MCAM Medical (2011) Limited v Striker Electrical Limited
[2019] NZHC 119
•11 February 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-1191
[2019] NZHC 119
BETWEEN MCAM MEDICAL (2011) LIMITED
Applicant
AND
STRIKER ELECTRICAL LIMITED
Respondent
Hearing: 11 February 2019 Appearances:
M Orange for the Applicant
N Tabb for the Respondent (given leave to withdraw)
Judgment:
11 February 2019
ORAL JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by me on 11 February 2019, pursuant to r 11.3 of the High Court Rules
Registrar/Deputy Registrar
Solicitors / Counsel: Fortune Manning, Auckland N Tabb, Auckland
MCAM MEDICAL (2011) LTD v STRIKER ELECTRICAL LTD [2019] NZHC 119 [11 February 2019]
[1] The applicant (MCAM) applies to set aside a statutory demand served by the respondent (Striker) on 7 June 2018. The amount demanded was $24,048.59, for electrical services supplied to MCAM's medical clinic in the period between August 2014 and late 2015.
[2] MCAM says that it has a counterclaim and/or set-off which is greater than the amount claimed by Striker in the statutory demand.
[3] The case was originally set down for a defended hearing on 2 October 2018, but Ms Tabb sought and was granted an adjournment because of certain serious health issues affecting a close family member of Striker's director. Striker's submissions had been due by 25 September 2018, but none have been filed then or since. At today's hearing Ms Tabb advised that she has been unable to obtain instruction, and that she was not in a position to make submissions for the respondent. I gave her leave to withdraw as counsel.
The dispute
[4] MCAM alleges that the work (which was part of a wider project involving fitting out the medical clinic's triage space, surrounding patient areas, and reception) was never completed by Striker, and such work as was done was completed negligently. It says that Striker's sole director, Mr Louis, walked off the job in early 2016. Mr Ah Kit, a director of MCAM, said in his affidavit that in late 2015 MCAM tried to agree a date for Mr Louis to finish the work, and on several occasions he promised to come. But he never turned up. After that had occurred several times, MCAM formed the view that Striker did not intend to follow through on its commitments.
[5] Mr Ah Kit said that in January and February 2016 the practice experienced frequent power outages. Mr Ah Kit said that they tried to contact Mr Louis, but he did not respond. Eventually, in February 2016 MCAM engaged Hewlett Electrical Limited (Hewlett) to fix the power outages.
[6] Mr Ah Kit's evidence was that Hewlett became concerned with the standard of some of Striker's work. Hewlett referred MCAM to Chopping & Associates (Chopping), a firm of electrical safety engineers, to investigate and report.
[7] Chopping provided a report on 29 February 2016. They concluded that there was a significant amount of remedial work required to bring the electrical installation up to minimum regulation requirements. Chopping considered the switchboards were in an unsafe condition, with no masking panels around recently installed circuit breakers, and the circuit breakers had not been properly aligned to fit neatly into the panel. They took the view that the switchboard required urgent attention to cover up live parts by fitting the masking panels correctly, labelling all circuit breakers to identify what they actually protected.
[8] Chopping also noted exposed basic insulation in the ducts, and insufficient or inadequate lighting in some areas. The emergency lighting had not been set up correctly and would not pass the mandatory requirements of Councils for public facilities. In addition, mandatory documentation had apparently not been provided (including a certificate of compliance stating that it was safe to connect, an electrical safety certificate saying it was safe to use, and a record of inspection confirming test results and documentation).
[9] Mr Ah Kit confirmed that the deficiencies identified by Chopping did not arise from work carried out by Hewlett. He said that all Hewlett did was refer the matter to Chopping.
[10] A complaint was lodged with the Electrical Workers Registration Board (the Board), on Chopping's recommendation. On 23 December 2016 the Board released its decision, concluding that Mr Louis had committed a number of offences under the Electricity Act 1992.
[11] Among its findings, the Board found that Mr Louis had committed the following disciplinary offences. He:
(1)created a risk of serious harm to any person, or a risk of significant property damage, through having carried out or caused to be carried out prescribed electrical work, in that:
(a)circuits and sockets were not provided with adequate RCD protection; and
(b)sockets did not have adequate isolation where required and were not labelled clearly; and
(c)sockets in Cardiac Protected Patient Areas were not on separate circuits and did not meet the requirements for equipotential earthing points.
