GHP Piling Limited v DCN Drilling Limited
[2014] NZHC 991
•14 May 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-000404 [2014] NZHC 991
BETWEEN GHP PILING LIMITED
Plaintiff
AND
DCN DRILLING LIMITED Defendant
Hearing: 28 April 2014 Appearances:
A de Hamel and L Leadbetter for the Applicant
N Tabb for the DefendantJudgment:
14 May 2014
JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 14 May 2014 at 11.00 a.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors:
Fortune Manning, Auckland
N Tabb, Auckland
Case officer: Katrina Tauhinu
GHP PILING LIMITED v DCN DRILLING LIMITED [2014] NZHC 991 [14 May 2014]
[1] The applicant, GHP Piling Limited, applies for an order setting aside the statutory demand that the respondent, DCN Drilling Limited, served on it on
12 February 2014. It contends there is a substantial dispute whether or not the debt claimed in the demand for $49,221.00 for drilling work is owing or is due, and that the application should be set aside pursuant to s 290 of the Companies Act 1993. GHP also seeks increased or indemnity costs against DCN on the grounds that DCN has misused the statutory demand process as a debt collection exercise and in the knowledge that there was a substantial dispute between the parties.
[2] DCN opposes the application. It contends that there is no genuine dispute about the debt claimed in the demand and that its use of the statutory demand procedure is appropriate.
[3] Broadly stated, the issue for determination is whether GHP has shown a fairly arguable basis for its claim that there is a substantial dispute. That turns on whether:
a) DCN had a contractual obligation to provide the drilling results in a timely way;
b)DCN failed to fulfil such obligation by withholding the results until this proceeding had began and they had become worthless.
Background
[4] The basis for DCN’s statutory demand is an agreement entered into between the parties on 6 December 2012. DCN agreed to conduct investigative drilling to test and record soil conditions at the Manukau District Court site and for that purpose to undertake Standard Penetration Tests. The drilling results were to be provided to GHP, which was a subcontractor to Mainzeal. GHP required the tests so as to have advance notice of the condition of the ground at each pile position and to tell it what to expect when carrying out its piling work. DCN quoted $48,863.50 for the work, which GHP accepted. A start date for the tests of 14 January 2013 was agreed, and DCN undertook the required works between 14 and 25 January 2013.
[5] Central to GHP’s application to set aside the demand is GHP’s disputed claim that DCN did not provide the results upon completion of the drilling, or in response to various requests made between then and April 2013, or indeed until March 2014.
[6] DCN claims that it sent the results to GHP by email on 25 January 2013 together with its invoice which GHP disputes. It was about this time that Mainzeal collapsed, though exactly when is not dealt with by either side in evidence.
[7] DCN says essentially that:
a) Having emailed the results and its invoice on 25 January it sent another invoice several weeks later in February, and that GHP disputed the invoice at that time but made no claim that it did not get the results;
b)On 4 April the parties met at its request to discuss the outstanding invoice. GHP’s director, Mr Yonge, agreed to pay for the results if they were re-sent, but in a display of bad faith he would not sign an undertaking to that effect when asked after the meeting if he would.
c) As these events occurred in the context of the collapse of Mainzeal, the obvious and irresistible inference is that GHP was concerned that it was going to have to pay for results that it no longer wanted because its position as subcontractor had come to an abrupt end. There would be no money coming to it from Mainzeal. Its conduct was that of an evasive debtor bent on avoiding its obligations.
[8] GHP says, to the contrary:
a) It did not receive the results on 25 January as claimed, and can only assume that they were not sent. It never got the results until March 2014 when DCN filed evidence in this proceeding.
b)The invoice was “re-sent” on 14 February after DCN’s email enquiry as to why it had not paid the invoice. It was not aware of the invoice until that enquiry. It requested the results on 20 February after receiving the invoice, which came but without the results. The results
were not sent despite that request. It continued to seek the results and had concerns about paying the invoice without receiving them.
c) It sent an email on 2 April, again raising queries about the invoice.
