Trow Group Limited v Horotiu Cartage and Hire Limited

[2024] NZHC 1504

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2024-419-13

[2024] NZHC 1504

BETWEEN

TROW GROUP LIMITED

Applicant

AND

HOROTIU CARTAGE AND HIRE LIMITED

Respondent

Hearing:	16 May 2024
Appearances:	Sean Maloney for the Applicant Brett Martelli for the Respondent
Judgment:	10 June 2024

JUDGMENT OF ASSOCIATE JUDGE TAYLOR

[Application to Set Aside Statutory Demand]

This judgment was delivered by me on 10 June 2024 at 3:00pm

pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar

Solicitors:

Price Baker Berridge, Auckland, for the Applicant

Martelli Yaqub Lawyers Limited (Brett Martelli), Auckland, for the Respondent

Counsel:

Sean Maloney/Eugene St John, O’Connell Chambers, Auckland

TROW GROUP LIMITED v HOROTIU CARTAGE AND HIRE LIMITED [2024] NZHC 1504 [10 June 2024]

Introduction

[1]    Trow Group Limited (Trow) applies to set aside a statutory demand made on it by Horotiu Cartage and Hire Limited (Horotiu) for payment of $67,439.42 for outstanding invoices, plus interest and recovery costs.

Background

[2]    Trow is a commercial deconstruction company which salvages and repurposes construction material. Trow’s main customers are local councils and government agencies. The charges in question from Horotiu arose in relation to contract work Trow was undertaking for Kainga Ora.

[3]    In April 2023, Trow engaged Horotiu as its cartage and hire supplier in the Waikato Region. Horotiu was contracted to take waste away from Trow’s sites and charge Trow for cartage and hire.

[4]    Mr Latu, the sole director of Trow, deposes that, in September 2023, Trow noticed that Horotiu’s charges since April 2023 appeared to  be “unusually high”.  Mr Latu alleges that Horotiu has overcharged Trow in respect of the cartage of waste during the period from April 2023 to October 2023.

[5]    Mr Latu further alleges that the Horotiu was taking loads of waste from Trow sites to a waste processor, Purpose Fill Limited (Purpose Fill), and then carting the same waste to another, cheaper processor. Mr Latu alleges that Purpose Fill and Horotiu were in collusion to overcharge Trow for the processing by having the waste processed by another processor at a cheaper rate than the rates charged by Purpose Fill to Trow, and then retaining the difference.

[6]    Any such overcharging for cartage is denied by Horotiu and any collusion to overcharge Trow for processing waste is denied by both Purpose Fill and Horotiu.

[7]    On 17 January 2024, Horotiu served a statutory demand on Trow, seeking the payment of $67,439.42 for outstanding invoices plus interest from October 2023 and November 2023. Trow lodged complaints with the Commerce Commission and Serious Fraud Office in January 2024 following Horotiu serving the statutory demand.

Trow’s application to set aside statutory demand

[8]    Trow seeks orders setting aside the statutory demand served by Horotiu on  17 January 2024. The grounds on which the orders are sought are, in summary:

(a)There is a substantial dispute as to whether the amount specified in the demand is owing or due.

(b)Trow has a counterclaim and/or set-off against Horotiu that is yet to be quantified but that will equal or exceed the debt claimed in the statutory demand.

(c)The terms of the contract between Horotiu and Trow were that Horotiu would take material from Trow’s site to Purpose Fill, who would then dispose of the material. Horotiu would charge Trow for the cost of the transport and disposal charged by Purpose Fill.

(d)In October 2023, Trow discovered that Horotiu:

(i)had, without the Trow’s knowledge, been taking the material to a third party instead of Purpose Fill;

(ii)was being changed significantly less by the third party;

(iii)was, together with Purpose Fill, charging Trow an 800% margin on the cost of disposal and making a secret profit; and

(iv)had been overcharging Trow by inflating the time spent and the amount of material disposed of.

