Opiweb Limited v Shirley

[2024] NZHC 558

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-001408

[2024] NZHC 558

UNDER

Part 19 of the High Court Rules 2016 and section 290 of the Companies Act 1993

BETWEEN

OPIWEB LIMITED

Applicant

AND

KATHRYN SHIRLEY

Respondent

Hearing:

5 March 2024

Appearances:

T D Bloy / L Kim for the Applicant

D Connor / S Sakairi for the Respondent

Judgment:

15 March 2024

Reissued:

22 March 2024

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 15 March 2024 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date.......................................

Solicitors:

Castle Brown, Auckland

Evolution Lawyers, Auckland D Connor, Auckland

OPIWEB LTD v SHIRLEY [2024] NZHC 558 [15 March 2024]

Introduction

[1]    Opiweb Ltd (Opiweb) asks the Court to set aside a statutory demand served on it by Kathryn Shirley. The statutory demand seeks repayment of an amount ($46,973.10) said to be  due and owing by  Opiweb under  various loans made by  Ms Shirley to the company. The statutory demand included debt recovery costs of

$4,600, but Ms Shirley now accepts that these costs should not have been included.

[2]    Opiweb relies on there being a substantial dispute about whether or not the debt is owing or due. Opiweb says that the loan agreements it had with Ms Shirley did not require the payment of interest (or costs) and that the principal has been repaid.

[3]The terms of the loans were not recorded in writing.

[4]    This judgment decides whether there is a genuine, substantial dispute about whether or not the debt is owing or is due, meaning that the statutory demand should be set aside.

Facts

[5]    Marcus Kahl (also known as Mohammed Ayub) incorporated Opiweb in 2007. He and Ms Shirley were in a relationship. She and Mr Kahl were recorded as the shareholders of the company. Ms Shirley agreed to be the director.

[6]    At Mr Kahl’s behest, Ms Shirley took out three personal loans with Westpac between 2008 and 2011 and advanced the funds to Opiweb. The first loan, drawn down in August 2008 and transferred to Opiweb from Ms Shirley’s personal bank account ending in suffix -92, was for $20,000. The second loan, drawn down in January 2009 from Ms Shirley’s personal bank account ending with the suffix -93, was for $25,000 — however, only $24,000 was transferred to Opiweb. The third loan, drawn down in August 2011 was for $15,000 and was for Opiweb to buy a car. Opiweb does not dispute that Ms Shirley advanced a total of $59,000 to it.

[7]    Under the terms of the loans between Ms Shirley and Westpac, the loans were repayable over ten years.

[8]    Opiweb made repayments towards the first and second loans between October 2008 and June 2021 at a rate of $236 and then $253 per month until 2009, when repayments were reduced to approximately $84 per fortnight. Opiweb made repayments towards the third loan between November 2011 and July 2014 at a rate of

$466 per month. It is not disputed that the third loan with Westpac was repaid.

[9]On 8 December 2020, Ms Shirley ceased being a director of Opiweb.

[10]   Opiweb made its last repayment in June 2021. It is not disputed that Opiweb repaid $43,987 between 2008 and 2021.

[11]   In September 2021 Ms Shirley asked Mr Kahl to have Opiweb repay the balances outstanding on the loans.

[12]   Ms Shirley served a statutory demand on Opiweb for the debt on 13 June 2023. Opiweb filed an application to set aside on 26 June 2023.

Legal principles

[13]   Under the Companies Act 1993, the Court may set aside a statutory demand if it is satisfied that:1

(a)there is a substantial dispute about whether or not the debt is owing or due; or

(b)the company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand is less than the amount of the counterclaim, set-off, or cross-demand; or

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

[14]   The general principles that apply to applications to set aside statutory demands are well-settled:2

1      Companies Act 1993, s 290(4).

2      See Confident Trustee Ltd v Garden and Trees Ltd [2017] NZCA 578 at [16].

(a)The applicant must show there is a genuine and substantial dispute as to the existence of the debt. The Court’s task is not to resolve the dispute but to determine whether there is a substantial dispute that the debt is due.

(b)The mere assertion of a dispute is insufficient. Material short of proof is required to support a claim that a debt is disputed.

(c)If such material is available, the dispute should normally be resolved first in ordinary civil proceedings before a statutory demand is issued.

(d)An applicant must establish that any counterclaim, cross-demand or set-off is reasonably arguable in all the circumstances. It does not need to prove the actual claim.

