Ester Electrical Limited v Lynx Recruitment Limited
[2025] NZHC 3258
•30 October 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2025-404-1319 [2025] NZHC 3258
UNDER the Companies Act 1993
IN THE MATTER of an application to set aside a statutory
demand issued under s 290 of the Act
BETWEEN ESTER ELECTRICAL LIMITED
Applicant
AND LYNX RECRUITMENT LIMITED
Respondent
Hearing: 8 October 2025 (by AVL) Appearances: T P Kelly for Applicant
C Harnett and N (C) Kwon for Respondent
Judgment: 30 October 2025
JUDGMENT OF ASSOCIATE JUDGE LESTER
This judgment was delivered by me on 30 October 2025 at 2.30 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
……………………………
ESTER ELECTRICAL LIMITED v LYNX RECRUITMENT LIMITED [2025] NZHC 3258 [30 October 2025]
[1] Ester Electrical Ltd (Ester) seeks an order setting aside a statutory demand issued by Lynx Recruitment Ltd (Lynx) on 8 May 2025 for $130,101.13.
[2] Ester is a tier one commercial electrical company that has expertise in commercial, residential, civil and industrial electrical projects. Lynx is a labour hire business.
[3] Ester sought to engage two electrical trade assistants from Lynx. Lynx sent its terms and conditions to Ester on 25 July 2024 which Ester signed and returned the next day.
[4] Over the following months, Lynx provided a number of staff to Ester including experienced electricians and electrical trade assistants.
[5] Lynx sent invoices to Ester between August 2024 and February 2025, but Ester ceased paying the invoices in full after November 2024. In January and February 2025, with Lynx chasing unpaid invoices, Ester promised part payment of some invoices and raised an issue with the workmanship of some of the staff provided by Lynx.
[6] The labour Lynx supplied was used at an apartment building in Parnell, Auckland. In short, Ester says the workers supplied were unskilled and undertook substandard work and/or work that resulted in dangerous wiring. Ester says that by overpaying the early invoices for these unskilled workers it has overpaid Lynx for the staff supplied and further, has incurred an estimated $286,450 in rectifying the defective workmanship of the staff supplied by Lynx.
[7] Ester, in its application, originally raised a number of claims (not all were pursued at the hearing). Ester’s claims are based on the idea that Lynx made misleading and deceptive statements about the skills of the staff it provided. Ester pleads the curriculum vitaes (CV’s) Lynx had been provided with on 23 July 2024 for candidates were inaccurate, and therefore misrepresentations. Those inaccuracies are said to give Ester claims under the Fair Trading Act 1986; that there has been a total failure of consideration; there has been a pre-contractual misrepresentation; that Lynx
supplied unlicensed or improperly licensed electrical workers in breach of s 143 of the Electricity Act 1992; that there are terms in Lynx’ contract which are unfair terms; that Lynx was negligent; that there has been a common mistake; and that Ester has remedies against Lynx under the Building Act 2004.
[8] The application to set aside the demand relies on ss 290(4)(a) and 290(4)(c) of the Companies Act 1993 (the Act).
[9] Mr Esterhuizen of Ester filed an affidavit setting out what he says were the misrepresentations by Lynx and provides photos of what he says is the defective work.
[10] The main issue for Ester in this application is that the terms and conditions it signed contained a no set-off clause.
[11]Clause 7.2 of Lynx’s terms and conditions provide:
You must pay each Amount Owed in full without any set-off or deduction whatsoever against any amount/liability (whether present, future, actual or contingent) owing by you to Lynx.
[12] Lynx submits its contract provides that payments fall due seven days after its invoices are tendered. The unpaid invoices in the statutory demand were due for payment on 20 December 2024, 20 January 2025, 20 February 2025 and 20 March 2025.
[13] Lynx submits this was a contract between commercial parties and that no set-off clauses, that is, “pay now argue later” clauses, are a common feature of commercial agreements.
[14] Lynx submits that when the contract was entered into, it invited Ester to raise any questions regarding the terms of the contract. No questions were raised. Lynx’s contract is a comprehensive document of just over six pages of relatively fine print.