(e)Trow has accrued claims against Horotiu for damages for breach of the Fair Trading Act 1986, breach of an agent’s duties to its principal, and breach of contract. Those claims will equal or exceed the amount stated in the statutory demand.

Affidavit of Saia Finau Latu dated 30 January 2024

[9]Mr Latu is the sole director of Trow.

[10]   As noted, he deposes that, in September 2023, Trow noticed that the amounts being charged in the Waikato were unusually high and Mr Latu contacted Shane Holland, the director of Horotiu for an explanation. Mr Holland never got back to Mr Latu.

[11]   Mr Latu deposes that, in October 2023, he discovered that Horotiu drivers were taking Trow’s hard fill loads to Purpose Fill and then taking the same loads of hard fill on to D&T MacDonald Limited (D&T MacDonald) in Hamilton. Mr Latu deposes that Trow contacted D&T MacDonald and found out that Trow was being charged per tonne what Purpose Fill was being charged per load. In some cases, Purpose Fill was charging Trow 800% more than what they were being charged. Mr Latu deposes that Purpose Fill was pocketing the difference, and that he believes that Horotiu was working with Purpose Fill and also pocketing a profit.

[12]   Mr Latu deposes that, after this discovery, Trow advised Horotiu to take their hard fill directly to D&T MacDonald and not via Purpose Fill.

[13]   Mr Latu deposes that, following this, he went through every invoice and docket for Horotiu and Purpose Fill. He says he realised that Horotiu had also been overcharging Trow. He found inflated and inconsistent time charges and weight discrepancies in the fill transported. He says Trow’s staff were under time restraints at the time and had signed off on the dockets without checking the accuracy of the details they were signing for.

[14]   Mr Latu deposes that Trow stopped paying Horotiu in November 2023 while these issues were investigated. Mr Latu says Horotiu ignored the issues and said that, because his staff had signed the dockets, Trow had to pay.

[15]   Mr Latu deposes that, in December 2023, he met with Mr Holland and discussed the issue of overcharging. Mr Latu deposes that Mr Holland placed the blame on Purpose Fill and said they may have been doing something of which he was unaware.

[16]   Mr Latu says he informed Mr Holland that they would be investigating Horotiu’s conduct, yet Horotiu continued to lodge a statutory demand.

[17]   Mr Latu deposes that, on 28 December 2023, he sent an email to Horotiu to confirm that invoices would not be paid until the Commerce Commission had investigated Trow’s complaint into Horotiu’s conduct.

[18]   On   17   January   2024,   Trow   lodged   a   complaint   with   the Commerce Commission about the conduct of Horotiu and Purpose Fill. On 19 January 2024, Trow lodged a complaint with the Serious Fraud Office. On 23 January 2024, Mr Latu sent an email to Kainga Ora, explaining why Trow had not paid Horotiu’s latest invoices.

[19]   Mr Latu deposes that, once the investigations are complete, Trow intends to file proceedings against Horotiu under the Fair Trading Act 1986, and for breach of Horotiu’s duties as an agent.

Horotiu’s opposition

[20]Horotiu opposes the application on the following grounds:

(a)Trow has no genuine dispute regarding the debt demanded in its statutory demand; and

(b)Trow has no set-off against Horotiu.

Affidavit of Rachel Jayne Knight dated 5 April 2024

[21]Ms Knight is the accountant for Horotiu.

[22]   Ms Knight says that she has access to bank account records and profit and loss statements of Horotiu. Ms Knight deposes that Horotiu sold a used excavator to Purpose Fill in 2020 and the funds were received via a finance company. She says that, other than this, there are no records in Horotiu’s bank account records or profit and loss statements of Purpose Fill paying money to Horotiu.

Affidavit of Paul Gerritsen dated 22 April 2024

[23]Mr Gerritsen is Purpose Fill’s sole director.

[24]   Mr Gerritsen deposes that Mr Latu did not produce any evidence of the alleged collusion between Horotiu and Purpose Fill and that the sole basis for Mr Latu’s assertion seems to be his belief that Purpose Fill and Horotiu know each other and are local companies.

