Heating & Gas Centre (2002) Limited v Anderson
[2020] NZHC 2343
•9 September 2020
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2020-419-000004
[2020] NZHC 2343
UNDER The Companies Act 1993, s 290 IN THE MATTER OF
Setting aside a statutory demand
BETWEEN
HEATING & GAS CENTRE (2002) LIMITED
Applicant
AND
MAUREEN ERIS ANDERSON, COLIN PARRY JONES and VALERIE JOY JONES,
as trustees of the RIMU & STIRLING NO 2 TRUST
Respondents
Hearing: 26 August 2020 Appearances:
D Hayes for Applicant
T M Braun and E Rawson for Respondents
Judgment:
9 September 2020
Reissued:
14 September 2020
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by Associate Judge Andrew
on 9 September 2020 at 3.00 pm, re-issued on 14 September 2020 pursuant to r 11.5 of the High Court Rules
Registrar / Deputy Registrar Date……………………….
HEATING & GAS CENTRE (2002) LTD v ANDERSON & ORS [2020] NZHC 2343 [9 September 2020]
[1] This judgment, originally dated 9 September 2020, is being re-issued to address the issue of an extension of time for complying with the statutory demand, pursuant to s 291 of the Companies Act 1993.
[2]The relevant, additional orders are set out at [42] below.
Introduction
[3] This is an application to set aside a statutory demand pursuant to s 290(4) of the Companies Act 1993 (the Act).
[4] The respondent trustees are the registered proprietors and landlord of the premises at 14 Perclo Place, Hamilton (the Property). The applicant, Heating & Gas Centre (2002) Ltd (Heating & Gas), was the lessee of the Property.
[5] The statutory demand in the sum of $18,038.11 was served on Heating & Gas in December 2019 and is said to consist of rental arrears and outgoings. At the same time, Heating & Gas was served with related High Court proceedings brought by the respondent trustees, as landlord, seeking an order to cancel the lease and claiming damages of $18,038.11. That is the same debt for rental arrears that is the subject of the statutory demand.
[6] Heating & Gas says that there is a genuine dispute over the debt and that it has a counterclaim against the respondent trustees for damages for the landlord’s unlawful entry of the Property. It claims that such damages equal or exceed the alleged debt.
[7] The critical issue I must determine is whether, as the applicant, Heating & Gas has established that there is arguably a genuine and substantial dispute as to the existence of the debt and/or whether the counterclaim is reasonably arguable in all the circumstances.
Factual background
[8] In August 2017, the respondent trustees and Heating & Gas entered into an agreement to lease the Property. The term of the lease was for four years and with one
right of renewal. The annual rental was $30,000. In accordance with cl 3.1 of the agreement to lease, the rent was to be paid monthly ($2,500 plus GST per month).
[9] On 6 September 2017, Heating & Gas was provided with a tax invoice by the respondent trustees that provided a break-down of rental payments and outgoings charged on an annual basis.
[10] The respondent trustees say that Heating & Gas failed to make payment of monthly rental of $2,500 on 18 February 2018 and that there were further failures on 18 February 2019, 18 September 2019, 18 October 2019 and 18 November 2019.
[11] On 14 October 2019, the respondent trustees served on Heating & Gas a letter advising Heating & Gas that its current rental arrears totalled $8,875.67. The letter made demand of payment of the outstanding sum by 4 pm on 14 October 2019. The letter also stated that failure to make the payment would result in the termination of the lease.
[12] On 18 October 2019, the respondent trustees served on Heating & Gas a letter entitled “Termination of lease”. The letter claimed that Heating & Gas was in default of the lease and that total arrears under the lease were $7,495.20. The letter further advised that the locks at the Property had been changed.