[15] The contract contains a series of clauses designed, in practical terms, to ring-fence Lynx from what happens on sites where the staff it supplies undertake their duties.
Relationship
6.5You acknowledge that Lynx is not performing the services set out in the Assignment Description; but is instead the supplier of Workers, at your request, to perform the services/work that you have described in the Assignment Description.
6.6While the Worker in on an Assignment with you, any Worker who is an On-Hire Employee (i.e. an employee of Lynx), will be under your control, supervision and direction, and you will be responsible for their supervision and direction in a manner consistent with Lynx’ obligations to them.
…
Liability and Indemnity
8.7Lynx is not liable for any statements or misrepresentations made by any Candidate, or for the accuracy or completeness of the information provided by a Candidate or a third party or for the suitability of the Candidate or any conclusions made as a result of such information. You agree to release Lynx from any liability whatsoever arising in connection with any untrue statements, omissions or misrepresentations by any Candidate which are passed on to you by Lynx.
…
8.10Lynx is not liable for any loss, damage, costs or compensation (whether direct or indirect) which may be suffered by you, or for which you may become liable, arising from:
(a)the Introduction by Lynx of Candidates/Workers (or delay in any such Introduction); and/or
(b)the failure of a Candidate/Worker to accept an offer of employment/Engagement or an Assignment.
…
[16]Mr Esterhuizen in his affidavit says:
26.Lynx gave me no reason to think that I needed to review the contract, and in fact my office manager … signed the contract on behalf of Ester.
[17] Detailed terms and conditions are commonplace in the building industry. As I have said, the project at the centre of this dispute is a new apartment building in Parnell, Auckland. There is nothing out of the ordinary in the construction industry in a party seeking contractual terms that favour their own position.
[18] Mr Esterhuizen says that he thought the contract with Lynx was just a standard form document, and that Lynx did not bring any clauses to his attention. However, failure to read a contract has never been a defence to what a party may in hindsight consider to be unfair terms.1 Nor in such a commercial context is there any duty on Lynx to warn of the contents of the contract. No set-off clauses are now commonplace in contracts—as are clauses seeking to limit or exclude liability.
[19] There is also a lengthy and comprehensive clause that provides Lynx will have no liability for any loss or damage suffered by Ester in connection with work undertaken by on-hire employees.
[20] Mr Flynn, a director and shareholder of Lynx, in his affidavit on behalf of Lynx, does not engage with the factual claims in relation to defective work in Mr Esterhuizen’s affidavit because Lynx relies on the above clauses—in particular, the no set-off clause. Lynx’s position is straightforward, it relies on the obligation to pay without set-off or deduction and that cl 8.7 set out at [15] above means even if it forwarded inaccurate CVs, Lynx has no liability for what a candidate may have incorrectly claimed in their CV.
Pay first, argue later clauses
[21] The leading authority is a Court of Appeal decision, Browns Real Estate Ltd v Grand Lakes Properties Ltd.2 The Court of Appeal explained how a Court ought to exercise its discretion under s 290(4)(b) where the parties had agreed to a no set-off provision:3
[16] While it is true that the Court in Laywood was dealing with effectively a clash between two statutes, similar reasoning applies where there is
1 Hewitt v Window World Franchise Ltd HC Whangarei CIV-2009-488-488, 7 July 2011, at [24].
2 Browns Real Estate Ltd v Grand Lakes Properties Ltd [2010] NZCA 425, (2010) 13 NZCPR 349.
3 Above n 2. Footnotes omitted.
a contractual no set-off provision. Just as in the [Construction Contracts Act 2002] context, the efficacy of a no set-off contractual provision would be undermined if statutory demands could be set aside on the basis of a set-off, counterclaim or cross-demand a commercial party had by contract expressly agreed could not be raised. In such a situation, there seems no reason in principle why statutory demands and bankruptcy notices should not be available as debt enforcement measures when, as was conceded by Browns, other enforcement measures would be (including summary judgment). Further, we accept Grant Lakes’ submission that an inability to meet the statutory demand, without recourse to the set-off or counterclaim which it is prevented from raising, would mean that Browns is insolvent: ie it would be unable to pay its debt as they become due in the normal course of business.