[25]   Mr Gerritsen deposes that Purpose Fill has an ordinary relationship with Horotiu. He says that Horotiu’s trucks deliver waste materials to Purpose Fill’s facility in Hamilton. He says Purpose Fill requires a purchase order for every load, Horotiu advises whose account the load is to be charged to, and Purpose Fill records the vehicle registration details and vehicle weights for each load.

[26]   Mr Gerritsen deposes that Purpose Fill purchased a used excavator from Horotiu in 2020 and, other than this, Purpose Fill has never paid Horotiu.

[27]   Mr Gerritsen deposes that Purpose Fill charges Trow on a monthly basis. Purpose Fill uses specific software to record loads brought into their site. He says all trucks are weighed with a certified weighbridge, vehicle registration details are captured, and purchase orders are required for all tips. Mr Gerritsen deposes that they use specific bin hire software to charge for their hire service and that they keep very accurate records, including GPS tracking of their fleet.

[28]Mr Gerritsen deposes that Trow has not paid Purpose Fill for invoices totalling

$35,356.86 plus interest. Trow denies owing the money, on the basis Purpose Fill has overcharged Trow. Mr Gerritsen deposes that he has provided evidence demonstrating that Purpose Fill has not overcharged Trow.

[29]   Finally, Mr Gerritsen deposes that Purpose Fill intends to serve a statutory demand on Trow for the unpaid invoices.

Affidavit of Shane Mark Holland dated 15 April 2024

[30]   Mr Holland deposes that he is Horotiu’s sole director and manages Horotiu’s daily operations.

[31]   Mr Holland deposes that Horotiu charges services by the hour and does not process waste or invoice the processing of waste. He describes Hamilton’s main refuse processing/recycling businesses and what they accept:

(a)Green Gorilla (clean and contaminated).

(b)Purpose Fill (clean and contaminated). Purpose Fill accepts unsorted mixed-fill, but charges a higher price for that service.

(c)D&T MacDonald (clean fill only).

(d)Envirowaste Services (contaminated).

(e)Puke Coal (clean and contaminated).

(f)Metalco (steel and aluminium).

[32]   Mr Holland deposes that Horotiu delivers waste to one of the waste processing companies, depending on the client’s instructions, and that clean fill is the cheapest to process because it involves relatively minimal work to make it safe for landfills.

[33]   Mr Holland deposes that, understandably, Trow wanted Horotiu to take as much fill as possible to D&T MacDonald, which he was happy to do because Horotiu charges by the hour, not by the load type.

[34]   Mr Holland deposes that building and demolition companies, like Trow, are responsible for sorting the waste so Horotiu can take it to the closest appropriate processor.

[35]   Mr Holland deposes that Horotiu does not have contracts with its clients, relying instead on the terms and conditions on its website, and that Horotiu advises clients of the terms by referring them to the website.

[36]   As to Horotiu’s operations, Mr Holland deposes that Horotiu’s operators complete “daily job records” (DJR) which provide a description of the work done on a job, together with other details. He also says that Horotiu operates an electronic recording system called a “daily activity record” (DAR) which records the truck’s route and engine records, and the distance travelled.

[37]   Mr Holland’s affidavit goes on to describe the various loads collected from Trow’s sites during October 2023, and he deposes that Horotiu received notably increased instructions from Trow during this time.

[38]   Mr Holland denies any collusion between Horotiu and Purpose Fill to overcharge Trow and denies the overcharging for cartage by Horotiu.

Legal principles

[39]Section 290 of the Companies Act 1993 provides, relevantly:

290     Court may set aside statutory demand

(1)The court may, on the application of the company, set aside a 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.

[40]The Court has set out the principles relevant to the application of s 290(4):1

What the applicant must show is that the dispute it raises has substance; the applicant must explain to the court what the dispute is; and the dispute so shown must be a real and not a fanciful or insubstantial dispute. The Court must bear in mind that it is operating in the summary jurisdiction, with the accompanying disadvantages that brings for any applicant. The Court must also keep in mind the requirement that what is intended to be a summary hearing should not be converted into a full-blown trial.

