South Pacific Fire Protection South Island Alarms Limited v Safe NZ Limited (until 17 February 2016 known as South Pacific Fire Protections Christchurch (2014) Limited)

[2016] NZHC 2621

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2016-409-000119 [2016] NZHC 2621

IN THE MATTER

of the Companies Act 1993

BETWEEN

SOUTH PACIFIC FIRE PROTECTION SOUTH ISLAND ALARMS LIMITED Plaintiff

AND

SAFE NZ LIMITED (UNTIL 17

FEBRUARY 2016 KNOWN AS SOUTH PACIFIC FIRE PROTECTIONS CHRISTCHURCH (2014) LIMITED) Defendant

Hearing:	25 July 2016 (Judgment: 5 August 2016)
Counsel:	N Tabb for Plaintiff G K Riach for Defendant
CostsJudgment:	2 November 2016

COSTS JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1]      On 5 August 2016 the Court issued a judgment on an application by the defendant, Safe NZ Limited (Safe), to stay this proceeding and restrain advertising. For reasons given in that judgment I awarded costs to Safe on that application.  After the judgment was issued the sum which the Court found was not the subject of a dispute was paid by Safe and on 29 September the proceeding was discontinued by leave, with costs reserved.

[2]      South Pacific Fire Protection South Island Alarms Limited (South Pacific) now applies for costs.   It says that it properly commenced the proceeding on the basis of an unpaid statutory demand and succeeded in having a substantial part of the amount demanded paid as a result of the judgment.  It says that the application was

appropriate and justified and that the proceeding could have been avoided altogether

SOUTH PACIFIC FIRE PROTECTION SOUTH ISLAND ALARMS LTD v SAFE NZ LTD (until 17 February

2016 known as South Pacific Fire Protections Christchurch (2014) Ltd [2016] NZHC 2621 [2 November 2016]

by Safe applying to set aside the statutory demand or paying the amount demanded into  its  solicitor’s trust  account,  in  accordance  with  an  arrangement  which  was discussed between counsel at an earlier point.  South Pacific makes reference to the Construction Contracts Act 2002 and says it was entitled to take the steps it did.

[3]      Safe opposes an order for costs against it and says costs should lie where they fall.   Counsel notes that the Court did find that there was a substantial dispute in relation to a significant part of the debt.   He notes criticism by the Court of the actions of the debt collector engaged by South Pacific and blames South Pacific’s counsel for the fact that an arrangement was not made for payment of the disputed sum into a solicitor’s trust account pending resolution of the dispute.

[4]      In the judgment dated 5 August there is a discussion in relation to costs at paragraphs [44] – [47].  The factors which I found relevant to the decision on costs in that judgment are also relevant to the application now before the Court.  There are two particular factors which have led to my decision on the present application by South Pacific. First, as noted in paragraph [45] of the judgment:1

... the statutory demand was issued in circumstances where a proper investigation of the factual position would have clearly disclosed that there was a dispute between the parties and that the issuing of a demand under s 289 was inappropriate.

[5]      I went on to note that South Pacific continued to argue that there was no dispute right up to and at the fixture which led to the judgment, notwithstanding the fact that it was clear from the affidavits that there was indeed a dispute.

[6]      Secondly, as noted in paragraph [46], the provisions of the Construction Contracts Act necessarily prevailed over that dispute in relation to invoices which were validly issued, but a significant number of the invoices relied on by South Pacific were not validly issued.  As I then recorded:

A  careful  examination  of  those  invoices  was  not  undertaken  by  South Pacific, it seems, otherwise it would have been clear that there were deficiencies in them, in terms of s 20, as I have analysed.  No such analysis was presented to the Court by South Pacific’s counsel.

1      South Pacific Fire Protection South Island Alarms Ltd v Safe NZ Ltd [2016] NZHC 1810.

[7]      The  combined  effect  of  these  two  facts  demonstrates  that  South  Pacific should not have issued a statutory demand under s 289 of the Companies Act 1993 when it did, and most certainly should not have proceeded with the application in relation to the invoices which were deficient in terms of the statutory requirements set out in the Act.  It is clear that the debt collection agent for the plaintiff either did not undertake the requisite degree of analysis before issuing the statutory demand, or if the agent did undertake that analysis, he or she simply overrode the very clear position which the analysis would have revealed.  Further, counsel did not undertake an analysis in submissions either.  It was left in part to counsel for Safe to draw these matters to the attention of the Court, and in part to the Court itself to undertake line by line analysis of every invoice, a task which should have been done before the notice under s 289 was issued, let alone at every relevant point in this proceeding thereafter.

[8]      South Pacific and its advisors, in particular the debt collection agent engaged in this matter, should take careful note of the terms of paragraph [6] of the judgment.

[9]      In the end, the only factor favouring an award of costs in favour of South Pacific is the fact that  it partly succeeded.    In  my judgment that is  more than balanced  by the  factors  I have  referred  to  in  the  earlier  judgment,  and  in  this

judgment.  Therefore, as submitted by counsel for Safe, costs will lie where they fall.

J G Matthews

Associate Judge

Solicitors:

N Tabb, Barrister & Solicitor, Auckland. Harmans Lawyers, Christchurch.