Safari BBQ Products Ltd v Safari Vervaardiging CC

[2022] NZHC 2741

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-691 [2022] NZHC 2741

BETWEEN  SAFARI BBQ PRODUCTS LIMITED

Applicant

AND  SAFARI VERVAARDIGING CC

Respondent

Hearing:                   30 September 2022 Appearances:   S Jeffs for Applicant

J Marcetic for Respondent

Judgment:                21 October 2022

JUDGMENT OF ASSOCIATE JUDGE LESTER

SAFARI BBQ PRODUCTS LIMITED v SAFARI VERVAARDIGING CC [2022] NZHC 2741

[21 October 2022]

[1]    Safari BBQ Products Ltd (SNZ) is owned and operated by an expatriate South African, Mr Erasmus. To cater for other expatriate’s love of traditional South African braii (BBQ), Mr Erasmus has  through  different  companies  imported  South African BBQ briquetts and other products from Safari Vervaardiging CC (SVC).

[2]    Since June 2017, Mr Erasmus has run his importing business through SNZ which signed a Credit Application Form (the Terms) with SVC on 26 June 2017. While Mr Erasmus accepts this Form was signed, he says it was not a feature of the business relationship between SNZ and SVC.1

[3]    The companies ceased trading together in early 2021 – the date of the last invoice issued by SVC to SNZ being 12 January 2021.

[4]    SVC says as at 10 May 2021 (the date of the last payment by SNZ), it was owed ZAR 1,147,061.35 which is about NZD$113,500.00.

[5]    SVC issued a statutory demand for ZAR 1,007,162.36  plus  interest  from  10 May 2021 to 12 April 2022 (the day prior to the date of the statutory demand). The interest claimed is ZAR 139,898.99 at  the  rate  specified  as  the  default  rate  in  the Terms.

[6]    I note here a Distribution Agreement was provided by SVC to SNZ in October 2017 but it was not signed by SNZ. Clause 4.1 of the Terms provides:

No variations of the terms of any contracts, including these conditions, shall be of any force unless agreed and committed to writing.

[7]    As the October 2017 Distribution Agreement was not signed by SNZ, I do not consider those terms apply. Mr Erasmus says he does not recall signing the Distribution Agreement. He does not claim to have signed it or to have agreed to its terms or communicated that agreement to SVC. In the absence of evidence that

1      The Terms contain a clause that the contract shall be interpreted and enforced in accordance with South African law. Both counsel confirmed the present hearing could proceed on the basis of New Zealand law. Mr Marcetic said that agreement was not a waiver of his client’s entitlements under the relevant clause. Whether SVC’s agreement to the present application being determined under New Zealand law would amount to a waiver is not for me to determine.

Mr Erasmus, on behalf of his company, agreed to the Distribution Agreement either by signing and returning it to SVC or confirming in some other way its terms were agreed, I do not consider the Distribution Agreement has any application.

[8]    Mr Jeffs, counsel for the applicant, submitted the Terms were not signed by SVC. The Terms do not contemplate being signed by SVC. The Terms were advanced by SVC as the basis on which it would do business with SNZ. SVC could not say it was not bound by its own terms and SNZ bound itself to those terms by signing.

[9]    Mr Jeffs submitted further that the informal, even casual, manner of trading between parties meant they were not treating the Terms as continuing to apply. I do not accept that. First, cl 4.1 of the Terms requires variations of the terms to be agreed in writing but, more fundamentally, that the trading relationship operated in a relaxed way does not amount to a waiver by SVC of the benefit of the Terms.

[10]   I agree with Mr Marcetic, counsel for the respondent, that the informal way orders were placed does not mean the Terms were overtaken or abandoned.

Principles applying to the setting aside of a statutory demand

[11]The following principles apply:2

[16]     The general principles under s 290(4) are well settled:

(a)The onus is on the applicant seeking to set aside the statutory demand to show that there is arguably 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 that a dispute exists is not sufficient. Material short of proof is required to support the claim that the debt is disputed.

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

(d)If a counterclaim, cross-demand or set-off is suggested an applicant must establish that this is reasonably arguable in all the circumstances.

