Herne Bay Heritage Ltd v DNS Contracting Ltd HC Auckland CIV 2008-404-000806
[2008] NZHC 2556
•3 September 2008
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2008-404-000806
UNDER the Companies Act 1993
BETWEEN HERNE BAY HERITAGE LTD Plaintiff
ANDDNS CONTRACTING LTD Defendant
Hearing: 1 September 2008
Appearances: S Grant for Plaintiff
P Davey for Defendant
Judgment: 3 September 2008 at 4:00 pm
JUDGMENT OF ASSOCIATE JUDGE HOLE
This judgment was delivered by me on 3 September 2008 at 4:00 pm pursuant to Rule 540(4) of the High Court Rules.
Registrar/Deputy Registrar
Date: ……………………….
Solicitors:
Hornabrook Macdonald Lawyers, PO Box 91845, Auckland
Bergseng & Co., PO Box 147 212, Ponsonby, Auckland
S Grant, PO Box 4338, Auckland
P Davey, PO Box 3320, Auckland
HERNE BAY HERITAGE LTD V DNS CONTRACTING LTD HC AK CIV 2008-404-000806 3 September
2008
Introduction
[1] By way of originating application, the plaintiff (“Herne Bay”) has applied to have a statutory demand (served on it by the defendant (“DNS”) on 5 February 2008) set aside pursuant to s 290 of the Companies Act 1993.
[2] In addition, Herne Bay applied for the time for its compliance with the statutory demand to be extended. On 1 April 2008, Faire AJ ordered that the time for compliance was to be extended until further order.
[3] The statutory demand claims $40,000 due by Herne Bay to DNS in respect of excavation works undertaken for Herne Bay by DNS at 29 Marine Parade, Herne Bay, between 24 November 2006 and August 2007. Herne Bay has paid the accounts sent to it by DNS in respect of the site clearance works undertaken in November 2006 and stage 1 of the project undertaken in May 2007. The $40,000 is the balance of a total of $82,839.72 claimed by DNS from Herne Bay in respect of stage 2 of the Marine Parade job.
[4] On 11 November 2007, a payment of $42,839.72 was made by Herne Bay in respect of stage 2. On the same day, Mr Dackers, representing Herne Bay, sent an e- mail to DNS reading:
We have made payment by direct credit today of $42,839.72. As it is
Sunday this will show Tuesday.
Note the account issuing is Havana Johnson.
This was all that was possible with the currently available funds. Will keep you updated on the balance.
However, some consideration needs to be given as to how we resolve the credit agreed for the project last year. Perhaps this can be addressed through the remaining works.
[5] By e-mail dated 12 November 2007, Mr Rich of DNS wrote to Herne Bay, as follows:
I can’t see the problem in meeting to discuss this but as you wish please find the following:
As per previous e-mail thanks for the payment.
Regarding the credit you referred to in, “last year’s project” when you mentioned this last time I told you of what transpired and repeat as below;
Eberts required a price for the excavation to the St Luke’s project. I submitted a price to them and advised you of the amount.
They later came back to me and asked for a reduction it that price and I called you to tell you of this and see if any reduction was being passed on to yourselves.
Your words to me were yes they had advised you and to just “put my new price through” which I did along with the priced schedule of quantities, Eberts can confirm this.
I have never had any credit or monies in my price your yourselves and was led to believe all was “above board” between your Hemisphere Group and Eberts.
I hope this clarifies the situation.
Can you please advise when the balance of the monies will be available as I am getting huge pressure from the transport company. We will need this company to complete the works as their cartage and tipping rates are far cheaper than anybody else.
[6] In or about May 2006, the St Luke’s Property Trust Limited undertook a project at St Luke’s. St Luke’s Property Trust Limited was a member of a group known as the Hemisphere Group. Herne Bay was also a member of the Hemisphere Group.
[7] According to Mr Rich’s affidavit, in respect of the St Luke’s project DNS was a sub-contractor to a company known as Ebert Construction Limited (“Ebert”). Counsel has advised that Ebert was not a member of the Hemisphere Group.
