Savage Garage NZ Limited v Peramune
[2023] NZHC 3204
•14 November 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-001369
[2023] NZHC 3204
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:
14 November 2023
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 14 November 2023 at 3.30 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 3204 [14 November 2023]
Introduction
[1] Savage Garage NZ Limited (SGL) sold used cars on behalf of Majitha Peramune from its customising garage business. This dispute involves six used cars SGL agreed to sell for Mr Peramune.
[2] Mr Peramune says that SGL has not paid him the full sale proceeds. He served a statutory demand dated 1 June 2023 on SGL for $65,000. SGL has applied to set aside the statutory demand on the basis that there is a substantial dispute as to whether the debt of $65,000 is owing or is due. Mr Peramune denies that there is a dispute, claiming that the so-called dispute is façade.
[3] The issue for the Court to decide is whether there is a genuine and substantial dispute that the amount claimed in the statutory demand is a debt that is owing and due.
Background
[4] SGL carries on business as a customising garage that does mechanical work, electrical work, window tinting, painting correction, wheel repairs and vehicle detailing.
[5] Mr Peramune is a customer of SGL who brought vehicles into the workshop for detailing before marketing and selling them privately.
[6] In October 2022, Mr Peramune asked SGL to sell six vehicles on his behalf. The vehicles were listed for sale on TradeMe Motors. Four of the vehicles were sold and the proceeds of sale were transferred to Mr Peramune. A vehicle exchange was agreed in relation to the proceeds of sale for the remaining two vehicles.
[7] In January 2023, SGL invoiced Mr Peramune for storage costs of $4,000.85. In March 2023, SGL sent Mr Peramune an invoice for $32,737.05 for detailing work and other services to the vehicles.
[8] On 2 May 2023, Mr Peramune, by his solicitors wrote a letter of demand to SGL, demanding payment of $65,000 said to be owing to him for the six cars. The letter was sent to SGL by email. Daniel Irvine, general manager of SGL, says that he did not receive the demand letter, which he later found in his ‘Junk’ email folder.
[9]On 1 June 2023, Mr Peramune served SGL with the statutory demand for
$65,000. SGL applied to set aside the statutory demand on 19 June 2023.
Legal principles
[10] Under the Companies Act 1993, the Court may set aside a statutory demand if it is satisfied that:1
(a)there is a substantial dispute about whether or not the debt is owing or due;
(b)the company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand is less than the amount of the counterclaim, set-off, or cross-demand;
(c)the statutory demand ought to be set aside on other grounds.
[11] The general principles that apply to applications to set aside statutory demands are well-settled:2
(a)The applicant must show there is a genuine and substantial dispute as to the existence of the debt. The Court’s task is not to resolve the dispute but to determine whether there is a substantial dispute that the debt is due.
(b)The mere assertion of a dispute is insufficient. Material short of proof is required to support a claim that a debt is disputed.
1 Companies Act 1993, s 290(4).
2 See Confident Trustee Ltd v Garden and Trees Ltd [2017] NZCA 578 at [16].
(c)If such material is available, the dispute should normally be resolved first in ordinary civil proceedings before a statutory demand is issued.
(d)An applicant must establish that any counterclaim, cross-demand or set-off is reasonably arguable in all the circumstances. It does not need to prove the actual claim.
(e)It is not usually possible to resolve disputed questions of fact based on affidavit evidence, especially when issues of credibility arise, unless such evidence is contrary to the available documents or earlier statements made by the parties.
(f)The Court's discretion as to whether to set aside a statutory demand is wide, but it will be a rare occasion where an application is refused if one of the grounds in s 290(4) are made out.
Is there a substantial dispute that the debt is owing or due?
The agreement
[12] The agreement between SGL and Mr Peramune was oral and informal. There is no contemporaneous written record of its terms.
[13] Mr Irvine has sworn affidavits describing the terms of the arrangement between SGL and Mr Peramune concerning the six vehicles. Mr Peramune has sworn affidavits refuting this version of the agreement and describing different terms.
[14] Mr Peramune says that he supplied SGL with vehicles that were “fully detailed, registered, and in a clean state ready to go on the yard for sale”.3 He says further that he had an agreement with SGL that he would receive a “pre-informed price” for the vehicles regardless of the sale price obtained by SGL.4
3 Additional affidavit of Majitha Thanujaya Peramune in Response, sworn 20 October 2023, at [4].
4 Affidavit of Majitha Thanujaya Peramune in Response, sworn 19 July 2023, at [6].
[15] Essentially, Mr Peramune says he agreed to sell the vehicles for the pre-agreed total sum of $167,000, payable on the sale of the vehicles by SGL to third parties. He says he received only $102,000 from SGL and is owed $65,000.
[16] Mr Irvine denies that he agreed Mr Peramune would receive a pre-agreed sum for the vehicles, irrespective of whether a loss or profit was made on the sale after the costs of detailing the vehicles.5 He states that he and Mr Peramune discussed the prices Mr Peramune wanted to achieve for the vehicles, and they agreed that SGL would charge Mr Peramune for the costs of repairs, detailing work on the vehicles, and sales costs.6 Mr Irvine says that it was agreed that Mr Peramune would receive the balance of the actual sale price achieved after those costs.7
[17] Mr Irvine says that the “pre-informed price” expectations were just estimates of a reasonable price expectation for the vehicles once the detailing was complete but was not a fixed price.
