Immigration Advice New Zealand Limited v Sales Navigator Limited
[2023] NZHC 3394
•28 November 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-823
[2023] NZHC 3394
BETWEEN IMMIGRATION ADVICE NEW ZEALAND LIMITED
ApplicantAND
SALES NAVIGATOR LIMITED
Respondent
Hearing: 28 August 2023 Appearances:
K J M Robinson for the Applicant G Jindal for the Respondent
Judgment:
28 November 2023
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 28 November 2023 at 4 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
WynyardWood, Auckland Ormiston Legal, Auckland
IMMIGRATION ADVICE NEW ZEALAND LTD v SALES NAVIGATOR LTD [2023] NZHC 3394
[28 November 2023]
Introduction
[1] Immigration Advice New Zealand Limited (IANZ) applies to set aside a statutory demand served on it by Sales Navigator Limited (SNL) dated 3 April 2023. The statutory demand seeks recovery of $11,270 that SNL says is due following the failure to pay an invoice issued for their marketing and technology services.
[2] IANZ submits it has consistently disputed the invoice since first receiving it in October 2021, raising queries in respect of the services completed compared with the services charged for, the quality of work and the quantum charged.
[3] IANZ acknowledges that some amount is owing but says it is not appropriate to resolve that amount before the High Court sitting in a summary jurisdiction in the context of a statutory demand. Instead IANZ says the dispute is properly determined in ordinary proceedings, most appropriately in the Disputes Tribunal.
[4] SNL responds that IANZ waited for six months before raising any issues by which time SNL had already paid all contractors and employees for the work completed by SNL. In addition, SNL says that when issues were finally raised by IANZ, the issues raised were superficial and are contradicted by evidence before the Court so that they are nothing more than mere assertions.
[5] I set out the legal principles applying to the setting aside of a statutory demand before considering whether IANZ has established that there is a substantial dispute whether or not the debt is owing.
Legal principles applying to setting aside a statutory demand
[6] Failure to comply with a statutory demand is one of the mechanisms by which insolvency is established under part 16 of the Companies Act 1993. A creditor may serve a statutory demand on a company in respect of any debt owed that is not less than the prescribed amount of $1,000.1 A company served with a statutory demand may apply to the court to set it aside but must do so within 10 working days of service.2
1 Companies Act 1993, s 289; Companies Act 1993 Liquidation Regulations 1994, cl 5.
2 Section 290(2).
[7] The court’s power to set aside a statutory demand is provided by s 290(4) of the Companies Act:
(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.
[8] The Court of Appeal confirmed the principles a court should apply when exercising the s 290(4) discretion in Confident Trustee Ltd v Garden and Trees Ltd:3
[16]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.
(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.
Section 290(4)(a): A substantial dispute
[9] IANZ’s application is pursuant to s 290(4)(a), that there is a substantial dispute whether or not the debt is owing, rather than s 290(4)(b), that it has a counterclaim. To succeed in an application under s 290(4)(a) the applicant must demonstrate a “fairly
3 Confident Trustee Ltd v Garden and Trees Ltd [2017] NZCA 578 (footnote omitted); confirmed by the Court of Appeal in Demasol Ltd v South Pacific Industrial Ltd [2022] NZCA 480 at [26].
arguable” basis for the alleged dispute.4 The onus of establishing the dispute is on the applicant. In AAI Ltd v 92 Lichfield Street Ltd (in rec and liq) the Court of Appeal summarised the applicant’s task:5
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.
[10] The court is not required to accept without question a bare assertion of facts, or “whatever unvarnished statements may happen to be made on affidavit”,6 and the debtor company must point to evidence, short of proof, of its claim.
[11] Because applications to set aside statutory demands are determined by the court in its summary jurisdiction, the principles developed in caveat applications and for summary judgment apply by analogy.7 The following passage from the Court of Appeal’s decision in Krukziener v Hanover Finance Ltd, the leading authority on summary judgment, is useful:8
The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as, for example, where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable… In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it.