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

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

[12]   United Homes (1988) Ltd v Workman assists in determining the type of material an applicant must produce and how that material will be assessed.3 In that case the applicant asserted a “clear express agreement” without substantiating the background. That assertion was considered bare to the point of being unconvincing. The Court said:

If an agreement is clear and express, there should be no difficulty in identifying the date and place of its making, the persons involved in its making, and the manner of its statement and/or recording. No such details are given.

[13]   Equivocal evidence will not be a proper foundation for a set-off.4 An applicant needs to produce evidence showing a real basis for a claimed set-off. Estimates of loss without an explanation as to how the estimate is arrived at will be insufficient.5 An outline of a claim is not enough.6

SNZ’s challenges to the statutory demand

[14]   The first ground of challenge is that there is a substantial dispute as to whether the debt is owing. SNZ says the sum claimed in the demand includes “unspecified amounts for damages for lost income”. SNZ says SVC has not explained the basis for, or calculation of, the amounts claimed for lost income.

[15]   The amount claimed is also challenged on the basis that the demand has wrongly charged interest twice.

[16]   The second ground is that the applicant has a counterclaim, set-off or cross-demand arising from SVC supplying contaminated charcoal and mouldy briquetts.

3      United Homes (1988) Ltd v Workman [2001] 3 NZLR 447 (CA) at [35].

4      Covington Railways Ltd v Uni-Accommodation Ltd [2001] 1 NZLR 272 (CA).

5      Jacobsen Creative Surfaces Ltd v Mapei Spa HC Auckland M967/02, 5 February 2003 at [23].

6      Jacobsen Creative Surfaces Ltd v Mapei Spa, above n 5, at [25].

[17]   The third and alternative ground is that the statutory demand is an abuse of process having been issued to obtain a collateral advantage in respect of a dispute between the parties in relation to a trademark.

First basis of challenge: Quantum

Interest claim by SVC

[18]The Terms provide:

Interest shall accrue on any amount due to Seller calculated from due date at 15% per annum …

[19]   Prior to the issuing of the statutory demand, none of SVC’s invoices included a particularised claim for interest. The claim for interest is first raised in the statutory demand itself.

[20]   A statutory demand can only be issued for an amount that is due and owing. At no time prior to the issuing of the statutory demand has SVC calculated or invoiced and demanded interest from SNZ.

[21]   The statutory demand is set aside in respect of the interest claim on the basis interest was not due and owing at the date the demand was issued. While the interest clause provides that interest shall accrue  on  overdue  amounts,  unless  and  until the interest is calculated and invoiced, there is not in terms of s 289(1) of the Companies Act 1993 (the Act), a debt owing by SNZ.

[22]   Under s 289(2) of the Act, the demand must be in respect of a debt that is due. It cannot be said interest was due in the absence of interest being quantified and invoiced.

Balance of amount demanded

[23]However, the addition of that sum does not invalidate the statutory demand.

[24]   The second challenge to the quantum in the demand is based on whether an increase in shipping costs per container of product payable by SNZ, from ZAR 45,000

to ZAR 75,000, in fact camouflaged what amounts to a damages claim by SVC or whether the whole increase is attributable to an increase in shipping costs.

[25]   Mr Erasmus says that he was told by Mr Reinstorf of SVC that SVC was charging SNZ ZAR 10,000 or ZAR 11,000 per container for interest and “lost income”. That claim is disputed.

[26]   Mr Reinstorf, in his affidavit, says that  the  increased  shipping  cost  of  ZAR 75,000 is made up of a number of components. He says:

It covers our costs of fulfilling orders, all freight costs to the local port, port charges and arranging for their shipping – by itself around ZAR 30,000 per 40ft container. The shipping costs then include the price for that specific container as well as the cost of servicing the account with the shipping company. The longer the delay in receiving payment, the greater the interest we have to pay on our account with the shipping line. Safari NZ’s irregular payment increased our costs in that regard, and we passed that on to Safari NZ. The need to cover for Safari NZ’s lack of payment also restricted our ability to expand our business and take on new customers.