(2)carried out or caused to be carried out prescribed electrical work in a manner contrary to any enactment relating to prescribed electrical work that was in force at the time the work was done, in that:
(a)cable terminations had been carried out poorly and excessively exposed copper conductor was present in one location; and
(b)excessive basic insulation was exposed in the luminaire installations.
[12]Mr Louis was fined $500.00 for the proved breaches.
[13] MCAM says that it incurred costs of $111,463.27 in getting the electrical work finished, and in fixing what it says was Striker's negligent work. Mr Ah Kit produced copies of the relevant invoices, saying that the new contractor (Arendal Electrical Limited – "Arendal") "effectively had to re-do all of the work completed by [Mr Louis]". He said that everything had to be checked and in most cases, re-done. Mr Ah Kit said that this led to the high costs MCAM incurred.
[14] On the subject of costs, MCAM had paid a total of $131,386.58 for the work Striker did carry out, being the amount claimed in Striker's first 15 invoices. The statutory demand was issued in respect of the two final invoices, issued in December 2015 and March 2016.
[15] In his affidavit in opposition, Mr Louis referred to delays in payment of his invoices throughout the project, and to various (agreed) additions to the contract (the accepted quote for the work had been approximately $71,000). Mr Louis said that there were occasions when he stopped work because of non-payment.
[16] Mr Louis referred to difficulties encountered in getting MCAM to agree to times for him to come in and complete the work, particularly as MCAM wished to keep the clinic operating.
[17] Mr Louis said that a date was eventually agreed for Striker to come back to the site to complete any works identified as being incomplete, but he was unwell on the agreed date, and could not attend. MCAM refused to arrange another date, and on 3 March 2016 confirmed that Striker's services were no longer required.
[18] Mr Louis' response on the various alleged faults with Striker's work was largely that Striker had not been allowed to finish the work, including a final safety check and tidy up work.
[19] Mr Louis said that the Board accepted that many of the issues complained about had come about because Striker had not been able to complete the work. He also said that a report of work done by Arendal shows that the work was not defective workmanship, but "tidying up" which would have been done at the end of the job. Mr Louis said that it would not have cost anywhere near $20,000 to do the tidying up work.
[20] Referring to the "frequent power outages" in January and February 2016, Mr Louis contended that they must have been a result of Hewlett's work – if they were as a result of Striker's work, they would have occurred in the final weeks/months of 2015.
[21] Mr Louis said he believed the work done by Striker was done competently, and that if it had been allowed to finish the job the matters raised by MCAM would have been tidied up and finished off to a good standard.
[22] Mr Louis acknowledged that there could be an arguable dispute over minor issues in the report of the Board. He suggested that a fair and reasonable figure to put on matters identified by the Board would be $3,000.
Legal principles
[23]Section 290 of the Companies Act 1993 (the Act) materially provides:
290 Court may set aside statutory demand
(1)The court may, on the application of the company, set aside a statutory demand.
(2)The application must be—
(a)made within 10 working days of the date of service of the demand; and
(b)served on the creditor within 10 working days of the date of service of the demand.
(3)No extension of time may be given for making or serving an application to have a statutory demand set aside, but, at the hearing of the application, the court may extend the time for compliance with the statutory demand.
(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.
(5)A demand must not be set aside by reason only of a defect or irregularity unless the court considers that substantial injustice would be caused if it were not set aside.
(6)In subsection (5), defect includes a material misstatement of the amount due to the creditor and a material misdescription of the debt referred to in the demand.
(7)An order under this section may be made subject to conditions.
[24] The onus is on the applicant for an order setting aside a statutory demand to show that there is a genuine and substantial dispute as to the existence of the debt. The dispute must be real and not fanciful or insubstantial; the applicant must show a fairly arguable basis upon which it is not liable for the amount claimed. The mere assertion that a dispute exists is not sufficient. An applicant must establish that any counterclaim
or cross-demand is reasonably demandable in all the circumstances. The obligation is not to prove the actual claim; such an obligation would amount to the dispute itself being tried on the application.1
Discussion and conclusions
[25] I am satisfied that MCAM has produced sufficient evidence to show that there is a genuine and substantial dispute as to the existence of the debt, and/or as to the existence of a counterclaim or cross-demand which would or might exceed in value the amount claimed in the statutory demand.
