Intagr8 Limited v Ezel Limited

[2015] NZHC 1631

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2015-404-000796

CIV 2015-404-000797 [2015] NZHC 1631

UNDER	Section 290 of the Companies Act 1993
IN THE MATTER OF	applications to set aside a statutory demand
BETWEEN	INTAGR8 LIMITED AND INTAGR8 SECURITY LIMITED Applicant
AND	EZEL LIMITED Respondent

Hearing:	13 July 2015
Appearances:	K D Puddle for the Applicants D P Hoskin for the Respondent
Judgment:	13 July 2015

ORAL JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

INTAGR8 LIMITED AND INTAGR8 SECURITY LIMITED v EZEL LIMITED [2015] NZHC 1631 [14 July

2015]

[1]      The  respondent  (Ezel)  issued  statutory  demands  upon  both  applicant companies for each company’s share of outgoings for electricity usage at the commercial premises owned by Ezel.

[2]      The applicants have applied to set aside the statutory demands.  They dispute any liability for the electricity usage, claiming:

(a)       Ezel had agreed to meet those costs;

(b)      The applicants believed that the genuiness of the claims is in question;

and

(c)       The applicants have offset claims.

[3]      The applicants each leased part of a building at Archers Road, Glenfield from Ezel.    Other  tenants  also  occupied  the  same  premises.    Apparently  only  one electricity meter services the usage of all tenants.

[4]      The applicants occupied pursuant to the terms of a deed of lease (the deed)

each dated in 2010.  The leases were for five years.  Intagr8 Limited paid a rent of

$130,920 per annum or $10,910 per month.  Intagr8 Security Limited paid an annual rent of $54,360 or $4,530 per month.   Each lease was subject to two yearly rent reviews.   Intagr8 Limited was required to pay 42.6 per cent and Intagr8 Security Limited 12.1 per cent of the building outgoings in addition to the rental payable.

[5]      The deed provided that outgoings included charges for water, gas, electricity, telephones and other utilities or services.

[6]      It is common ground that Intagr8 Limited’s lease does not record the whole agreement between the parties.  There was as well a side agreement which provided for a rental holiday but only upon the basis that outgoings were paid from the lease commencement date.   In this case the rental holiday comprised a discount for a period of two years and also provided that if Ezel sold the premises within that two

year  period  then  Intagr8  Limited  would  be compensated if  a higher rental  was payable to the new landlord.

Electricity charges

[7]      Ms Taylor swore affidavits on behalf of the applicants and as well affidavits in reply to Ezel’s affidavits in opposition.  She deposes in the reply affidavits that the applicants were told they would not be billed for electricity because Ezel had contacted all suppliers “and they had determined that they would not be billed for it”. Ms Taylor insists they were ensured that any electricity charges would be covered by Ezel.   Further and because there was a single electricity meter the applicants, like other tenants, were not able to enter into their own electricity supply agreements.

[8]      The applicants  say the  side  agreements  were important  to  the applicants because it gave them certainty as to rent and outgoings.   It is not clear what Ms Taylor is referring to in that regard.

[9]      Meridian Energy was the electricity provider for the premises.  Meridian had not issued electricity charges for power supply to the premises between 29 April

2010 and 19 May 2014.  As a result the applicants as well as other tenants had not been charged for power during this period.

[10]     In August 2014 Meridian issued a bill for electricity usage for more than

$90,000.   Ezel’s solicitors then wrote to the applicants with invoices requiring contributions equal to that which was required by the lease.

[11]     Then Ezel gave notice to Meridian Energy of its dispute with the charges claimed.  A settlement was negotiated by which Ezel agreed to pay a total sum of

$22,500.  Ezel then reissued contribution demands in the sum of $9,585 from Intagr8

Limited and $3,847.50 from Intagr8 Security Limited.

[12]     Those invoices also included a request for payment of a proportionate share of the legal costs incurred by Ezel in its dispute of the Meridian claim.  The statutory demands do not include a claim for those legal costs.

[13]     The Court has already referred to the applicants’ claim that Ezel had assured them inter alia that they would not have to pay for electricity.  During the course of their occupation the applicants paid fixed monthly outgoings.   They say they understood those to cover any electricity charges.  They say further that the outgoing invoices were unspecific and did not refer to any underlying charges.