[17] We do not accept Browns’ submission that a specific reference excluding the statutory demand procedure is needed. There is a question as to whether a contractual provision, however worded, can totally oust the jurisdiction of the courts to consider a counterclaim, set-off or cross-demand. However, this is an issue that is more theoretical than real. In our view a contractual no set-off provision of the type at issue in this case would normally result in the court’s discretion being exercised against an applicant if the sole grounds for an application to set aside a statutory demand was the existence of a set-off, counterclaim or cross-demand which a party had expressly agreed could not be raised. We consider that commercial parties should be required to honour the bargain they have made, absent other grounds that tell against the recognition of a statutory demand. Grand Lakes, rightly in our view, conceded that an application to set aside the demand can be made under s 290(4)(c). Such an application would, however, need to be on grounds other than the existence of a set-off or counterclaim.
[22] Here, the application relies on s 290(4)(a) which empowers the Court to set aside a statutory demand if it is satisfied there is a substantial dispute whether or not the debt is owing or due. Section 290(4)(b) relates to a counterclaim or set-off, and s 290(4)(c) provides that a demand may be set aside if the demand ought to be set aside on other grounds.
[23] To the extent that the application refers to s 290(4)(a), it is clear that as a whole (and subject to matters I discuss below), Ester in fact relies on a set-off. Mr Kelly, counsel for Ester, accepted as much during the hearing. I also note paragraph 31 of Mr Butler’s written submissions begins: “If the court does not accept that the total amount owing can be setoff …”.
[24] Mr Kelly, recognising the need to address the no set-off clause, relied on a decision of Associate Judge Sussock, Sunrise Management Ltd v Bunnings Ltd, where her Honour addressed the applicability of the principles in Browns Real
Estate Ltd.4 The applicant which sought to set aside the demand in Sunrise Management, alleged it was deceived into entering its contract with Bunnings. Her Honour referred to the Court of Appeal’s decision in Industrial Group Ltd v Bakker, where the Court held that if deceit were established, Mr Bakker would not be able to rely on the contract documentation in any way “as fraud unravels all”.5 Associate Judge Sussock concluded in that context that it was reasonably arguable the no set-off clause did not apply where a claim of deceit could be raised.6 Associate Judge Sussock noted that there was no allegation of deceit in Browns Real Estate Ltd.7
[25] I also note Associate Judge Sussock referred to the Court’s jurisdiction under s 43 of the Fair Trading Act 1986.
[26] That no allegation of deceit is made here was confirmed by Mr Kelly at the hearing. There is no basis to distinguish Browns Real Estate in this case.
[27] I also mention the claim of a total failure of consideration as if such were reasonably arguable then it could be said there was no debt owing at all. However, Mr Esterhuizen’s evidence was that some of the workers provided by Lynx were competent and carried out their work properly. Accordingly, there was not a total failure of consideration as, even on Ester’s case, Lynx provided some value. Mr Kelly’s submissions did not seek to develop this ground.
[28] All of the claims raised by Ester noted at [7] above, are claims for money which, if successful, would be set-off against Lynx’s claim. This means all of the claims are subject to the no set-off clause.
[29] At the end of the day, this was a commercial contract between commercial parties. As noted at the outset, the construction context is one where detailed contracts are common and contracting parties routinely attempt to protect themselves with robust clauses.
4 Sunrise Management Ltd v Bunnings Ltd [2022] NZHC 317, (2022) 16 TCLR 321.
5 Industrial Group Ltd v Bakker [2011] NZCA 142, (2011) 20 PRNZ 413 at [22].
6 At [60].
7 At [57].
[30] A no set-off clause is included in the standard form Auckland District Law Society commercial lease. As such, it can hardly be described as unusual or uncommercial.
