Savage Garage NZ Limited v Peramune

[2023] NZHC 3864

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-001369

[2023] NZHC 3864

BETWEEN

SAVAGE GARAGE NZ LIMITED

Applicant

AND

MAJITHA THANUJAYA PERAMUNE

Respondent

Hearing:

7 September 2023

Appearances:

E Elia for the Applicant

N Perera for the Respondent

Judgment:

21 December 2023

COSTS JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 21 December 2023 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

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

Solicitors:

Brookfields, Auckland

Legal Associates, Auckland

SAVAGE GARAGE NZ LTD v PERAMUNE [2023] NZHC 3864 [21 December 2023]

Introduction

[1]                 In a judgment delivered on 14 November 2023,1 I set aside a statutory demand issued by Majitha Peramune dated 1 June 2022, on the grounds that there was clearly a substantial dispute over the terms of the agreement between Mr Peramune and Savage Garage NZ Limited (Savage Garage). I reserved my decision on costs and invited submissions.

[2]                 Savage Garage seeks increased costs on the grounds that when it received the statutory demand, it instructed its lawyers to  write to Mr Peramune’s lawyers on    16 June 2023 to inform him that the debt was disputed and invite him to withdraw the statutory demand. In this letter Savage Garage’s lawyers advised that if the statutory demand was not withdrawn, the letter would be put before the Court in support of an application  for  increased  costs  if  an  application  to  set  aside  was  necessary.  Mr Peramune declined to withdraw the statutory demand, and an application to set aside was duly filed.

[3]                 Savage Garage submits that: the statutory demand was unnecessary and frivolous; that Mr Peramune contributed unnecessarily to the time and expense of the proceeding by pursuing an unnecessary step (opposing the application) and an application that lacked merit (denying the existence of a genuine dispute); that he failed to act reasonably; and the statutory demand was an abuse of the statutory process.

[4]                 Essentially, Savage Garage submits that Mr Peramune acted improperly by failing to reconsider his position following receipt of the 16 June 2023 letter, and again following receipt of the application to set aside the statutory demand and affidavit in support which demonstrated a significant factual dispute that made it clear that a defended hearing of the application should not be necessary.

[5]                 Mr Peramune opposes an order for increased costs, submitting that the statutory demand was not unnecessary or frivolous, unreasonable, or an abuse of process.

1      Savage Garage NZ Ltd v Peramune [2023] NZHC 3204.

Legal principles

[6]                 The Court’s jurisdiction to award increased costs is derived from r 14.6 of the High Court Rules 2016. Rule 14.6 provides:

14.6     Increased costs and indemnity costs

…

(3)  The court may order a party to pay increased costs if—

(a)  the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or

(b)  the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

(i)  failing to comply with these rules or with a direction of the court; or

(ii)  taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii)   failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or

(iv)   failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or

(v)  failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or

(c)  the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or

(d)  some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.

[7]                 It is well settled that where statutory demands are issued inappropriately, increased costs are routinely awarded.2 In Norwich Properties Ltd v Mark Gray Architect, the Court held that an uplift on 2B scale costs of up to 50 per cent was not

2      Andrew Beck (ed) McGechan on Procedure (online ed, Thomson Reuters) at [HR14.6.02(3)(a)(i)] cited in Herbert Construction Co Ltd v Viking Group Ltd HC Napier CIV-2011-441-206, 19 September 2011 at [17].

uncommon where an ‘ill-advised’ statutory demand was improperly issued and set aside by the Court.3

[8]                 In two recent decisions,4 the Court ordered a 50 per cent uplift in costs against the issuer of a statutory demand where the issuer knew, or ought to have known, the debt claimed was disputed; no legal advice was taken prior to the issue of the statutory demand; and the issuer had the opportunity to withdraw but did not do so.

[9]                 It is incumbent on the issuer of a statutory demand to ensure that the demand was issued on a proper basis, and that the statutory demand was not the subject of a genuine dispute.5

Discussion

[10]              In my assessment, it ought to have been obvious to Mr Peramune that the statutory demand procedure was inappropriate, given the clear dispute over the nature of the arrangement between him  and Savage  Garage.  Savage Garage clearly put  Mr Peramune on notice that the debt was disputed in the letter of 16 June 2023. That letter set out Savage Garage’s version of the arrangement. Mr Peramune had the opportunity to withdraw the statutory demand at that point but chose not to.

[11]              Instead, he opposed the application to set aside the statutory demand, in the face of an obvious conflict of evidence on the essential terms of the agreement between them. At [32] of the judgment I concluded:

There is undoubtedly a significant conflict of evidence between the parties on the essential terms of the agreement between them. This conflict of evidence cannot be resolved by this Court in the context of statutory demand proceedings. The issue of whether SGL owes Mr Peramune a debt and if so, how much, ought to be resolved through ordinary proceedings, where the parties will give oral evidence and can be cross-examined.

[12]              As noted, it is incumbent on the issuer of a statutory demand to ensure that the demand was issued on a proper basis, and that the statutory demand was not the subject

3      Norwich Properties Ltd v Mark Gray Architect [2015] NZHC 994 at [31].

4      Haines v Memelink [2019] NZHC 2169 at [39]–[51]; and Haines v Memelink [2021] NZHC 1063 at [19]–[27].

5      AAI Ltd v 92 Lichfield Street (in rec and in liq) [2016] NZHC 90 at [20] citing Rembrandt Custodians Ltd v Pro-Drill (Auck) Ltd HC Auckland M337/IM03, 13 June 2003 at [38].

of a genuine dispute. If it was not apparent to Mr Peramune before he issued the statutory demand that the debt was disputed, it ought to have been apparent once he received the 16 June 2023 letter, and again when Savage Garage filed its application to set aside and supporting affidavit. In these circumstances, the debt should have been pursued through ordinary proceedings (in the District Court), not by invoking the statutory procedure.

[13]              In his submissions opposing increased costs, Mr Peramune essentially reiterates his earlier submissions as to why his version of the arrangement should be preferred, concluding that Savage Garage has failed to establish a genuine and substantial dispute. Plainly, that is wrong. The judgment found that Savage Garage had established a genuine and substantial dispute as to the existence of the debt.

Result

[14]              Accordingly, I order Majitha Peramune to pay Savage Garage NZ Limited increased costs and disbursements in the total sum of $18,182.42.

Associate Judge Gardiner