Risecorp Investment Trustee Ltd v Staywell Hospitality Management Ltd
[2015] NZHC 1277
•8 June 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-501 [2015] NZHC 1277
UNDER the Companies Act 1993 IN THE MATTER
of an application to set aside a statutory demand
BETWEEN
RISECORP INVESTMENT TRUSTEE LIMITED
Applicant
AND
STAYWELL HOSPITALITY MANAGEMENT LIMITED Respondent
Hearing: 28 May 2015 Appearances:
Ms J S Cooper for Applicant
Mr D T Broadmore for RespondentJudgment:
8 June 2015
JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE
This judgment was delivered by me on
08.06.15 at 4 pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
RISECORP INVESTMENT TRUSTEE LIMITED v STAYWELL HOSPITALITY MANAGEMENT LIMITED [2015] NZHC 1277 [8 June 2015]
Introduction
[1] The applicant, Risecorp Investment Trustee Limited (“Risecorp”), seeks to have the statutory demand by Staywell Hospitality Management Limited (“Staywell”) dated 27 February 2015 set aside.
[2] While the primary ground relied on by Risecorp is that the claimed debt is not due and owing, Risecorp also claims that it has counter-claims against Staywell which it has been unable to quantify due to a lack of financial reporting by Staywell. Risecorp also relies on an alleged equitable set-off arising from claims against Staywell by related entities to Risecorp, totalling $1,750,000.
Background
[3] The statutory demand had attached to it 34 invoices totalling $94,699.56. [4] Staywell states that the invoices break down into the following categories:
a) $21,535.90 for Fees due to Staywell under the hotel management agreement that the parties entered into in 2013 (“the Agreement”); and
b) $73,133.66 for Operating Costs due to Staywell under the Agreement.
[5] Staywell says that “fees” is self-explanatory, and that “operating costs” relate to amounts that Staywell was required to pay out by way of expenses incidental to its operation of the Rotorua hotel.
[6] The statutory demand includes outstanding fees (as defined in the
Agreement) of $21,535.90 due to Staywell for the period from 1 April 2014 to 31
January 2015. However it appears that the applicant accepts that the respondent has since the commencement of these proceedings provided the requisite information for the period from April to July 2014. For that reason, the fees due for that period have now been paid.
[7] Following service of the statutory demand, Risecorp has paid Staywell’s fees for April to July 2014 together with all Staywell's Reservation Fees (being a total of
$5,837.47). That, Staywell says, left the fees for the period August 2014 to January
2015 still owing – a sum of $15,698.43. As well, operating costs of $73,133.66 are alleged to still be owing for the period 31 March 2014 to 31 January 2015. There does not appear to be any dispute about the quantum following the making of this payment but the applicant maintains that there is a substantial dispute about liability.
[8] Because Risecorp failed to pay the fees and operating costs, Staywell ceased supplying reports containing management information and financial performance reports as it was obliged to perform pursuant to the contract between the parties. For its part, Risecorp claims that because Staywell has not performed its contractual obligation of providing financial performance information it, Staywell, has not been able to verify whether or not it actually now owes the amounts that Staywell claims.
[9] The evidence from Staywell was that the fees fell into the following categories:
a) Base Management Fees which are 1.5% of Gross Revenue plus tax;
b)Incentive Management Fees which are 4% of Gross Operating Profit plus tax;
c) Group Sales and Marketing Contributions which are 1.5% of Gross
Room Revenue plus tax and the cost of direct third-party charges; and
d) Reservation Fees which are 2.5% of Gross Room Revenue plus tax
relating to reservations produced through Staywell’s booking engine.
[10] Staywell says that the other category of claim – “operating costs” – (which
Staywell compendiously describes as “chain services”) comprise:
a) accounting services which Staywell provides to Risecorp;
b)costs of head office personnel in staff providing business promotion services, sales supervision and other accounting services together with reimbursement of costs such as travel incurred in visiting the Rotorua hotel;
c) costs (which I presume comprise wages and salary) of staff directly involved in the operation of the Rotorua hotel, although not physically based there.
