Seven Seas Limited v Baker - [2020] NZHC 616

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-001621

[2020] NZHC 616

BETWEEN
SEVEN SEAS LIMITED

Applicant

AND

TREVOR BAKER and MARY ANNA

SMITH as trustees of the TREVOR BAKER AND MARY ANNA SMITH FAMILY TRUST

Respondents

Hearing: 5 December 2019

Appearances:

S J Tee for the Applicant

D J G Cox for the Respondent

Judgment:

24 March 2020

JUDGMENT OF ASSOCIATE JUDGE SARGISSON

This judgment was delivered by me on 24 March 2020 at 10.30 a.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date.......................................

Solicitors:

Morton Tee, Auckland Rennie Cox, Auckland

SEVEN SEAS LTD v BAKER [2020] NZHC 616 [24 March 2020]

Introduction

[1]This proceeding concerns an application to set aside a statutory demand.

[2] The respondent, Trevor Baker and Mary Anna Smith as trustees of the Trevor Baker and Mary Anna Smith Family Trust, is the landlord of a commercial premises at 77 Barrys Point Street, Takapuna. The applicant, Seven Seas Ltd, is the tenant of unit B of that property. The landlord issued an invoiced dated 19 July 2019 for rent and outgoings. The tenant paid only part of that invoice. Then, on 31 July 2019, the landlord served a statutory demand on the tenant for the outstanding amount.

[3] The tenant failed to comply with the statutory demand. Instead, it has applied for an order setting aside the demand under s 290(4) of the Companies Act 1993. It says there is a substantial dispute whether the debt is owing and due and, alternatively, that the statutory demand should be set aside on other grounds. The landlord opposes the application.

Background

[4] On 26 June 2017, the parties signed an agreement to lease the property. Clause 4.1 of the agreement to lease provides that the tenant shall enter into a formal lease with the landlord to be prepared by the landlord’s lawyer using the ADLS standard form. However, the parties have been unable to agree on the final terms of the deed of lease. There is, at this point, only a draft deed of lease. The tenant has nevertheless taken possession of and occupied the premises. And, at the hearing, the parties agreed that the standard terms of the draft deed of lease apply.

[5] On 19 July 2019, the landlord invoiced the tenant $16,635.89 (GST inclusive) for monthly rent and specific outgoings for the coming year. The specific outgoings included insurance, Auckland Council rates, water rates, Building Warrant of Fitness and insurance-related valuations. The amount for Auckland Council rates was for the year from 1 July 2019 to 30 June 2020, rather than a monthly instalment. As unit B comprises half the premises, the actual amount invoiced for Auckland Council rates was half of the rates assessed for the period from 1 July 2019 to 30 June 2020 (that is,

$5,865.02 plus GST).1 The amount reflects a discount that was available to the landlord, as the ratepayer, if the annual rates were…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] NZHC 616
Decision Date: 24 March 2020

CaseChat Overview and Summary

Seven Seas Limited, a tenant, sought to set aside a statutory demand issued by its landlord, Trevor Baker and Mary Anna Smith as trustees of the Trevor Baker and Mary Anna Smith Family Trust, for outstanding rent and outgoings. The dispute centred on the validity of the statutory demand under the Companies Act 1993, specifically whether there was a substantial dispute regarding the debt's owing or due status. The landlord issued the demand for an unpaid invoice total of $9,693.43, which included monthly rent, outgoings, and costs related to the statutory demand. Seven Seas argued that there was a substantial dispute about the debt due to the landlord's failure to provide a reconciliation of outgoings and the tenant's alleged overpayment. The landlord maintained that the tenant's payment was overdue and that the statutory demand was appropriately issued.

The court examined whether a substantial dispute existed regarding the debt. It noted that the tenant had not contested the landlord's right to demand payment of outgoings on demand, as per the lease agreement. However, the court found that there was a genuine dispute over whether the Auckland Council rates were due and owing at the time the statutory demand was issued. This was because the landlord had not received an invoice from the Auckland Council at the time of the statutory demand, which raised questions about whether the rates had actually been incurred. Consequently, the portion of the statutory demand relating to the Auckland Council rates was set aside. Additionally, the court found that the tenant's claims regarding the landlord's failure to provide a reconciliation and the tenant's alleged overpayment did not constitute a substantial dispute. The tenant's solvency and the landlord's ulterior motives were also considered, but the court concluded that neither provided a basis to set aside the statutory demand. The statutory demand stood for the remaining amount, including costs for the service of the demand. The court ordered that the statutory demand be set aside in part, with the tenant required to pay the remaining amount by a specified date, or face potential liquidation proceedings.

Orders