At the meeting on 4 April there was agreement to the extent that DCN agreed to provide the results and GHP agreed to pay for them if satisfactory. At the meeting there was no suggestion that the release of the results was conditional on a signed undertaking for payment. The request did not accord with what was agreed.
d)Just as it is incorrect that it did not ask for the results, is it incorrect that it did not want them or need them. Despite Mainzeal’s demise, it had the opportunity to use the results in the re-tendering for the work it had subcontracted to Mainzeal for, or to on-sell them to another tendereror. Also, it was its position throughout that it wanted to receive the results so that it could check them to ensure they were satisfactory before paying for them. By withholding the results, DCN rendered them worthless.
Evidence
[9] The positions of the parties are not able to be reconciled. The evidence is such that it does not provide any clear-cut answer as to whose evidence is right and whose is wrong. It is sufficient to refer to the written communications (or lack of such) and to make some general observations about the evidence to illustrate the point.
[10] I pause first to note that it emerged at the hearing that the parties dispute whether there was any obligation on DCN to provide the results in a timely way. Counsel for DCN submitted that even if DCN did not send the results on 25 January (which she did not concede), DCN had no obligation to provide them within any particular time or in a timely way; and therefore that even if it were the case that GHP did not get them until March 2014 it must pay for them.
Contemporaneous emails and correspondence
[11] There are no relevant emails or correspondence in evidence that are contemporaneous with the events in the latter part of January to March 2013.
[12] GHP has produced the copy of the invoice dated 25 January 2013 that it says it did not receive until mid-February 2013, and then minus the results. Strangely, it produces no covering letter or email. Nor does it produce any other email or other correspondence of a contemporaneous nature to support the claim that in February it raised concerns about the invoice and asked for the test results. There is no documentary evidence to suggest that it did so in March. Rather, it relies on a later email exchange between Mr Penney, the director of DNC, and Mr Yonge as setting out a true reflection of events and discussions from January to April. I will come back to it momentarily.
[13] Though DCN disputes Mr Yonge’s account, it acknowledges it cannot produce a copy of the relevant email of 25 January that it says would corroborate the fact that it sent the invoice plus the results on that day. It offers the explanation that it suffered a computer failure which wiped all relevant contemporaneous documentation. The computer affected is said to be the computer of Mrs Penney, who is the wife of Mr Penney. In her affidavit Mrs Penney says she was responsible for dealing with DCN’s accounts and is confident that on 25 January she did send the invoice and the results or “logs” as is her “usual practice”, but she had some work done on her computer “a few weeks after this” and as a result her sent items were completely wiped. She also says however that after the meeting on 4 April she went home and checked her computer and “was able to confirm that the email has been sent from her computer”. Mrs Penney may be using the word “few” in an unusually elastic way, but without further explanation it is difficult to reconcile the two statements. It also has to be asked why Mrs Penney did not furnish this confirmation to Mr Yonge when she claims she found it.
[14] Mr Penney also does not produce the relevant email, yet he has been able to produce as exhibits several emails belonging to an exchange between himself and Mr Yonge in December 2012 and early January 2013, which suggests his computer was unaffected. It appears that he used the same email address as Mrs Penney, so it is unclear why Mr Penney has not reproduced and exhibited a copy of the email to his affidavit. DCN offers no explanation.
The April emails
[15] The emails exchanged by the parties in April 2013, which Mr Yonge has produced, show that Mr Penney advised on 4 April (following the meeting that day) that:
We have no problem sending the log sheets through but we want to know if you will sign a form for us stating that we will be paid within seven days of receiving the logs as you agreed upon.
[16] The emails also show that Mr Yonge responded a week later on 11 April rejecting the request for such an undertaking, describing it as the imposition of a “condition” on the release of the results. He suggests he was still waiting for the results (or logs) which he wanted as evidence the work was done and to on-sell them, and expresses concern that delay would jeopardise any chance for payment recovery:
Thanks for coming the other day. You confirmed that the drilling logs would normally have be [sic] issued with the invoice, and it was determined that they weren’t in this case. We confirmed that although the invoice was dated 25 Jan 2013, it was not received until 14 Feb 2013. There appears to have been some hitch at your end.