Principles
[11] I accept the submission of Ms Cooper, for the applicant, that s 290(4) of the Companies Act 1993 provides that 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.
[12] I also agree with her submission that, in determining whether there is a substantial dispute, the following principles are applicable:1
a) The Court is required to determine if the applicant can show a fairly arguable basis upon which it is not liable for the amount claimed.2
b)The mere assertion of a dispute is not sufficient, some material short of proof is required.
1 See Heath and Whale on Insolvency (LexisNexis, online looseleaf ed) at 20.7.
2 Queen City Residential Ltd v Patterson Co-Partners Architects (No 2) (1995) 7 NZCLC 260 at
396.
c) It is not usually appropriate to resolve disputed issues of fact on affidavit evidence alone, particularly when issues of credibility arise.
d)The jurisdiction is a summary one and calls for a prompt judgment as to whether there is a genuine and substantial dispute. It is not the task of the Court to resolve the dispute.3
[13] I also consider that counsel for the respondent has correctly stated the following additional considerations that the Court is required to take into account:
a) The onus is on the applicant to show that there is arguably a genuine and substantial dispute as to the existence of the debt;4
b)An applicant must establish that any counterclaim or cross demand is reasonably arguable in all the circumstances;5
c) An applicant seeking to set aside a statutory demand on the basis of a set off for an unliquidated sum:6
…must be able to do more than merely assert that there is an available set-off. It must be able to point to evidence before the Court showing that it has a real basis for the claimed set-off and that accordingly the applicant’s claim to be a creditor is, to the extent of the set-off, seriously in doubt….it must show that there are ‘clear and persuasive grounds’ for the set-off claim.
d) The Court is not required to:7
…accept without question whatever unvarnished statements may happen to be made on affidavit. The Court is entitled to act in a more robust and commonsense manner. The principles developed in cognate fields such as applications to remove caveats, and opposition to summary judgment apply by analogy.
e) Statutory demands can be allowed to stand in reduced figures representing items not open to dispute.8
3 See Industrial Group v Bakker [2011] NZCA 142 at [24]-[25].
4 Aladdin's Motor Inn Ltd v Bowcorp Holdings Ltd [2012] NZCA 532 at [23].
5 At [23].
6 Covington Railways Ltd v Uni-Accommodation Ltd [2001] 1 NZLR 272 (CA) at 274-275.
7 United Homes (1988) Ltd v Workman [2001] 3 NZLR 447 (CA) at [34].
Contentions of the parties with respect to the obligation to pay fees
[14] The central issue which the applicant relied upon for resisting the demands for the fees payments was that there had not been proper provision of substantiating particulars of what the charges were in respect of. The position of the applicant was that that information had to be supplied and that the obligation to pay was conditional upon it. The arguments of the parties in relation to these points are now discussed.
[15] In support of its position, Staywell primarily invoked the provisions of cl 11.1 of the Agreement. Counsel for Staywell summarised the relevant provisions of that clause as follows:
3.2The Fees (which are due under clause 11.1) must be paid in accordance with clause 11.3, which includes the following elements:
(a) The [Fees other than the Establishment Fee] must be paid monthly in arrears within 7 days of production of invoices and substantiating documents by SWHM to the Owner;
(b) If the Owner fails to make payment when due then…SWHM will be entitled to interest at the rate of 12 percent per annum…. SWHM will also be able to suspend provision of part or all of its services pursuant to this Deed until payment is made, which suspension will not affect its entitlement to be paid Fees pursuant to this Deed;
(c) Unless the Owner raises any queries relating to an invoice within 10 Business Days after receipt of that invoice (which queries must be detailed in writing), the charges in the invoice will be deemed to have been accepted and approved. The issuing of any such queries will not affect the Owner's obligation to pay such invoice on or before the due date with SWHM being obliged to refund any overpayment within 3
Business Days after resolution of any issues; and
(d) A certificate issued by SWHM as to the amount owing in respect of an invoice will be final and binding on the parties in the absence of manifest error.