[31] In issuing its statutory demand, Lynx seeks to hold Ester to Ester’s contractual obligation to pay without set-off or deduction. Lynx is entitled to rely on its contract and none of the matters raised by Ester warrant depriving Lynx of a valuable contractual advantage.
Can the demand be set aside on other grounds?
[32] The Court of Appeal in Browns Real Estate Ltd recognised that the presence of a no set-off clause does not prevent the Court exercising its jurisdiction under s 290(4)(c) of the Act. However, as reproduced earlier at [21], it said:
Grand Lakes, rightly in our view, conceded that an application to set aside the demand can be made under s 290(4)(c). Such an application would, however, need to be on grounds other than the existence of a set-off or counterclaim.
(footnotes omitted)
[33] There are no factors other than the matters relied on as founding a set-off or a total failure of consideration. Mr Kelly referred to the general injustice of Lynx, in his words, sitting behind the contractual provisions noted at [15] and claiming it was not responsible for what Ester asserts were misrepresentations. This submission amounts to a commercial party seeking to be relieved from the terms it agreed to.
[34] Nor is this a compelling case of pre-contractual misrepresentation, as was the case in Sunrise Management. Ester submits that the CVs provided on 23 July 2024 must have been inaccurate because of the defects in the workmanship that occurred. It does not follow that because a tradesperson has completed work poorly that their CV was inflated or false. In any event, Lynx’s contract as a whole distances it from any claim arising from the work of the staff it provides.8 Such is not surprising. Lynx would not want to, in effect, have liabilities akin to that of an insurer in relation to
8 See Weine v Tadd Management Ltd [2024] NZCA 323, (2024) NZCPR 526 as to when a party passing on information from a third party will not be a mere conduit of that information for the purposes of finding a pre-contractual misrepresentation. Here, it is clear Lynx was not adopting the statements in the CVs as its own.
negligently completed work. That is all the more so when it has no say over the work the staff it supplies carries out, or their supervision. As to the claim under the Fair Trading Act, it could be said Lynx was a conduit for the CV’s provided by its staff, but in any event, cl 8.8 of the contract between the parties records that Ester was acquiring the services of Lynx for the purposes of a business, and so the provisions of the Consumer Guarantees Act 1993 and ss 9, 12(A) and 13 of the Fair Trading Act were not to apply in connection with any of the services provided by Lynx.
[35] The alternative argument raised by Ester, as touched on in [6] above, is that Ester says it has overpaid the invoices that it has paid because the appropriate rate for the skills of staff provided was $30 an hour, not the average $46.50 per hour actually charged. On that basis, Ester calculates it has overpaid $121,960.91. This repackaging of the misrepresentation claim does not assist. It is only a different way of presenting Ester’s alleged damages claim arising from the claimed misrepresentation, that is, rather than claiming costs to rectify, an overpayment measure is adopted. The reality of Lynx’s contract is that it agreed to provide staff to Ester—but Lynx was not standing behind any statement made by those individuals in their CVs. Ester was responsible for the control and supervision of those workers on its site and if there was any issue or loss arising from their workmanship, Lynx would not be liable for the same.
[36] Whether Ester now considers those terms to be onerous is not the point. Ester agreed to the terms that it must pay first and argue later.
[37]The application to set aside the statutory demand is dismissed.
[38] Pursuant to s 291(1)(a) of the Act, the time for Ester to pay the outstanding amount is extended by 15 working days from the date of the release of this judgment. If the demand is not satisfied, Lynx may apply to have Ester placed in liquidation.
Costs
[39] Lynx is entitled to costs, which I reserve. If Lynx wishes to rely on its indemnity costs clause in its contract then it is to file a costs memorandum within five working days with the usual supporting information. If it is content with costs on a 2B basis together with disbursements as fixed by the Registrar, then that will be the order of the Court as to costs in the event no costs memorandum is filed as timetabled above.
Associate Judge Lester
Solicitors:
Russell van Hout, Auckland (for Applicant) Hesketh Henry, Auckland (for Respondent)
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