[13] On 22 October 2019, the respondent trustees issued a notice pursuant to s 245 of the Property Law Act 2007 (the PLA) to Heating & Gas. The letter was entitled “Cancellation of lease for breach of covenant to pay rent”. The letter claimed that the amount of rental and other outgoings outstanding as at 31 October 2019 was
$14,307.81. The letter gave notice to Heating & Gas that it had until 8 November 2019 to remediate the breach. It further noted that if the breach was not remedied at the expiry of that period, the lessor may seek to cancel the lease in accordance with s 244 of the PLA.
[14] On 6 November 2019, Heating & Gas’ solicitor advised the respondent trustees that he considered the notice issued on 22 October 2019 to be invalid.
[15] On 15 November 2019, the respondent trustees issued Heating & Gas and its director, Mr Henson, with trespass notices in respect of the Property.
[16] On 27 November 2019, the respondent trustees, as landlord, re-entered the Property and had the locks changed. Mr Henson returned to the Property at approximately 4 pm and was advised that he was trespassing.
[17]The statutory demand was served on 6 December 2019.
[18] In December 2019, the respondent trustees filed related High Court proceedings (CIV-2019-419-325) against Heating & Gas seeking an order to cancel the lease and claiming damages of $18,038.11.
[19]On 11 February 2020, this Court made an order by consent (CIV-2019-419-
325) that the lease was cancelled, and the respondent trustees were granted possession of the Property. No orders were made in relation to costs or damages. The parties agreed to deal with the issue of costs separately.
Relevant legal principles
[20] In Confident Trustee Ltd v Garden and Trees Ltd, the Court of Appeal referred to the principles applicable to applications under s 290(4) of the Act, as follows:1
The general principles under s 290(4) are well settled:
(a)The onus is on the applicant seeking to set aside the statutory demand to show that there is arguably a genuine and substantial dispute as to the existence of the debt. The Court’s task is not to resolve the dispute but to determine whether there is a substantial dispute that the debt is due.
(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 first in ordinary civil proceedings before any statutory demand is issued.
(d)If a counterclaim, cross-demand or set-off is suggested an applicant must establish that this is reasonably arguable in all the circumstances.
1 Confident Trustee Ltd v Garden and Trees Ltd [2017] NZCA 578 at [16].
(e)It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise unless such evidence is contrary to the available documents or earlier statements made by the parties.
[21]In AAI Ltd v 90 Lichfield Street (in rec and in liq), Winkelmann J held:2
[22] It is important to keep in mind the words of the statute. What the applicant must show is that the dispute it raises has substance; the applicant must explain to the Court what the dispute is; and the dispute so shown must be a real and not a fanciful or insubstantial dispute. The Court must bear in mind that it is operating in the summary jurisdiction, with the accompanying disadvantages that brings for any applicant. The Court must also keep in mind the requirement that what is intended to be a summary hearing should not be converted into a full-blown trial.
Analysis and decision
Issue 1: Has the applicant established that there is arguably a genuine and substantial dispute as to the existence of the debt?
[22] Mr Hayes, for Heating & Gas, responsibly acknowledged that, apart from the February 2018 payment of rent and the alleged $1,200 missing money, the bulk of the rent arrears, the subject of the statutory demand, is not really in dispute.
[23] The evidence put forward by Mr Henson of Heating & Gas in relation to the February 2018 rent is thin and tenuous. He claims that he paid the February 2018 rent in cash and that IRD currently hold a receipt for that payment, which he is trying to reclaim. In response to that evidence, Ms Amy Jones, the daughter of the respondent trustee, Mr Colin Jones, says that she has never met Mr Henson and never attempted to contact him about the February 2018 rent.
[24] As to the $1,200 cash which Mr Henson alleged is missing, after Mr Colin Jones had entered the premises on 27 November 2019, that is in substance a counterclaim.
[25] In these circumstances, I reject the submission of Mr Hayes that the withdrawal by the respondent trustees of their damages claim in the related proceedings before
2 AAI Ltd v 90 Lichfield Street (in rec and in liq) [2015] NZCA 559, [2016] NZAR 1338.
Muir J in February 2020 is an acknowledgement that there is a disputed debt. The respondent trustees were successful in those proceedings, having the lease cancelled and being granted possession. No inference can properly be drawn from that non- pursuit of the damages claim. Heating & Gas has not been able to demonstrate that there is any real dispute about the rent arrears owed to the respondent trustees.