[41]   As to s 290(4)(a), the Court is to look at whether a genuine and substantial dispute exists.2 Mere assertion of a dispute does not suffice, and the applicant must show a fairly arguable basis for it.3 In practice, it is required that there be some material, short of proof, that backs up the claim that the amount is in dispute.4

[42]   Where a counterclaim, set-off, or cross-demand is sought to be raised, the Court has a discretionary power to set aside the statutory demand, provided the company can show a real basis, on clear  and  persuasive grounds, for doing so.  “Pay now, argue later” considerations have sometimes been allowed to prevail over the effect of liquidation.5

Analysis

[43]    The issues to be determined in this judgment are whether, for the purposes of s 290(4) of the Companies Act:

1      AAI Ltd v 92 Lichfield Street Ltd (in rec and in liq) [2015] NZCA 559, [2016] NZAR 1338 at [22] (footnote omitted).

2      Taxi Trucks Ltd v Nicholson [1989] 2 NZLR 297 (CA) at 301.

3      N F Global Ltd v Sky Capital Management Ltd [2020] NZHC 2196 at [39]. See also United Homes (1998) Ltd v Workman [2001] 3 NZLR 447 (CA) at [27].

4      Arzan Investments Ltd v Beresford Apartments Ltd (2003) 16 PRNZ 825 (HC) at [17].

5      N F Global Ltd v Sky Capital Management Ltd, above n 3, at [40], citing Volcanic Investments Ltd v Dempsey & Wood Civil Contractors Ltd (2005) 18 PRNZ 97 (HC); Browns Real Estate Ltd v Grand Lakes Ltd [2010] NZCA 425, (2010) 20 PRNZ 141; and Covington Railways Ltd v Uni-Accommodation Ltd [2001] 1 NZLR 272 (CA) at 274–275.

(a)there is a “substantial dispute” as to whether or not the debt underlying the statutory demand issued by Horotiu is owing or due; or

(b)whether Trow “appears” to have a counter-claim, 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, being $1,000.

Trow’s submissions

[44]   Mr Maloney, for Trow, submits that there is a substantial dispute in respect of the invoices the statutory demand relates to. Trow alleges that Horotiu has inflated the time charged in its invoices.

[45]   Mr Maloney submits that Trow has a counterclaim as Horotiu has engaged in misleading and deceptive conduct by taking construction material to Purpose Fill, then carting the same waste to other companies that charge significantly less than the price charged by Purpose Fill to dispose of the same waste. He submits that Trow alleges that Horotiu and Purpose Fill colluded to mislead and overcharge Trow and profit from the difference between the rate charged by Purpose Fill and the rate charged by the cheaper companies to process the waste.

[46]   Mr Maloney submits that the principal of Trow, Mr Latu, has produced spreadsheets that contain a careful analysis of the time charged versus the time trips should have taken (in some cases, the time in the invoices is several times more than the expected trip time, with no explanation) and the amounts charged by Purpose Fill compared to what a competitor (D&T MacDonald) would charge to dispose of the same  material,  with  Purpose  Fill  charging  up  to  eight   times   more   than   D&T MacDonald.

[47]   Mr Maloney submits that Trow estimates that Purpose Fill and Horotiu have overcharged Trow by $63,000 for waste disposal and $55,000 for cartage  since April 2023. On this basis, he submits that Trow:

(a)disputes the amounts claimed in the invoices, which underly the statutory demand; and

(b)has a counterclaim and/or set-off against Horotiu and Purpose Fill for an estimated $118,000 due to overcharging and misleading conduct going back to April 2023.

[48]   Mr Maloney submits that the threshold to establish a reasonably arguable dispute in respect of the underlying debt, and in respect of establishment of a counterclaim, set-off, or cross-demand, is low and he relies on Industrial Group Ltd v Bakker6 and AAI Ltd v 92 Lichfield Street Ltd7 as authorities.

