who gave the go ahead, and the contract being with Dive Otago.
[26] Dive Otago’s solicitors subsequently pointed out that the pool was owned by the landlord and that Dive Otago had not accepted the quote in writing. Dive Otago’s solicitors recorded:
…the quote was forwarded to Lincoln Darling for the landlord.
Our client presumes that you then dealt with Mr Darling or his Property
Agent, Chris Murphy.
[27] Mr Clydesdale again then responded that all his contact had been with Dive
Otago. He recorded –
It was not till we called asking for payment that he said that the landlord was putting up the rent and he was arguing with him he was sorry and would sort payment next time we called it was then he said this account was not his but the landlord (sic).
[28] Mulford issued its statutory demand shortly afterwards, followed by Dive
Otago’s application which is now before the Court.
[29] Virginia Watson’s affidavit was brief. She refers to an occasion in early January 2014 in which an employee of Mulford called at the Dive Otago premises for the purpose of matching the paint in the dive pool. She deposes that when she indicated that Dive Otago had recently updated its branding colours, the Mulford employee responded that he had instructions from the landlord to simply replace what was in the pool already. She deposes that when she protested the colour choice the Mulford employee advised her that he would find out if the colours could be changed. She says he returned within a week and gave her an option as to which colour to choose. She says that there was no discussion on who gave her the authority to choose colours.
Mulford’s case
The evidence
[30] Mulford opposed the application upon the basis there is no substantial dispute as to the debt being due. Its opposition evidence is provided by Mr Clydesdale; by Jesse Nicolaou, the Waterproofing Contracts Manager for Mulford; by Appie Borren (a sales representative of Sika New Zealand Ltd, a company which specialises in relation to concrete and gives technical advice, and visited the Dive Otago premises in the course of the contract work); and Mr Darling, the landlord.
Mr Clydesdale’s evidence
[31] Mr Clydesdale’s evidence traverses the discussions with Mr Watson and Mulford’s quoting for the work. He explains developments consistently with the correspondence which followed the sending of the invoice. His evidence takes issue with or adds to Mr Watson’s evidence in the following ways:
(a) Mr Watson rang Mr Clydesdale to request a quote for repair work to the dive pool about 19 July 2014;
(b)Mr Clydesdale met Mr Watson on site to inspect the pool and scope the work;
(c) Mr Clydesdale then sent the quote to Mr Watson in late July 2013;
(d)About 6 August 2013, Mr Clydesdale called Mr Watson to confirm he received the quote, Mr Watson then explaining that he was looking at all the information but was also obtaining a competing quote from another business (Adhesion Sealing);
(e) Mr Watson subsequently called to ask further questions about the quote;
(f) Mr Clydesdale, in September, followed up with Mr Watson, who said that he had not made a decision over the pool;
(g)About 28 November 2013, Mr Watson telephoned Mr Clydesdale to say that Mulford had won the job and requested that Mr Clydesdale come down and meet to discuss the timing of the repairs;
(h)Mr Clydesdale took with him his Waterproofing Contracts Manager, Mr Nicolaou, to see the pool and to discuss a start date which was then discussed with Mr Watson;
(i)In early December, Mr Clydesdale took Mr Borren to the site to discuss technical details;
(j)On 6 January 2014, Mr Clydesdale called Mr Watson to discuss site access for the work. Mr Clydesdale asked for the job acceptance form whereupon Mr Watson said that he had lost the quote and asked for another to be sent;
(k) On the same day, 6 January 2014, Mr Clydesdale emailed to Mr
Watson another copy of the quote saying:
Hi Dave attached is the quote hope you get this time as discussed this morning we are looking at to start on site 13th (sic).
(l)The repairs were then commenced and were completed in mid- January 2014, whereupon the invoice was sent;
(m) Mr Clydesdale deposes that at no time from July 2013 to February
2014 (when the invoice was issued) did Mr Watson or any other representative of Dive Otago claim that Dive Otago’s landlord would be paying the invoice rather than Dive Otago itself;
(n)On 25 July 2014, Mr Clydesdale rang Mr Watson to ask when payment would be made, whereupon Mr Watson said that he would chase up payment as soon as possible, expressing surprise that the invoice had not been paid. Mr Watson explained that Dive Otago was having a dispute with its landlord, with the landlord having put up the
rent “by heaps”, there now being an argument with the landlord, and
this being the reason for the delay in payment;
(o)The letter from Dive Otago’s solicitors dated 16 May 2014 followed, with the further exchanges of correspondence until Mulford issued its statutory demand.