4 Forge Holding Ltd v Kearney Finance (NZ) Ltd HC Christchurch M149/95, 20 June 1995; United Homes (1998) Ltd v Workman [2001] 3 NZLR 447 (CA) at [32].
5 AAI Ltd v 92 Lichfield Street Ltd (in rec and in liq) [2015] NZCA 559, [2016] NZAR 1338 at [22]; referring to Re A Company [1991] BCLC 737 (Ch) at 740.
6 United Homes (1988) Ltd v Workman, above n 4, at [34].
7 At [34].
8 Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162 (citations omitted) at [26].
Solvency
[12] If an application to set aside a statutory demand is made on the basis that the debt is disputed, proof of solvency is not determinative but will support the applicant’s case that the dispute is genuine.9
Factual background
[13] The applicant, IANZ, provides immigration advice and services. Mr Sarfraz Shaikh is a director and has sworn two affidavits in support of the application to set aside.
[14] The respondent, SNL, is a company providing marketing and technology services. Its director, Mr Taufeeq Rashid, has sworn an affidavit in support of its opposition.
[15] In March 2021 Mr Shaikh and Mr Rashid met and discussed the possibility of SNL providing marketing and technology services for IANZ’s business. This resulted in Mr Rashid sending a quote to Mr Shaikh on 30 March 2021 initially for $17,440. This quote was revised downwards to $13,440 on the same day because, in Mr Rashid’s evidence, SNL had another client who could utilise the same resources and so cost savings of $4,000 were possible.
[16] The quote was sent under the cover of an email which said “[p]lease see the attachment for a list of my primary areas of focus (inclusive of the cost)…”. The quote then listed various services including:
(a)a professional corporate photoshoot for $800;
(b)creating a new website (initial scoping) for $5,000;
(c)a Facebook campaign structure for product sale for $2,400;
9 AMC Construction Ltd v Frews Contracting Ltd [2008] NZCA 389, (2008) 19 PRNZ 13 at [5]– [6].
(d)Google AdWords for $1,200;
(e)advertising/lead generation for $1,320;
(f)website on-page search engine optimisation for $1,520; and
(g)website off-page search engine optimisation (backlinks increase) for
$1,200.
[17] Mr Shaikh’s evidence is that he contacted Mr Rashid the next day to set up a meeting to go through the quote and clarify the scope of work, arranging a teleconference for 7 April 2021. However that telephone conference never went ahead.
[18] It is difficult from the evidence to work out the sequence of events from then on in terms of requests for work, feedback on that work and whether the work was accepted or not. There is contemporaneous evidence however that Mr Shaikh was not happy with some of the work and the invoice itself records in respect of five out of six of the tasks charged for that approval was pending.
[19] Furthermore, Mr Rashid does not directly dispute some of Mr Shaikh’s evidence, including that he informed Mr Rashid that the company profile prepared for IANZ was of poor quality. An email dated 15 September 2021 is also included in the evidence in which Mr Shaikh raises issues in respect of a logo provided and a PowerPoint presentation and company profile that had been prepared, saying the font size is difficult to read, the photos overpower the written material, and the focus needs to be on the written material. Mr Rashid says in his evidence that these suggestions were accepted by SNL but there is no correspondence supporting this, and Mr Shaikh’s evidence in reply is that this email was ignored.
[20] On 8 October 2021 Mr Shaikh sent an email saying “[t]here has been an announcement made by Immigration New Zealand recently so [IANZ] have been extremely busy with phone calls and emails etc.” He then says: “At this stage, I would like to put this project on hold and we will review it once things are settled”.
[21] An email was sent on the same day from SNL attaching an invoice for $9,800, with the cover email recording that payment was due by 15 October 2021. An email was then sent on 13 October 2021 reminding Mr Shaikh that $9,800 was due for payment on 15 October 2021 and then a further follow up on 16 October 2021 at 8.05 am confirming that no payment had yet been received.