[8] At p 6 of Mr Dackers’ second affidavit, he states that DNS had undertaken the work at St Luke’s for St Luke’s Property Trust Limited. This is denied by DNS. Its denial is confirmed by Exhibits D and E to Mr Richards’ affidavit which show quite conclusively that DNS contracted with Ebert in respect of the St Luke’s storage facility project.
Herne Bay’s case
[9] Herne Bay argues that it is not obliged to pay the $40,000 to DNS as DNS had given a credit in respect of work undertaken at St Luke’s amounting to $40,000; and Herne Bay is entitled to take advantage of that credit. In its application, Herne Bay claims that there is a genuine dispute between the parties and that Herne Bay has a counterclaim against DNS for $40,000.
[10] In her submissions for Herne Bay, counsel contended that Herne Bay’s defence did not “rest on set-off per se but on the defendant’s representation that it would apply a credit due to St Luke’s to a contract involving another company in the group”.
DNS’s case
[11] DNS says DNS did not give a credit to anyone in respect of the St Luke’s project. However, its original quotation to Ebert was subsequently revised by a reduction in price amounting to $40,000. Further, it says that, in respect of the St Luke’s project, it did not contract with any member of the Hemisphere Group but only with Ebert. Finally, it denies that Mr Rich or anyone else from DNS made any representation to Herne Bay to the effect that Herne Bay was entitled to a credit of
$40,000 in respect of the Marine Parade job.
Issues
[12] To some extent the issues are inter-dependent. They are:
(i)Was any credit given by DNS to anyone in respect of the St Luke’s project?
(ii) If so, was it given to Herne Bay?
(iii)Was any representation given by DNS to Herne Bay that the contract price for the Marine Parade works would be reduced by $40,000?
(iv)If so, did it cause or induce Herne Bay to enter into the Marine Parade contract?
The evidence
[13] Mr Dackers swore two affidavits for Herne Bay. Paragraphs 5, 6 and 7 of his first affidavit are relevant:
5.DNS carried out excavation work in 2006 at St Luke’s under my direction as project manager. After DNS had submitted a tender to do this work, Glen Rich of DNS telephoned me and told me that his price was to reduce by $40,000 and that DNS would provide a credit for the amount of its over-estimate. He specifically asked me for direction as to how the credit would be applied. I directed DNS to give the credit of $40,000 against a residential project that Christopher Cook and I were involved in at Marine Parade, Herne Bay, through HBH [Herne Bay], and he agreed.
6.After further discussions HBH engaged DNS to carry out site clearance at the Marine Parade development at the end of 2006 and excavation work in May 2007.
7.At the end of 2006, Glen Rich of DNS and I discussed the $40,000 credit. At first Mr Rich said that DNS was not providing any credit on the Herne Bay development. He asserted that it had been previously discussed that the credit should be given to Ebert Construction Limited. I answered that this was not what was discussed and that I had previously directed him to apply the credit to a residential project to be carried out at Marine Parade which I was involved in and he agreed. At this point, Mr Rich acknowledged that the credit was to be applied towards a residential project.
[14] In his second affidavit, Mr Dackers deposed (inter alia):
4.In my earlier affidavit sworn on 15 February 2008 at point 4 I stated that after had submitted a tender to do the work at St Luke’s, Mr Rich of DNS telephoned me and told me that his price was to reduce by $40,000 and that DNS would provide a credit for the amount of its over-estimate. He specifically asked me for a direction as to how the credit should be applied. I directed DNS to give the credit of
$40,000 against a residential project that Christopher Cook and I
were involved in at Marine Parade, Herne Bay, through HBH, and he agreed.