It was evidenced that GHP first requested the drilling logs in an email dated
20 February 2013.
We require the drilling logs as evidence that the work has been done, but also to attempt to sell them to a third party after the demise of Mainzeal. The delay in their provision will most likely jeopardize any chance we would have had for payment recovery.
It is noted that the records have never passed through our hands, and it was DCN Drilling who gave the results directly to the Consultant, hence maybe it is Consultant who should be paying for the work.
We do not accept your imposed condition on the release of the drilling logs. Queries raised in our email dated 2 April 2013 remain unanswered, and your
invoice remains both unsubstantiated and in dispute.
[17] These emails were followed by further emails on 16 April. Mr Yonge wrote to Mr Penney and his wife stating:
We have not received any test results on 25th Jan or since. You [sic] recent emails say that they were still to come. You have told multiple story’s [sic] regarding the results, so who knows what to believe. The disputes regarding payment time, contract terms, stand by etc are still in dispute.
[18] Mr Yonge then arranged for his son to send a further email to DCN, stating
“We await some rationale of progress”, and advising:
Please ensure that your lawyer is aware of the outstanding items of dispute and our request for substantiation and test results. It continues to mystify me that you now say that the results were sent on 25 Jan, when all along we have said that nothing was received on 25 Jan, and the copy invoice in
February had nothing attached. We have been asking for test results since
Feb, when we first received a copy of the invoice.
[19] Mr Penney responded immediately advising that DCN has email proof of all contact, that the matter was in the hands of his lawyer and that Mr Yonge should not hesitate to contact him. He said:
We have e-mail proof of all the contact and when they were sent, and we have tried to resolve this as nothing has happened except your constant denial, this invoice has been outstanding for several months and it doesn’t take this long to save a problem.
[20] There is no suggestion that Mr Penney substantiated his assertion about
“email proof” by copying it to Mr Yonge.
[21] That same day GHP sent an email to DCN’s lawyers requiring “substantiation, dispute resolution, and the provision of test results”. The email goes on to state GHP had not received the results:
We did not receive an invoice until mid-Feb, and responded then requesting the test results. Stand-by is not considered payable as advised. ... nothing has been resolved, and we have not received the test results to show that the work has been done. DCN have made no reasonable attempts at resolution, and have produced an incredible number of scenarios regarding the test results.
We believe these results were given directly to consultants, and in which case DCN has given away our intellectual property. Maybe their invoice should be sent to the Consultants. Our manager is away until early May and would be available to meet with you then, but in the first instance we consider the invoice unsubstantiated and disputed.
[22] Discussions between the parties apparently broke down entirely at that point.
Subsequent correspondence
[23] On 9 September DCN’s lawyers wrote to GHP advising that failing
payment, steps to protect DCN’s position would be taken.
[24] Mr Yonge responded by email on 14 September, and again repeated the claim that the results had not been received and were now valueless:
Your client is well aware that disputes exist, and our offer to meet with you to resolve these went unanswered. I am overseas and will be back in New Zealand on Tuesday.
The work was never completed in that the specifications require test drilling, SPT tests, and reporting. We have never received any results despite repeatedly asking for these, therefore the work is incomplete and now of absolutely no value. These results were advised as being with the January invoice (disputed as below), did not come with the February invoice re-send, and did not come as agreed after meetings with your client.
These results were apparently given only to the engineers, and it is they who have benefitted from them. The engineers have since used the results, redesigned the structure, and put the subsequent work out to re-tender.
We have disputed that the invoice was sent in January. We have not [sic] record of it’s [sic] receipt, and your client has not provided the evidence that it was sent, as they agreed to do. Your client did however acknowledge a problem with their procedures.
We have disputed the inclusion into the invoice of non-agreed payment terms.
The work is incomplete and now worthless, and the invoice is quite clearly in dispute.
We remain available to meet to resolve these.