(e)It is not usually possible to resolve disputed questions of fact based on affidavit evidence, especially when issues of credibility arise, unless such evidence is contrary to the available documents or earlier statements made by the parties.

[15]   The Court’s discretion as to whether to set aside a statutory demand is wide, but it will be a rare occasion where an application is refused if one of the grounds in s 290(4) are made out.

Is there a genuine and substantial dispute?

The parties’ positions

[16]   Opiweb claims that there is a substantial dispute about whether or not the debt is owing or due. It emphasises that the statutory demand has been issued based on an unwritten agreement entered into 15 years ago. It submits that the terms of the loan agreement are uncertain and cannot be resolved without trial. It says that discovery and cross-examination of Ms Shirley and Mr Kahl are necessary to determine the terms of the loan.

[17]   Opiweb’s application is supported by affidavits from Mr Kahl. He is not a director of the company but says that he is authorised by Opiweb to make the affidavits, he “acts” for the company and is aware of its affairs.

[18]   Opiweb submits that there are two areas of dispute. First, there is a dispute about whether interest  was payable by  Opiweb under the loan agreements with    Ms Shirley. Mr Kahl’s evidence is that Opiweb did not agree to pay interest on the loans. He says:

The loans were not as I recall documented in writing and were not subject to any interest. I recall that the intention was that the loans would be repaid over l0 years. Regular payments to Mrs Shirley were set up for $84 in respect of the first loan and $466.00 in respect of the second.

Near the end of term of the loans there was a modest balance still left to pay. Mrs Shirley and I agreed in 2017 that in lieu of repayment of money she would have use a car of her choosing, a white Honda Fit station wagon with the registration plate KZJ340. She still has possession of this vehicle.

At the time Mrs Shirley was removed I discussed the indebtedness of the company to her and she confirmed that there was nothing left owed to her.

[19]   Relatedly, Opiweb submits that because Westpac’s interest rates were not known or disclosed to Opiweb, they are insufficiently certain to be enforced as a contractual term of the loan.

[20]   Second, whether or not the principal loan to Opiweb has been repaid in full. Mr Kahl’s evidence, quoted above, is that the remaining principal balance of the loan was repaid by Ms Shirley having use of a company vehicle.

[21]Ms Shirley submits that there is no substance to the disputes raised by Opiweb.

[22]   She says that there is nothing to the contention that the remaining debt was set off against her use of a company car. In her affidavit she says:

Marcus also claims that the debt owing under the Loans is subject to a set-off against a car he purchased for me in 2017. However, the car he purchased for me was a gift he purchased not long after I started demanding he repay the

$30K cash loan… Marcus only later claimed that I owed him money for the car after I demanded repayment of the Loans, the $30K cash loan and resisted his claims to be the beneficial owner of my apartment.

[23]   This evidence is corroborated with an  email  exchange  between  her  and  Mr Kahl on 30 August 2017, in which Mr Kahl says to her:

When you’re ready, we can buy you a car from here – it’s really good, one of the guys here buys cars from here all the time.

Japanese Used Cars

See if you can choose one, and maybe we will order it?

[24]   Ms Shirley emphasises that this email was sent well before June 2021 when Opiweb stopped repaying the loans. There is no discussion of the car being able to be used as part-payment of the loans in this email.

[25]    As to the alleged dispute over whether interest was payable, Ms Shirley agrees that interest was not discussed, but deposes that it was understood the payments by Opiweb would match or be sufficient to ensure that her three loans with Westpac were repaid in full. She states:

Marcus states in his affidavit that he had not agreed to pay interest. It is probably correct that interest was never discussed. However, it was clearly understood that Marcus would ensure that the 3 loans I obtained from Westpac under the 92, 93 and 95 loan account suffixes would be repaid in full. It was never a term of our agreement that I would be responsible for funding the repayment of those loans or that Marcus would only repay the loan principal borrowed and I would be responsible for the interest and bank fees. That just doesn't make any sense to me.

Assessment

[26]   I am not persuaded that the areas of dispute raised by Opiweb have any substance.

[27]   It is important to be clear that for the most part the loan agreement, and the facts around repayment, are not disputed. The undisputed facts are:

(a)It was agreed that Ms Shirley would take out personal loans with Westpac and on-loan the funds to Opiweb.

(b)Consistent with that agreement, Ms Shirley took out three loans and forwarded the funds ($20,000, $24,000, and $15,000) to Opiweb.

