Travel Shop Limited v Greenwoods Corner Travel (1987) Limited HC Auckland CIV 2010-404-2930

[2010] NZHC 1643

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-002930

BETWEEN  TRAVEL SHOP LIMITED Applicant

ANDGREENWOODS CORNER TRAVEL (1987) LIMITED

Respondent

Hearing:         24 August 2010

Appearances: Mr A Kashyap for Applicant

Mr P Spring for Respondent

Judgment:      27 August 2010 at 10 a.m.

JUDGMENT OF ASSOCIATE JUDGE DOOGUE

This judgment was delivered by me on

27.08.10 at 10 am, pursuant to

Rule 11.5  of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Counsel:

Mr A Kashyap, P O Box 26-596, Epsom, Auckland

Keegan Alexander, P O Box 999, Auckland

TRAVEL SHOP LIMITED V GREENWOODS CORNER TRAVEL (1987) LIMITED HC AK CIV-2010-404-

002930  27 August 2010

Background

[1]      The respondent and the applicant both operate as travel agencies.  Since late

2006,  the  applicant  has  purchased  airfares  on  behalf  of  its  clients  from  the respondent, who has the ability to purchase at a discount.  Difficulties in relation to payment arose.

[2]      The respondent issued a statutory demand against the applicant dated 3 May

2010.  The first part of the demand reads as follows:

WHEREAS  you  are  indebted  to  GREENWOODS  CORNER  TRAVEL (1987) LIMITED TRADING AS PANWORLD TRAVEL CENTRE of 6B Saville Drive, Mangere East, Auckland ("the Creditor") in the amount of SEVENTEEN THOUSAND EIGHT HUNDRED AND EIGHTY SEVEN DOLLARS AND THIRTY SEVEN CENTS ($17,887.37) being the net sum owed for travel services rendered by the Creditor between 2007 and 2009 ("the Debt") full details of which were supplied to you on one April 2010.

[3]       The applicant now seeks an order setting aside the statutory demand. The application is made under s 290 of the Companies Act 1993, which states:

290      Court may set aside statutory demand

(1)The Court may, on the application of the company, set aside a statutory demand.

(2)      The application must be—

(a)made within 10 working days of the date of service of the demand; and

(b)served on the creditor within 10 working days of the date of service of the demand.

(3)No extension of time may be given for making or serving an application to have a statutory demand set aside, but, at the hearing of the application, the Court may extend the time for compliance with the statutory demand.

(4)The Court may grant an application to set aside a statutory demand if it is satisfied that—

(a)there is a substantial dispute whether or not the debt is owing or is due; or

(b)the company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or

(c)       the demand ought to be set aside on other grounds.

(5)A demand must not be set aside by reason only of a defect or irregularity unless the Court considers that substantial injustice would be caused if it were not set aside.

(6)       In subsection (5) of this section, defect includes a material misstatement of the amount due to the creditor and a material misdescription of the debt referred to in the demand.

(7)       An order under this section may be made subject to conditions.

[4]       Following  the  filing  and  service  of  the  application,  the  respondent  has reduced the amount for which demand is made and the total is now $11,169.11.

[5]       There was no dispute between the parties that on an application of this kind the applicant is required to demonstrate a "fairly arguable basis" on which they were not liable for the demands.

[6]       I accept, too, as the respondent’s counsel submitted, that the mere assertion that a dispute exists is not sufficient.  Material, short of proof, is required to support the claim that the debt is disputed.   Further, an applicant must establish that any counterclaim or cross demand is reasonably arguable in all the circumstances.[1]

[1] North Harbour Equine Hospital Ltd v Little HC Auckland CIV-2006-404-7585, 19 February 2007, Associate Judge Abbott; Carpet Plus 2003 Ltd v A Team Flooring Specialist Ltd HC Auckland CIV-

2008-404-4725, 19 January 2009, Associate Judge Sargisson.

[7]       In the context of this case, the dispute has reduced down to three items which in aggregate comprise the respondent’s remaining claim.

First disputed item

[8]      The dispute here boils down to two statements of position advanced by each party which contradict each other.   First, the applicant says in substance that it is unable to locate amongst its records any reference to ticketing being provided for a group of travellers.