[27]   There are four of shipments that make up the amount in the statutory demand. 23 containers were invoiced at a freight cost of ZAR 75,000 which, at ZAR 11,000 per container, would mean on SNZ’s case an overcharge of ZAR 253,000. Mr Erasmus says that if the claimed overcharge had been applied to all shipments from March 2019 the total would be ZAR 572,000.

[28]   If SNZ is correct it has paid ZAR 11,000 per shipment it should not have been charged, then it will have a claim against SVC in respect of that alleged overpayment.

The no set-off clause

[29]Clause 1.4 of the Terms provides:

Unless otherwise stated, all prices are net. and exclude VAT. Payment must be made by Purchaser to Seller without deduction, set-off or demand at Seller’s address.

[30]   SVC’s submissions did not rely on the no set-off clause. When raised by the Court, counsel sought and were given time to file further submissions on whether  the clause applied. Mr Marcetic submitted that, while SNZ could raise other

challenges to the statutory demand, the no set-off clause prevented it from doing so by way of a set-off or a counterclaim.7

[31]   Mr Jeffs noted during the course of the parties’ trading relationship, SVC never insisted on its invoices being paid without deduction or set-off. Mr Jeffs noted SVC had given SNZ a number of credits arising from product quality claims made by SNZ. However, SVC allowing a credit against SNZ’s debit balance  did  not  represent SNZ refusing to pay an amount due because of a set-off or a counterclaim. SNZ raised quality issues with products supplied by SVC. SVC considered that claim and accepted a credit was due, albeit not at the level sought.

[32]   In particular, Mr Jeffs referred to events in 2021 when the parties’ positions had hardened. He noted:

The parties differed as to what would be an appropriate allowance, but it was never disputed that any allowances would be off-set against [SVC’s] invoices.

[33]In response, Mr Marcetic noted:

… the purpose of cl 1.4 is that [SNZ] pays [SVC] in full first, with further arguments to follow about any credits or deductions. That is exactly what happened in relation to the credits applied in February 2021: product was supplied in 2019, was paid in full by [SNZ], and issues of credits were subsequently resolved in full in February 2021. That is entirely consistent with clause 1.4.

[34]   Mr Jeffs submitted SVC ignored the no set-off clause as it was not referred to by its South African solicitors in their November letter of demand and was not relied on by SVC in its opposition or submissions.

[35]   Mr Jeffs submitted all these factors should be taken into account when the Court considers how to exercise the Court’s discretion under s 290(4)(b). Mr Jeffs submitted that the Court ought to decline to give effect to cl 1.4.

[36]   Ultimately, SVC has demanded an amount it says is payable pursuant to its contractual terms. SNZ does not assert SVC is estopped from relying on its terms or

7      New Zealand Dairy Processing Ltd v Schenker (NZ) Ltd [2012] NZCA 343, [2012] NZCCLR 28 at [35]-[41].

it somehow waived its ability to rely on the clause. I have some sympathy for Mr Jeffs’ submission that, had the no set-off clause been expressly relied on earlier, SNZ may well have re-assessed its approach to the demand. That is an issue for costs in respect of this application rather than an issue that undermines whether SNZ owes the money pursuant to the Terms it signed. I am satisfied that the no set-off clause can be relied on by SVC in this application.

[37]   Clause 1.4 of the Distribution Agreement does not prevent SNZ prior to payment disputing that the amount claimed is properly calculated. However, once the invoiced amount is paid, any dispute SNZ has relating to historical invoices cannot be set-off against current unpaid invoices.

[38]   In respect of claimed historical overpayments, such may not be relied on to avoid paying amounts otherwise now due to SVC.

[39]   The Court of Appeal has said that a contractual no set-off will normally result in the Court’s discretion being exercised against an applicant who seeks to set aside  a statutory demand where the basis of the application is the existence of a set-off, counterclaim or cross-demand the applicant has expressly agreed cannot be raised.8

[40]   However, as to the four unpaid invoices that make up the amount in the demand it is necessary to examine whether they may include the alleged ZAR 11,000 “levy”. SNZ disputing the quantum of an unpaid invoice is not it raising a set-off. SNZ is entitled to ensure the amount it is being called upon to pay is correctly calculated.

