Image Centre Limited v You Enterprises Limited HC Auckland CIV-2011-404-4896

[2011] NZHC 1344

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-4896

IN THE MATTER OF     the Companies Act 1993

BETWEEN  IMAGE CENTRE LIMITED Plaintiff

ANDYOU ENTERPRISES LIMITED Defendant

Hearing:         (On the papers)

Counsel:         D S Lester for the Plaintiff

V M Ammundsen for the Defendant

Judgment:      27 October 2011 at 4:00 PM

COSTS JUDGMENT OF ASSOCIATE JUDGE ABBOTT

This judgment was delivered by me on 27 October 2011 at 4:00 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date: ...................................

Solicitors:           Maude & Miller, P O Box 213, Wellington email: [email protected]

Ayres Legal, P O Box 8159, Symonds Street, Auckland email:  [email protected]

IMAGE CENTRE LIMITED V YOU ENTERPRISES LIMITED HC AK CIV-2011-404-4896 27 October 2011

[1]      This application for liquidation of the defendant was withdrawn by leave on

21 September 2011 after the defendant paid the outstanding debt.

[2]      At  the  time  the  application  was  withdrawn  both  parties  sought  costs. Memoranda have been filed setting out each party’s claim.  The plaintiff contends that it is entitled to costs on the principle that costs follow the event.  The defendant contends that it is entitled to costs based on the presumption in favour of awarding costs against a party who has withdrawn.

Background

[3]      The plaintiff filed its application to liquidate the defendant on 9 August 2011. The application was based on the defendant’s failure to comply with a statutory demand.   The plaintiff issued that demand on 14 July 2011, requiring payment of

$14,335.16 as a balance due for printing work undertaken for the defendant.

[4]      The defendant is one of three related companies for whom the plaintiff had undertaken printing work.   In the course of discussions about repayment (prior to issue of the statutory demand) the defendant had contended that some of the debt had been incorrectly allocated to the defendant, but the plaintiff was not satisfied on the information provided that that was the case.

[5]      Following  service  of  the  statutory  demand,  the  defendant  provided  the plaintiff with further information, as a result of which the plaintiff accepted that some of the debt should be allocated to one of the other accounts.   The plaintiff notified the defendant on 26 July 2011 that it was allocating $10,000.00 of the debt to the other account, thus reducing the amount demanded to $4,335.16.   The defendant did not raise any dispute over this amount.

[6]      The plaintiff issued this proceeding after the defendant failed to pay the reduced balance within the balance of the 15 working day period stipulated in the statutory demand.  The proceeding was served on the defendant on 18 August 2011. On  or  about  30 August  2011  solicitors  acting  for  the  defendant  contacted  the plaintiff’s solicitors.  The plaintiff agreed not to advertise the application on the basis

that the defendant would pay the outstanding balance immediately.   The plaintiff agreed to withdraw the application but said that it would be seeking an order for costs. The defendant paid the balance of $4,335.16 on 30 August 2011.

Discussion

[7]      Counsel for the defendant relied on rule 15.23 of the High Court Rules which provides that a plaintiff who discontinues a proceeding against a defendant must pay costs  to  the  defendant  up  to  the  time  of  discontinuance  unless  the  defendant otherwise agrees or the Court otherwise orders.  Counsel argued that there were no circumstances  to  justify  displacing  this  presumption.[1]    Counsel  also  relied  on

authority that statutory demands are not to be used for debt collection purposes,[2] nor

as a device to embarrass a party where there is a contest as to liability.[3]

[1] Coromandel Heritage Protection Society Inc v Thames Coromandel District Council HC Hamilton CIV-2007-419-001649, 11 February 2008.

[2] Pirtek Waikato Ltd v Ellison Trading Ltd HC Hamilton M107/99, 10 August 1999.

[3] Gateway Cargo Systems Ltd v Airborne Freight Ltd HC Auckland CIV-2003-404-007207, 16 March 2004.

[8]      The defendant’s argument based on rule 15.23 overlooks the fact that the plaintiff discontinued only because it had achieved what it had set out to achieve in issuing the proceeding.  As such, it is prima facie entitled to costs as the successful party.[4]    At the point that the plaintiff issued this proceeding there was a debt outstanding for $4,335.16, and no indication of payment.  Counsel for the defendant sought to argue that there was an arrangement for payment in place, and that there were unresolved issues over the quality of printing work.  There is no evidence to support this submission and, more significantly, the balance of the debt sought under

the statutory demand was not disputed on this basis (there was no application to set aside the statutory demand).  Indeed, it is significant that the defendant did not offer to pay the debt until about 30 August 2011, five weeks after it was notified of the plaintiff’s agreement to reallocate $10,000.00 of the sum demanded, and nearly two weeks after the application for liquidation was served.

[4] Small v A Judicial Committee HC Christchurch CIV-2009-409-2622, 20 April 2010.

[9]      I  do  not  accept  that  the  plaintiff  issued  the  application  for  liquidation improperly.  It is apparent from the evidence before the Court that the defendant had

been struggling to clear substantial debt, and in that context its failure to pay the small balance, or to apply to set aside the statutory demand, was a sufficient basis for concern about the defendant’s solvency.

[10]     I do not accept the defendant’s argument that there was an arrangement in place for payment.   The plaintiff accepts that there had been an arrangement in respect of arrears, but says that arrangement did not extend to current debt, and the defendant’s failure to make an acceptable proposal for clearing current debt was the reason for issue of the statutory demand.  This view of the facts is supported by the absence of any correspondence from the defendant, following service of the statutory demand, contesting the plaintiff’s right to demand payment (other than in respect of the sums eventually allocated to the other account) and by the defendant’s failure to apply to set aside the statutory demand on this basis.

[11]     Weighing  these  matters  I  consider  that  the  plaintiff  is  entitled  to  costs. However, I also take into account the modest amount of the debt and the straight forward nature of the application.

Decision

[12]     The defendant is to pay the plaintiff’s costs up to and including the hearing

on 21 September 2011 on a scale 2A basis together with disbursements as fixed by the Registrar.

Associate Judge Abbott