[49]Expanding on this, Mr Maloney refers to the Court of Appeal statement in

Industrial Group Ltd v Bakker:8

[24]      We note that the statutory scheme is for applications to set aside statutory demands to be a summary proceeding … It follows that it would be unusual for the High Court to engage in detailed analysis of the merit of any counterclaim, set off or cross demand. The section calls for a prompt judgment as to whether there is a genuine and substantial dispute. It is not the task of the Court to resolve the dispute. The test may be compared with the principles developed in cognate fields such as applications to remove caveats, leave to appeal an arbitrator's award and opposition to summary judgment.

[25]      The approach required by the “appearance” test in s 290 is a review with a low threshold. The tight time constraints distinguish the s 290 discretion from that to be exercised on, say, a summary judgment application, where the presence of complex legal issues is not necessarily a bar to a remedy. As with leave to appeal an arbitrator's award, the hearing should, in the normal course, be short and to the point, and the judgment likewise.

[50]   In relation to AAI Ltd v 92 Lichfield Street Ltd, Mr Maloney refers to the Court of Appeal statement:9

[22] It is important to keep in mind the words of the statute. What the applicant must show is that the dispute it raises has substance; the applicant must explain to the court what the dispute is; and the dispute so shown must be a real and not a fanciful or insubstantial dispute. The Court must bear in mind that it is operating in the summary jurisdiction, with the accompanying disadvantages that brings for any applicant. The Court must also keep in mind

6      Industrial Group Ltd v Bakker [2011] NZCA 142, (2011) 20 PRNZ 413 (footnote omitted).

7      AAI Ltd v 92 Lichfield Street Ltd (in rec and liq) [2015] NZCA 559; [2016] NZAR 1338.

8      Industrial Group Ltd v Bakker, above n 9.

9      AAI Ltd v 92 Lichfield Street Ltd (in rec and liq), above n 10.

the requirement that what is intended to be a summary hearing should not be converted into a full-blown trial.

Horotiu’s opposition and Trow’s response

[51]   Mr Martelli, for Horotiu, seeks to refute Trow’s overcharging allegation. He submits that Mr Latu, in his initial evidence, did not specify the alleged overcharging invoices prior to October 2023, so Horotiu could only respond in opposition, via    Mr Holland’s  evidence,   to   the   unpaid   invoices,   being   those   issued   after   31 October 2023. He submits that Mr Latu’s reply statement challenged invoices issued before 31 October 2023 but that, again, Mr Latu did not adduce the invoices that are contested so they are not before the Court.

[52]   Mr Martelli submits that the spreadsheet contained in Mr Latu’s evidence, dealing with the alleged over-charging, is vague and imprecise, and that the basis on which the charges are being queried is not clear. He submits that, in relation to the charges queried, Mr Latu:

(a)has not accurately (or at all) particularised Trow’s, or the processors’, addresses by which to gauge the distances;

(b)did not explain his “time on distance” calculations against maps or give timed examples during rush hour and afternoon hours; and

(c)admits that time must be allowed for loading and unloading the waste from Horotiu’s trucks.

[53]   To respond to the allegation of overcharging in respect of the invoices referred to at paragraphs [15](i) to (k) of Mr Latu’s  affidavit in reply, dated 2 May 2024,  Mr Martelli submits that evidence has been adduced by Mr Holland, setting out the DAR reports and the DJR reports, which explains the times taken for the job and the relevant truck’s engine status and movements. In his submission, Mr Martelli presents an analysis of invoices 5719, 5729, and 5733, together with a separate document setting out the DAR reports in respect of the work covered by these invoices and handwritten annotations as to what was occurring during each time period recorded in the DAR report.

[54]   By this information, Mr Martelli seeks to show that there is no real basis for the challenges to the invoices rendered by Horotiu, at least in respect of the invoices that have been identified by Mr Latu in his evidence.