[41]   SNZ’s claim is that SVC padded its invoices by adding ZAR 11,000 per container representing interest and damages for late payment which frustrated SVC’s ability to take on new clients as the late payment impacted on SVC’s cashflow.

[42]   Mr Reinstorf denies making the statements asserted by Mr Erasmus. SVC provided to SNZ an explanation for the increase of shipping costs from ZAR 45,000 to ZAR 75,000 in a WhatsApp message on 1 May 2020. The shipping company SVC

8      Browns  Real  Estate  Ltd  v   Grand   Lakes   Properties   Ltd   [2010]   NZCA   425,   (2010)  20 PRNZ 141 (CA) at [17].

had been using was no longer available.  The new shipping company’s rate was  ZAR 30,000 higher per container than the previous shipping company. ZAR 30,000 is the difference between the old rate of ZAR 45,000 and the new rate of ZAR 75,000. Mr Erasmus confirmed orders based on this information.

[43]   Of the old rate of ZAR 45,000, ZAR 18,000 represented the previous shipping company’s rate.  When Mr Erasmus was contemplating arranging his own shipping in mid-2019, Mr Reinstorf sent him an email which included a breakdown of the “land side costs”, that is, the costs in addition to the shipping rate. Those costs were:

(a)marine surveyor ZAR 2,000 per container;

(b)transport from George to PE ZAR 13,000 per 40 ft container;

(c)loading costs at the factory ZAR 1,500 per 40 ft container;

(d)        land side rates (PE Port) ZAR 8,500 per 40 ft container; Giving a total of ZAR 25,000. “PE” is Port Elizabeth.

[44]   Those land side costs  coupled with the ZAR 18,000 shipping rate arrives at  a total of ZAR 43,000. There is reference to SVC charging ZAR 2,000 per container for administrative costs (that explanation being provided in the context of a breakdown of the ZAR 75,000 rate).

[45]   It seems that the exact shipping cost per container was not always ZAR 45,000 or ZAR 75,000 – there were “unders and overs” but a flat rate gave SNZ predictability. Against the above information, as Mr Marcetic put it, there is no room to hide an impost of ZAR 11,000.

[46]   Mr Erasmus has not produced any evidence that the shipping rate increase of ZAR 30,000 did not in fact occur or was inflated. SVC has produced an invoice from the shipper dated 4 June 2020. The total of that invoice is ZAR 65,441.22.

[47]   The additional ZAR 10,000 in round numbers, includes a claim by SVC for its loading costs including forklift rental, administrative costs of ZAR 2,000, obtaining certain certificates for export and banning costs being portside container loading costs.

[48]   The shipping invoice does include a charge under the heading “Clearing Charges” being a finance fee of ZAR 723.14. The other items listed in the invoice are all disbursements so the finance fee may represent the shipping company’s costs associated with having carried those disbursements during the invoice period – the invoice, as I have said,  being dated 4 June 2020 but not due until 31 July 2020.       It would seem that the invoice has charged an interest cost in respect of those disbursements representing the shipper being out of its funds for the period between the period of the issuing of the invoice and its due date.

[49]   Mr Erasmus’ evidence is that ZAR 11,000 had been added per container for interest and loss of income. That claim was repeated in Mr Erasmus’s reply.

[50]   While Mr Erasmus says he did not agree to SVC’s increased shipping costs, that is inconsistent with the WhatsApp exchange where the increase to ZAR 75,000 is outlined and then Mr Erasmus confirms that he wanted to order more product.

[51]Mr Reinstorf’s evidence set out at [26] above is that:

The shipping costs then include the price for that specific container as well as the cost of servicing the account with the shipping company.

[52]   Given the invoice produced shows a finance cost, a straight pass through of this cost is not the type of unauthorised padding claimed by Mr Erasmus.

Conclusion on over charging claim

[53] The claim of historical overcharging cannot be raised as a set-off against the amount in the statutory demand. As to the four unpaid invoices that make up the demand, the overpayment would be ZAR 44,000. The last line of Mr Reinstorf’s evidence at [26] above could be read as suggesting SVC included a charge to compensate  for its inability to take on new business.   I cannot be satisfied that     Mr Erasmus’ sworn evidence can be disregarded. There is a straight conflict of

evidence on this issue. I set aside the statutory demand to the extent of ZAR 44,000 under this head.