[9]      The dispute concerns a category of passengers identified as “(e) passengers

Ms E Divya John, Ms Liss, Mr John Varghese and Mr David John” for whom the

respondent says it purchased tickets.  Ms Gupta for the applicant claimed that she was unable to locate the above passengers in her company’s records.

[10]     Mr Patel sets out what he says is the proof of this claim.  He says that by accessing data tracking the transaction from the Amadeus travel reservation system, it can be established that the tickets were in fact purchased by the respondent on behalf of the travellers in question.  The Amadeus evidence, he alleges, establishes that the bookings were created by a Mr Zulfi, an employee of the applicant.  He sets out other items in the chain of evidence which he says establishes that the passengers in group “(e)” booked through the applicant and that accordingly the respondent does not intend to make any concession in respect of the $8,356.15 owing for those tickets.

[11]     The  applicant  is  required  only to  demonstrate  that  there  is  a  substantial dispute concerning the item in question.   The applicant is not required to prove a negative, namely that it did not incur the charges.  It need only show that there are proper grounds for regarding the claim to debt as being doubtful.

[12]     The fact that a proprietor of the business has said on oath that she is unable to locate any documentary evidence which would verify that the charge was one for which her firm was liable is evidence that the Court is required to weigh.

[13]     Against that evidence, the respondent points to the existence of archived information on the Amadeus system as proof that in fact it was the applicant who ordered the tickets on behalf of the travellers.

[14]     Ms Gupta filed a further affidavit sworn on 2 July 2010 which commented on the affidavit of Mr Patel dated 4 June 2010.  In that affidavit she does not make any comment to controvert the detailed evidence that Mr Patel sets out in his affidavit. Ms Gupta did not attack the reliability of the Amadeus record.  She did not assert that the records did not show what Mr Patel alleged they did, namely that the passengers were customers of the applicant and that an employee/agent of the applicant, Mr Zulfi, had made the bookings in question.

[15]     The evidence that Mr Patel has annexed is documentary evidence obtained from a third party.  It is thus not dependent upon the integrity of the respondent’s accounting records on their own.  That evidence, in my view called for an answer which it did not receive.   My conclusion therefore is that the applicant has not established that there is a substantial dispute in regard to the passenger “(e)” claim.

Second disputed item

[16]     I deal next with category “(f) passenger Janak Dulari Aggarwal”.  In respect of this passenger Ms Gupta for the applicant had contended that while the traveller was a customer of the applicant she was billed twice for a single one-way ticket.  Mr Patel’s evidence was that two tickets were issued to Ms Aggarwal — because she was not able to travel on the ticket issued on 15 August 2007, a further ticket was issued on 26 November 2007.  Mr Patel said:

73.Once  the  error  came  to  her  attention,  Ms  Gupta  requested  the respondent to obtain a refund of the unutilised ticket ….

[17]     The documentary evidence does seem to establish that the applicant intended that a refund should have been applied for.  Further, Mr Patel has produced refund advice from Singapore Airlines which would appear to establish that a full refund was given for this ticket.   However, that refund was apparently given to the respondent and not to the applicant.  Mr Patel now says:

75       In short, although the allegation of double-charging is denied, the

Respondent  is  now  willing  to  afford  the  Applicant  a  credit  of
$1,268.28 in respect of his ticket.

[18]     It is therefore unnecessary to consider this item in terms of the statutory demand.

Third disputed item

[19]     The next dispute concerns category “(g) passenger infant Vincent Angela Jaison”.   The applicant asserted with respect to this particular ticket that the respondent had negligently issued a ticket that was intended for an infant as an adult’s ticket.

[20]     When this matter was brought to the attention of the respondent Mr Patel sent an email to Travel Shop which contained the following passage:

I need passport copy of below pax

JAISON/ANGELAMIS (INF) AKL-COK-AKL ETKT NO.618 5661243955

COZ I have speak with SQ they are asking passport copy of above pax for refund coz by mistake ticket has been issued as adult fare so they are ready to refund the amount but they need passport copy of above inf…

[21]     Mr Patel records the complaint that Mr Gupta made that the respondent was negligent in issuing an infant’s ticket as an adult’s ticket.   His answer rather than denying that there was negligence on the part of the respondent is to assert that the passport details which Singapore Airlines requested as part of the process had never been forwarded to the respondent.

[22]     He then goes on to say that the respondent maintains its claim for $1,699.80.

