Giggle HQ Limited v Giggle Limited
[2023] NZHC 3846
•21 December 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-1721
[2023] NZHC 3846
UNDER part 19 of the High Court Rules 2016 and the Companies Act 1993 IN THE MATTER
of an application to set aside a statutory demand
BETWEEN
GIGGLE HQ LIMITED
Applicant
AND
GIGGLE LIMITED
Respondent
Hearing: On the papers Appearances:
D M Hughes for the Applicant S Elliot for the Respondent
Judgment:
21 December 2023
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
[Costs]
This judgment was delivered by me on 21 December 2023 at 4 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Anthony Harper, Auckland
Insight Legal Limited, Warkworth Blackstone Chambers, Auckland
GIGGLE HQ LTD v GIGGLE LTD [2023] NZHC 3846 [21 December 2023]
Introduction
[1] This is an application for costs by Giggle HQ Ltd (Giggle HQ) in relation to its application to set aside the statutory demand served on it by Giggle Ltd.
[2] After filing the application and before filing any evidence in response, Giggle Ltd withdrew its statutory demand. A joint memorandum was then filed dated 24 August 2023 recording that the applicant and respondent had not been able to reach agreement on costs and advising that the applicant intended to discontinue the proceeding subject to the Court’s determination of costs.
[3] Associate Judge Taylor directed in his minute dated 6 September 2023 that memoranda were to be filed to allow the issue of costs to be determined on the papers. I now do so below.
Background
[4] On 26 July 2023 Giggle Ltd served a statutory demand on Giggle HQ for the sum of $16,669.21 relating to 11 purportedly unpaid invoices.
[5] On 4 August 2023, Giggle HQ filed and served an application to set aside the statutory demand. The application was accompanied by affidavits from Christopher Brown and Jasmine Kiihfuss. Giggle HQ says that these affidavits set out that:
(a)three invoices, totalling $1,827.41, had already been paid by Giggle HQ to Giggle Ltd;
(b)three invoices, totalling $7,199, were issued for incorrect amounts and ought to have been issued for $3,468.74 only and that Giggle Ltd was, no later than 24 June 2023, notified that at least two of the invoices had been issued for incorrect amounts;
(c)three invoices, totalling $4,222.80, were not due and owing to Giggle Ltd;
(d)two invoices, totalling $3,450, were due and owing to Giggle Ltd;
(e)the sum of $6,918.74 only was due to Giggle Ltd; and
(f)Giggle HQ had a counterclaim against Giggle Ltd for no less than
$29,871.48.
[6] On 16 August 2023, Giggle Ltd withdrew its statutory demand. This was before filing any notice of opposition or evidence in the proceeding. The email from counsel for Giggle Ltd advising that the statutory demand was to be withdrawn recorded:
At the time the statutory demand was issued, no dispute had been raised by GHQ in relation to any of the 11 invoices concerned. GHQ’s application now raises (for the first time) a number of matters in dispute.
Given the matters raised, Giggle Limited withdraws the statutory demand.
(emphasis in original)
Relevant costs principles
[7] The starting point is that costs are at the discretion of the Court.1 Although the discretion is wide, it is not unfettered. Rule 14.2 of the High Court Rules 2016 sets out the general principles that are to be applied including:
(a)the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds; and
(b)an award of costs should reflect the complexity and significance of the proceeding.
[8] On a discontinuance, the applicant bears the onus of displacing the presumption in r 15.23 of the High Court Rules that the applicant must pay the respondent’s costs. Rule 15.23 provides:
Unless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.
1 High Court Rules 2016, r 14.1.
[9] “Proceeding” is defined in the High Court Rules as “any application to the Court for the exercise of the civil jurisdiction of the Court other than an interlocutory application”.2
[10] The application to set aside a statutory demand was filed as an originating application under Part 19 of the High Court Rules and so falls within the meaning of “proceeding”. Rule 15.23 therefore applies to this application.
[11]The principles applying to the application of r 15.23 are summarised in
McGechan on Procedure:3
(a)The r 15.23 presumption obviates any requirement for the defendant to demonstrate that the plaintiff acted unreasonably in commencing and then discontinuing the proceeding. The defendant has the advantage of the presumption even where there has not been such unreasonableness.
(b)Although the r 15.23 presumption is designed to give a certain and predictable outcome upon discontinuance, it may be displaced if the court finds there are circumstances which make it just and equitable that it should not apply.
(c)Although the court is not limited in factors it may take into account when considering whether the presumption is displaced, generally:
(i)The court will not consider the merits of respective cases unless they are so obvious that they should influence the costs outcome.
(ii)The court will consider the reasonableness of the stance of both parties up to the point of discontinuance: whether it was reasonable for the plaintiff to bring and continue the proceeding; and for the defendant to oppose the proceeding. The plaintiff will not be able to avoid the presumption by showing that at one point it had reasonable grounds for believing it would be successful in the proceeding.
(iii)The reason for discontinuing may be relevant, for example a change of circumstances rendering the proceeding unnecessary. However it must be clear that the plaintiff would have succeeded had the circumstances … not changed …
(d)The court’s general discretion in r 14.1 as to costs can also override the general principles relating to discontinuance.
2 High Court Rules 2016, r 1.3.
3 Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR15.23.01]; citing Kroma Colour Prints Ltd v Tridonicatco NZ Ltd [2008] NZCA 150, (2008) 18 PRNZ 973, FM Custodians Ltd v Pati [2012] NZHC 1902 at [10]–[12] and Opus International Consultants Ltd v Colac Bay Vision Ltd [2015] NZHC 1782, [2015] NZCCLR 19 at [20]–[24].