[25] DCN’s response came from its debt collectors in February 2014 demanding payment. Subsequently they served the statutory demand. Further correspondence followed between both sides about the appropriateness of using the statutory demand procedure and debt collectors.
General observations
[26] I begin with GHP. It has the onus.
[27] GHP appears to have been selective in the emails it has produced in its affidavit evidence. Materially, GPN omits to include the email of 20 February or the email of 2 April in which it purports to raise its concerns about the January invoice once again. This is not explained by Mr Yonge.
[28] There is also some apparent inconsistency between Mr Yonge’s evidence and his emails. In evidence Mr Yonge deposes that the failure to provide the results meant GHP lost the opportunity to use them for commercial benefit. Though he touches on this concern in his emails, not previously mentioned is the claim in his evidence that this failure cost GHP the opportunity to re-tender for the work it was previously contracted to do:
The core issue in dispute is the failure of DCN to provide GHP with the SPT results to complete the scope of work. This meant that GHP could not use those results for commercial benefit. Without being provided the SPT results in a timely way the scope of work was incomplete and the dispute arose. The initial piling re-tender closed on 26 March 2013 and the second piling re-tender closed on 24 April 2013. If we had received the SPT results that would have given us an advantage in the re-tenders. The results had a commercial value to us for months after Mainzeal’s demise, which was the reason we requested them to be sent to us.
[Emphasis added].
[29] Mr Yonge offers no explanation for why this particular professed concern about re-tendering was not mentioned in the April correspondence. Whether this, plus the missing emails, points to a lack of candour is however a matter of conjecture.
[30] Counsel for GHP acknowledges these shortcomings in the evidence, but he submits they are not determinative given the limited documentation from both sides that Mr Yonge’s evidence is far from implausible, and therefore that there is sufficient reason for the Court to be satisfied that GHP’s evidence passes the threshold of credibility. He argues that the exchange of emails in April lends support for GHP’s alleged continuing requests for the results, expressions of concerns about the invoice and delay, as does Mr Yonge’s email of 14 September. In effect, he contends that Mr Yonge’s claim not to have received the material on 25 January, or at all, despite his continued requests is not self-evidently dishonest or wrong. He submits that a contrary finding would require that I find that Mr Yonge is a liar.
[31] A lack of explanation is not confined to GHP’s evidence. It is a flaw the evidence for each side shares. In DCN’s case, it gives rise to unanswered questions not simply about when and if critical emails were lost from its computers, but about why DCN acted as it did in April 2013 and in particular:
a) Why Mrs Penney did not furnish the confirmation she found on
4 April;
b)Why, despite Mr Penney’s claim in his email of 16 April that “We have email proof of all the contact and when they were sent”, DCN makes no suggestion that it copied that proof to GHP at the time. It seems it had nothing to lose and everything to gain by simply re-sending the results and emails it relies upon;
c) What advantage DCN saw in withholding the results on 4 April and requesting an undertaking as to payment after it had agreed to “send them through”.
[32] If DCN had indeed sent the results to GHP on 25 January 2013, and had proof, an obvious way of putting an end to GHP’s claims would have been to provide that email proof with the email of 16 April. If its claim to have sent the results in January is genuine, arguably DCN’s reluctance to re-send them is suggestive of the factual possibility that its claim is not as forceful as counsel contends.
[33] I turn then to the issues that require determination. I pause to set out the relevant legal principles.
Legal principles
[34] Section 290 provides that a company may apply to set aside a statutory demand on the grounds that there is a substantial dispute or that the demand ought to be set aside on other grounds. It relevantly states:
290 Court may set aside statutory demand
(1) The court may, on the application of the company, set aside a statutory demand. (2) The application must be—
(a) made within 10 working days of the date of service of the demand; and
(b) served on the creditor within 10 working days of the date of service of the demand.1
…
(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.
