Hearing:	19 March 2020
Court:	Cooper, Courtney and Stevens JJ
Counsel:	G P Blanchard QC and T Nelson for Appellant S L Robertson QC for Respondent
Judgment:	23 April 2020 at 12.30 pm

JUDGMENT OF THE COURT

A The appeal is allowed and the cross-appeal is dismissed.

BThere is an order setting aside the statutory demand served on the appellant pursuant to s 289 of the Companies Act 1993 and dated 11 December 2018 for $1,452,803.62 (“the setting aside order”).
CThe setting aside order is subject to the conditions set out in [85].
DAny question of the application of, or compliance with, the above conditions is to be referred to the High Court.
EAs requested by counsel, the costs and disbursements of and incidental to the appeal, the cross‑appeal and the hearing in the High Court are reserved.
FIf agreement cannot be reached by the parties on all aspects of costs, counsel may file brief memoranda of no more than three pages.

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REASONS OF THE COURT

(Given by Stevens J)

Introduction

Mega Project Holding Ltd (Mega) and Orewa Developments Ltd (Orewa) are property developers who were planning and undertaking residential subdivisions on their respective properties in Orewa, north of Auckland. The properties both adjoin West Hoe Heights, which runs between them and was required to be upgraded for the developments to proceed. In December 2016, Mega and Orewa entered into a Heads of Agreement to share the costs of the roading work (the contract).
Essentially, Orewa was to carry out the roading work and Mega was to pay Orewa half the costs. Orewa carried out the roading work and asked Mega to pay its half share. Numerous requests were made for Mega to pay its share of the costs. Mega gave no response to these requests and to date has made no payment.
On 11 December 2018 Orewa served a statutory demand on Mega under s 289 of the Companies Act 1993 requiring payment of $1,452,803.62 said to be “for roading construction costs adjoining the land belonging to you at West Hoe Heights Orewa, pursuant to a written agreement made on or about 5 December 2016 between you and the creditor”.
Mega applied to the High Court to set aside the statutory demand under s 290 of the Companies Act, contending there was a “substantial dispute” as to the debt under s 290(4)(a). The relevant principles under that section are well-settled. The applicant must establish the existence of a substantial dispute. Material short of proof is required and the mere assertion that a substantial dispute exists will not suffice. Affidavit evidence alone will usually be insufficient to resolve disputed questions of fact, particularly when issues of credibility arise.[1]
[1]Confident Trustee Ltd v Garden and Trees Ltd [2017] NZCA 578 at [16].
Mega contended that a substantial dispute about the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Mega Project Holding Ltd v Orewa Developments Ltd

Details

AGLC: Mega Project Holding Ltd v Orewa Developments Ltd [2020] NZCA 111
Case: [2020] NZCA 111
Decision Date: 23 April 2020 at 12.30 pm

CaseChat Overview and Summary

In the Court of Appeal of New Zealand, Mega Project Holding Ltd (Mega) appealed against the refusal of the Associate Judge to set aside a statutory demand served on it by Orewa Developments Ltd (Orewa). Mega argued that there was a substantial dispute about its liability to pay Orewa under their contract for shared costs of roading work. The appeal was heard by Cooper, Courtney, and Stevens JJ, with Stevens J delivering the judgment. The Court allowed the appeal and dismissed the cross-appeal by Orewa. The statutory demand was set aside subject to certain conditions.

Mega and Orewa were property developers who planned to undertake residential subdivisions on their respective properties in Orewa, north of Auckland. They entered into a Heads of Agreement in December 2016 to share the costs of the roading work required for their developments. Orewa carried out the roading work, but Mega did not pay its share of the costs. Orewa served a statutory demand on Mega under s 289 of the Companies Act 1993. Mega applied to the High Court to set aside the statutory demand, contending that there was a substantial dispute as to the debt under s 290(4)(a) of the Act. The Associate Judge found that there was a genuine and substantial dispute about contractual liability but declined to set aside the statutory demand. He concluded that Orewa was entitled to claim the sum of $1,284,122.94, being half of the reasonable value of the services supplied, but without any entitlement to interest.

On appeal, the Court found that there was a substantial dispute about Mega's liability under the contract, resulting in an order setting aside the statutory demand. The Court agreed with Mega that the statutory demand was made relying on the contract and Mega had no notice of a restitutionary or other non-contractual claim. The Court also found that there was a substantial dispute as to the nature and terms of the variation of contract contended for by Orewa and whether Mega was estopped from relying on Orewa's non-compliance with the conditions of the contract to avoid paying its share of the costs of the roading work. The Court concluded that the exercise of the discretion to set aside the statutory demand should be in favour of Mega, given the substantial dispute about its liability under the contract.

The Court decided to impose conditions for setting aside the statutory demand, requiring the parties to engage in the appointment of an impartial quantity surveyor to determine the fair and reasonable costs of the roading work. The Court also considered Orewa's late request to require Mega to pay a substantial portion of the debt into an independent trust account pending determination by the quantity surveyor of the amount of costs for roading work payable by Mega. However, the Court was unwilling to speculate on the factual position and considered that Orewa should review the matter after delivery of the judgment and, if necessary, make an application to the High Court supported by affidavit evidence.

The appeal was allowed and the cross-appeal was dismissed. The statutory demand was set aside subject to conditions, and the costs and disbursements of and incidental to the appeal, the cross-appeal, and the hearing in the High Court were reserved.

Orders