Red Jack Resources Limited v Smith Diesel Services Limited
[2019] NZHC 1776
•26 July 2019
IN THE HIGH COURT OF NEW ZEALAND GREYMOUTH REGISTRY
I TE KŌTI MATUA O AOTEAROA MĀWHERA ROHE
CIV-2019-418-14
[2019] NZHC 1776
BETWEEN RED JACK RESOURCES LIMITED
Applicant
AND
SMITH DIESEL SERVICES LIMITED
Respondent
Hearing: 16 July 2019 Appearances:
D M Jackson for Applicant
J B Orpin-Dwell for the Respondent
Judgment:
26 July 2019
JUDGMENT OF ASSOCIATE JUDGE LESTER
This judgment was delivered by me on 26 July 2019 at 1.00pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar 26 July 2019
RED JACK RESOURCES LTD v SMITH DIESEL SERVICES LTD [2019] NZHC 1776 [26 July 2019].
[1] The applicant seeks an order setting aside a statutory demand issued by the respondent demanding payment of $633,890.84. Attached to the statutory demand was a statement of the account between the parties showing all debits and credits. The amount claimed is the balance outstanding under the parties’ trading relationship which commenced in March 2017 and concluded in October 2018.
[2] The respondent is a company based in Hokitika and provides earthmoving services and maintenance and repairs of diesel machinery, mining management and plant hire.
[3] Initially, the applicant, which operates a gold mine in Awatuna on the West Coast, engaged the respondent to carry out work on earthmoving equipment. The amounts charged for this work were relatively modest with no invoice exceeding
$2,000 for the first five months or so of trading.
[4] The applicant completed an Account Opening Form dated 4 July 2018 which records the director of the applicant as being Mr Wei Fang. Mr Jerry Hu is given as the “accounts payable contact name” and an email address is given to which invoices and statements can be sent.
[5] Mr Jackson, appearing for the applicant, advised from the Bar (without objection) that the bank account for the applicant could be operated by Mr Hu and Mr Fang only.
[6] The parties’ trading relationship entered a new phase when they entered what they refer to as the “Stripping Contract” dated 3 October 2017. This Stripping Contract was to remove the overburden at the applicant’s mining site. The Stripping Contract specified the charge for the removing of overburden was $3.30 per m2. The Stripping Contract listed the equipment that the respondent would commit to the work. It also provided for the respondent to hire equipment owned by the applicant for use on the job, set out the hire rates for the applicant’s plant to be used by the respondent, and the division of maintenance obligations in respect of that plant.
[7] Once work under the contract got underway, the level of charges increased significantly. Monthly invoices for the removal of overburden when the project was up and running were not less than $200,000 and up to $425,000.
[8] In addition to the monthly overburden invoices there were further invoices for other services provided by the respondent.
[9] The applicant made irregular, generally round sum payments, against the invoices. For example, in April 2018 there were six round sum payments ranging between $30,000 and $65,000, but with the monthly overburden invoices running at around $300,000 per month, the indebtedness between the parties remained significant. The lowest amount owed by the applicant to the respondent according to the schedule annexed to the statutory demand (the mathematical accuracy of which is not in issue) showed that near the end of February 2018 the indebtedness was just under $200,000. With the February earthmoving invoice being nearly $350,000 the amount due (but not necessarily overdue) from the applicant to the respondent increased to nearly $550,000 at the end of February 2018. The end of month indebtedness following the monthly earthmoving invoice remained in excess of
$500,000 and at times as much as $764,000 for the rest of the trading relationship.
[10] None of the payments made by the applicant were allocated to specific invoices so the respondent, as it was entitled to, applied the payments received to its oldest invoices.
[11]The last payment made by the applicant reduced the amount due to
$651,035.87.
[12] Following adjustments which are not material, the amount claimed in the demand was $633,890.84. By the time of the hearing on 16 July 2019, the respondent accepted two additional credits should be allowed, reducing the amount claimed to
$612,236.34. This amount includes $162,136.85 relating to 14 invoices (“the non-stripping invoices”) which, with minor exceptions, relate to work not covered by the 3 October 2017 Stripping Contract.