[14]     Ms Taylor has deposed that between 1 August 2012 and 31 March 2015

Intagr8 paid $30,606.08 in outgoings and Intagr8 Security Limited paid $12,285.44.

[15]     In  the  outcome  of  the  parties’ dispute  the  applicants  have  conducted  a reconciliation of the amounts paid for outgoings under their leases.   They now believe that because Ezel “has not provided [them] with reasonable details of actual outgoings  for the term  of the lease to  enable [them] to determine whether any overpayment should be credited…”

[16]     Ms Taylor expresses genuine concern that there has been overcharging for outgoings under the lease.  It is not clear on what basis she expresses this concern.

[17]     It was not until her affidavit in reply that Ms Taylor refers to there being a single electricity meter or to there being a side agreement and the significance of that for the applicants.  Ms Taylor had not earlier said how or why the side agreements provided certainty regarding outgoings.  Certainly she had not earlier said that the applicants had received an assurance that electricity charges would be covered by (i.e. paid by) Ezel.

[18]     The applicants also claim Ezel has provided them with insufficient details

regarding the settlement of Meridian Energy’s claim.

[19]     They say they asked Ezel for details to enable them to verify the revised accounts agreed with Meridian, but that none was given until 26 March 2015 when the settlement details were confirmed.

[20]     Under s 290 of the Companies Act 1993 the Court may set aside a statutory demand if it is satisfied:

(a)      There is a substantial dispute as to whether or not the debt is owing or is due;

(b)The company appears to have a counterclaim, set off, or cross demand of an amount not less than that sought by the statutory demand; or

(c)       The demand ought to be set aside on other grounds.

[21]     The applicants say there is a substantial dispute that the amount claimed in the statutory demands are due and owing.  Also the applicants say they are solvent because they have deposited in their solicitors’ trust account an amount sufficient to pay both statutory demands.

The applicants’ case - summary

[22]     Mr Puddle for the applicants submits the dispute is comprised as follows:

(a)      That Ezel agreed to cover electricity outgoings at the start of  the leases, and no invoices for outgoings received specified that they were for electricity.

(b)The statutory demand served on Intagr8 Limited is incorrect because it  does  not  take  into  account  the  $1000  setoff  regarding  the kitchenware that it was agreed would be purchased from it by Ezel.

(c)      Based  on  their  dealings  and  because  of  the  side  agreements  the applicants have substantial doubts that the outgoings they have paid over the course of the lease are genuine.

(d)The applicants do not know of the Meridian Energy settlement terms despite having requested that information.   Therefore they have genuine doubts about settlement as it may have contained additional conditions relating to Ezel which could have impacted on the settlement figure.

(e)      All of this information could have been provided prior to issuing statutory demands and the matter could have been resolved without the issue of a statutory demand.

[23]     It  is  the  applicants  case  that  from  the  beginning  they  were  assured  no electricity was payable because Ezel said it would pay that cost.  Mr Puddle relies on two pieces of evidence to support the submission namely:

(a)       Ezel’s email of 26 August 2014; and

(b)      The side agreements.

[24]     The applicants’ position is that the payment of outgoings needs to be analysed by somebody appropriately qualified and that because this has not been done the Court cannot be satisfied the potential of a claim cannot be ruled out.

Considerations/conclusion

[25]     A great deal of reliance has been placed by the applicants upon Ms Taylor’s claims in her reply affidavit (and not before then) that it was agreed the applicants would not be billed for electricity; that they were assured Ezel would meet those costs.

[26]     Understandably counsel for Ezel objects to this evidence which is not at all supported by reference to exhibited correspondence.   Ms Taylor suggests Ezel’s email dated 26 August 2014 provides proof of such an arrangement, but clearly it does not do so.