5.At point 14 in the affidavit of Mr Rich he states that he was advised by Ebert Construction Limited (“Eberts”) that the DNS tender was
$40,000 too high and that DNS was able to save money and re-
submit the price by reducing the overall cost by $40,000. Then Mr Rich says that he phoned me to advise of the reduced tender price to ensure that St Luke’s Property Trust Limited would receive a price reduction from Eberts. I disagree with Mr Rich’s version of the events regarding the phone call and confirm my recollection of the phone call is as set out in point 4 above. Mr Rich did not tell me there was a price reduction for the St Luke’s tender but instead told me there was a credit available, which I directed DNS to apply towards the residential project at Marine Parade.
[15] Paragraph 5 of the second affidavit of Mr Dackers reiterates the evidence given by Mr Rich in his affidavit pertaining to the tender. However, annexed to Mr Rich’s affidavit are Exhibits D and E. Exhibit D is a quotation from DNS to Ebert Construction Limited in respect of the St Luke’s storage facility project. Exhibit E is Ebert’s acceptance of that quotation which it refers to as a “revised quotation”.
Conflict in evidence
[16] The affidavit evidence conflicts. The Court of Appeal referred to conflicts in affidavit evidence in Krukziener v Hanover Finance Ltd [2008] NZCA 187 at para [26]. It recorded that the Court does not normally resolve material conflicts of evidence or assess credibility of deponents where only evidence by way of affidavit is given. However, the Court does not have to accept uncritically affidavit evidence that is inherently lacking in credibility as, for example, where that evidence is inconsistent with undisputed contemporary documents. Casey J in Pemberton v Chappell [1987] 1 NZLR 1 at p 8 was more robust. He said:
It would be a bold step to reject what he now says about these matters out of hand solely as a result of his dubious affidavit evidence. There is every reason to be suspicious of his good faith. But once the essential core of his complaint is known to have some independent support, I cannot be satisfied that he has no defence.
[17] Thus, where there is disputed affidavit evidence, the Court looks to independent evidence to see if it is possible from it to resolve the conflict. The independent or corroborative evidence submitted by Herne Bay as supportive of Mr Dackers’ allegations is:
a) The fact that DNS was engaged to carry out works on Herne Bay’s residential project, which enabled DNS to give the credit to Herne Bay;
b)The fact that Mr Dackers did not seek to obtain the benefit of the credit from any other party, when it was clearly available even on Mr Rich’s version of events;
c) The reduction in November 2007 of the outstanding DNS account to exactly $40,000;
d)The reference in Mr Dackers’ e-mail to the need to deal with the credit, which could have been offset against either the outstanding amount and a combination of that and the amount that was to be charged for the remaining work.
(The cost of undertaking stage 3 by the substituted contractor for DNS, was about $30,000.)
[18] The independent evidence to which DNS refers is:
a) Exhibits D and E to Mr Rich’s affidavit being the quotation and acceptance of the St Luke’s contract;
b) Mr Dackers’ e-mail being Exhibit B attached to Mr Rich’s affidavit.
Was there a credit due:
[19] Herne Bay states that arising out of the St Luke’s project, it was entitled to take advantage of a credit due to it in the sum of $40,000 from DNS. In itself, this proposition seems improbable. Paragraph 5 of Mr Dackers’ first affidavit indicates that after DNS submitted its tender for the St Luke’s job, Mr Rich of DNS then telephoned him and said that his price was to reduce by $40,000 and that DNS would provide a credit for the amount of its over-estimate. Given that the St Luke’s job had
not commenced and that there is no evidence that the tender by DNS had been accepted at this stage, it seems strange that DNS would make an offer to do the job in the sum of $40,000 in excess of its real price and then provide a credit. It seems even stranger that the recipient of such a quote would agree to that proposition as that would mean the recipient would have to pay DNS $40,000 more for the job than it was worth against the possibility of there being further work in respect of which a credit might be given.
[20] It seems to me that Exhibits D and E of Mr Rich’s affidavit put the issue beyond dispute. There was a revised quotation, as Mr Rich says, which was then accepted.
[21] The independent documentary evidence, then, seems to support Mr Rich’s view.