Legal principles
[13] Counsel were in agreement as to the legal principles, but not surprisingly emphasised different aspects of the tests applied by the Court.
[14] The respondent’s counsel emphasised that it is the applicant that must demonstrate there is arguably a genuine and substantial dispute as to the existence of the debt and that it is the applicant that must establish that any counterclaim, crossclaim or set-off is reasonably arguable in the circumstances. This requires the applicant to demonstrate “clear and persuasive” grounds rather than a mere assertion.1
[15] While the Court will not usually resolve disputed questions of fact on affidavit evidence alone, the Court is not required meekly to accept without question whatever unvarnished statements happen to appear in an affidavit. The Court is entitled to act in a robust and common-sense manner.2 The Court is not required to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement in an affidavit however equivocal, lacking in precision, inconsistent with undisputed documents or other statements by the deponent, or if it is inherently improbable, this being the well-known approach to affidavit evidence from Eng Mee Yong v Letchumanan.3
[16] For the applicant, Mr Jackson referring to Industrial Group Ltd v Bakker,4 emphasised that it would be unusual for the High Court to engage in detailed analysis of the merit of any counterclaim relied on. He emphasised that the “appearance” test in s 290 of the Companies Act 1993 is a review with a low threshold taking into account the tight time constraints that apply in the statutory demand context compared with, for example, the summary judgment context.
[17] Mr Jackson submitted that it follows that the Court is not required to “delve deeply” into the evidence to determine whether the threshold has been met.
1 Manchester Securities v Body Corporate 172108 [2018] NZCA 190, [2018] 3 NZLR 455 at [27].
2 United Homes (1988) Ltd v Walker [2001] 3 NZLR 447 (CA) at [34] and Fletcher v Jadie Trustee Ltd [2011] NZCA 603 at [18].
3 Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341.
4 Industrial Group Ltd v Bakker [2011] NZCA 142, (2011) 20 PRNZ 413 at [24].
[18] That may well be right, but at the end of the day the applicant must still give evidence of the basic components of the counterclaims on which it relies, which goes beyond bare unparticularised assertion.
Applicant’s case
[19] The applicant’s case treated the non-stripping invoices as a separate category, submitting that while the applicant accepted liability to pay invoices under the Stripping Contract, it disputed liability to pay anything over and above charges incurred under the Stripping Contract. The applicant’s submissions contained the following:
The applicant’s position is, as in any case, that if the respondent wishes to claim a payment for additional or other services beyond the scope of the stripping contract, it must prove that the parties entered into an independent contract for those services or that otherwise they were provided per agreed variations of the stripping contract itself.
It is the applicant’s case that the respondent’s evidence does not establish a clear and undeniable right to payment of those additional invoices. On the contrary, there is a dispute to be had over whether the respondent was ever engaged to carry out the services which it now claims the right to payment for, which cannot be resolved on a summary basis. (emphasis added)
[20] As will be developed when addressing the non-stripping invoices, a difficulty for the applicant in sustaining that part of the submission highlighted above is that all the disputed invoices have been paid as a result of the respondent applying payments received to the oldest outstanding invoices first.
[21] In relation to the amount due under the Stripping Contract, eight set-offs/counterclaims were raised totalling $450,657.75. One item totalling $48,000 was accepted as having already been taken into account by the respondent, meaning the counterclaims to be considered amount to $402,657.75. Taking into account the non-stripping invoices, along with the amount of the counterclaim, the applicant disputes $564,794.60 of the amount claimed meaning that $47,441.74 would even on the applicant’s case be due and payable.
[22] I will refer to how the applicant in reply sought to recast quantum at the end of this judgment.
[23] In broad terms, it is therefore necessary to examine whether the non-stripping invoices are somehow recoverable by the applicant (they already having been paid) and then to review the counterclaims.
The non-stripping invoices
[24] Mr Orpin-Dowell analysed the disputed invoices in two groups: eight invoices issued between November 2017 and March 2018 (“Martin invoices”), and a further group of six invoices issued between July 2018 to October 2018 (“Category Two invoices”) dealing with the operation of the applicant’s gold screen and labour charges for the operation of the applicant’s machinery.