[16] Counsel for the respondent summarised the effect of these provisions in the following way:9
8 At [46]; 21st Century Investments Ltd v ANZ National Bank Ltd [2011] NZCA 548 at [39].
9 Mr Pandey is a director of the applicant.
3.9Mr Pandey's evidence for Risecorp is that he consistently made it clear to StayWell, including at the monthly meetings, that the Fees would not be paid until StayWell provided supporting information. However, it is significant that there is no contemporaneous evidence in support of Mr Pandey's assertion:
(a) There are no documents recording any challenge to StayWell's fee invoices or requesting further substantiating documents; and
(b) The meeting minutes annexed to Mr Pandey's reply affidavit do not record any issue being raised with StayWell's fee invoices or any request for further substantiating documents.
3.10In any event, if Risecorp has previously challenged StayWell's Fees at meetings (which is denied), it has not raised any queries in writing:
(a) If Risecorp had any queries in relation to the invoices, it had to detail those queries in writing within 10 Business Days after receipt of the invoices (clause 11.3). On that basis, if Risecorp required any further substantiating documents it was obliged to request them in writing within 10 Business Days after receipt of the invoices; and
(b) In the absence of any query in writing, the charges in the invoices are deemed to have been accepted and approved (clause 11.3).
3.11 In addition, even if a query had been raised in writing or if further substantiating documents had been requested, the parties had agreed to a 'pay now, argue later' procedure in respect of StayWell's Fees. Risecorp was obliged to pay the invoices before the due date, with StayWell being required to refund any overpayment within 3 Business Days after resolution of any issues (clause 11.3). On that basis, even if further substantiating documents had been requested, StayWell would be entitled to payment pending resolution of any genuine dispute, subject to repayment by StayWell of any overpayment.
(Quotations ommitted)
[17] Risecorp complains that it has not been provided with the particulars that it is entitled to under the contract, because Staywell has refused to provide any accounts or monthly financial information to Risecorp since April 2014. Therefore, Risecorp says it has been unable to ascertain the fees it owes to Staywell under the
Agreement. Further, Risecorp disputes that it has not raised the queries that it has
had in regard to the fees. In particular, Risecorp pointed to the minutes of a meeting which took place in January 2014 which record that Mr Pandey raised these issues. Risecorp takes the position that it has therefore done what it was required to do in order to raise these disputes with Staywell.
A substantial dispute relating to the fee charges?
[18] It is necessary to consider whether there are grounds for concluding that there is a dispute as to whether the necessary preconditions to the right to charge were present. Clause 11.3 of the contract provides:
11.3 The .. Fees must be paid monthly in arrears within seven days of production of invoices and substantiating documents by [STA] to the Owner.
[19] Determining the question of whether the circumstances were such that a right to payment had accrued to Staywell under the contract involves, in the first place, construction of the terms of the contract.10
[20] There is no definition provided in the contract as to what level of supporting documentation is required in terms of cl 11.3 of the contract. Having regard to the context in which the parties are to carry out their responsibilities under the contract, it would seem that Risecorp would, at a minimum, be entitled to summary information about the financial results which have been achieved and of which Staywell is entitled to a percentage. It is relevant to the background to the dispute that Risecorp had no employees of its own involved in the operation of the hotel. It was not keeping the accounts for the business. In order for Risecorp to be satisfied that what it was being invoiced with was a legitimate charge under the contract, it would need to know what the underlying performance figures were.
[21] The position here can be contrasted with more simple transactions. An example might be where a party has agreed to buy articles from another party which cost $100 each. An invoice rendered at the end of the month for $400 contains
within that the implicit statement that four articles were provided. That might be
10 Hugh Beale (ed) Chitty on Contracts ( 31st ed, Sweet and Maxwell, London, 2012) vol 1 at [21-
040].
sufficient information for the party charged to make a decision about whether or not the invoice is properly payable.
[22] The position is different in this case because there is less transparency about the basis for the charges which the claimant imposes. It is not until one has clear information about what the trading results were for the month in question that a judgment can be made as to whether the invoice is defensible or not.