(c)Opiweb made repayments to Ms Shirley which Ms Shirley then used to pay down the loans with Westpac.

(d)Initially Opiweb made repayments of approximately $250 per month to Ms Shirley. At Mr Kahl’s behest, Ms Shirley negotiated with Westpac for her repayments to be reduced to $84 per fortnight. Accordingly, Opiweb’s repayments to Ms Shirley reduced to $84 per fortnight. Opiweb also made additional monthly repayments of $466 between November 2011 and July 2014 in relation to the third loan.

(e)Opiweb stopped making repayments to Ms Shirley in June 2021. At that point Ms Shirley’s third loan with Westpac had been repaid in full but there were still amounts outstanding under the first and second loans.

[28]   Against that agreed position, Opiweb contends that the debt of $46,973.10 claimed by Ms Shirley is disputed in two ways.

[29]   First, that the debt includes interest and Opiweb did not agree to pay Ms Shirley interest. This objection appears to have arisen out of the fact that the calculation of the debt supporting the statutory demand refers to principal and interest payments made by Ms Shirley to Westpac.

[30]   To explain, Ms  Shirley  engaged  the  services  of  a  forensic  accountant,  Dr Bryant, to confirm the amount owing by Opiweb to her under the loans for the purpose of the statutory demand. Dr Bryant sets out his workings in an affidavit filed in support of Ms Shirley’s opposition to this application.

[31]   Dr Bryant added the total repayments made by Opiweb to Ms Shirley to arrive at the total of $43,987. This summary and total was provided to Opiweb as  Appendix 2 to the statutory demand. Opiweb does not dispute the correctness of this figure.

[32]   Next, Dr Bryant calculated the total payments made by Ms Shirley towards the three loans to 31 March 2023. These payments totalled $71,265.10. Of this,

$25,880.10 was interest and $45,385 reduced the principal owing. Dr Bryant included a schedule with all these payments as Appendix 1 to the statutory demand. Opiweb does not dispute the correctness of this calculation.

[33]   Dr Bryant then deducted the repayments by Opiweb from the repayments by Ms Shirley to 31 March 2023. He added the outstanding balances on Ms Shirley’s first (92) and second (93) loans of $6,819.26 and $8,275.74. This gives the shortfall of $42,373.10 that is the debt claimed. As noted, Dr Bryant’s costs were added but it is conceded that the debt cannot include this as a debt owing and due.

[34]   The accuracy of this calculation is not challenged by Opiweb. Rather, Mr Kahl says that the debt should not include interest, because Opiweb did not agree to pay Ms Shirley interest. But this assertion does not engage with Ms Shirley’s description of the loan arrangement or the undisputed evidence as to what took place.

[35]   Ms Shirley describes the loan agreement made with Opiweb at para 26 of her affidavit:

I agreed to make the Loans to Opiweb on the understanding Marcus would make repayments to match the loan repayments I was required to make to Westpac for each of the loans until they were repaid in full.

[36]   Ms Shirley is not saying that the agreement was that Opiweb would pay her interest on the loans at the rate charged by Westpac. She is saying that Opiweb would repay her in the amount she was required to repay Westpac. Obviously, her repayments would have an interest and principal component.

[37]   Mr Kahl (apparently speaking for Opiweb even though Ms Shirley, not he, was the director at the relevant time) does not dispute this description of the loan agreement.

[38]   In his first affidavit, responding to Appendix  1  to  the  statutory  demand, Mr Kahl simply states:

Opiweb never agreed to pay Mrs Shirley interest and I do not know on what basis she claims this amount.

[39]He expands in his affidavit in reply:

I disagree with Kathryn’s comments at paragraph 26 of her first affidavit. Although Opiweb agreed to borrow funds from Kathryn, it was on the understanding that those loans would be interest free. Furthermore, I was never provided a copy of any of the loan documentation recording the terms of the loan between Kathryn and Westpac New Zealand Limited (Westpac), therefore it is not possible for Opiweb to be aware of the terms relating to, or make repayments to match, Kathryn’s loan repayments to Westpac.

…

I disagree with [the analysis of Mr Bryant] as the calculations include annual interest amounts of the personal loan that Kathryn has with Westpac. As the parties did not agree that interest would be payable on the First Loan, Second Loan, and Third Loan I believe that the analysis used by Mr Bryant to calculate the figure in the statutory demand is flawed.