[27]     Also claims of an agreement were not referred to in Ms Taylor’s original affidavit in opposition.   The reply affidavit does not say who, when or why that claim was made.  Indeed, it appears that not before the 25 June 2015 when the reply affidavit was sworn, was any mention made of the issue that the applicants were not liable for electricity because Ezel had agreed to cover that cost for them.  Until then the applicants’ primary focus concerned proof of Meridian’s debt.  Further it appears clear  that  following  service  of  the  statutory  demands  neither  the  applicants’ solicitor’s correspondence nor by the reconciliation prepared by the applicants, was it suggested that the applicants were not liable for electricity charges.  Further, and since the Meridian debt was paid and the services of another electricity provider had been engaged, it appears the applicants have since met their proportionate share of the electricity outgoings on the building.

[28]   Too much emphasis has been placed by the applicants upon the “side agreement”.  Clearly that agreement was designed to provide a rental discount during the first two years of the lease.  The added requirement to ensure payment of certain outgoings did not absolve the applicants of their responsibility for a proportionate share of all named obligations provided by the deed of lease.

[29]     The applicants claim that there are good reasons to doubt the accuracy Ezel’s periodic  accounts  for  payment  of  outgoings  because  of the lack  of  information provided in support of those.  However no question was ever raised in that regard until receipt of Meridian’s account requiring payment for four years of electricity supplied, when for reasons best known to Meridian, it had not provided any invoices before then.

[30]     The  applicants’ responsibility for  the  payment  of  electricity  outgoings  is clearly set out in clause 3 of the deed of lease.  That obligation was not altered by a further deed or indeed even the side agreement.  Each deed set out the proportionate share of outgoings required to be paid by tenants.

[31]     Ezel has incurred and indeed paid a total sum of $22,500 to Meridian Energy for which sum it is clearly entitled to reimbursement from its tenants.  That sum is one  quarter  of  the  amount  originally  sought  by  Meridian  for  payment.     A

compromise was negotiated using services provided by the Office of the Electricity and Gas Complaints Commissioner.  There is no reason to think the applicants have been prejudiced in that outcome.  Indeed if Meridian has pursued the matter through Court proceedings then likely the applicants and other tenants would have been joined to any proceeding dispute.  The Court is satisfied sufficient evidence has been provided  of  the  amount  paid  to  Meridian  for  the  supply  of  electricity  to  the applicants’ tenanted premises.

[32]     The Court does not accept submissions or Ms Taylor’s evidence regarding claims of insufficient evidence being provided to support the invoices submitted to justify the amounts charged in the monthly payments.   The clear answer to those claims is provided by the evidence of Ms Gonzur for Ezel at paragraphs 33 – 40 of her affidavit and also in various annexures to her affidavit.

[33]     The Court agrees that Ms Taylor’s reconciliation exercise does not provide sufficient evidence of reasons to review invoices over the term of each party’s lease.

[34]     The applicants urge that the statutory demand is inappropriate because they are solvent and indeed have placed a fund in trust to meet Ezel’s debt if these present applications should fail.

[35]     In  response to  claims  of solvency Ms  Gonzur  has  provided  evidence  of numerous  examples  over  the  last  two  years  of  Ezel  chasing  the  applicants  for overdue rental and outgoings.

[36]     This application is clearly more than just about insolvency.   The Court’s focus is upon whether or not there is arguably a genuine and substantial dispute as to the existence of the debts.  Clearly the debts exist.

[37]     The  remaining  element  of  the  applicants’  case  concerns  claims  of  a “legitimate” setoff.  The claim concerns an amount of $1000 which the applicants say was agreed to be paid for kitchenware left by Intagr8 Limited when its lease terminated earlier this year.

[38]     However there is no evidence by way of invoice to show a debt is due or that there is that value in the items as claimed. The Court agrees there is no evidence that Ezel is the entity responsible for payment of the setoff amount.

[39]     In a Court’s view clear and persuasive grounds for a setoff claim does not exist here.

Result

[40]     The Court is of the view that neither statutory demand should be set aside.

Judgment

[41]     Both applications are dismissed.

[42]     The  time  for  payment  of  the  amounts  due  by  the  statutory  demand  is extended to 4:00pm, 17 July 2015.

[43]     Each applicant shall pay costs to Ezel calculated on a 2B basis, together with disbursements approved by the Registrar.

Associate Judge Christiansen