The Martin invoices
[25] I have referred to the first category as the “Martin invoices” as the respondent says these eight invoices were all approved prior to being issued by a Mr Craig Martin. There is a dispute as to what role Mr Martin had as an employee. The respondent characterises Mr Martin as being the Mine Manager of the applicant. This is disputed. Mr Fang, in his reply affidavit, categorises Mr Martin’s role as Excavator/Operator and, for want of a better term, a general hand around the mine.
[26] There is a factual issue that cannot be resolved as to what Mr Martin’s role was. Nor is there any evidence which would allow me to determine what the implied actual authority of someone in Mr Martin’s role as characterised by the applicant would be.5 In other words, I cannot determine whether someone engaged to operate an excavator would be reasonably understood in the industry as having authority to commission repairs on machinery.
[27] Accordingly, I approach this group of invoices on the basis that it is reasonably arguable that Mr Martin did not have actual authority to engage the respondent to carry out the work covered by this group of invoices.
[28] Such, however, does not determine whether the demand in respect of these invoices should be set aside.
5 C Hawes and D Lester Laws of New Zealand Agency (online ed) at [30].
[29]The following are significant:
(a)Each of the invoices in this category have been produced. Each is a detailed invoice of the work carried out.
(b)The applicant does not dispute that the work set out in the invoices was carried out, nor the quality of the work.
(c)The applicant does not dispute the reasonableness of the charges contained in each invoice.
[30]Earlier I referred to the Account Opening Form. It contained the following:
Invoices and statements to be emailed.
Email (generic if possible): [email protected]
[31]The email address was provided by the applicant.
[32] The disputed invoices were sent to the nominated email address for invoices. The invoices were paid either on the authority of Mr Fang, the director of the applicant, or on the authority of Mr Hu, the person nominated as the accounts payable person.
[33] As I will refer to below, at this time the applicant was short on cash and it was scrutinising the invoices it received.
[34] There is no real explanation offered by the applicant as to why these invoices totalling nearly $140,000 were paid when it says they were not authorised.
[35] Having received the benefit of the work under the invoices and not challenging the quality of the work or the reasonableness of the charges which have been paid, Mr Jackson did not set out a principled basis upon which his client could seek to recover the payments made.
[36] Mr Orpin-Dowell analysed recovery in terms of whether the payments could be recovered in restitution as payments made on a mistaken basis. I accept his
submissions in this regard that the applicant has not pointed to any relevant mistake. Its nominated contact for accounts payable received itemised invoices for the services and it paid those invoices without query.
[37] The only basis put forward for challenging these invoices was Mr Martin’s lack of authority to commission the work. On the applicant’s case, only Mr Hu or Mr Fang had authority to authorise these repairs. However, there is no explanation as to why, if that is the case, when these invoices were received neither Mr Fang nor Mr Hu, who controlled the bank account, queried the invoices. With detailed invoices having been sent to the nominated accounts payable person and the accounts having been paid, such would also amount to the applicant ratifying Mr Martin’s actions even if there was an arguable issue in respect of authority.
[38] I am not satisfied that the applicant has established a reasonably arguable counterclaim in respect of these invoices. As I noted above, this is not a case of the respondent “now claiming the right to payment”; it has already been paid. The applicant needed to set out a basis upon which these amounts were recoverable. The onus in that regard was on the applicant.
[39] The applicant’s submissions say there is a dispute as to whether the works were in fact carried out. That submission, in my view, cannot survive the fact that the detailed invoices were tendered, reviewed and paid.
[40] I do not accept that the applicant has established a reasonably arguable counterclaim to recover the Martin invoices.
Category Two invoices
[41] The Category Two challenged invoices totalled $23,919.38. These largely relate to the operation of the applicant’s gold screen.
[42] The Stripping Contract relates to the removal of overburden to allow the mining operation to access the potentially gold bearing material.
[43] The running of that material through the gold screen is a separate operation and not covered by the Stripping Contract.
[44] In effect, the applicant’s argument is that the Stripping Contract exclusively governed the contract between the parties and anything outside the Stripping Contract was not authorised and therefore subject to a dispute.
