Stylez Limited v Body Corporate 82925 HC Wellington CIV-2011-485-692

[2011] NZHC 1207

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2011-485-692

IN THE MATTER OF     a statutory demand dated 31 March 2011 and served on 1 April 2011

BETWEEN  STYLEZ LIMITED Applicant

AND  BODY CORPORATE 82925

Respondent

Judgment:      7 October 2011 at 10:30 AM

JUDGMENT AS TO COSTS OF ASSOCIATE JUDGE D.I. GENDALL

This judgment was delivered by Associate Judge Gendall on 7 October 2011 at 10.30 am under r 11.5 of the High Court Rules.

Solicitors:           Treadwells, Solicitors, PO Box 859, Wellington

Grove Darlow & Partners, Solicitors, PO Box 2882, Auckland 1140

STYLEZ LIMITED V BODY CORPORATE 82925 HC WN CIV-2011-485-692 7 October 2011

[1]      This  proceeding  involved  an  application  by  the  applicant  to  set-aside  a statutory demand issued against it by the respondent.

[2]      That application was scheduled for hearing on 1 August 2011, along with a further application filed at a reasonably late stage by the applicant seeking an order staying the proceeding pursuant to the Arbitration Act 1996.

[3]      The Monday 1 August 2011 hearing however was essentially to consider only the first application being one to set-aside the statutory demand.

[4]      At the commencement of that hearing, Mr Davie counsel for the respondent indicated that, following receipt of an affidavit filed on behalf of the applicant, which he says he received only about 5.00 pm on the proceeding Thursday, 28 July

2011, it became apparent that there were factual issues which had arisen between the parties such that it was no longer appropriate for the respondent to maintain its opposition to the setting-aside application.

[5]      Accordingly,  Mr  Davie  indicated  that  the  respondent  was  prepared  to withdraw its opposition to that application.

[6]      The application by the applicant therefore effectively succeeded and an order was made on 1 August 2011 setting-aside the statutory demand.   This order was made also on the basis that the applicant withdrew its application for a stay of the proceeding which it then did.  Leave to withdraw this application was granted by the Court.

[7]      Costs on these matters were reserved on the basis that counsel would file memoranda to be referred to me for decision.  Those memoranda from counsel for the respondent and counsel for the applicant have been filed and I now give my decision on the costs issue.

[8]      From the costs memoranda filed there is a clear dispute between the parties regarding costs as essentially:

(a)      The  applicant  seeks  costs  from  the  respondent  on  an  increased category 2B basis to include a 50% uplift together with disbursements inclusive of travel costs;

(b)The respondent seeks costs from the applicant on both matters on a category 2B basis.

[9]      At the outset I comment simply that the amount in issue in the statutory demand served on the applicant under all the circumstances here cannot be said to be particularly substantial and yet the legal machinations over this between the parties has been quite extensive. The wisdom of this course of action must be questioned.

[10]     From all of this it is clear that there are wide ranging disputes between the parties over what happened in this matter.   Suffice to say at this point that at least on two occasions following service of the statutory demand counsel for the applicant wrote to counsel for the respondent outlining the reasons why the amount claimed in the demand was disputed and inviting its withdrawal.   This was disputed by the respondent who continued with its opposition to the present application right up to the commencement of the hearing on 1 August 2011.

[11]     In my view, having considered all the material before the Court including the late-filed affidavit by the applicant and the lengthy submissions advanced by both counsel, I can say now that the statutory demand here either should not have been issued or should have been withdrawn prior to the hearing on 1 August 2011.

[12]     That  said,  the  applicant  is  entitled  to  costs  on  what  was  a  successful application to set-aside the statutory demand, and in the normal course of events those costs would be awarded on a category 2B basis.  I reject the application by the respondent for costs here.  It was the unsuccessful party and has put nothing before the Court to show that it is entitled to an award of costs here.

[13]     The issue now arises as to whether those category 2B costs should be the subject of a 50% increase as requested here by the applicant.

[14]     Increased costs are provided for in terms of r 14.6(3) High Court Rules.

[15]     In Summer Construction Ltd v Bakker HC, Wellington, 10 November 2006, CIV-2006-485-1499 I dealt with the issue of increased costs claimed where an inappropriate statutory demand had been issued and noted:

[29]     There is no doubt from the authorities that the Court views seriously any decision  taken  by  a  party  to  proceed  with  an  inappropriate  statutory demand in the face of a warning issued by an applicant company.  This is particularly the case where, as here, settlement offers under r 48G are made.    Such  situations  in  the  past  have  often  resulted  in  awards  of increased costs being made – see Pramukh Enterprises Ltd v Johal Enterprises  Ltd  (HC AK,  1  July  2004,  CIV-2004-404-1870, Associate Judge Lang); The Ingleby Company Ltd v Rodal Consultants Limited (HC AK, 4 September 2003, CIV-2003-404-2928, Master Lang); Ordeal Enterprises Ltd v Callan Healthcare Properties Ltd (HC AK, 31 March

2003, M1552/IM02, Master Lang) and Ebert Construction Ltd v Advanced

Windows Ltd (HC AK, 22 February 2001, M105/IM01, Master Gambrill).

[30]     In the present case, as early as 12 July 2006 the respondent was put on notice by the  applicant’s counsel that if the  applicant was required to pursue its application to set-aside the statutory demand, then substantial costs would be incurred and would be sought from the applicant.

[31]     It is clear that a company that receives a statutory demand finds itself in an invidious  position.    Should  it  fail  to  comply  with  the  demand,  it  is presumed to be unable to pay its due debts, and proceedings may be issued seeking an order for liquidation.   The company must therefore act immediately in  order  to  avoid  the  statutory presumption  which  would otherwise be imposed.   Further, any application to set-aside a statutory demand is often a rather expensive exercise.

[16]     As I have noted above, the factual situation in the present case is somewhat confused and strongly disputed on behalf of the applicant and the respondent.

[17]   The respondent’s position is that the statutory demand was effectively withdrawn at the last moment only because of the failure on the part of the applicant to  file  its  submissions  for  the  1 August  2011  hearing  on  time  and  importantly because of the late affidavits filed by the applicant on 28 July 2011.  Those affidavits were filed in reply well out of time in terms of earlier directions given.

[18]     The respondent contends that the allegations in those late affidavits were new and raised significant factual issues which it turned out at that last minute could not be resolved in a forum considering the setting aside of the statutory demand.  It was only on this basis the respondent claims that the statutory demand was withdrawn.

[19]     Although these aspects are strongly disputed by the applicant, it is difficult here to reach some final and definitive conclusion on this issue.

[20]     Under all these circumstances it is my view that, although the applicant effectively succeeded and is clearly entitled to costs on the setting aside application, it has not shown definitively that prior to 1 August 2011 it could be said that the statutory demand should not have been issued at all and should have been withdrawn prior to 28 July 2011 such that an order for increased costs in terms of r 14.6(3) is required to be made here.

[21]     I conclude therefore that the applicant is entitled to costs on its successful application to set-aside a statutory demand but only on a category 2B basis together with  disbursements  as  approved  by  the  Registrar.    Those  disbursements  are  to include return air fares for counsel for the applicant Auckland/Wellington/Auckland which are appropriate in the circumstances here.

[22]     As  to  the  stay  application,  this  was  brought  late  in  the  piece  and  was withdrawn by the applicant on 1 August 2011.  In my view costs on this application should  lie  where  they fall.    There  is  to  be  no  order  made  as  to  costs  on  that application.

‘Associate Judge D.I. Gendall’