Mr Nicolaou’s evidence
[32] Mulford’s Waterproofing Contracts Manager, Mr Nicolaou, gave evidence of his involvement in the 28 November 2013 meeting between Mr Clydesdale and Mr Watson. He deposes that he did not hear any statement by Mr Watson at that meeting that the go-ahead of Dive Otago’s landlord would be required before work started nor did he hear Mr Watson say at any stage that payment would be coming from the landlord rather than Dive Otago. He says that he firmly believed on the basis of the November meeting that Dive Otago was the other party to the contract. He deposes that although he was regularly on site after November and met Mr Watson on a number of occasions, neither Mr Watson nor any other employee ever said anything to make him believe that anyone apart from Dive Otago would be paying for the work.
[33] Mr Nicolaou refers to Ms Watson’s evidence as to an occasion in early January 2014 when a Mulford employee called at the premises. He deposes that he was the person who called. It followed a discussion with Mr Watson who had explained that Virginia Watson would be deciding on the colour scheme. Mr Nicolaou deposes that he had a discussion about the colour scheme at the pool with Virginia Watson. He deposes that the first colour selected by Virginia Watson was not available, whereupon he explained to her that she would most likely be limited to the range of colours contained in the waterproofing materials specialist’s (Sika) colour chart. He left the Sika colour chart with her. He then rang the Sika representative, Mr Borren, to check if there were any other colours than those represented in the colour chart. He rang Ms Watson a few days later to confirm that the choice of colour was limited by Sika’s range of paints. He rejects Ms Watson’s statement that he had spoken about instructions from the landlord to replace what
was in the pool already. He states that he had no instructions from anyone other than
Mr Clydesdale, Mr Watson and Ms Watson.
The landlord’s evidence
[34] The landlord, Mr Darling, gave very brief evidence in which he referred to Mr Watson’s evidence. He stated that Mr Watson’s claim that he had either hired or given the go-ahead directly to Mulford to carry out work on the pool was completely untrue. He denies that he had any dealings with Mulford or anyone associated with Mulford in relation to the contract. He says that he did not accept nor authorise anyone on his behalf to accept a quote from Mulford or instruct them to undertake any work.
Mr Borren’s evidence
[35] The fourth deponent for Mulford was Mr Borren. He refers to two visits to the premises, one before the pricing of the scope of work and the other afterwards, in relation to concrete repairs. He states that during those visits, in his discussions with Mr Watson, he had no knowledge of any landlord being involved in discussions or negotiations. Nothing was said to him to give him to believe that another party was contracting with Mulford for the repairs. He deposes that as far as he was concerned the contract was between Mulford and Dive Otago.
Dive Otago’s reply evidence
[36] Reply evidence was given by Mr Watson and by his wife, Mary Watson, who is also a director of Dive Otago.
Mr Watson’s reply evidence
[37] Mr Watson gives evidence to the following effect:
(a) Mr Watson confirms the correctness of Mr Clydesdale’s evidence that he (Mr Watson) advised Mr Clydesdale that Mulford had won the contract on 28 November 2013. He explains that this followed a discussion which he had had with Mr Darling, the landlord, that day;
(b)Mr Watson rejects Mr Clydesdale’s evidence as to Dive Otago not stating between July 2013 and February 2014 that the landlord would be paying for the invoice rather than Dive Otago. He says that:
On receiving the job acceptance form, I told him that I had sent it on to the Landlord. I advised the Respondent prior to commencement of the pool repair work that the Landlord would be paying for the work.
(c) Mr Watson states that he was surprised in April 2014 when telephoned by Mr Clydesdale as to the non-payment of the invoice because he was unaware that it had not yet been paid. He states that he advised Mr Clydesdale the landlord would be paying for the work as had been agreed with the landlord;
(d)He refers to having raised the issue of defects in Mulford’s work with the landlord pursuant to Dive Otago’s duty under the lease, by Dive Otago’s solicitor’s letter dated 2 July 2014. Four “defects” are identified in the letter together with “images showing the defects”. There is no other narrative explanation or financial assessment of the defects. Mr Watson explains that the defects were raised with the landlord and not with Mulford because he views the defects as a matter for the landlord to resolve with Mulford.