[40]   Mr Kahl’s evidence focuses on the loan from Ms Shirley to Opiweb being “interest free”. He does not engage with Ms Shirley’s evidence that it was agreed that the repayments from Opiweb would match her repayment obligations to Westpac.

[41]   At the same time, Mr Kahl claims that it was not possible for Opiweb to know what those payments amounts were. That is nonsense. The undisputed evidence of Ms Shirley is that Opiweb made regular repayments to her 00 account which were utilised to pay down her 92, 93 and 95 loan accounts. The initial payments were reduced at Mr Kahl’s request to $84 per fortnight. Her evidence, uncontroverted by Mr Kahl is that:

Not long after the second loan was taken out Marcus said he was 'struggling' with payments and asked me to call Westpac to have the two personal loan repayments reduced. He coached me in what to say to the bank beforehand and if I remember correctly he spoke to them during the call, as he did often on difficult calls, calling himself 'Kathryn's accountant'. Marcus then repaid the loans from Opiweb at a reduced rate of $84.00 per fortnight, with the effect of significantly extending the repayment period.

[42]   Furthermore, in the email exchanges between Ms Shirley and Mr Kahl in August/September 2021 when Ms Shirley was chasing Mr Kahl for payment, there was never a request by Mr Kahl to separate out principal and interest.   He asked   Ms Shirley to “tell me how much is left, and how much is the repayment and how long

I have to keep the repayment up for,  so that it is all paid”.3 On 2 September 2021  Ms Shirley forwarded an email from Westpac setting out the outstanding balances for each of the 92 account and 93 account loans ($8,649.65 and $10,845.62 respectively), the interest rates, the fortnightly payments made by Ms Shirley and the loan expiry (originally 10 years and extended to 2029).4

[43]Mr Kahl replied on 2 September 2021with:

...If we could have the same for the mortgage account then I can know whats going on or if that had the load [sic] amount included.

BTW; I've suffered from Covid, so might be a little slow in returning.

[44]   There is no suggestion in any of the email correspondence between them at this time that Opiweb’s obligation to Ms Shirley did not “match” her obligation to Westpac.

[45]   Furthermore, Mr Kahl stated in his email to Dr Bryant, originally without prejudice but produced in his own affidavit:

It has never been my intention to leave Shirley out of pocket in anyway, however, proof of funds is required.

[46]   Overall, Opiweb’s purported dispute relating to the interest component of the debt is inherently unlikely and unsubstantiated by any evidence. All the available contemporaneous evidence points towards an agreement that Opiweb would repay Ms Shirley in the amount she was required to repay Westpac.

[47]   As to the claim that the principal balance was paid by Ms Shirley having use of a company car, this also defies belief.

[48]   The evidence shows that  the car  was purchased for Ms Shirley  in  2017.  Mr Kahl does not dispute this. In Mr Kahl’s email to Ms Shirley concerning the car purchase (see para [23] above) there is no discussion of the car being used as part-payment of the loans.

3      Email from Mr Kahl to Ms Shirley 31 August 2021.

4      Email from Ms Shirley to Mr Kahl 2 September 2021.

[49]   Further, it is common ground that Opiweb continued making repayments until June 2021. Why would it do so if the loans were settled by the car purchase?

[50]   As noted above, there is a series of email communications between Ms Shirley and Mr Kahl in August  and September 2021  which involves Ms Shirley asking    Mr Kahl to pay her the amounts remaining on the 92 and 93 loans, Mr Kahl asking for details of the amounts outstanding, and Ms Shirley providing those details. There is no suggestion by Mr Kahl  that  the  outstanding  balances  have  been  settled  by  Ms Shirley having use of the car. Why would Mr Kahl be asking about the loans if they had been repaid through Ms Shirley having the car, purchased in 2017?

[51]   The late suggestion by Mr Kahl that the debt was settled by Ms Shirley having use of a company car is lacking in credibility and rejected as a basis for setting aside the statutory demand.

Result

[52]I order:

(a)the application to set aside the statutory demand is dismissed;

(b)the statutory demand stands for the reduced amount of $42,373.10;

(c)Opiweb   must   comply   with   the    statutory    demand    within    15 working days, failing which Ms Shirley may make an application to put the company into liquidation; and

(d)the respondent will be paid her costs on a 2B basis and reasonable disbursements to be fixed by the Registrar.

Associate Judge Gardiner