Submissions
[12] Giggle HQ submits that it is clear from the affidavits filed that many of the disputed invoices had been raised with Giggle Ltd prior to the statutory demand being issued. Following the withdrawal of the statutory demand, Giggle HQ offered to settle the issue of costs with Giggle Ltd for the payment of $3,000. That offer was not accepted.
[13] In Giggle HQ’s submission, the statutory demand ought never to have been issued because:
(a)Giggle Ltd was aware that the debt claimed in the statutory demand was clearly not due and owing.
(b)The statutory demand was filed for reasons other than to recover a debt due to Giggle Ltd with Giggle HQ submitting that it was to influence and impact upon the parallel proceedings (CIV-2023-463-11) relating to the broader dispute including between Giggle HQ and Giggle Ltd, as to the extent of Giggle HQ's rights to use and sub-licence the Giggle Systems and Solutions.
(c)Relatedly, Giggle Ltd is one of a number of companies, owned by or associated with Darren Shaw, which are in dispute with Giggle HQ. Giggle HQ says the serving of the statutory demand was nothing more than a tactical step in that dispute, as opposed to a genuine attempt to recover a debt due and that this is evidenced by Giggle Ltd's serving of the statutory demand despite being on notice of many of the grounds on which the debt was disputed and by the withdrawal of the statutory demand following Giggle HQ's application. This has resulted in a waste of the Court's time and Giggle HQ's time and costs.
[14] Giggle HQ says that despite this, it does not seek costs on an increased basis but instead costs on a 2B basis for the filing of the application.
[15] In response, Giggle Ltd submits that in the application to set aside Giggle HQ conceded a total of $9,1062.72 (covering seven of the 11 invoices) was owed by it. The remainder is disputed.
[16] Giggle Ltd submits that the matters remaining in dispute relate predominantly to Giggle HQ’s practice of issuing ‘GHQ Notices’, purporting to specify the correct amount to be invoiced in respect of advertising run by Giggle HQ on Giggle Ltd’s networks. Giggle Ltd does not accept this practice is valid and submits there is no contractual basis for it. However, Giggle Ltd acknowledges there is a dispute to be determined.
[17] Because of this, Giggle Ltd no longer considered it appropriate to maintain a statutory demand and instead, as a matter of expediency, withdrew the statutory demand on the basis that:
(a)the conceded amounts are required to be paid; and
(b)it is more appropriate for the remaining disputes to be determined as part of the parties’ ongoing substantive proceeding rather than in the confines of an application to set aside the statutory demand.
[18] Giggle Ltd’s position is that it has been partially successful in respect of the statutory demand and so the appropriate course is for costs to lie where they fall. The respondent’s submission is that this is consistent with the approach adopted in similar cases, referring to Cooney Trustees Ltd v Pirawai Excavation Ltd, QDC Developments Ltd v The Trustees of the Boss Properties Trust, Palladium Properties Ltd & Ors v Commissioner of IRD and Northern Crest Investments Ltd v Robt. Jones Holdings Ltd.4
[19] Giggle Ltd submits that the law is clear that where a debtor company concedes part of a statutory demand, the company is required to make immediate payment of
4 Cooney Trustees Limited v Pirawai Excavation Limited [2014] NZHC 243; QDC Developments Limited v The Trustees of the Boss Properties Trust HC Wellington CIV-2010-485-1761, 1 December 2010; Palladium Properties Ltd & Ors v Commissioner of IRD HC Auckland CIV- 2006-404-006942, 20 June 2007; and Northern Crest Investments Ltd v Robt. Jones Holdings Limited HC Whangerei CIV 2008-485-2673,11 March 2009.
the conceded amount referring to Palladium Properties and Northern Crest Investments.5
[20] In addition, Giggle Ltd submits that there is no basis for the counterclaim raised by Giggle HQ as the sum claimed reflects the fees charged by Giggle HQ to its franchisees for use and support on Giggle HQ’s networks. Giggle Ltd says it is not, nor ever has been, a franchisee of Giggle HQ and there is no other relationship between Giggle Ltd and Giggle HQ that requires Giggle Ltd to pay any such fees. The costs memorandum filed for Giggle Ltd describes the alleged counterclaim as an “aspirational fiction”.
Discussion
[21] As set out above in the summary from McGechan on Procedure, when considering whether the rule 15.23 presumption is rebutted, the Court will not consider the merits of respective cases unless they are so obvious that they should influence the costs outcome.
[22] The position here is complicated because the discontinuance by the applicant is following the withdrawal of the statutory demand. The application to set aside the statutory demand could not proceed following the withdrawal because there was no longer any statutory demand to set aside.
[23] Importantly in terms of costs, the statutory demand appears to have been withdrawn without condition. There was no agreement in writing, for example, that the amount that the applicant conceded was payable was required to be paid before the statutory demand was withdrawn.
[24] In addition, the position in respect of the disputes in relation to the debt owed and the alleged counterclaim are not so obvious that they ought to influence the costs outcome.
5 Palladium Properties Ltd & Ors v Commissioner of IRD (HC AK CIV 2006-404-006942, 20 June 2007) at [25] and Northern Crest Investments Ltd v Robt. Jones Holdings Limited HC Whangerei CIV-2008-485-2673,
11 March 2009.
[25] In circumstances where the statutory demand was simply withdrawn and so the application was required to be discontinued, costs ought to be paid by the respondent.
Costs claimed
[26] A memorandum has been filed on behalf of the applicant seeking costs on a 2B basis in the amount of $4780 for step 37 in sch 3 of the High Court Rules 2016 plus disbursements of $540 for the filing fee for the originating application.
[27] These costs sought and the filing fee disbursement are both appropriately claimed. I therefore award costs and disbursements on this basis below.
Result
[28]The respondent is to pay costs to the applicant on a 2B basis in the amount of
$4,780 in costs, plus disbursements of $540, for a total of $5,320.
Associate Judge Sussock
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