(e) Mr Watson says that he is astonished by the affidavit evidence of the landlord in which the latter deposes that he neither accepted nor authorised anyone to accept a quote from Mulford. Mr Watson refers to having obtained the two quotations for the pool work (from Mulford and from Adhesion Sealing). He referred the quotes to the landlord. Mr Watson exhibits an email from the landlord dated 7
October 2013 in which the landlord stated that he will get another quote (from Titus Waterproofing). Mr Watson deposes that the email contains advice that the landlord:
… had lost my earlier letter enclosing the Respondent’s quote. [although the email does not refer to such a lost document but instead refers to the landlord having lost a letter “about possible tenant changes if you renew”.]
(f) Mr Watson replied to the landlord in an email of the same date, 7
October 2013. He deposes that he attached a copy of his earlier letter (of 16 August 2013). That letter exhibited and dealt with two topics, namely the possible change in tenancy arrangements (as referred to in the landlord’s email) and the requirement for repairs, attaching details of the Mulford quotation.
(g)Mr Watson deposes that the landlord subsequently decided to reject the Titus Waterproofing quote he obtained, and at the 28 November
2013 meeting with Mr Watson the landlord agreed that Mulford’s quote should be accepted. Mr Watson deposes that the landlord then agreed to pay for the dive pool repair work in return for Dive Otago renewing its lease;
(h)He deposes that a dispute has subsequently arisen between Dive Otago and the landlord as to the market rent to take effect on the renewal. He deposes that he believes that the continuing dispute over the rental has prompted the landlord to adopt the stance he has in his affidavit;
(i)Mr Watson observes that whereas the landlord has by affidavit rejected the claim by Mr Watson “that he had either hired or given the go-ahead directly to Mulford to carry out work”, Mr Watson has not in fact made such claim precisely because he has no knowledge of communications directly between Mr Darling and Mulford and has made no assertions about them. Mr Watson reiterates observations he has made in his first affidavit as to the dealings directly between Mulford and Dive Otago.
[38] Although the affidavit was filed as a reply affidavit, it went on to deal with “consequences of liquidation” and “solvency of the applicant”. These were not raised by Dive Otago in its grounds of opposition. Nor were they matters raised in Mulford’s evidence so as to call for a reply.
[39] I summarise Mr Watson’s points only briefly as to insolvency:
(a) Dive Otago has been established for 18 years, is a substantial diving training establishment and has commitments to a substantial number of staff and students all of whom would be affected by the liquidation;
(b)Dive Otago is solvent, as indicated by a letter from its accountant in which it is stated that it is “financially viable and secure” and is able to meet its financial commitments as they fall due;
(c) The reason Dive Otago has not paid Mulford’s bill is simply because
it is not payable by Dive Otago;
(d)Mr Darling as landlord is using the non-payment situation to put pressure on Dive Otago to capitulate to the landlord’s rental demand, without going through a rent review dispute resolution process.
Mrs Watson’s reply evidence
[40] In her affidavit, Mrs Mary Watson responded specifically to the landlord’s
evidence. She deposes that she had mistakenly overpaid rent to the landlord in April
2014. She says that in a discussion with the landlord’s wife, in which the “new rent” was discussed, the landlord’s wife (Christina Murphy) stated that the lease renewal document would be returned within a week or two because she (Christina Murphy) had the Mulford Holdings bill to pay on the 20th of that month (April 2014). Mrs Watson refers to the 20 March 2014 letter exhibited by Mr Watson in his reply evidence, written by the landlord (through Christina Murphy) to Dive Otago in which was stated:
We have received the account for the pool refurbishment and now need to finalise your renewal so we can process it for payment.
Discussion of the issues
Dive Otago’s solvency
[41] Dive Otago, through Mr Watson’s reply evidence, sought to establish its
solvency.
[42] Solvency was neither raised in opposition nor dealt with in its initial evidence. There was no application for leave to rely upon an additional ground. As such I would not be prepared to grant leave to Dive Otago to pursue the ground or to rely upon the “reply” evidence. Ms Jarvis did not see such leave.
[43] Had this ground of opposition been properly raised, I would in any event have found it not to constitute on the evidence filed a stand-alone ground. In doing so, I would have applied the observations of the Court of Appeal in AMC Construction Ltd v Frews Contracting Ltd3 and the decision of Mallon J in Gill Construction Co Ltd v Butler.4
The contract
[44] Dive Otago’s principal ground of application is that it was the landlord who engaged Mulford to perform the works and as such was responsible for payment. In a slightly different formulation, but to the same effect, Ms Jarvis in her submissions identified the first issue as “Did the landlord commission the work?”.