[22]Mr Shaikh replied on Monday, 18 October 2021 saying:
As you may understand in today’s time it is impossible for any company to pay such a large amount. And I would appreciate it if you could send an invoice only for the work that has been carried out till date and I will be happy to look into it.
[23] On 27 October 2021, SNL’s accounts team sent an email to Mr Shaikh saying that Mr Rashid had agreed to partial payments. The final invoice was said to be attached with two payment due dates. The email says: “I hope this helps and please don’t forget about the payment due dates as I have a payroll to process on 1 November”. Mr Shaikh responded by email on 28 October 2021 saying that he hopes to review all the information and will respond within a week.
[24] On 29 October 2021, Mr Rashid sent an email to Mr Shaikh confirming that he had agreed to the invoice being paid in two stages and saying that he did not know what was causing the delay but that he was attaching the costs for the services on the project. Mr Rashid said that this information normally would not be provided to clients and that he would appreciate it if Mr Shaikh could look into it because it was causing him hardship and would cause the payroll to be in deficit.
[25] The affidavits filed do not describe whether there was any correspondence in the interim but on 1 February 2022, Mr Rashid sent an email to Mr Shaikh saying:
I was wondering if you had any time to process my invoice, which has now been overdue for more than four months. Could you please complete the payments as soon as possible? As previously stated, I had to pay the business account from my personal account in order to pay the resource because they will not wait this long for their payments.
I am personally in need of funds and would greatly appreciate it if you could release the payments as soon as possible.
[26]Mr Shaikh responded on 3 February 2022 saying:
I still haven’t had a chance to look into it. I appreciate your patience. As you may have noted, the 2021 Resident Visa was announced, and most of my staff have been working for nearly 12 hours a day. Once the Phase 2 applications fizzle out. I hope to look into it and respond to you.
[27] On 7 April 2022, Mr Shaikh then sent a lengthy email saying he had now reviewed the invoice and commenting on each of the tasks charged for in the invoice.
[28] In respect of logo design, the first task for which $600 was charged, Mr Shaikh says that he would have expected certain steps to have been completed but none were, including a failure to discuss IANZ’s requirements. When the logo concept was provided, Mr Shaikh says he immediately raised concerns that the logos seemed extremely close to Immigration New Zealand’s logo and redirected SNL to the IPONZ (New Zealand Intellectual Property Office) website to ensure it would not be a breach of copyright. Mr Shaikh says that he had not heard back from SNL on this and so did not consider this work has been completed. Furthermore, Mr Shaikh said he had recently contacted a logo designer for another venture in Rotorua who followed the steps he would have expected and cost a total of $175 plus GST.
[29]The second task discussed in the email was the company profile for which
$1000 was charged. Mr Shaikh accepts that a draft of the company profile was provided but says that he raised concerns with Mr Rashid that the content seemed “substandard and below par to NZ standards”. Mr Shaikh says in the email that Mr Rashid agreed the language did not meet New Zealand standards and that Mr Rashid informed him that he would be discussing this with SNL’s “outsourced agency in India”.
[30] Mr Shaikh noted however that there were minimal changes made and he was still unhappy with the outcome. Mr Shaikh said he therefore contacted a local copywriter who understood the contents that needed to go in the company profile, told him the estimates of the costs involved, waited for approval from IANZ before going ahead and provided a draft for him to review. Mr Shaikh says he sent a copy of the finalised version to Mr Rashid by email on 6 September 2021 and no response has been received. Mr Shaikh says that sourcing it locally cost him less than one third of the amount now charged by IANZ.
[31] Mr Shaikh then says his experience in respect of the third and fourth tasks, the brochure and company presentation was similar to the logo design. $800 was charged for the brochure and $1200 for the company presentation. Mr Shaikh’s email says there was no discussion of IANZ’s requirements or what the costs involved would be. Mr Shaikh says he was not happy with the font size, the photos were not relevant as they did not depict New Zealand or its culture and various other feedback was provided. Again, Mr Shaikh says no response has been received.