[23] Considerations of that kind support the position which Risecorp takes in the present application. Those considerations suggest that it is necessary for Risecorp to have a reasonable level of detail about the trading results before it will be able to make sense of the invoice which has been rendered. Those considerations then link to the further basis for the position which Risecorp takes, which is that it cannot have been the contractual intention of the parties that it would have to pay on an invoice whose basis has not been properly explained to it.
[24] A concrete instance of the problem about which the applicant’s complaints arose was when an invoice dated 30 September 2014 was rendered. In this invoice a pre-GST amount of $1149.06 was claimed to be owing. The narration set out in the invoice stated, “base management fee”, “group sales and marketing contributions” and “reservation fee”. A subtotal appeared opposite each item.
[25] It is correct that the Agreement between the parties makes provision for fees of the kind to be charged. For example in the “details schedule”, the following reference is made to the base management fee:
Base Management Fee 3.5% of Gross Revenue plus Service
Taxes.
[26] However, without any detail as to what the gross revenue was, the invoice was uninformative.
[27] I consider that it is arguable that substantiating documents would need to state the period from which the charges were made and the summarised figures which underlie the calculation of the amount owing.
[28] However, the provision requiring Staywell to provide substantiating material is not to be read in isolation from the other parts of cl 11.3. Included is the following:
Unless the Owner raises any question relating to an invoice within 10
Business Days after receipt of that invoice (which queries must be detailed in writing), the charges in the invoice will be deemed to have been accepted
and approved. The issuing of any such queries will not affect the Owner’s
obligation to pay such invoice on or before the date with [STA] being obliged to refund any overpayment within 3 Business Days after resolution of any issues. A certificate issued by [STA] as to the amount owing in respect of an invoice will be final and binding on the parties in the absence of manifest error.
[29] Staywell’s counsel characterised the effect of the contract as the parties adopting a “pay now, dispute later” regime.
[30] Mr Broadmore said that the applicant could not complain about a failure to provide substantiating documents if it had not complied with the timetable in cl 11.3 for notifying the respondent of any issue relating to an invoice. That is to say, if the applicant considered that it had not received appropriate substantiating documents it must raise that issue in written form within 10 business days of receiving the invoice. Therefore the submission was that any rights to object were lost unless the owner raised a query in writing within 10 business days after the receipt of the invoice.
[31] Despite its insistence that it had actually raised in writing with the respondent alleged absence of particulars substantiating the invoices, I do not consider that the applicant has in fact put forward an evidential platform which would entitle the Court to conclude that there was a substantial dispute in this area of the evidence.
[32] However, that failure on the part of the applicant is not necessarily fatal, as I
go on to consider.
[33] Mr Broadmore submitted that the applicant had been in default of its obligations to make payment for services since 30 May 2014. That debt was not
paid until 8 May 2015, which apparently was also the date upon which the applicant gave notice to the respondent of cancellation of the Agreement between the parties.
[34] Because the applicant was in default under the contract, Mr Broadmore submitted, the respondent was entitled to suspend services in reliance upon cl 11.3 which provides, in part:
if the owner fails to make payment when due then, (in addition to any other rights which [the respondent] may have, [the respondent] … will also be entitled to suspend provision of part or all of its services pursuant to this deed until payment is made, which suspension will not affect the entitlement to be paid fees pursuant to this deed.
[35] Therefore, the argument proceeds, the respondent was entitled to withhold that information, both in the regard that it was not required to provide it in management reports, but also in the sense that it was not required to insert that information into the invoices rendered to the applicant. In that way, the respondent was able to excuse itself for not performing the obligation that it would otherwise have had of providing substantiating information as part of the invoices which were rendered to the applicant.
[36] However, an alternative view of the effect of the contractual arrangements might be put forward, to the effect that it cannot have been intended that the applicant as the absent owner of the hotel enterprise would be required to pay earnings based remuneration to its agent in circumstances where it was not to be told what those earnings were. Further, it might be argued that the stage was not reached where the owner was required to “raise[s] any queries relating to an invoice” unless and until it had been provided with the substantiating detail that the contract called for. One reason for accepting an interpretation along those lines is that, otherwise, the effect of the Agreement would be to render the requirement for substantiation redundant. That would be because in every case the respondent could, in breach of its obligations, decline to provide substantiation and do nothing about meeting that obligation unless a query was raised in writing within 10 business days. In that circumstance, the respondent would in effect be submitting that the obligation to pay, after receipt of invoices and substantiating documents, could be ignored.