Second ground of challenge: Counterclaim

[54]   This is the counterclaim or set-off relating to the defective products. This ground of challenge runs squarely into the no set-off clause.

[55]   SNZ is faced with a pay now argue later provision. Despite the parties ceasing trading at the start of 2021, SNZ has taken no steps to pursue its alleged claims. The short point is that the no set-off clause is a barrier to these claims being raised even if they were reasonably arguable.

Third ground of challenge: Abuse of statutory demand process

[56]   SNZ says that on 24 January 2022 SVC applied for a declaration of invalidity of the Safari trademark of which SNZ is the registered owner. SNZ opposes the challenge to its trademark.

[57]   SNZ submits that the statutory demand has been issued to obtain a collateral advantage in respect of the trademark. SNZ says if it was put into liquidation, the liquidators would be unlikely to oppose the declaration of invalidity application or would sell the trademark to SVC. It is therefore submitted that the demand should be set aside as it has been issued for a purpose not contemplated by the Act.

[58]   The first point against this argument is that the last payment received by SVC was in May 2021. If SVC is owed a debt it is entitled to issue a demand to collect it. Second, Mr Erasmus does not say that SNZ will be unable to pay the debt if the demand is not set aside it is not asserted liquidation will follow if SNZ’s application is unsuccessful.

[59]   Mr Jeffs noted that before SVC made demand for payment of its debts, its New Zealand solicitors made demand that SNZ stop using the Safari trademark and threatened to commence High Court proceedings if it did not. That letter is dated

8 October 2021. A demand for the debt was made by SVC’s South African solicitors on 11 November 2021.

[60]The submission is:

[SVC’s] statutory demand must have been intended to pressure SNZ into paying an amount that SVC knew was disputed, to bring this application, or to risk an application for liquidation.

[61]   Mr Jeffs submitted this application has distracted SNZ’s attention and resources from the trademark proceeding which involves the most substantive issue between the parties.

[62]   A statutory demand can legitimately be used to recover a debt. The Court of Appeal has acknowledged that statutory demands:9

“are, in a practical sense, important enforcement mechanisms”, notwithstanding that they may ultimately lead to a process which focuses on liquidity and asset worth rather than the payment of a particular creditor.

[63]   I do not accept SVC had to wait until resolution of the trademark dispute before it could take steps to collect a debt it had been owed since 2021 at the latest. I was not told of progress or otherwise in the trademark dispute so I have no idea of what, if any, impact this application has had on its progress. Through raising the abuse of process claim SNZ in effect seeks a stay of enforcement of a debt that it owes. Just what should happen to that debt in the meantime was not explained by SNZ. The debt does not go away.

[64]   I do not accept that SNZ has demonstrated that the issue of a statutory demand by SVC was an abuse of process.

Conclusion

[65] The statutory demand is set aside to the extent of the interest claim and the ZAR 44,000 discussed at [52].

9      Manchester Securities Ltd v Body Corporate 172108  [2018] NZCA 190, [2018] 3 NZLR 455 at [34].

[66]   I order that the time for the payment of the remainder of the demand is extended for 15 working days and pursuant to s 291(1)(a), that SNZ is to pay the amount claimed in the statutory demand, save for the interest claim and ZAR 44,000 to SVC within 15 working days of the date of this Judgment. If that payment is not made, SVC may apply to put SNZ into liquidation.

Costs

[67]   SVC is entitled to costs. A memorandum of not more than five pages is to be filed by SVC within five working days of the date of this judgment. If no memorandum is filed, the order of the Court will be that SVC is entitled to costs on  a 2B basis plus disbursements as fixed by the Registrar. If SVC files a costs memorandum, SNZ is to reply within five working days of receiving it.

Associate Judge Lester

Solicitors:

Bell Associates Lawyers, Auckland (for Applicant) Chapman Tripp, Auckland (for Respondent)

Copy to counsel:

S Jeffs, Barrister, Auckland (for Applicant)