[18] Mr Irvine further deposes that Mr Peramune asked if he could store the vehicles at the SGL’s garage until they were sold, and that he agreed to this on the basis that SGL would charge Mr Peramune a storage fee if the cars were not sold after 30 days.8
[19] Mr Irvine says that the vehicles provided by Mr Peramune were in imperfect condition and required, amongst other things, dent removal, wheel repairs, brakes, painting, and paint correction.9
[20] He says that the total actual sale proceeds from the vehicles were $164,000, which was close to Mr Peramune’s expectation of $167,000.10 He says that SGL paid Mr Peramune $83,000 from the sale proceeds of four of the vehicles and transferred a Jeep Wrangler to Mr Peramune at a value of $65,000 in exchange for two of the
5 Affidavit of Daniel Irvine in reply, sworn 25 August 2023, at [8].
6 Affidavit of Daniel Irvine in reply, sworn 25 August 2023, at [6].
7 Affidavit of Daniel Irvine in reply, sworn 25 August 2023, at [6].
8 Affidavit of Daniel Irvine in reply, sworn 25 August 2023, at [7].
9 Affidavit of Daniel Irvine in reply, sworn 25 August 2023, at [5].
10 Affidavit of Daniel Irvine in support of an application for orders setting aside a statutory demand, sworn 19 June 2023, at [10]; and Affidavit of Daniel Irvine in reply at [9].
vehicles.11 Therefore, Mr Irvine says that Mr Peramune has received total value of
$148,000 for the six vehicles. He says Mr Peramune owes SGL $32,737.05 for detailing works and other services to the vehicles and $4,000.85 for storage costs.
[21] Mr Irvine says that SGL deducted the cost of the detailing from the sale proceeds of one of the vehicles (the Mercedes) and paid the balance to Mr Peramune. This vehicle was sold for $29,000, and $25,000 was paid to Mr Peramune. The exchange between them was referred to as the “work reduction”.12
Submissions
[22] Ms Elia submits that there is a dispute between the parties as to the terms upon which SGL would sell the vehicles for Mr Peramune. On that basis, she submits, the statutory demand should be set aside.
[23] Mr Perera submits that there is no genuine or substantial dispute as to whether the debt is due. He emphasises that SGL did not raise this ‘dispute’ during the correspondence with Mr Peramune prior to the statutory demand. (This correspondence has not been put before the Court). Mr Perera submits that the contended dispute is “a façade” to deflect the statutory demand.
[24] In support of this submission, Mr Perera highlights several areas of inconsistency within Mr Irvine’s evidence. These include that in his first affidavit he states that the Jeep Wrangler was exchanged for the Audi Q5 and Audi Q2 and in his reply affidavit he states that the cars exchanged were the Audi Q5 and the Mazda 3. Furthermore, in his first affidavit Mr Irvine states that he sold the Mercedes for
$26,000 and in his reply affidavit he says this was an error and it was sold for $29,000.
[25] In reply, Ms Elia acknowledges that there are inconsistences within both Mr Irvine’s and Mr Peramune’s evidence. She submits that this is because the arrangements were informal and not recorded. Mr Irvine has done his best to recall
11 Affidavit of Daniel Irvine in support of an application for orders setting aside a statutory demand, sworn 19 June 2023, at [9] and [10]; and affidavit of Daniel Irvine in reply, sworn 25 August 2023 at [9].
12 Affidavit of Affidavit of Majitha Thanujaya Peramune in Response, 19 July 2023, exhibit “C” at 6.
events and he corrected his initial error concerning the Mercedes sale price. As to his general credibility, she asks: why would SGL agree to the arrangement Mr Peramune describes and assume all the risk on the sale of the cars?
Assessment
[26] In my assessment there is clearly a substantial factual dispute as to the terms of the agreement between SGL and Mr Peramune.
[27] The primary dispute is whether or not Mr Peramune supplied the vehicles for sale by SGL on the basis that SGL would pay Mr Peramune a predetermined sum for the vehicles, irrespective of the amount actually achieved on the sale. In support of that contention, Mr Peramune has produced a copy of an email dated 2 November 2022 which he says was sent to Mr Irvine, listing the “price expectations” for the six vehicles. However, this email does not necessarily support his position. The term “price expectations” could simply mean the price he expected to achieve rather than a fixed amount SGL was required to pay him irrespective of the actual sale price.
[28] There is also a dispute about whether the parties agreed that SGL would carry out detailing work and repairs to the vehicles to bring them up to a suitable condition for sale and either deduct or separately invoice Mr Peramune for these costs. There is a further dispute about whether the parties agreed that Mr Peramune would pay storage costs.
[29] Mr Peramune has produced text messages which he says corroborate his version of the arrangement. However, some of these messages are inconsistent with his claim that he and Mr Irvine agreed a fixed price for the vehicles, and that SGL alone carried the risk that the vehicles might not achieve his price expectations. For example, on 28 October 2022 Mr Peramune messaged Mr Irvine saying, “Oh, $26k too low, bro, my guy offer is $28.5k if he can match at least would be nice”.
[30] Mr Peramune has produced invoices from other garages who completed repair works on the six vehicles before they were handed over to SGL to be sold on his behalf.
He maintains that the vehicles handed over to SGL for sale were in a fully detailed, registered and clean state, ready to go on the yard for immediate sale.
[31] However, SGL insists that it carried out work on all six cars to bring them up to sale standard. In addition to SGL’s March 2023 invoice, Mr Irvine has provided invoices from panelbeaters who carried out work on the six vehicles.
[32] 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.
Result
[33]I order that the statutory demand dated 1 June 2023 is set aside.
[34] In accordance with the usual principle, SGL, as the successful party, should be paid its costs. SGL seeks increased costs. It may make submissions of no more than four pages within 10 working days. Mr Peramune may file submissions in response of no more than four pages within a further 10 working days. A decision will be made on the papers.
Associate Judge Gardiner
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