[45] In her written synopsis, Ms Jarvis commenced with this proposition:
The applicant’s evidence shows that it reached agreement with the Landlord for the repair work to be done and the lease to be renewed, and that the Landlord would pay for the repair work.
[46] The analysis of any contractual position as between Dive Otago and Mulford must start with the dealings between those two parties.
[47] It is common ground that Mulford (through Mr Clydesdale) had its dealings over the repair contract with Dive Otago (through Mr Watson). Dive Otago
3 AMC Construction Ltd v Frews Contracting Ltd [2008] NZCA 389, (2008) 19 PRNZ 13 at [7].
4 Gill Construction Co Ltd v Butler [2010] 2 NZLR 229, (2009) 20 PRNZ 274 at [25].
requested a quotation for the work which Mulford addressed to Dive Otago as would have been expected. On 28 November 2013, Mr Watson telephoned Mr Clydesdale to tell him that the Mulford quote had been successful. The start date and other technical details of the project were then discussed and agreed at a meeting on site later that day. The work was then undertaken and the invoice presented in accordance with the quotation.
[48] The second specific particular in Dive Otago’s grounds of application, turning on contractual principles, stated that:
The Applicant did not accept the quote or otherwise enter into a contract with the Respondent for performance of the Work.
[49] Acceptance of the quotation is plainly on the evidence what took place on 28
November. Mr Watson’s evidence is that he communicated the acceptance. Nothing in Mr Watson’s evidence asserts that he accepted the quotation that day expressly on behalf of another party or that he was authorised by another party to do so. What he accepted was a quotation addressed to Dive Otago.
[50] The relevant contract was entered into that day.
[51] On the evidence, the argument of Dive Otago that the contract was entered into between the landlord and Mulford does not bear scrutiny.
[52] Mr Watson’s reply evidence is significant in that regard. In the landlord’s
evidence it had been stated that:
… the claim Mr Watson is making that I either hired or gave the go-ahead directly to Mulford to carry out the work on the pool is completely untrue.
Mr Watson in reply expressly stated that he had no knowledge of communications directly between the landlord and Mulford and that he had made no assertions about them.
[53] For his part, Mr Clydesdale has deposed that he had never met the landlord and had no idea of the identity of the landlord in the course of undertaking the work or in issuing the invoice.
[54] In these circumstances, there could not have been a contract entered into between Mulford and the landlord. The meeting of minds between identified parties required for the existence of contract simply could not have taken place.
[55] Strictly, I do not need to consider whether Dive Otago may be argued to have entered into the contract as an agent of the landlord as such was not asserted by Dive Otago in its grounds of application or Ms Jarvis’s submissions. In any event, on the evidence filed by Dive Otago, there would be no basis for an argument that Dive Otago was the landlord’s agent for the purposes of a contractual negotiation. Mr Watson does not depose to any agency nor does he make suggestion that he said to Mulford that he was acting as agent for a principal (whether identified or unidentified).
The relevance of the landlord/Dive Otago negotiations?
[56] I have found that the evidence cannot sustain an argument that a repair contract came into existence as between Mulford and the landlord. The contract was clearly as between Mulford and Dive Otago. That leaves for possible consideration what the terms of their contract were.
[57] Mr Watson’s evidence suggested a possible line of argument as to a special
term by which payment would be made. Mr Watson deposed:
Mr Clydesdale asked me to sign the job acceptance form attached to the quote and return it to him. I advised him that I had sent it to the Landlord for completion because he was the person paying for the work. I further advised that the Landlord had lost the quote.
[58] In her written submissions on this point, Ms Jarvis submitted:
On the basis of this evidence, the Respondent was on notice that the Landlord, rather than the Applicant, would be the party to the contract for the work.
[59] Of course, the words used by Mr Watson did not stipulate for the pool contract to be between Mulford and the landlord. Dive Otago was in no position to “put Mulford on notice” that the landlord would be the one entering into the contract. What Mr Watson at most did, if he is ultimately found to have said to Mr Clydesdale
that which I have quoted, was to “put Mulford on notice that the landlord was going to pay for the repair work”. Any such agreement by its nature was as between the landlord and Dive Otago. It is entirely unsurprising that in the context of such discussions between Dive Otago and the landlord, the landlord would be wanting to see the various quotations which were obtained by Dive Otago. To the extent that Mr Watson deposes that he told Mr Clydesdale that he had sent the acceptance form to the landlord for completion, such cannot in the absence of execution by the landlord give rise to a valid argument that Mr Watson’s notified acceptance on 28
November 2013 should have been understood by the parties to be the landlord’s
acceptance.