[55]   In response, Mr Maloney submits that, while Mr Holland deposes that Horotiu keeps the DAR records for the truck’s activity, the printouts annexed to his affidavit only show bare, unverified numbers and, moreover, those printouts do not explain the significant discrepancies between the time charged in the invoices and the expected duration of the relevant trips. Mr Maloney rejects any suggested probative value in the handwritten annotations on Mr Martelli’s DAR report in explaining what was occurring during each of the times recorded in the DAR report and submits that, at the very least, Trow is entitled to inspect the electronic records for itself, and/or with the assistance of an expert, which cannot be facilitated in the context of an application to set aside a statutory demand.

[56]   As to the absence of the detail of any challenged invoices referred to in the initial evidence of Mr Latu, Mr Maloney submits that, due to the time constrains of the 10-day limitation applying to the application to set aside the statutory demand, there was not time to review the hundreds of invoices relating to the period from April 2023 up to October 2023.

[57]   In relation to the counterclaim, Mr Martelli submits that Horotiu’s position is that Purpose Fill’s charges have nothing to do with Horotiu and that Horotiu simply took waste to processors, including Purpose Fill. He submits that Trow’s assertions of overcharging are even weaker when considered against the obvious explanation for Purpose Fill's higher charges, namely:

(a)Mr Latu openly admitted that Trow employed inexperienced staff on the relevant sites;

(b)the inexperienced staff did not separate the waste correctly;

(c)D&T MacDonald (the cheapest processor) cannot accept mixed waste;

(d)Trow had to send the waste to other processors, including Purpose Fill, because it accepted mixed waste; and

(e)Purpose Fill charges a margin for that service.

[58]   As to the alleged collusion between Purpose Fill and Horotiu relating to profiting from Purpose Fill’s charges, Mr Martelli submits that mere beliefs and assertions do not meet the threshold for an “appearance” of a counterclaim, as required under s 290. He refers to the Bakker decision, which provides that preliminary evidence to prove the material facts of the cause of action is necessary, and he submits that, in this instance, Trow has no evidence of a criminal conspiracy. He submits that Trow relies on supposition and belief arising from ordinary business dealings between Horotiu and Purpose Fill, which is insufficient and, in addition, Horotiu  and  Purpose Fill’s directors have each sworn evidence rejecting the allegation.

[59]   Mr Martelli submits that the situation in the present case is similar to the that in the Auravale v Shalimar case, where the applicant was criticised by the Court for ordering products from the respondent when it had no intention on paying for the goods.10 Mr Martelli submits the circumstances of this case strongly suggest that Trow is in the same position as Auravale as, in October 2023, despite knowing of the alleged “collusion”, it ordered extensive cartage from Horotiu, never intending to pay for those services.

[60]   Finally, in relation to the counterclaim, Mr Martelli submits that it is telling that Trow has not commenced a claim against Purpose Fill or Horotiu, despite seven months passing since it discovered the “collusion”, which is ample time to start an action. He refers again to the Auravale decisions, in which the Court noted that Auravale could take comfort from still being able to advance its claim, despite the Court setting the statutory demand aside, and he submits that the same applies here in that Trow can advance its claim despite the fact the statutory demand may be set aside.

[61]Mr Maloney responds to these various grounds of opposition as follows:

10     Auravale Industries Ltd v Shalimar Knitwear Ltd (1999) 8 NZCLC 262,074 (HC) at 347.

(a)The evidence establishes that Horotiu carted waste from Trow’s sites to Purpose Fill and then carted the same waste on to D&T MacDonald, who charged considerably less for disposal. He submits that this arrangement could not have occurred without Horotiu’s collusion, as Horotiu was the company responsible for carting the waste to  Purpose Fill, and then on to D&T MacDonald.

(b)While Mr Holland, from Horotiu, and Mr Gerritsen, from Purpose Fill, claim in their evidence that the companies have a “limited but legitimate business relationship”, it seems odd that Purpose Fill’s director would file an affidavit in support of legal proceedings for a company with which he has only an arm’s-length relationship.