[26] I find that Heating & Gas has not established a genuine, substantial dispute as to the existence of that debt. I also reject the submission that a statutory demand is an abuse of process because the sum sought in the demand was also being claimed in concurrent proceedings.3
[27] The critical issue, which I now address, is whether Heating & Gas has established a reasonably arguable counterclaim.
Issue 2: Is the applicant’s counterclaim reasonably arguable in all the circumstances?
[28] Heating & Gas contends that it has a counterclaim that meets, or exceeds, the debt in the statutory demand. It claims that the respondent trustees, as landlord, unlawfully re-entered the Property in November 2019, and that those unlawful actions, including placing a container and then a 10-tonne concrete block over the entrance to the Property, has caused substantial loss to Heating & Gas’ business. It is claimed that the re-entry did not comply with the provisions of s 244 of the PLA because the landlord committed forcible entry under s 91 of the Crimes Act 1961. Section 244(1)(b) of the PLA provides that a lessor who wishes to exercise the right to cancel a lease may re-enter the land peaceably and without committing forcible entry under s 91 of the Crimes Act 1961.
[29] In his affidavit, Mr Henson, the director of Heating & Gas, further claims that the landlord unlawfully picked and changed the locks, that his burglar alarm was destroyed and that his water was cut off. At paragraph 53 of his affidavit, Mr Henson summarises his position as follows:
The above acts of the landlord have destroyed my peaceful enjoyment of the property and have caused substantial losses of income and costs to me. Lost income is estimated at around $30,000.00 based on days lost dealing with harassment of the above events. I lost several jobs as a result. In addition I
3 See Autoterminal New Zealand Ltd v IBC Japan Ltd [2020] NZHC 843 at [112].
have incurred about $10,000 in legal fees to date fending off these interferences.
[30] Having regard to the evidence of Mr Colin Jones and the obvious difficulties experienced by the respondent trustees as a landlord dealing with a lessee who had not paid the rent, there is good reason to be sceptical about many of the claims which Mr Henson makes. However, there are obvious conflicts in the evidence as to the nature of the re-entry and the various events of which Mr Henson complains. For the purposes of this application, I am prepared to accept that there are reasonably arguable claims that the re-entry was unlawful. In reaching that conclusion, I accept that there is some merit to Mr Hayes’ submission that the orders of Muir J did not specify the date that the lease was cancelled, and the default position that therefore arises, namely the date of the order, means that the previous entries by the landlord were arguably unlawful.
[31] The critical issue that arises, however, is whether Heating & Gas has provided sufficient evidence to establish a reasonably arguable claim that its crossclaim is equivalent to or exceeds the amount of the statutory demand.
[32] As Mr Braun, for the respondent trustee, submitted, this case is similar to Hurunui Hotel (2004) Ltd v Strong, where Associate Judge Osborne declined to set aside a statutory demand.4 In that case, a lessee, who had fallen out with its landlord, sought to set aside the demand on the basis that it had an unresolved claim at arbitration for damages arising from what it said were the landlord’s breaches of lease. Associate Judge Osborne held that the applicant, the lessee, had not satisfied him that it had a cross-demand equivalent to the landlord’s demand. His Honour held:
[15] I am prepared to accept for the purposes of this application that the lessee may have in the form of the claims it is pursuing at arbitration at least the appearance of a cross-demand, as required by the first aspect of s 290(4)(b).