1 It is not in dispute that these requirements are met.
[35] The Court of Appeal has noted that the assessment to be made by the Court requires it to make a prompt judgment as to whether there is a genuine and substantial dispute and that it is not the task of the Court to resolve the dispute. 2
[36] Factors to be considered are well understood. Relevantly:
a) The applicant must show that there is arguably a genuine and substantial dispute as to the existence of the debt.
b)The mere assertion that a dispute exists is not sufficient. Material, short of proof, is required to support the claim that the debt is disputed.
c) If such material is available, the dispute should normally be resolved other than by means of Court proceedings.
d)It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise.
[37] Associate Judge Abbott recently noted in Trends Publishing International
Ltd v Dalgety Finance Group Ltd:3
a) The party applying to set the demand aside has the onus of showing a fairly arguable basis for its case that it is not liable for the amount claimed;
b)The inquiry, in essence, is whether the assertion of a dispute passes the threshold of credibility;
c) The applicant is required to place before the Court information that is sufficiently reliable and believable to allow the Court to conclude that the applicant’s assertions could be correct;
d)The applicant must show a sufficient likelihood of a genuine and substantial dispute that it would be unfair to determine that dispute
2 Industrial Group v Bakker [2011] NZCA 142 at [24]; (2011) 20 PRNZ 413.
3 Trends Publishing International Ltd v Dalgety Finance Group Ltd [2014] NZHC 55 at [21].
summarily in this Court rather than by action in the ordinary way in an appropriate forum.
Discussion
Did DCN have an obligation under its contract with GPN to provide the drilling results in January 2013 or otherwise in a timely way?
[38] Ms Tabb contends that there was no contractual obligation on DCN to provide the results within any particular time or in a timely way, or to assume the risk of their being of no value if not so delivered. DCN is, she argues, nonetheless entitled to payment. She submits that, therefore, even if the results were not sent in January 2013 (which she does not concede), or soon afterwards, it does not matter. She argues that what matters is that the results were provided, even if this was not until over a year later in March 2014. Additionally she says it was open to DCN to adopt a pay first approach and to send its invoice before sending the results. Her argument seemed to be that however the facts are viewed, GHP is obliged to pay for the drilling.
[39] The evidence as to the parties’ terms of contract is sparse and it is unnecessary for me to express a view that is seen to be determinative on these matters. For present purposes it is sufficient to say that it is not in dispute that DCN was contracted to do the drilling and to provide the test results of the drilling, and that Ms Tabb’s argument as to timing seems novel. There is certainly room for argument that the parties’ agreement impliedly, if not expressly, required the provision of the drilling results in a timely way. DCN’s own evidence is emphatic that it provided the results as soon as it finished the drilling which suggests that it recognised an obligation to make timely delivery of the results.
[40] There is also room for argument that the results were to be provided before payment. Mrs and Mr Penney do not suggest the contrary or give any indication that the parties contracted on the basis that payment was required before the provision of the results. Mrs Penney says that DCN normally supplied the test results with its invoice. Materially, the invoice that she says she sent on 25 January states that payment is due by 20 February.
[41] I accept, as counsel for DCN submits, that there is no suggestion DCN
contracted to bear the risk of Mainzeal’s unexpected demise or the associated risk
that GHP might not be able to make commercial use of the results. Nonetheless if GHP was entitled to timely provision of the results, it is trite that DCN could normally expect that the consequence of its failure (if any) to fulfil that obligation would be that the results would be of no or diminished value to GHP. Relevantly, DCN makes no suggestion that the results would have had any ongoing commercial value if not provided in a timely way.
Do GHP’s assertions that it did not get the results in January 2013, or indeed until
March 2014 when it got DCN’s evidence, pass the threshold of credibility?
[42] The dispute is essentially one of fact.
[43] In the context of the present proceeding the Court’s difficulty is in determining whose version of events is right. Applications of this kind do not call for a forensic examination of the evidence, and where there are conflicts in the evidence care is needed to avoid unsafe conclusions. It is, as the Court of Appeal observed, not the task of the Court to resolve the dispute.4
[44] Each party’s counsel submits its version of the evidence is to be preferred. [45] Counsel for Mr Yonge accepts there cannot be a dispute of any substance if
it is clear that DCN sent the results on 25 January 2013, but he submits it arguably
did not do so. Moreover, he submits, it did not avail itself of two further opportunities to do so: firstly in February when DCN asked for them after receiving an email enquiry as to why it had not paid DCN’s invoice, and secondly on 4 April when the parties agreed that DCN would provide the results later that day and GPN would pay the invoice if the results were satisfactory.
