Total Tyres Limited v Roydons Automotive Repairs Limited

[2012] NZHC 3118

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

CIV 2012-463-000407 [2012] NZHC 3118

UNDER  the Companies Act 1993

IN THE MATTER OF     Roydons Automotive Repairs Limited

BETWEEN  TOTAL TYRES LIMITED Applicant

ANDROYDONS AUTOMOTIVE REPAIRS LIMITED

Respondent

Hearing:         22 November 2012

Appearances: D Broadhurst for the Applicant

M Hojabri for the Respondent

Judgment:      22 November 2012

ORAL JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

Solicitors:

D Broadhurst, Buddle Bentley McCleary, Whakatane – [email protected]

M Hojabri, Robinson Law, Whakatane – [email protected]

TOTAL TYRES LIMITED V ROYDONS AUTOMOTIVE REPAIRS LIMITED HC ROT CIV 2012-463-

000407 [22 November 2012]

[1]      The applicant (Total Tyres) has applied to set aside a statutory demand served on it by the respondent (Roydons).   Total Tyres says it has a cross demand of sufficient sum.

[2]      The  issues  between  the  parties  are  not  about  solvency.    The  acceptable evidence is that Total Tyres is solvent.

[3]      There is no dispute that the statutory demand sum of $13,000 is owed to

Roydons, or that the debt due is secured by a General Security Agreement (GSA).

[4]      Rather  Total  Tyres  asserts  that  when  it  purchased  the  vehicle  workshop business it got less than there was agreed should be provided.

[5]      The parties bargain is recorded in a written agreement for sale and purchase dated  5  October  2011.     The  purchase  price  was  $50,000  of  which  $22,000 represented tangible assets and $28,000 intangible assets (i.e. goodwill).

[6]      Clause 3.3(3)(c) of the agreement provided that Roydons was to deliver the business records on settlement date.  Business records is defined in clause 1.1(5) as:

“Business  Records”  means  all  existing  books,  records,  files  and  other relevant  information  (including  electronically  stored  information) concerning the business, including details of customers, suppliers, agents and distributors excluding the vendors personal records.

[7]      Total  Tyres  says  Roydons  have  failed  to  provide  any  relevant  business records, invoicing database or any other office systems to enable the business to be operated as a going concern.  Specifically there has been no provision of a working version of the electronic database used for the business by Roydons.

[8]      Total Tyres complains that although it received a list of client names and addresses there is no reference to customer vehicles, warrant of fitness dates or customer servicing history, and such could reasonably be expected to exist.   Post settlement Roydons provided copies of invoices showing that same detail that Total Tyres believes is held on an electronic database.

[9]      Total Tyres asserts the value of the businesses reputation was misrepresented by Roydons and to the contrary Roydons had developed a reputation for supplying warrants of fitness to vehicles in breach of required standards.

[10]     Total Tyres says that because the business came with a monthly tenancy only that no goodwill could be attributable to the location of the business and therefore it says it paid $28,000 for intangible assets of no value at all.  Therefore it says it has a set off claim for that amount.

Considerations

[11]     The issues between the parties including those raised upon the setting aside application were the subject of correspondence between solicitors before Roydons served its statutory demand.  Indeed, a number of other issues were raised as well but these are not advanced on the setting aside application.

[12]     To succeed upon its setting aside application Total Tyres must show that it has a real basis for the claim of set off i.e. that there are clear and persuasive grounds to support a set off claim.

[13]     In my view these do not exist in this case.

[14]     The business agreement does not require the provision of customer service records or warrant of fitness dates.   Copies of invoices provided post settlement almost certainly would have been provided from a hardcopy source.   It does not appear there has been any complaint about lack of provision of hardcopy records.

[15]     As for there being no value attributed to the location of the business there can be little cause for complaint because the agreement specifically identified the premises as being subject to a monthly tenancy.  Besides Total Tyres obtained legal and accounting services pre-purchase.

[16]     This  case  is  more  about  receiving  less  than  was  expected,  rather  than receiving less than was agreed would be provided.

[17]     The evidence is that the electronic database provided client invoices and statements and nothing more.   It was not used to store or collect client details or records.  The definition of ‘business records’ required the production of those which existed. The evidence suggests Total Tyres indeed received all of those records.

[18]   Roydons business operated without the collection of vehicle registration numbers, vehicle makes and models and mechanical servicing records.   What therefore Total Tyres claims are unsupplied are business records that in fact did not exist at all.

[19]     Claims of a bad business reputation are unsupported by sufficient evidence.

Result

[20]     The setting aside application is dismissed.

[21]     Pursuant to s 291(1)(a) of the Companies Act 1993 Total Tyres is directed to pay the sum of $13,000 (plus interest from 1 May 2012) by 7 December 2012 and in default of payment Roydons may apply to put Total Tyres into liquidation.

[22]     The applicant shall pay the respondent’s costs on a 2B basis together with disbursements in an amount of $4,340.95.

Associate Judge Christiansen