[37] The considerations detailed in the previous paragraph do not, however, deal with the additional point about the claimed entitlement of the respondent to regard its obligation to “suspend provision of part or all of its services pursuant to this deed” so long as non-payment continued. Such an interpretation would require the provision of substantiating documents to be viewed as “provision of services”.
[38] The argument would be that even if there had otherwise been an obligation to provide substantiating documents, because that was part of the services which the respondent was required to render under the Agreement and because service was suspended, the duty to provide substantiating documents was likewise in abeyance.
[39] That I would regard as being an unlikely interpretation of what the parties intended. There is a distinction between the function which the respondent was discharging when it made up its invoices, which was arguably not providing services, and its role, for example, in providing and training staff to manage the hotel which plainly would fall within such definition. Further, the respondent has an election where there has been a breach. It may continue or not continue to provide services as it chooses. The contract is clear that that is the case. The contract does not however make it clear that if it chooses to continue to provide services it does not have to provide substantiating information about what those services were when charging for them.
[40] It is possible that a court which ultimately is required to give final judgment on these points will, if that contingency occurs, come to a different view about the effect of cl 11.3 in the respects that I have just been discussing. However, for present purposes, I do not regard the position which the respondent takes as being clearly in accordance with the provisions of the contract. The converse of that is that it is arguable that the respondent by its conduct disentitled itself to the payments because it did not comply with the requirement of providing substantiating documents.
The certificate issue
[41] A further point that needs to be mentioned concerns the provision in the Agreement for the respondent to provide a certificate pursuant to cl 11.3 that an amount is due and owing.
[42] While reference was made to the certification process in the course of discussion of the Agreement that the parties entered into, the respondent has not relied on it as a separate ground of opposition to the application to set aside the statutory demand and therefore I will not consider it further.
The “no set-off” point
[43] If it is correct that there is a substantial dispute as to whether the respondent has complied with pre-conditions to invoicing charges to the applicant (as I have found), the further issue of whether the applicant is entitled to rely upon a set-off does not need to be considered and, therefore, it will not be mentioned further in this judgment.
The dispute about the operating costs
[44] In addition to paying fees which were based upon income earned, the applicant was also obliged to pay to the respondent all costs reasonably incurred in managing the property such as wages, salaries, maintenance and repairs, and what are defined in the contract as “chain services”. Chain services were defined as benefits, services and facilities which the respondent provided in connection with the operation and for the benefit of the property and other properties operated by the respondent and its affiliates. As the definition in the contract described them:
These benefits, services and facilities are typically those that would be performed at the property level, but which [the respondent] performs on a centralised basis because it provides such benefits, services and facilities to various hotels.
[45] There are described thereafter examples of “chain services” which include
such matters as:
business promotion services and sales supervision (including the maintenance and staffing of [the respondent’s] head office sales supervision and public relations force…” (p)rovision of reservation services and systems” and “food and beverage supervision (including promotions, restructuring of operations and non--day to day supervision), human resources, personnel and other operational departmental supervision and services;
[46] Chain services, it appears, are a layer of services provided to the hotel chain as a whole. The agreed calculation of the parties was that the applicant’s Rotorua hotel should bear 12.5 per cent of these relevant costs.