[45] The respondent’s evidence is that these works were authorised by a Mr Liu, described by Mr Fang as his “business partner”. It is common ground that the services relating to the gold screening were separate from the Stripping Contract. There is no reply evidence from Mr Liu disputing that he authorised this work.
[46] There are text messages produced between Mr Smith of the respondent and Mr Liu consistent with Mr Liu at least being aware that the respondent was supplying labour to operate the gold screen.
[47] Again, these invoices have been paid. Again, the reasonableness of the amount claimed in respect of these six invoices is not in dispute.
[48] Of the six invoices in this category, two small invoices are said by the applicant to be payable by the respondent pursuant to the Stripping Contract: invoice 3411 for
$1,061.34 being the cost of replacing an alternator on the applicant’s excavator, and invoice 3423 for $1,431.75 for repairing the hydraulic stick cylinder on the same excavator.
[49]Clause 9(a) of the Stripping Contract provides:
9 the Hire of the miners / Owners Cat 365C and Moxy MT41 truck.
9(a) the contractor would use the miners / owners 365CL the contractor would cover the cost to maintain and service on a day to day basis ie .Top up oils servicing, damage to hoses schedule services,
9(b) the contractor would also take over the running of the MT41 and cover the cost of servicing and the day to day maintaining including hoses top up oils and scheduled servicing.
9(c) all major repairs will be met by the miner/owner no allowance has been made for the contractor to cover the cost for equipment overhauls such as track overhauls, engine repairs Hydraulic ram
overhauls to these will be meet by the miner replacement of tyres due to damage will be the contractors obligation but tires worn out will be the miners /owners.
[50] The respondent’s case is that the alternator and hydraulic stick cylinder work is outside the scope of para 9(a) of the Stripping Contract. The competing argument is that the relatively modest amounts of these invoices would mean they were not “major repairs” as contemplated by para 9(c).
[51] Invoice 3423 is for a hydraulic stick cylinder with para 9(c) expressly excluding “hydraulic ram overhauls”. As the director of the respondent, Mr Smith’s evidence is that the hydraulic stick cylinder is within the meaning of “hydraulic ram overhauls” for which the respondent is not liable. This evidence on this point is not contradicted in reply.
[52] I am unable to determine whether the small amount under invoice 3411 is within the major repair obligation of the applicant or the respondent’s obligations under 9(a).
[53] That issue, however, also runs up against the fact that invoice 3411 has been paid. For the reasons given in relation to the preceding group of invoices, I do not consider that the applicant has set out a reasonably arguable basis for the recovery of this paid invoice, even if there is a reasonably arguable basis for saying that it may not have been the responsibility of the applicant.
[54] I do not consider the applicant has established a reasonably arguable counterclaim, that is a reasonably arguable ability to recover these paid invoices.
Counterclaims
[55]The further counterclaims that need to be considered are as follows:
(a) Hire of dump truck $102,600.00 (b) Sale of a dump truck $115,000.00 (c) Diesel for pump use by respondent $20,000.00 (d) Pump hire to respondent $41,400.00 (e) Pump hire costs incurred $73,500.76 (f) Damage to access road and site plant $43,598.60 (g) Damage to excavator $6,558.39
Hire of dump truck
[56] This claim and the sale of the dump truck claim concern the MT41 “Moxy” truck which belonged to the applicant.
[57] By the end of December 2017, the truck required substantial repairs to keep it operational. Costs estimates for the repairs were sent but it is common ground that the applicant did not ask for the repairs to be done at this time.
[58] Then in April 2018, the possibility of fixing the truck was raised again. A detailed quote was provided by the respondent which showed some $47,000 including GST of work was required if all the work in the quote was undertaken. The quote broke down the work to: work that had to be done to get the truck operational; work that would be needed as soon as possible, but would not stop the truck from operating; and a further category of work that the respondent was prepared to undertake at its own cost. Included in work that was essential to getting the truck operational again was an overhaul of the front brakes.
