Jobx New Zealand Limited v Umbrellar Limited

[2016] NZHC 2018

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV 2016-404-001660

[2016] NZHC 2018

IN THE MATTER OF

Section 290 of the Companies Act 1993

BETWEEN

JOBX NEW ZEALAND LIMITED

Applicant

AND

UMBRELLAR LIMITED

Respondent

Hearing:	On the papers
Counsel:	J M Skinner for the Applicant A L Davis for the Respondent
Judgment:	29 August 2016

COSTS JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on

29.08.16 at 3:00pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date……………

JOBX NEW ZEALAND LIMITED v UMBRELLAR LIMITED [2016] NZHC 2018 [29 August 2016]

[1]                 On 18 July 2016 the applicant applied for an order setting aside the respondent’s statutory demand. That application asserted there was a substantial dispute about whether a debt was owing to the respondent, and asserted that the amount claimed to be owing by the respondent had been in dispute for some time.

[2]                 The affidavit of Mr O’Meara on behalf of the applicant referred to the background of the parties’ issues.

[3]                 The respondent’s claim related to a range of services and products delivered by the respondent to the applicant. The parties’ business relationship had endured for 10 years but in the last two years, issues arose regarding product and service provided.

[4]                 Mr O’Meara deposes that the respondent acknowledged the need to provide compensation but that none was forthcoming. Through 2015 and the first half of 2016 the parties discussed whether compensation be paid to the applicant and if so in what amount. In June 2016 the respondent offered an account credit of $6,500. This was declined. Shortly after the respondent issued a demand for $14,616.89. Following this the statutory demand that is the subject of the present application, issued.

[5]                 The respondent’s statutory demand has now been withdrawn and in issue is whether costs should be paid to the applicant. The applicant applies for 2A costs. The respondent’s position is that costs should lie where they fall but if costs are awarded then those should be fixed on a 1A basis.

[6]                 Ms Davis for the respondent says the issue of an initial informal demand followed failed settlement negotiations. Ms Davis says the applicant was advised that if payment of the respondent’s claim was not made within a week then the respondent would proceed on the basis that the applicant was insolvent and a statutory demand would issue for the full amount outstanding under the unpaid invoices.

[7]                 The statutory demand was served on 5 July 2016. On 13 July the applicant applied to set aside the statutory demand.

[8]                 The parties renewed their negotiations. Ms Davis asserts that despite the respondent’s view that the setting aside application would fail a settlement proposal was made in order to avoid the costs of a defended High Court hearing.

[9]The offer was refused and no agreement since has been reached.

Considerations

[10]              The setting aside application succeeded. Prima facie costs should be payable to the applicant. Routinely costs awards address issues of complexity and significance. In the Court’s experience, actual costs routinely exceed the daily rates provided by the scale. Notwithstanding this, applications for costs according to the scale rate must be endorsed by advice from counsel that the scale rates do not exceed actual costs incurred.

[11]              Usually costs awards do not take into account the pre litigation steps of the parties1. In this case however both counsel agree that pre litigation steps be reviewable by this judgment, if appropriate.

[12]              Ms Davis submits the applicant failed on two occasions to advise that there was a dispute as to the amount demanded by both its informal and formal demands. Had the applicant advised the debt was disputed following issue of the informal demand, the respondent says it would not have issued the formal second demand.

[13]              Ms Davis submits it is common practice for solicitors to advise the solicitors for the issuing party that an application to set aside will be filed – for the purpose of avoiding costs associated with such an application. In this case Ms Davis says no such advice was received and therefore the respondent had no opportunity to withdraw the statutory demand.

[14]              In the Court’s view the respondent should pay the applicant’s costs on a 2B basis as applied for – subject to confirmation from applicant’s counsel that those costs do not exceed costs actually incurred.

1 Paper Reclaim Limited v Aotearoa International Limited [2006] 3 NZLR 188.

[15]              There has been a long enduring dispute between the parties. Settlement negotiations had taken place over many months. It does not seem to the Court that claims of insolvency assumed any significance for the respondent’s purposes when its formal statutory demand was served. In the Court’s view some other formal process ought to have been engaged to resolve the parties’ issues.

[16]              Costs are awarded to the applicant on a 2A basis together with disbursements, as requested.

Associate Judge Christiansen