[46] Counsel for DCN on the other hand argues emphatically that a robust approach is warranted when considering the conflicts in evidence, and the lack of email records that might put beyond any doubt whether or not the claimed email of
25 January was indeed sent. Mr Yonge’s evidence, she contends, is so implausible as to render doubt (if any) of no consequence, such that it should be “taken with a grain of salt” and rejected. She argues the demise of Mainzeal lies at the heart of the so-called dispute, and when the dispute is viewed in that context it is plain that
Mr Yonge did not actually need the logs once Mainzeal collapsed and that GPN has
4 Industrial Group v Bakker [2011] NZCA 142 at [24]; (2011) 20 PRNZ 413.
manufactured a dispute. What other reason, counsel asks, would GHP have to not sign the requested undertaking on 4 April? Counsel surmised that if Mr Yonge was genuine in his promise to pay, he would have no reason to refuse to sign an undertaking.
[47] The submission is conclusory and is not one I consider I can safely accept in the context of the present application. Certainly there are shortcomings in Mr Yonge’s evidence but that does not point necessarily to Mr Yonge’s having no genuine or rational reason for not giving an undertaking, or that he is being deliberately untruthful in his denial that GHP received the results in January 2013. GHP’s correspondence in April suggests GHP wanted to check the logs before paying and to try to sell the results. I cannot discount the possibility that these may have been genuine reasons and that there may be an explanation for the failure to mention GHP’s interest in re-tendering.
[48] Moreover, the difficulties with a robust approach are ones that counsel for DCN herself appeared to recognise, when making the rather less emphatic submission that the Penneys’ view of events is “the more likely”. Essentially what counsel for DCN invites me to find is that DCN did indeed send the invoice and test results on 25 January following completion of the work, and that Mr Yonge has deliberately fabricated his claim that he never received the results to avoid paying for the work his company contracted for. I am satisfied it would not be safe to reach such a conclusion in the context of the present application.
[49] Counsel’s further submission, that even if DCN did not send the results on
25 January, GHP now has them and must pay for them, does little to lend support for the robust approach counsel argues for.
Conclusion
[50] I agree with Mr de Hamel, if only by a fine margin, that there is arguably a genuine dispute that the results were not sent to GPN on 25 January 2013.
[51] It may be that this is simply a case of a party that is set upon avoiding payment, and, in bad faith, using the time old excuse that it did not get what was contracted for. It may however be a case of a party that genuinely wanted the results to be satisfied the work was done so as to have the opportunity to try to make some use of them before it was too late; that in fact the other party had never released the
results, being itself anxious about Mainzeal’s demise and wanting to use what leverage it had to secure payment.
[52] The issue is one properly reserved for trial where the Court will have the benefit of greater evidence as to the intentions and actions of both sides.
Result
[53] For the above reasons, I grant the application to set aside the statutory demand. The statutory demand is set aside accordingly.
Costs
[54] Costs must follow the event. GHP is entitled to costs and disbursements on a 2B basis as approved by the Registrar. I order accordingly. I note, as I did at the hearing, that I do not consider this is a case for an order for increased or indemnity costs for reasons that are twofold:
a) First, to the extent that GHP has incurred costs in excess of scale costs, it must take a degree of responsibility for that. Its evidence is not without defects or free from criticism. It is by a fine balance that GPH is the successful applicant. Moreover if it did not get the results in January (as claimed) it could have produced the correspondence it claims it received and sent in February 2013. Had it done this proceeding may have over well before now.
b)Secondly, as counsel acknowledges, GHP’s actual costs do not significantly exceed 2B costs. The cost of preparing further submissions to set out what those costs actually are and the reasons why they should be granted is not warranted. A sense of proportion is called for.
Associate Judge Sargisson
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