[23]     This is not a matter that can be resolved in the context of an application to set aside a statutory demand.   If there has been a breach of duty on the part of the respondent which caused loss, it would seem likely that the respondent has a set off or counterclaim which it should be entitled to place in the balance against the amount of the debt claimed.

Fourth disputed item

[24]     The next category is “(h) cheque issued by Applicant to the sum of NZ

$10,000”.  The essential complaint that Ms Gupta made about this amount was that the respondent had not credited against what the applicant owed to it the sum of

$10,000 which was the subject matter of this cheque. She deposed:

h)I attach herewith as Annexure “Q” a cheque copy for the amount of NZD$10,000 that was deposited by the Respondent Company in their bank on 5th February 2007. Also attached under Annexure “Q” is the copy of the Respondent Company's deposit slip and our bank statement.

[25]     Mr  Patel  has  provided  a  detailed  explanation,  including  annexing  to  his affidavit a copy of the diary note and bank statement which appears to corroborate what he says; namely, that the $10,000 was paid into the bank account and that he

took the $10,000 off the amount that was owed by the applicant, which was the effect of his diary entry.

[26]      Ms Gupta for the applicant alleges that the diary note is a forgery.  She did not comment on the bank statement.  She says:

They  themselves  are  proving  that  they  are  unable  to  substantiate  the transaction just on the basis of the so called diary.

[27]    The onus is on the applicant to show that there is a substantial dispute concerning the overall indebtedness.   In essence what the applicant says is that it paid $10,000 towards the overall indebtedness but that in establishing that overall indebtedness it has not received credit for the amount so paid.

[28]     The onus of proof is on the applicant to show that there is a substantial dispute about whether it has received credit for the $10,000.  One way that it could have done so is by placing in evidence a full and reliable reconciliation, carried out by an independent party in whom the Court had confidence, of all credits and debits arising during the course of its trading relationship with the respondent.  But it has not chosen to do that.

[29]     The result is that the applicant has not established that there is a liability of

$10,000 which the respondent owes to it that the applicant is able to set-off against the various debts which the respondent has claimed in its statutory demand.

Claim based on alleged general unreliability of records

[30]     As I understand it, the applicant makes the claim that the general unreliability of the respondent’s records, the absence of verifying invoices and other features of the trading arrangements between the two parties means that the applicant cannot rule out that there may be other non-specified claims, some of which it is not aware of, that it would be able to bring against the respondent if it investigated the position closely.  This, I understand, is offered as another basis upon which the Court ought to set aside the statutory demand.

[31]     I do not accept that such a ground is available to the applicant.  There is an onus on the applicant — and on all applicants in the same position as it — to persuade the Court that it has a specific set-off or counterclaim which would defeat the statutory demand.[2]   Generalised assertions that there are possible claims available to the applicant will not suffice.

Conclusion

[2] Covington Railways Ltd v Uni-Accommodation Ltd [2001] 1 NZLR 272 (CA) at [11].

[32]     The overall result is set out in the following table:

Claim	Result	Debt             to respondent
Disputed item #1: Ms E Divya John, Ms Liss and others	Not a substantial dispute	8,356.15
Dispute item #2: Passenger    Janak    Dulari Aggarwal	Applicant     has     substantial dispute (credit given)	0.00
Dispute item #3: Infant    Vincent     Angela Jaison	Substantial defence exists	0.00
Dispute item #4: Claim   that   $10,000   not credited	No substantial dispute	—
Amount owing	$8,356.15

[33]     The applicant has failed to establish that there is a substantial dispute or that it has a set-off or counterclaim which would reduce the amount claimed in the statutory  demand  below  the  point  at  which  the  respondent  is  entitled  to  bring winding up proceedings.   The application to set aside the statutory demand is dismissed.   I have considered whether an order ought to be made under s 290 providing for the immediate liquidation of the applicant company, but on reflection have decided that the fairer approach to take is to give the applicant an opportunity to meet the debt.  I therefore make an order pursuant to s 291(1)(a) of the Companies

Act 1993 that the applicant is to pay the debt of $8,356.15 within 14 days of the date

of  judgment  in  default  of  which  the  creditor,  the  respondent,  may  make  an application to put the company into liquidation.

[34]     The parties should confer on the matter of costs and if they are unable to agree them I will hear counsel at 9 a.m. on a convenient date.

J.P. Doogue

Associate Judge