The relevance of post-contract conduct
[60] Ms Jarvis invited me to consider post-contract conduct such as Dive Otago’s consistent looking to the landlord to make payment. I do not consider that Mr Watson’s conduct to which Mulford was not a party can inform the construction of the contract entered into in November 2013. I would also view it in any event as largely equivocal as it is at least consistent with the landlord being indemnified rather than principle.
[61] Once it is established (as I have found) that the contract for the pool repair was as between Mulford and Dive Otago, the most favourable extension of Mr Watson’s evidence might be a term of the contract whereby Dive Otago would not be primarily responsible for the payment and that Mulford would look only to the landlord. Such a term would have obvious problems as to enforceability for Mulford and would appear commercially absurd when it is common ground that Mr Clydesdale and Mulford had no detailed knowledge of or understanding of the landlord or his position. In any event, such a term of the Mulford/Dive Otago contract cannot arise on Mr Watson’s evidence. Mr Watson does not suggest that he requested such an arrangement as a term of the contract or that Mulford agreed to it. What Mr Watson asserts is that after the landlord had agreed with him to pay for the work (on 28 November 2013), he (Mr Watson) advised Mr Clydesdale that the landlord was the person paying for the work. Although Mr Watson’s evidence makes reference to the proposition that “the contract was to be between the Landlord and
the Respondent” significantly he does not depose that he ever stipulated the conditions or terms relating to the landlord only being responsible.
The landlord/Dive Otago dispute
[62] It is clear that there is a dispute between Dive Otago and the landlord over the renewal of the lease and the rental and apparently over the bearing of the capital cost of pool repairs. The ultimate responsibility for the amount of Mulford’s invoice for its quoted repairs, as between Dive Otago and its landlord, appears to become a negotiating item in the resolution of wider lessor/lessee issues.
[63] I refrain in this judgment from passing comment upon the respective positions between those two entities as the landlord is not a party to this proceeding and, upon my examination of the evidence as to the contract, the arrangements between Dive Otago and the landlord cannot affect Mulford’s right to pursue payment of its invoice through its statutory demand issued to Dive Otago.
Dive Otago’s claimed defects
[64] On its application to set aside the statutory demand, Dive Otago was entitled by s 290(4)(b) of the Companies Act 1993 to set up any cross-demand or set-off. It did not do so. However, Mr Watson in his reply evidence attached the 2 July 2014 letter written by his solicitors not to Mulford but to the landlord’s solicitors, in which were set out four alleged defects in the work carried out by Mulford.5
[65] I refuse to consider the allegations of such defects. First, a set-off is not identified as a ground of the application and was not supported by the initial evidence filed. Secondly, to the extent defects are identified in the letter exhibited, it is by the merest assertion of defects, being unsupported by any detailed narrative. The photographs attached to the letter take matters no further in the absence of a narrative explanation. Thirdly, the defects are not identified as having any particular cost associated with their remedy. Responsibly, Ms Jarvis did not pursue this
evidence as constituting a separate ground of defence but relied on it primarily as
5 Above at [37](d).
further evidence of the genuineness of Mr Watson’s position in relation to the landlord’s responsibility.
Conclusion
[66] The evidence establishes beyond argument that Mulford entered into a contract with Dive Otago on 28 November 2013 for a quoted sum for the repair of the dive pool and that Mulford is contractually entitled to payment for the sum invoiced in accordance with the quotation.
[67] Issues as to the non-payment of the costs of the repairs by the landlord are a matter for resolution between the landlord and Dive Otago. If Dive Otago now makes payment to Mulford and thereby meets the requirements of the statutory demand within the extended time I provide, Dive Otago will have its rights of recovery against the landlord to the extent it can establish it has such rights.
Orders
[68] I order:
(a) The application is dismissed;
(b) The time for payment pursuant to the statutory demand is extended to
6 November 2014 and, failing by that date full payment of the demanded sum and the costs and disbursements hereby ordered, the respondent will be entitled to present an application for an order liquidating the applicant;
(c) The applicant is to pay the respondent’s costs on a 2B basis together
with disbursements to be fixed by the Registrar.
Solicitors:
Goldsmith Law, Dunedin
Wilkinson Rogers Law, Dunedin
Counsel: D R Tobin, Dunedin
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