[26]I come to that view for the following reasons:
(1)The Chopping report referred to a "significant amount of remedial work" that would be required to bring the electrical installation up to minimum regulation requirements. The use of the word "remedial" in particular, suggests that Chopping was alluding to defective, rather than incomplete, or "tidying up" work. That view is reinforced by the evidence that it was Chopping who considered the matter sufficiently serious to warrant a complaint being lodged with the Board.
(2)The Board found Mr Louis had created a "risk of serious harm to any person, or a risk of significant property damage", through having carried out or caused to be carried out the prescribed work. It referred to circuits and sockets not provided with adequate RCD protection, and sockets that did not have adequate isolation where required. It found that sockets in Cardiac Protected Patient Areas were not on separate circuits and did not meet the requirements for equipotential earthing points. In addition, the Board found that Mr Louis had carried out or caused to be carried out prescribed electrical work which did not conform to statutory requirements, including in the respect that cable terminations excessively exposed copper conductor in one location, and
1 Howes & Ors Brookers Company and Securities Law (looseleaf ed, Brookers), at CA 290.02, citing North Harbour Equine Hospital Ltd v Little HC Auckland CIV-2006-404-7585, 19 February 2007.
excessive basic insulation was exposed in the luminaire installations. On its face, it is difficult to dismiss those findings as being relatively unimportant, as Mr Louis appeared to endeavour to do in his affidavit. Nor do the matters identified by the Board appear on their face to be matters of "tidying up" work, that an electrician might reasonably leave to the end of the job.
(3)Mr Ah Kit's evidence was that all of the work done by Striker had to be redone. Mr Louis challenged that, contending that the work described in the Arendal report really involved not much more than tidying up, or completion work. That is not apparent from the Arendal report itself, at least to my eye. For example, I note that under the heading "Top Switchboard", Arendal referred to the need to replace earth and neutral bars allowing for one wire per terminal, correcting the previous expansion from 36 ways to 48 ways. Under the heading "Lower Switchboard", Arendal referred to a need to replace the mains switch with a compatible unit "for existing pan assembly…". Further, Arendal mentioned in a section of their report concerned with the Classification of Patient areas, a need to replace 56 power points in body-protected electrical areas. Under a heading "Recently Installed 20 AMP 10mA RCBO's", Arendal referred to "26 new 20 AMP 10mA RCBO safety devices that have been installed very recently, before [Arendal] had any involvement with this site. Arendal recommended that the cables between the switchboard and the first power points be replaced with 6mm TPS cables and that the RCBO circuit protection be downrated to 16 Amp where necessary. The Arendal report included other comments that tended to suggest extensive replacement, rather than mere tidying up. For example: "These 4 socket-outlets must be rewired and replaced…", and "The earthing system in the Cardiac-protected electrical area does not meet current regulations. The Cardiac-protected electrical area power circuit requires a complete rewire."
It appears to me from the evidence that there is ample to suggest that the quality of the work performed by Striker was arguably deficient, to the point where extensive remedial work was indeed required.
(4)There is a dispute over the cause of the January/February 2016 power outages. It is not clear whether they are connected with the work done by Striker (Mr Louis said they could not have been, and must have been caused by work done by Hewlett), or whether there may have been some other cause. Mr Ah Kit's evidence was that Hewlett would not have done any work which might have caused the power outages. For present purposes, the short point is that there is a dispute over a matter which is clearly not suitable for resolution on an application such as this.
(5)The same can be said of Mr Louis' contention that he was prevented from returning to the site to complete any necessary work. That is denied by MCAM, and again it is not something which is capable of resolution in a summary context such as this.
(6)Finally, Mr Louis has acknowledged that some deduction from the amount claimed is appropriate. However, he offers no quantification of his figure of $3,000, and I am satisfied from the combination of the Chopping report, the Board's findings, and the Arendal report that the cost of necessary remedial work is likely to be significantly in excess of that, and probably greater than the amount claimed by Striker in the statutory demand.
[27] For all of those reasons I am satisfied that MCAM has proved that there is a genuine and substantial dispute, whether by way of set-off or by way of counterclaim, which will arguably exceed the amount demanded by Striker.
Result
[28] The application to set aside the statutory demand is granted. MCAM is entitled to costs in the ordinary way, and those costs are fixed on a 2B basis, with disbursements to be fixed by the Registrar.
Associate Judge Smith
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