[32] Mr Shaikh’s email did not refer to the fifth task charged for in the invoice, the brand guide for which $200 was charged.
[33] With the final task, the company website for which $6000 is charged, Mr Shaikh said that during a Zoom meeting he was shown a sample of a website. Once again, Mr Shaikh says there were no discussions held to understand IANZ’s requirements and the written content of the sample was not related to IANZ’s business. Mr Shaikh records in his email that IANZ’s website is “informative only and does not require any highly technical programming”. Mr Shaikh said in his experience most website development companies present such samples for free during their initial presentation. He continues that, once again, the costs were not discussed prior to the work being started and no approval was obtained.
[34] In conclusion, Mr Shaikh expressed his disappointment with the failure to discuss costs before the project started, to obtain written approval and to ensure client expectations were met. The email finishes by saying:
Your invoice consists of work that has not been approved by me prior to it commencing, nor has it been confirmed by me as completed. I would further like to add that I have not been using any of the work mentioned in your invoice. However, it is my intention to recognise the effort put in by you and your team. Hence, please review your invoice and resend reasonable costs for only the work that was carried out. My current budget will allow me to consider reasonable costs in three figures only.
I look forward to receiving your reviewed invoice.
[35] On 9 April 2022, Mr Rashid sent a reply to Mr Shaikh saying that he had attempted to respond to Mr Shaikh’s points “because a few details and discussions were overlooked” with the email saying, “see highlighted below”. However, the copy
of the email annexed to Mr Rashid’s affidavit does not include the earlier email with Mr Rashid’s responses and Mr Rashid does not go into detail in his evidence on the points that were made in response. Mr Rashid does however say that a project cost estimate was provided to Mr Shaikh on 30 March 2021 and, although Mr Shaikh took a while to respond, he then requested that SNL begin working on the project. As a result, Mr Rashid says that he does not accept that it was an exorbitant fee or that the costing was not approved.
[36] In response to Mr Shaikh’s point that nothing has been finished, Mr Rashid says: “there was no feedback from the team to take anything to the finish line” and that SNL was then asked to put the project on hold. Mr Rashid says it took six months for Mr Shaikh to get back to him in regard to the invoice and asking him to revise the invoice now is not an option because the business had already paid the resources. The email finishes by saying he expected the debts to be paid as soon as possible.
[37] A further email does not appear to have been sent until almost a year later, on 3 April 2023, when Mr Rashid emailed Mr Shaikh saying: “You have outstanding invoice payments of $11,270 since October 15, 2021. It is the business’s year-end, and I would like the payment to be made as soon as possible.” Mr Rashid then says if the invoices are not paid in full by 6 April 2023, he will hand the matter to “my legal/recovery”.
[38]On 13 April 2023 the statutory demand was served.
[39] On 21 April 2023, IANZ’s solicitors wrote to the respondent advising the debt is disputed, referring to previous correspondence, and asking for the demand to be withdrawn or this application to set aside would follow. The respondent refused to withdraw the statutory demand.
[40] Prior to the hearing, IANZ paid the total disputed sum into its lawyer’s trust account to demonstrate its solvency.
[41] Counsel for SNL sent an email to the solicitors for IANZ on 25 May 2023 asking them to confirm that the amount had been received and to provide assurance
that the solicitors for IANZ would not release the funds until the conclusion of these proceedings “nor adjust this amount towards any fee payable by [IANZ]”. No response was received to this email. Mr Robinson confirmed for IANZ that the undertakings sought were not given.
Is there a genuine and substantial dispute?
[42] I consider that the factual chronology set out above shows that there was a substantial dispute between the parties as to the existence of the debt before the statutory demand was served.