[59] In an email sent by the applicant to the respondent on 5 November 2018, the applicant said:
A big problem we have is our MT41 truck that we sent to you to have the brakes repaired, we know we could not afford at that stage but it gave no right for you to take the transmission out of the truck and use in one of your trucks…
[60] It is not in dispute that while the Moxy truck was laid up the respondent used the transmission from the truck to keep operational its own truck used at the mining site. The applicant alleges that it lost revenue from the truck being unavailable to be
hired out as a result of what it says was the unauthorised use of the transmission. I do not consider this claim has any merit.
[61] The truck could only ever have been hired out by the applicant if it had completed the repairs on the brakes in order to get the truck operational again. As it could not afford to do that and there is no evidence it ever gave instructions for the repair work to be done the truck was not available to be let out because it was not roadworthy.
[62] Accordingly, whatever might have happened to the transmission is irrelevant to the applicant’s ability to hire out the truck as it knew the truck would only be operational if it paid for the brake repair. It acknowledged that it did not have the funds to pay for the repair.
[63] Nor is it tenable for Mr Fang to suggest in his reply affidavit that there was an obligation on the respondent to repair the brakes.
[64] The detailed repair estimate for the truck was sent in April 2018 to the applicant with a covering email explaining the different categories of repair. If at that time the applicant had believed that the repair costs set out in the estimate were the responsibility of the respondent, then one would have expected that to have been raised at that time.
[65] The other point is that the respondent in its submissions notes that the loss of hire claim by the applicant is calculated on the assumption that the applicant could have hired the truck to the North Canterbury Transport Infrastructure Recovery. The respondent’s case is that that organisation will only hire plant that is less than four years old and has less than 4,000 clock hours and is in “as new condition”. The applicant’s truck is well outside those criteria. Mr Jackson accepted this when I put it to him.
[66] I do not accept this counterclaim on the basis that it is wholly inconsistent with the contemporary actions of the applicant, that is, its failure throughout the time that the truck had been at the respondent’s yard to assert that the respondent was
responsible for the repairs and its acceptance in the 5 November 2018 email that the reason the brake repairs did not occur was that the applicant did not have the funds to meet the cost of repair.
[67] That then leaves the complaint that the respondent used the transmission from the truck without consultation or permission. It is common ground that the respondent at one stage had a problem with the transmission of one of its own dump trucks that was being used in the Stripping Contract. In order to get the truck back on site as quickly as possible, the respondent says it asked to borrow the transmission from the applicant’s truck which was sitting unused because it was not in working order.
[68] Mr Smith of the respondent, says that he discussed the matter with Mr Liu, a representative of the applicant, who agreed the transmission could be used.
[69]There is no evidence from Mr Liu disputing that he gave this authority.
[70] Mr Smith’s uncontradicted evidence is that the transmission was used for a relatively short time and returned to the vehicle. Given the vehicle was inoperable because of the brake problem, I do not consider that the using of the transmission can have caused the applicant any loss. Any claim for the relatively short allegedly unauthorised use of the transmission cannot be quantified on the material before the Court.
[71] Nor do I consider there to be any argument that the respondent has converted the truck or committed detinue, it originally having possession of the truck with consent. Mr Jackson confirmed that there had been no call for the respondent to deliver up the truck, that is for the respondent to make it available to be uplifted given that the brake repairs have still not been done. In the absence of any suggestion that the respondent has unlawfully declined to permit the applicant to uplift its property, no issue in that regard arises.
Sale of the dump truck
[72] This is a claim that at some unspecified point in time, the respondent agreed to buy the Moxy truck from the applicant for $100,000 plus GST. The applicant’s evidence in respect of this sale is wholly unsatisfactory.
[73]In his first affidavit, Mr Fang says:
Credit for Moxy MT41 dump truck – Red Jack is owed $115,000.00 by Smith Diesel in respect of a dump truck that Mr Smith agreed to purchase at that price. This is a Red Jack dump truck which Mr Smith took and kept in Smith Diesel’s yard. Smith Diesel has removed the transmission from it in order to repair another dump truck. I note Smith Diesel’s solicitor acknowledges that the purchase of the dump truck was discussed but refutes that there was an agreement to purchase (refer 15 November 2018 letter) but offers a set-off in the email of 28 November 2018. I am clear on this issue – Mr Smith agreed to purchase the dump truck and $115,000.00 is owing to Red Jack.
