JNJ Holdings Limited v MJ & Kimko Company Limited
[2022] NZHC 2189
•31 August 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-000457
[2022] NZHC 2189
BETWEEN JNJ HOLDINGS LIMITED
Applicant
AND
MJ & KIMKO COMPANY LIMITED, KWANG-ON KIM and EUNOG KO
Respondents
Hearing: On the papers Appearances:
M Singh and P Kim for the Applicants B Rooney for the Respondents
Judgment:
31 August 2022
COSTS JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 31 August 2022 at 3.00 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors:
Glaister Ennor, Auckland Lovegroves, Auckland
B Rooney, Auckland
JNJ HOLDINGS LTD v MJ & KIMKO COMPANY LTD [2022] NZHC 2189 [31 August 2022]
[1] The respondents apply for costs on the applicant’s discontinuance of its application to set aside a statutory demand, which the respondents served on it to recover payment of a judgment debt. The applicant opposes paying the respondents’ costs.
[2] The respondents rely on r 15.23 of the High Court Rules 2016. That rule creates a presumption that a plaintiff who discontinues a proceeding against a defendant will pay the defendant’s costs up to and including the discontinuance.
[3]The applicant says they should not pay costs because:
(a)the presumption does not apply to an application to set aside a statutory demand;
(b)the statutory demand was improper and an abuse of process because:
(i)the applicant has a counterclaim against the respondents in the District Court that exceeds the amount in the demand;
the applicant is not insolvent; and
(c)the respondents did not file a notice of opposition and supporting affidavit.
I will consider each of these submissions in turn.
[5] The applicant is correct that this Court has held that when an application to set aside a statutory demand is withdrawn, rather than relying on the presumption in r 15.23, the Court should enquire into the surrounding circumstances and what happens afterwards to ascertain which side has substantially succeeded and which side has substantially failed.1 That is because the withdrawal of a statutory demand is equivocal and does not by itself indicate where costs should fall. Rather, success or failure turns on whether the creditor’s position as a creditor for the debt stated in the
1 Greys Avenue Investments Ltd v New Zealand Mint Ltd [2015] NZHC 2633.
demand is upheld. Payment and arrangements for payment or its equivalent are consistent with the creditor’s position.2
[6] In the present case, the applicant withdrew their application to set aside the statutory demand because they had paid the judgment debt. If anything, that vindicates the respondents’ position as creditor.
[7] The fact that the applicant has a counterclaim against the respondents in the District Court does not on its own make it an abuse of process for the statutory demand to have been issued. The statutory demand was for a costs order of Toogood J in the respondents’ favour in relation to their successful appeal against the District Court’s entering of summary judgment against them.3 There cannot have been any dispute as to whether the debt was owing or due in terms of s 290(4)(a) of the Companies Act 1993. The applicant says it has a counterclaim that warranted the demand being set aside under s 290(4)(b). Because the applicant did not pursue the application, the Court has no basis for concluding that the statutory demand was wrongly issued because of the asserted counterclaim.
[8] I also consider it important that before the statutory demand was served on 18 March 2022, the respondents’ counsel first made enquiries with the applicant’s solicitors about payment of the judgment debt. These enquiries were made on 20 December 2021 and 24 January 2022. The response from the applicant’s solicitors was that they were “taking instructions”.
[9] Similarly, it is not an abuse of process to serve a statutory demand on an apparently solvent company. Rather, a company is presumed to be unable to pay its debts if it does not comply with a statutory demand within the prescribed time.4 Solvency is not a ground for setting aside a statutory demand under s 290(4), and the Court of Appeal has held that cases where the solvency of a company would provide a standalone ground for setting aside a statutory demand are likely to be extremely rare.5
2 Greys Avenue Investments, above n 1, at [36].
3 MJ & Kimko Company Ltd v JNJ Holdings Ltd [2021] NZHC 3055.
4 Companies Act 1993, s 287(a).
5 AMC Construction v Frews Contracting Ltd [2008] NZCA 389 at [7].
[10] The respondents were required to prepare a notice of opposition and supporting affidavit to the application to set aside. Contemporaneous correspondence confirms that the respondents were unable to file these documents because the applicant did not provide the CIV number. What is important is that the respondents had to spend time preparing these documents, and the fact that they were not ultimately filed before the application was discontinued is irrelevant.
[11]I am satisfied that the respondents should be paid their 2B scale costs.
[12] I decline to award indemnity costs under r 14.6(4)(a) as sought by the respondents. I am unable to conclude that the application to set aside was hopeless without enquiring into the merits of the purported counterclaim in the District Court.
Result
[13] The applicant will pay the respondents 2B scale costs of $5,736, plus reasonable disbursements fixed by the Registrar.
Associate Judge Gardiner
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