Hutchison Plumbing Gasfitting & Drainlaying Limited v Peliconstruction Limited

[2023] NZHC 1229

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

I TE KŌTI MATUA O AOTEAROA

TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE

CIV-2022-463-103

[2023] NZHC 1229

UNDER

the Companies Act 1993

IN THE MATTER OF

an application to set aside a statutory demand

BETWEEN

HUTCHISON PLUMBING GASFITTING & DRAINLAYING LIMITED

Plaintiff

AND

PELICONSTRUCTION LIMITED

Defendant

Hearing:	11 May 2023 at 2:15pm
Appearances:	D B Rendall for the Plaintiff
Judgment:	24 May 2023

JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

Application to set aside statutory demand

This judgment was delivered by me on 24 May 2023 at 4:00pm

pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

Solicitors:
OSC Law (David B Rendall), Rotorua, for the Plaintiff

HUTCHISON PLUMBING GASFITTING & DRAINLAYING LIMITED v PELICONSTRUCTION LIMITED [2023] NZHC 1229 [24 May 2023]

Introduction

[1]    Peliconstruction Limited (Peliconstruction) applies to set aside a statutory demand that Hutchison Plumbing, Gasfitting and Drainlaying Limited (Hutchison) has made on it.

Background

[2]    On 21 September 2022, Hutchison served Peliconstruction with a statutory demand (the demand). The demand relates to two invoices issued by Hutchisons for plumbing work done on a strip drain for Peliconstruction.

[3]    On 5 October 2022, Peliconstruction filed an application to set aside the statutory demand pursuant to s 290 of the Companies Act 1993. As no notice of opposition had been filed by the respondent, on 8 February 2023 this proceeding was set down to be heard unopposed.

Peliconstruction’s application to set aside statutory demand

[4]    Peliconstruction seeks orders setting aside Hutchison’s demand and costs. The grounds on which the orders are sought are: 1

1.   The Application is made by the Plaintiff to set aside the Statutory Demand issued by Hutchinson Plumbing and Drainlaying Limited dated 1st day of September 2022 and served on the Applicant on 21 September 2022.

2.   Section 290 (2) provides for an application to set aside the statutory demand within 10 days of the date of service. That Application needs to be made by 6th October 2022.

3.   Section 290(2)(b) requires the creditor to be served within the same ten day period as the application is heard by the Court.

4.   The Court has the jurisdiction to grant an application to set aside a statutory demand if it is satisfied that there is a substantial dispute as to whether or not the debt is owing or is due; or the Company appears to have counterclaim, set off or cross demand and the amount specified in

1      Application to set aside a statutory demand dated 5 October 2022 at [1]–[8].

the demand is less the amount of the counterclaim, set off or cross demand.

5.   The Notice of Defence details that there is a counterclaim for a sum more that the demand itself and accordingly meets the criteria for the Court to grant an application to set aside such summary judgement.

6.   The Notice of Defence and Affidavit in Support both outline the details as to the set off, counterclaim and accordingly this application is seeking the Court to set aside the application in terms of Section 290 of the Companies Act 1993.

7.   Costs are sought in the manner as the Court sees fit, and in light of the previous offers that this matter should be determined in the Disputes Tribunal.

8.   Seeking that the statutory demand be set aside. The application meets the criteria required for such decision to be granted by the Courts as it meets the requirements of Section 290(4) (A&B) as detailed in the Notice of Defence and Affidavit

Affidavit of Steven Ross dated 4 October 2022

[5]    Mr Steven Ross, Director of Peliconstruction, has made an affidavit in support of his set aside application.2

[6]    Mr Ross deposes that Hutchison issued two invoices, 9155 for $6,356 and 9170 for $15,015.88, for work they carried out for Peliconstruction. Peliconstruction paid a $10,000 deposit leaving $11,371.88 owing, which Mr Ross claims Hutchison has ignored.