[74]In his later affidavit reply, Mr Fang says:
Mr Smith is careful to only refer to the documentary record when he says there was no agreement to purchase the dump truck. Initially, we hired this truck to Smith Diesel and it credited its invoices for the hours used. We then negotiated Smith Diesel’s purchase of the Moxy MT41 dump truck for
$115,000 (which Red Jack paid Smith Diesel $180k when we brought the truck in early 2017). Despite that, at no stage did Smith Diesel ever credit Red Jack for the dump truck in its invoicing.
[75] The absence of particulars as to the circumstances of the sale, in particular when and where it was made, is obvious. The applicant did not raise a GST invoice in respect of the sale. While the sale price would have been met by the respondent passing a credit against the amount it was owed, there would still need to be a GST record of the sale.
[76] While it is common ground that the respondent acquiring the truck as part of a deal was discussed, the contemporary documentation (or lack of it) along with the applicant’s contemporary actions are wholly inconsistent with a sale having been concluded.
[77]In that regard, one point is particularly telling.
[78] When the mining operation was completed, the applicant had an obligation to rehabilitate the land.
[79] The possibility of the respondent completing the land rehabilitation was discussed by the parties. On 29 October 2018, the respondent provided a written price for the rehabilitation work. The written quote stated the price was only valid if the sum of $583,074.37 (then currently due to the respondent) was paid in full by the first week in November 2018. It also required that month’s current invoice to be paid.
[80] The quote set out a proposal as to how payment for the rehabilitation work could be made. Included as a component in how the rehabilitation work could be paid for was the following:
Ownership returned to Smith Plant Hire of the Moxy MT41 … valued at
$70,000.
[81] The reference to ownership being returned to Smith Plant Hire is to the fact that the applicant had originally purchased the Moxy truck from the respondent.
[82] What is telling in this context is that the applicant did not query why the respondent was looking to include the truck in the rehabilitation deal at $70,000 when the applicant would now have it that the truck was already owned by the respondent at $115,000.
[83] At no point did the respondent pass a credit for the purchase price and again, as noted, no invoice for the Moxy truck had issued.
[84] That a credit for the Moxy truck had not been issued is significant in the context that the respondent had been for many months in increasingly ardent terms chasing payment of the significant amount it was owed.
[85] In response to these calls for payment, promises of payment without dispute were made. In respect of this issue, the applicant at no time called to the respondent’s attention that the amount it was chasing was inflated because the respondent had not passed a credit for the value of the truck.
[86] I do not consider that the applicant has demonstrated clear and persuasive grounds that the respondent agreed to purchase the truck. Its evidence is lacking in basic details as to the existence of a sale and purchase agreement and does not address its silence in relation to receiving the rehabilitation quote which proceeds on the basis the applicant owned the truck. Nor does the applicant address its unequivocal assurances of payment in particular it not referring to what it would now have the Court accept was an absent significant credit for the truck.
[87] The applicant has not met the standard of establishing a genuine and substantial dispute in respect of this issue.
Pump costs
[88]I deal with the three claims in relation to pump issues together.
[89] It is common ground that pumps were necessary as part of the Stripping Contract. In effect, a significant pit was dug to allow access to the gold bearing material. That pit was liable to fill with water. The applicant’s submission in summary is that the Stripping Contract could not be completed by the respondent without pumps being used and it was therefore part of its obligation to supply pumps and the fuel for the pumps as, in the absence of that essential equipment, the respondent would not be able to meet its contractual obligations.
[90] The respondent’s position is that the Stripping Contract specifies under the heading “The machines” the plant that it was to supply. The submission is made that pumps are not mentioned. All of the “machines” listed are dump trucks, dozers or excavators.
[91]Under the heading “Scope of Work” there appears the following:
6(a) the stripping contractor would maintain the haul roads, tip head, pit floor condition, the stripping contractor would also control the pumps to keep the pit clear of water.
