Four Avenues Property Group Ltd v Higgs Construction Ltd

[2016] NZHC 1202

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2016-409-000296 [2016] NZHC 1202

UNDER

the Companies Act 1993

BETWEEN

FOUR AVENUES PROPERTY GROUP LIMITED

Applicant

AND

HIGGS CONSTRUCTION LIMITED Respondent

Hearing:	7 June 2016 (Determined on the papers)
Counsel:	J P Forsey for Applicant P O'Dea for Respondent
Judgment:	7 June 2016

COSTS JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1]      On 13 April 2016 Higgs Construction Limited (Higgs Construction) issued a notice to Four Avenues Property Group Limited (Four Avenues) under s 289 of the Companies Act 1983.   The demand related to a payment claim issued under the Construction Contracts Act 2002.

[2]      Prior to the notice being issued, on 6 April 2016, Four Avenues wrote to Higgs Construction pointing out that the claim was in dispute.  The same day Higgs Construction wrote advising that it would be applying for a winding-up order and would be serving a notice accordingly.

[3]      Eight days after the notice was served, counsel for the applicant wrote to counsel for the respondent highlighting the previous correspondence demonstrating the dispute between the parties, noting that there was a bona fide dispute over liability for the sum claimed and stating that the statutory demand process was being

used inappropriately.  He invited Higgs Construction to withdraw the demand.  He

FOUR AVENUES PROPERTY GROUP LTD v HIGGS CONSTRUCTION LTD [2016] NZHC 1202 [7 June 2016]

also advised that if the demand was not withdrawn the applicant would seek indemnity costs on making an application to set it aside.

[4]      No response was received.   On 26 April counsel for the applicant wrote again, this time seeking confirmation that the demand would be drawn by 5 o’clock that day.  Again, no response was received.  The application to set aside the demand was therefore filed and served on 28 April.

[5]      On 31 May counsel for the applicant wrote to counsel for the respondent yet again, drawing attention to ETB Realty Ltd v Eastlight Asset Trading No 3 Ltd1  in which the Court ordered an uplift of 50 per cent on scale 2B costs, and ordered that the director of the respondent company which had issued the statutory demand was personally liable for the costs.  In this letter counsel for the applicant again invited the respondent to withdraw the demand.

[6]      This time, a reply was received, and the demand was withdrawn.

[7]      As a result counsel for the applicant says the statutory demand process was improperly used to apply pressure in a situation where not only there was a dispute but that it had been clearly notified to the respondent.   Counsel for the applicant therefore seeks costs on a 2B basis with an uplift of 50 per cent, relying on r

14.6(3)(b)(ii), which provides that there may be an increase in scale costs where an opposing party has taken or pursued an unnecessary step or an argument that lacks merit.

[8]      Counsel for the respondent refers to the letter of 31 May to which I have referred, and notes that it says:

… accordingly we ask you to confirm withdrawal of the Statutory Demand by return.  Otherwise our instructions are to seek recovery of indemnity costs from your client and, in light of the ETB decision, our client will consider seeking recovery of costs against the directors of Higgs personally.

[9]      Counsel  says  that  this  request  implies  that  if  the  statutory  demand  was withdrawn there would be no issue as to costs.  The respondent takes the view that it

1      ETB Realty Ltd v Eastlight Asset Trading No 3 Ltd [2016] NZHC 609.

is not reasonable for any costs to be awarded as it has complied with the request to withdraw the demand by return, and in plenty of time for the matter to be discontinued before being called.

[10]     Counsel for the respondent then goes on to say that he opposes any award of costs and asks to be heard further should the Court wish to make an order.

[11]     Costs awards are invariably dealt with on the papers except in the most prolonged and complex cases where a hearing might be directed.  Counsel for the respondent has been served with the applicant’s memorandum, and has responded by memorandum.  No further hearing will be granted to the respondent.

[12]     In  my  opinion  counsel  for  the  respondent  was  not  entitled  to  draw  the inference he claims to have drawn.  The letter was quite clear in its terms.  It refers only to seeking indemnity costs and costs against the respondent’s director, which are not in fact sought.  Further, this was the third time that the applicant had written to the respondent, the other two occasions being unsuccessful in persuading the respondent to withdraw the demand on the basis that there was a substantial dispute, or even eliciting a response.

[13]     The Court has made its position in relation to the use of statutory demands where debts are in dispute very clear over many years.   On this occasion the respondent’s failure to engage with the applicant in relation to the claimed dispute, and its decision to withdraw the demand only after the third request, and after the applicant had been put to the expense of filing an application in a statutory environment imposing a very tight deadline for doing so, direct the Court to award costs against the respondent, and in my opinion in the circumstances outlined an

uplift of 50 per cent is justified, as in Summer Construction Ltd v Bakker.2

2      Summer Construction Ltd v Bakker HC Wellington CIV-2006-485-1499, 10 November 2006, per

Associate Judge Gendall.

[14]     The respondent will pay to the applicant costs on a 2B basis, plus 50 per cent,

plus disbursements fixed by the Registrar.

J G Matthews

Associate Judge

Solicitors:

Duncan Cotterill, Christchurch. Helmore Ayers Lawyers, Christchurch.