[43] Counsel for the respondent submits that “[t]he delay in raising any issues whatsoever, until 7 April 2022, is fatal to IANZ’s cause”. This submission is made on the basis that Mr Shaikh’s earlier email of 18 October 2021 reads, in the respondent’s submission, “as an admission of work been done by SNL, [IANZ]’s inability to pay the invoice, and an attempt to get a discount”. Counsel submits that nowhere in the October 2021 email does IANZ raise any issues with quality, scope or quantum. Instead, the respondent submits that “what was assured by [IANZ] in this email was that it will happily look into (i.e., pay for) work that has been carried out till date.”
[44]The email of 18 October 2021 reads as follows:
As you may understand in today’s time it is impossible for any company to pay such a large amount. And I would appreciate it if you could send an invoice only for the work that has been carried out till the date and I will be happy to look into it.
[45] Although it could have been more clearly expressed, I do not consider there can be any dispute that the above email raises issues in relation to the invoice, by asking for an invoice to be sent for the work that had been carried out to date and then saying that Mr Shaikh would review it. Neither of these comments suggest that Mr Shaikh was agreeing to pay the invoice. The timing of this email is important as it was sent only one working day after the invoice’s nominated due date, which was only seven days after it was issued.
[46] As counsel for IANZ submits, no contract or terms of payment had been signed and so no time frame for payment had previously been agreed.
[47] It is unfortunate that there was then a significant delay before a detailed response to the invoice was provided by IANZ but the response then provided clearly raises issues in respect of all but one of the tasks charged for in the invoice and only
$200 was charged for that remaining task.
[48] Mr Rashid responded to this email on behalf of SNL but his substantive response in respect of each of the points raised is not included in the evidence. Mr Rashid disputes that the costs were exorbitant or not approved but his main response appears to be that he is not in a position now to reduce the invoice because the contractors have already been paid. This latter point does not however mean that the amount is not genuinely disputed by IANZ. This is instead an issue for SNL itself in terms of the payment terms for SNL’s contractors.
[49] I agree with counsel for the applicant that timing is a significant indicator of whether a dispute is genuine and substantial. If issues have been raised contemporaneously with the invoice rather than in response to the service of the statutory demand, they are much more likely to indicate that the dispute is genuine.
[50] In respect of issues with both the scope and quality of work, these were clearly raised in the 7 April 2022 email and cannot now be discounted in circumstances where any substantive response by SNL is not included in the evidence.
[51] IANZ accepts that some work was completed and says that it is prepared to pay a fair and reasonable amount. The question of what that amount is, however, is not a matter that can be determined in the context of this application.
[52] Counsel for SNL submits the Court ought to uphold the statutory demand on the basis of quantum meruit. This would only be appropriate though where there is a clear method for calculating the amount owed.
[53] In Mega Project Holding Ltd v Orewa Developments Ltd¸ the Court of Appeal set aside the statutory demand on the basis of a substantial dispute notwithstanding that there was an acknowledgement that fair and reasonable costs were owing.10 In
10 Mega Project Holding Ltd v Orewa Developments Ltd [2020] NZCA 111.
that case there was a mechanism in the contract to determine what those costs ought to be and so various conditions were imposed by the Court. In this case, IANZ submits that the appropriate mechanism to determine a fair and reasonable amount is determination in a civil proceeding. Given the amount in issue, this would be in the Disputes Tribunal.
[54] I agree as the tasks charged for are not all matters that clearly fall within the original quote and nor does the quote set out an hourly rate. In addition, there are disputes between the parties regarding the extent to which work was completed or was of a usable quality. It is not appropriate for such disputes to be determined in the context of an application to set aside and so the demand cannot be upheld on the basis of quantum meruit.
Result
[55]The application to set aside the statutory demand is granted.
Costs
[56] The applicant asked to be heard on costs if it was successful. I ask the parties to confer and only if agreement cannot be reached for memoranda of no more than three pages (excluding schedules) to be filed, on behalf of IANZ within 25 working days and SNL a further 10 working days. I record my preliminary view that increased costs may be appropriate as there appears to have been a clear dispute prior to service of the statutory demand and an application to the Disputes Tribunal would have been a more efficient and appropriate way of resolving the issues.
Associate Judge Sussock
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