[92] The applicant says that maintaining the pit floor condition and the reference to controlling the pumps, together with the submission that pumps were fundamental
to the task accepted by the respondent, meant that it is at least reasonably arguable that the provision of pumps was the responsibility of the respondent.
[93] There was no expert evidence as to what in the industry would normally be expected to be included in a contract such as this. In the absence of that evidence, I am unable to conclude which party had the obligation to provide the pumps and fuel under the Stripping Contract.
[94] The evidence as a whole in relation to the provisions of pumps is not satisfactory.
[95] Mr Jackson refers to an email sent by a Mr Clark on behalf of the applicant to the respondent dated 13 April 2018. This email was in response to an email from Mr Smith complaining that the respondent was short of funds due to delays in payment by the applicant. The respondent’s email called upon the applicant to pay amounts the respondent said were 60 days overdue, when in fact the amounts were 30 days overdue.
[96] Mr Clark’s reply sought to correct the respondent saying that of the amount claimed to be outstanding, the only overdue amount was 30 days overdue with the balance being current.
[97]Included in the email is the following:
All the pump invoices are going to be credited because that’s what was agreed to, if you haven’t got a pump that will do the job then that’s your problem not ours.
[98] The respondent says that this was a reference to pumps required to operate the gold screen. The respondent accepts that it agreed not to charge for these pumps and it has honoured that commitment.
[99] The applicant seeks to give a wider meaning to this provision that it applies to pumps generally.
[100] I consider that Mr Orpin-Dowell’s acknowledgement in his submissions that in relation to this claim the applicant has put forward some evidential material beyond mere assertion was a proper acknowledgement.
[101] The applicant’s claim for pump hire costs incurred are for the hire of pumps and necessary ancillary pipes and joints et cetera said to have been paid by the applicant.
[102] The applicant says that in addition, it purchased a pump which it made available to the respondent. The applicant makes a claim that in substance it hired the pump it purchased to the respondent. The applicant’s evidence does not suggest an express hire agreement.
[103] The applicant’s claim is not without its difficulties. There is force in the respondent’s submission that with the applicant being “cash strapped” it is surprising that the third party invoices for the hire of pumps were not passed on to the respondent and equally with the respondent pressing for payment that these issues were not raised in reply.
[104] However, by a narrow margin, I consider that the applicant has established an arguable case in relation to the pump costs.
Damage to access road, site plant and excavator
[105] The context of these claims is that the relationship between the parties effectively fell apart in November 2018. Mr Smith of the respondent attended the site on 12 November 2018 with a third party. Mr Fang’s version of events is in substance that the third party was brought to the site by Mr Smith to strong-arm him into paying. The third party struck Mr Fang and the third party eventually pleaded guilty to assault. Mr Smith was not charged.
[106] The day after the assault, the respondent arranged to enter the mine site and removed items of machinery.
[107] The applicant says in the process of the equipment being removed, its excavator was damaged, and the access road was badly damaged through a 20,000 litre diesel tank being dragged out.
[108]The claims as advanced by Mr Jackson in his submissions are as follows:
(a)Damage of access road and site plant: $43,598.60
(b)Damage to excavator: $ 6,558.39
[109] I deal with this last item first. This relates to the supply and installation of a new engine control system. The respondent had previously carried out this work for the applicant but because the invoice had not been paid the unit was removed.
[110] While the original Account Opening Form contains a traditional reservation of title clause, there is no such clause in the Stripping Contract. Mr Orpin-Dowell did not attempt to reconcile the respondent’s actions with its obligations under the Personal Property Securities Act 1999.
[111] These events occurred on 13 November 2018. If the respondent did act properly under a reservation of title clause, it would need to give a credit for the value of the item removed. There is no credit shown on the schedule to the statutory demand for this item. For present purposes, I consider there is a reasonably arguable claim in respect of this item.
[112] As to the access road, Mr Smith of the respondent does not dispute that at the time of the removal of the plant some works (to use a neutral term) were undertaken on the road.