[7]    He deposes the invoices were for a house renovation which required some plumbing work, including a strip drain outside the house. Peliconstruction have the following four disputes over the work carried out for that strip drain:

(a)Hutchison invoiced for installing 25 metres of drain, but the floor plan is for 15 metres, of which Peliconstruction provided 12 metres, fittings, corners and sumps;

(b)Hutchison cut the lugs in breach of the manufacturer’s specifications and without Peliconstruction’s approval to do so;

2      Affidavit in support of a statutory demand being set aside dated 4 October 2022.

(c)Hutchison damaged 36 square metres of painted cladding, which required repainting at a cost of $1,980 plus GST; and

(d)Hutchison incorrectly laid concrete in a 2.5 metre section damaging the cladding and vented cavity system, which will require the drain and cladding to be removed and reinstalled.

[8]    Mr Ross deposes that he suggested the matter be resolved in the Disputes Tribunal, but Hutchison refused. He says Hutchison is aware of these concerns and the counterclaim by Peliconstruction to reclaim the cost of the damage.

[9]    Relying on an annexed counterclaim deducted off Hutchison’s two invoices, Mr Ross notes that ultimately $8,215.60 including GST is owed in Peliconstruction’s favour. Therefore, he believes the demand should be set aside as the arguable offset exceeds the amount sought.

Legal principles

1. Section 290 of the Companies Act 1993 provides, relevantly:

290     Court may set aside statutory demand

(1)The court may, on the application of the company, set aside a statutory demand.

…

(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.

…

[11]The Court has set out the principles relevant to the application of s 290(4):3

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.

[12]   As to s 290(4)(a), the Court is to look at whether a genuine substantial dispute exists.4 Mere assertion of a dispute does not suffice, and the applicant has to show a fairly arguable basis for it.5 In practice, it is required that there be some material short of proof that backs up the claim that the amount is in dispute.6

[13]   Where a counterclaim, set-off, or cross-demand is sought to be raised, the Court has a discretionary power to set aside the statutory demand, but the company must show a real basis, on clear and persuasive grounds, for doing so. And “pay now, argue later” considerations have sometimes been allowed to prevail over the effect of liquidation.7

Analysis

[14]   The question to be determined in this judgment is whether there is a substantial dispute whether or not the debt is owing or due, for the purposes of s 290(4)(a)of the Companies Act 1993, or whether Peliconstruction appears to have a counterclaim, set- off or cross- demand, and the amount specified in that demand less the amount of the counterclaim, set-off or cross-demand is less than the prescribed amount for the purposes of s 290(4)(b).

3      AAI Ltd v 92 Lichfield Street Ltd (in rec and in liq) [2015] NZCA 559, [2016] NZAR 1338 at [22] (footnotes omitted).

4      Taxi Trucks Ltd v Nicholson [1989] 2 NZLR 297 (CA) at 301.

5      N F Global Ltd v Sky Capital Management Ltd [2020] NZHC 2196 at [39]. See also United Homes (1998) Ltd v Workman [2001] 3 NZLR 447 (CA) at [27].

6      Arzan Investments Ltd v Beresford Apartments Ltd (2003) 16 PRNZ 825 (HC) at [17].

7      N F Global Ltd v Sky Capital Management Ltd, above n 5, at [40], citing Volcanic Investments Ltd v Dempsey & Wood Civil Contractors Ltd (2005) 18 PRNZ 97; Browns Real Estate Ltd v Grand Lakes Ltd [2010] NZCA 425, (2010) 20 PRNZ 141; Covington Railways Ltd v Uni- Accommodation Ltd [2001] 1 NZLR 272 (CA) at 274–275.

[15]   The unchallenged evidence provided in the affidavit of Mr Steven Ross of Peliconstruction in support of the application sets out the grounds of the dispute of the amount claimed under the statutory demand, and also the basis for a counterclaim by Peliconstruction against Hutchison which exceeds the amount of the statutory demand. As this evidence is unchallenged by Hutchison, it is accepted.

[16]   I am of the view that on the evidence provided in support of the application to set aside the statutory demand, with no opposition thereto, that the orders sought in the application should be made.

Orders

[17]I make the following orders:

(a)The statutory demand issued by Hutchison dated 1 September 2022 against Peliconstruction is set aside, pursuant to s 290(4) of the Companies Act 1993.

(b)Costs should follow the event, and accordingly Peliconstruction is entitled to costs on a 2B basis together with disbursements in respect of the application.

…………………………….. Associate Judge Taylor