If there was a credit, was it due to Herne Bay?
[22] Mr Dackers’ two affidavits indicate a considerable confusion in his mind as to the relevant parties. In particular, at paragraph 6 of his second affidavit, he states:
… the work at St Luke’s undertaken by DNS was for the company St Luke’s Property Trust Limited which at that time was a member of the group known as the Hemisphere Group.
[23] If that is correct, then why did DNS provide its quotation for undertaking those works to Ebert, and why did Ebert accept that quote? Exhibits D and E of Mr Rich’s affidavit conclusively show that Mr Dackers was wrong when he stated that DNS did the work for St Luke’s Property Trust Limited. Given that the contract was between Ebert and DNS, the only organisation to which DNS could have given a credit (if it did so) was Ebert. There was no point in DNS giving any credit to St Luke’s Property Trust Limited or any other member of the Hemisphere Group as no member of the Hemisphere Group was obliged to pay DNS for the work which it undertook in respect of the St Luke’s project. In short, if there was a credit (and I doubt that there was), it must have been given to Ebert.
[24] Mr Dackers’ affidavits are silent as to when he claims the representations were made. The inference is that they were made at the commencement of the Marine Parade project. However, at paragraph 4 of the second affidavit he says that he directed DNS to give the credit of $40,000 against the future residential project. This must have been at the time DNS made the original offer to Ebert in respect of the St Luke’s project – viz. May 2006. If that is so, there is no evidence that there was any contractual arrangement between Herne Bay and DNS in existence at that time whereunder DNS was to undertake work for Herne Bay in respect of the Marine Parade project. It seems strange that Mr Dackers should direct that the credit should be given against a future project which at that time DNS appears to have had no involvement in.
[25] The suggestion is that the representation was sufficiently certain in its terms as to mean that the price to be paid in respect of the Marine Parade project should be
$40,000 less than its actual cost to DNS. Exhibit B to Mr Rich’s affidavit, being the e-mail of 11 November 2007, contradicts this proposition. If the representation was made with the sort of particularity which is argued for by Herne Bay, it seems strange to have written:
However, some consideration needs to be given as to how to resolve the credit agreed for the project last year. Perhaps this can be addressed through the remaining works.
This comment is a clear statement to the effect that there was no agreement between the parties as to how the alleged credit of $40,000 was to be dealt with. The earlier statement in the e-mail to the effect that the payment of $42,839.72 was all that could be managed at the time and that DNS would be contacted in the future about the balance also negates any suggestion of the alleged misrepresentation: it anticipates payment of the balance due. The self-serving comments of Mr Dackers at paragraph 9 of his second affidavit do not assist.
[26] There is no evidence from anybody that the alleged representation induced Herne Bay to enter into the Marine Parade contract. However, if the representation had been made, it is reasonable to infer that this would have been the case.
Conclusion
[27] In terms of s 290(4)(a), Herne Bay has the burden of proving a fairly arguable basis upon which it is not liable for the $40,000 claimed: Eastgate Real Esate Ltd v Walker (2001) 15 PRNZ 308. In fairness to Herne Bay, its counsel did not resile from this self-evident proposition. The affidavit evidence of Mr Dackers in support of Herne Bay’s contention that the $40,000 is the subject of a dispute is not supported by the independent documentary evidence. Indeed, the independent documentary evidence effectively disposes of his allegations. In these circumstances, Herne Bay has not managed to establish that there is a fairly arguable case that the $40,000 claimed by DNS is disputed.
[28] It follows that the application to set aside the statutory demand is declined.
[29] The time for compliance with the statutory demand is extended until 4:00 pm on 19 September 2008.
[30] DNS has succeeded. It is entitled to costs. Both parties agree that category
2B is applicable. Accordingly, there is an order for costs against Herne Bay in favour of DNS to be calculated in accordance with category 2B of the scale, together
with appropriate disbursements as fixed by the Registrar.
Associate Judge J D Hole
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