[113] I consider the relevance of the events of the previous day, when the assault occurred, as informing how the respondent was likely to have acted on the following day. By that time the respondent was owed a substantial amount. The relationship between the parties had wholly broken down. An individual brought to the site by Mr Smith had assaulted Mr Fang. The respondent was on site to remove its equipment. The circumstances support my view that it is reasonably arguable that the
respondent would not have been overly sensitive to the applicant’s equipment or access road.
[114] There is merit in Mr Orpin-Dowell’s criticism of the absence of photographs of the damage or a breakdown of the claims, but I do not consider I am in a position in respect of these issues to disregard the sworn evidence of the applicant.
[115] Again, by a relatively narrow margin, I consider the applicant has established an arguable counterclaim in relation to these issues totalling $50,156.99.
Overall result
[116] The applicant has established a reasonably arguable basis for disputing the statutory demand in relation to $185,057.75 being the items just discussed and the pump costs. The statutory demand is set aside to that extent leaving $427,178.59 properly claimed by the demand, that is the revised amount referred to at the outset of this judgment of $612,236.34 less $185,057.75.
Applicant’s alternative argument
[117] Mr Fang, in his reply affidavit, sought to revisit the basis upon which the applicant challenged the amounts in the statutory demand. This was rightly criticised by respondent’s counsel. The applicant sought to revisit the amounts invoiced under the Stripping Contract by tallying the volume of earth moved (determined by contemporaneous pit surveys) and multiplying that by the stripping rate. Against that figure, Mr Fang then attempted to identify payments made only for the stripping work and to then deduct credits for the applicant’s equipment which was to be used by the respondent under the Stripping Contract.
[118] It may be this approach was adopted to deal with the fact that on the applicant’s initial figures, it owed the respondent just over $22,000 which increased to just over
$70,000 once the counterclaim included in error (the amount already having been taken into account) was allowed for.
[119] I do not consider it open to the applicant to entirely recast its approach in an affidavit in reply.
[120] One of the fundamental difficulties is that the invoices tendered by the respondent during the life of the Stripping Contract often included items that were not part of the Stripping Contract. The applicant in its initial affidavit produced an analysis from an accountant identifying the disputed invoices. Those are the disputed invoices addressed by the respondent and dealt with in the first part of this judgment. The forensic accountant’s spreadsheet did not dispute some non-stripping invoices or non-stripping line items in what were predominantly Stripping Contract invoices. Mr Fang’s alternative approach is in effect to dispute a whole range of invoices and line items not put in issue in his first affidavit or in the schedule prepared by the accountant. This evidence is not strictly in reply being a wholly new approach to the applicant’s quantification of the amounts in issue between the parties.
[121]For these reasons, I do not consider it was an approach open to the applicant.
[122] I also record that Mr Fang in his reply affidavit claimed higher amounts, without explanation for the items at [11] above. In the absence of an explanation for the charge, without the invoices to support the claims and with Mr Jackson adopting the lower figures in his submission, I did not accept Mr Fang’s revised claims.
[123] To the extent that this alternative approach relies on the applicant asserting that the respondent can only claim for the cost of earthmoving as the balance of the amounts claimed are for “alleged variations or additional services” I do not accept that approach is open. This position is wholly inconsistent with the repeated and unequivocal assurances of payment in full made by the applicant on numerous occasions over a period of months when the respondent was chasing payment. In respect of the paid invoices dealt with up at the outset of this judgment the alternative argument would fail for the same reasons.
[124] Taking into account the credits accepted by the applicant, the amount due under the statutory demand is $427,178.59.
[125] The time for complying with the statutory demand by the respondent is extended by 10 working days from the date of this judgment (that is by Friday 9 August 2019).
[126] The applicant is to pay the amount of $427,178.59 within 10 working days of the judgment (that is by Friday 9 August 2019).
[127] In default of payment in full by Friday 9 August 2019 the respondent may make an application to put the applicant into liquidation.
[128]Costs are reserved.
Associate Judge Lester
Solicitors:
Chris Morrall, Barrister and Solicitor, Christchurch Copy to counsel: D M Jackson, Barrister, Christchurch Connors Legal, Greymouth
Copy to counsel: J B Orpin-Dowell, Barrister, Wellington
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