[47] The entitlement to claim operating costs is broadly based upon an extensive indemnity which is provided to Staywell by the provisions of cl 13.5. That provision requires the owner to indemnify Staywell from:
(b) Operating Costs or Ownership Costs or any other costs, charges or debts incurred or assumed by [STA] or any other party;
[48] Clause 13.7 provides:
owner shall reimburse Staywell upon demand for any payment which Staywell is required to make for any reason in connection with the Property or the Business, including payments of any type made in connection with claims for which Staywell is indemnified under clause 13.5,… Staywell will provide supporting documentation substantiating any such payment. …
[49] There are substantial differences between the provisions that govern recovery of the fees on the one hand, with which I have already dealt in this judgment, and the provisions that govern the operating costs on the other. One difference is that recovery of the operating costs is not subject to the “no set-off” provision. There is no provision equivalent to the time limits for notifying objections in default of which the owner, Risecorp, is to be taken to have accepted that the particular claim is admitted. Such deeming provisions, although present in the part of the contract which deals with recovery of fees, cl 11, are not present in that part which deals with recovery of operating expenses. The entitlement to recover amounts expended is also subject to a duty on the part of the respondent to provide “supporting documentation
substantiating any such payment”.11
11 Clause 13.7 of the Agreement.
[50] The applicant points to the fact that many of the invoices did not contain the level of substantiation which the contract called for. An example appears in the invoice dated 31 March 2014, where the narration of the claim simply states, “Sydney March re-charges LRO”. The last three letters apparently identify the charges as relating to the Leisure Hotel Rotorua which is the subject property.
[51] As Ms Cooper submitted, the terms of the arrangement between the parties meant that the respondent completely took over control of the hotel premises at Rotorua and the running of the hotel operation carried on on those premises. The applicant as owner of the hotel was not involved in or informed about the day to day running of the hotel. The substance of Ms Cooper’s submission was that that consideration informed the level of information that would be required as part of the substantiation process. She submitted that submitting invoices of the kind which is instanced above, fell well short of what a reasonable interpretation of cl 12.7 required.
[52] Mr Broadmore in his comprehensive submissions, in reply, was able to suggest many points upon which the position of the applicant was able to be refuted. These included the fact that many of the items were those contemplated in the budget which the parties settled for the first 12 months of operation commencing either in December 2013 or January 2014. That factor reduced the significance of the narration contained in invoices of the kind to which I have made reference above.
[53] I consider, however, that there is force in the argument put forward by Ms Cooper to the effect that there is a considerable difference between making provision in the budget for items which are going to be spent, and retrospectively accounting for the actual amounts that were spent. An obligation to do the latter is not displaced by the fact that the budget contemplated some expenditure of the kind which is later disputed.
[54] Nor do I consider that it is any answer for the respondent to say that, irrespective of the alleged absence of particulars, the amounts claimed turned out to be broadly within the range contemplated by the budget for the year ended December 2014 which the parties agreed upon.
[55] A discrete part of the argument concerns the respondent’s employment of a general manager who would oversee the operations of the hotel chain. A Mr Michael Sulser was appointed to this position. However, the respondent made a claim for expenses that were incurred relating to the general manager’s relocation to Auckland from where he was to carry out his duties, apparently. The expenses were generated as a result of the respondent acquiring rental space from which the New Zealand operation would be conducted. The respondent claimed upon the applicant for part of this cost. As well, a claim was made that the applicant should meet part of the cost of rental of an apartment which was provided for Mr Sulser.
[56] The applicant drew attention to cl 10.8 of the Agreement which provided that the respondent would pay the wages or other compensation of its own employees “who are not employed on the premises of the property” – seemingly a reference to the Rotorua hotel – other than costs of travel and living expenses incurred for various purposes such as hiring and training of employees at the property. Further, any travel and living costs that were exceptional in terms of the statement of the parties obligations and cl 10.8 had to be set out in a proposed budget or consented to in writing by the owner of the hotel. Ms Cooper submitted that it was not valid for the respondent to now claim the cost of what was more or less permanent accommodation for Mr Sulser in the Auckland apartment. Further, she submitted that on Mr Sulser’s relocation to Auckland, it was no doubt the case that he would be recompensed for additional living costs occasioned by his taking the position.