[16] Where the lessee’s application fails is through Mr Clay’s inability to point to any satisfactory evidence indicating that the cross-demand is equivalent to the statutory demand. Mr Cooper’s evidence that the cross- demand will be at least $100,000 per annum is not a satisfactory quantification. Quantification in this context requires something more than a
4 Hurunui Hotel (2004) Ltd v Strong [2013] NZHC 883; see also Manchester Securities Ltd v Body Corporate 172108 [2018] NZCA 190 at [28].
deponent’s ball park estimate. I refer to cases such as Florian Leathergoods Ltd v Furjan.5
[33] In applying the principles of Hurunui to this case, I find that Heating & Gas has failed to provide the necessary quality of evidence to establish that it is reasonably arguable that its counterclaim meets, or exceeds, the amount of the statutory demand. Just as in Hurunui, Heating & Gas here, has not only provided insufficient quantification of the alleged counterclaim, but there is no demonstrated justification of the failure of quantification. All that Mr Henson has done is to give a ballpark estimate of the figure of $30,000 and in circumstances where, on the undisputed evidence, his business was, at the relevant time, in severe financial difficulties. If he did experience significant business losses at that time it is far from apparent that they had anything to do with the allegedly unlawful actions of the landlord. I also find that Mr Henson has provided very little detail at all about the nature of his business. The evidence falls well short of what is required.
[34] The basis for the counterclaim in this case is even weaker than that in Hurunui, where at least the applicant was able to point to and rely upon an arbitration claim. Heating & Gas, which really has made no attempt to provide evidence as to the nature of its business, has not, to date, taken any steps to advance a counterclaim.
[35] I also note that it is undisputed that Heating & Gas remained in possession until the consent orders were made by Muir J in February 2020. No rent was paid by Heating & Gas for the period November 2019 through until February 2020. I also understand it to be undisputed that Mr Henson lived at the Property during that time, which was not permitted under the lease.
[36] I further note that Mr Henson has made no attempt to quantify the other losses of which he complains, namely losses arising from the allegedly unlawful changing of the locks and the cutting off of the water supply. The estimated damage to the alarm system is said to cost between $750 and $2,000, but that is well short of the amount of the statutory demand. In any event, no documentation is provided in support of such a claim.
5 Florian Leathergoods Ltd v Furjan HC Christchurch M283/99, 30 July 1999 at [28].
[37] Mr Hayes contended that there was a potential exemplary damages claim against the respondent trustees as the landlord. For the reasons given above, I am sceptical as to whether a proper basis exists for an award of exemplary damages, but even if it did, it is difficult to see how anything other than a very modest or minimal amount of damages might be awarded.
[38] Likewise, Mr Hayes’ reliance on the decision of Kós J in Hong v Auckland Standards Committee No 3, is of no assistance to Heating & Gas.6 I accept that the reference by Kós J at [50] to the issue of forcible re-entry might provide support for the claim of an arguable case that Heating & Gas acted unlawfully in this case. However, that case does not in any way address the critical issue of whether Heating & Gas has provided sufficient quantification of its alleged losses.
[39] In all the circumstances, I conclude that Heating & Gas has not established a reasonably arguable counterclaim that it meets, or exceeds, the amount of the statutory demand.
[40] Having found that the applicant, Heating & Gas Centre (2002) Ltd, has failed to establish that there was a genuine and substantial dispute over the debt and/or that it has a counterclaim against the respondent trustees for damages that equal, or exceed, the alleged debt, it follows that the application to set aside must be dismissed.
Result
[41] The application by Heating & Gas Centre (2002) Ltd, the applicant, to set aside a statutory demand, dated 19 December 2019, is dismissed.
[42] I further order, pursuant to s 291 of the Companies Act 1993, that the time for complying with the statutory demand is extended until 1 October 2020. In the event that the debt, the subject of the statutory demand, is not paid by that date, then the respondent trustees may make an application to put the applicant company into liquidation.
[43] As to costs, my preliminary view is that the respondent, having been successful, is entitled to costs and disbursements, and on a 2B basis.
6 Hong v Auckland Standards Committee No 3 [2015] NZHC 2521.
[44] If costs cannot be agreed, then memoranda (no more than three pages) are to be filed and served within 21 days.
Associate Judge P J Andrew
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