[57] The first of the points that were taken in regard to these expenses has some validity. At first glance, cl 10.8 would apparently authorise the costs of employees travelling down to Rotorua and staying there while they carried out a function such as hiring and training of employees, to which I have already made reference. It might be tentatively suggested, at least, that it was not within the contemplation of the Agreement that permanent accommodation arrangements elsewhere would be at the cost of the applicant. The second point is not quite so persuasive. It is not unknown that employees relocate to new cities to take jobs because the advantages in the form of remuneration, prospects for advancement, et cetera, make that decision an economically sound one even though there may be some additional accommodation expenses incurred. On the basis of the limited argument and
evidential material before the Court, an interpretation of the kind which the applicant puts forward means that, at best, the contractual interpretation offered is a possibility which cannot be completely excluded. It is no stronger than that.
[58] Before leaving this point, I should add that the objection which the applicant makes is not restricted to the employment of Mr Sulser but also to claims made in regard to expenses relating to the employment of his successor’s general manager, Mr Parkes.
[59] There are also other costs of other employees, apparently charged back on the strength of cl 10.8, which are objected to because there is no substantiation provided for why the respondent should look to the applicant to meet them.
[60] I further understand that the applicant claims that there were other expenses totalling approximately $2500 for “A and G travel” which are disputed. This category apparently is given an abbreviated description but refers to administrative and general charges. The applicant says there is no proper authority for the respondent claiming these amounts from it.
[61] The total cost of disputed expense charges identified in the submissions of
Ms Cooper came to $72,621.31.
[62] For the respondent, Mr Broadmore pointed to other provisions of the contract which he said justified the imposition of the charges. For example, cl 10.6 imposed an obligation on the respondent to provide the applicant “clustered accounting, hotel based sales and marketing, human resources, information technology or other services from another property or [the respondent’s] head office” and that “the applicant agrees that the cost for such services will be an amount which represents a pro rata proportion of the costs of providing those clustered services and that such costs shall form part of Operating Costs”.
Conclusion concerning operating costs
[63] Before setting out conclusions on whether this part of the subject matter of the application justifies the making of an order setting aside the statutory demand, I
remind myself that, in addition to the principles that govern applications of this kind and which are set out above, the jurisdiction is not excluded by the need to decide difficult questions of law that might require extensive argument.12 The court not uncommonly deals with applications of this kind and is required to involve itself in what turn out to be lengthy analyses of contractual interpretation. That fact on its own does not justify the granting of applications to set aside statutory demands. A respondent to such an application is entitled to have the application properly considered. However, where it proves impossible to determine what the parties
intended by the contract without extensive consideration of the factual background and the exchange of contemporaneous documents between the parties and similar matters, the Court is being asked to do something which is not to be contemplated as part of deciding an application to set aside.
[64] In this case, the areas of uncertainty concern whether or not a debt is owing. It must be arguable that it is a necessary pre-condition to a debt coming into existence that the respondent complies in substance with its obligation to give supporting documentation substantiating the claim to the applicant. It must be arguable that the respondent has failed to do so when sending an invoice which, for
example, simply says “Sydney March Re charges LRO”.13 That example is fairly
representative of a sequence of invoices concerned with the same type of liability which the respondent was seeking to claim reimbursement of.
[65] The weighing of these factors and counterweights to them is not something that can be carried out satisfactorily as part of exercising the jurisdiction.
[66] The same considerations which meant that the set-off issue did not need to be considered in relation to the fees applies equally in the case of the invoices for the recovery of operating costs. The point has not been reached where it is necessary to consider if the applicant has a right of set-off and the matter will not be discussed
further.
12 Attorney General v Prince and Gardener [1998] 1 NZLR 262, at 267. Although that was a strikeout application, such an application is a cognate type of case which has application to the similar summary process of applications to set aside statutory demands.
13 Invoice dated 31 March 2014.
Summary
[67] There is a substantial dispute as to what amount is owing or due. As such, it is not necessary for me to consider whether there is an available set-off, counterclaim, or other grounds for refusing the order. The applicant has made out one of the grounds under s 290(4) of the Companies Act 1993 and as such the statutory demand is set aside.
Costs
[68] The parties should confer on the question of costs and if they are unable to agree which party is liable and the amount of same they are to file memoranda not exceeding five pages on each side within five working days (applicant) from the date
of this judgment and 10 working days (respondent).
J.P. Doogue
Associate Judge
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