(c)The limitations of the application to set aside the statutory demand prejudice Trow’s ability to directly challenge the assertions of Horotiu and Purpose Fill regarding those companies’ internal affairs and past dealings. There is a significant asymmetry of information, and those matters are solely within the knowledge of Horotiu and Purpose Fill. Mr Maloney submits that the purpose of discovery and cross-examination is to address that information imbalance and that that cannot be achieved in the context of an application to set aside a statutory demand.

Trow’s solvency

[62]   Mr Maloney submits that Trow’s solvency is not an issue, with Mr Latu stating Trow’s net worth of $1 million and an annual cashflow of $5 million. He submits that there is no evidence put forward by Horotiu of Trow’s insolvency, other than pointing to some late paid invoices, which were all eventually paid.

[63]   Mr Martelli submits that Trow’s solvency is an issue as invoices to which the statutory demand relates remain unpaid, establishing the presumption of Trow’s insolvency. He submits that the position is that the cost of projects undertaken by Trow, for which Horotiu has been providing cartage, have increased and Trow has run out of money. He submits that Green Gorilla, another waste processing company, has

stopped accepting Trow’s refuse because Trow was not making payments to Green Gorilla, which, while he acknowledges is hearsay evidence, is nonetheless evidence which the Court can consider in an interlocutory hearing.

Result

[64]   I am of the view that Horotiu’s statutory demand should be set aside. The reasons for this view are:

(a)Trow has established a reasonably arguable basis for a genuine and substantial dispute regarding the invoices rendered by Horotiu for cartage of waste from the period of April 2023 to October 2023. Issues raised in Mr Latu’s spreadsheet relating to discrepancies in respect of time charged are matters that need to be tested in evidence at trial. I do not accept Mr Martelli’s submissions that the explanation given in respect of the invoices, to which Horotiu did respond, is sufficient to establish that there is no real basis for Trow’s challenges to the invoices for the period from April 2023 to October 2023.

(b)Trow,  via  Mr  Latu,  had  clearly  communicated  to  Horotiu,  via  Mr Holland, the dispute as to overcharging in the invoices and secret profit allegations in relation to collusion between Horotiu and Purpose Fill before Horotiu issued the statutory demand.

(c)Mr Martelli’s handwritten annotations of what was occurring in relation to the relevant vehicle intervals, shown in the DAR, are of limited probative value. The evidence needs to be examined at trial with a much more detailed examination as to the meaning of those reports and the explanation for time discrepancies, and, if need be, the underlying electronic records may be scrutinized.

(d)Despite Mr Martelli making much of the fact that Mr Latu did not specify the challenges to invoices prior to his initial evidence in October 2023, which would have given Horotiu the opportunity to respond to those challenges in opposition, I accept it is a reasonable

explanation that Mr Latu did not have time to do this before filing his initial evidence, given the 10 day time limit to apply to set aside the statutory demand and the fact that there are hundreds of invoices issued by Horotiu between April 2023 and October 2023 to be reviewed.

(e)In relation to Trow’s counterclaim, based on the allegation of collusion between Purpose Fill and Horotiu to overcharge Trow for waste processing, Trow has met the low threshold of there being an “appearance” of a counterclaim. There are circumstances which require investigation at trial, such as why waste was first taken to Purpose Fill and then the same waste was subsequently transported to D&T MacDonald. I accept Mr Maloney’s submission that there is a significant asymmetry of information, as will often be the case with allegations of collusion, as matters that are solely within the knowledge of Purpose Fill and Horotiu can only be elucidated by discovery and cross-examination, which is not possible in the context of an application to set aside a statutory demand. In my view, Trow have raised a sufficient issue to meet the test in s 290(4)(b) of the Companies Act.

(f)Trow’s circumstances are not similar to the circumstances in the Auravale decision, as proposed by Horotiu, as there is no evidence before the Court of a deliberate increase in contracting levels requested by Trow in October 2023 after Trow acquired knowledge of the alleged collusion. I take Mr Maloney’s point that the cartage arrangements relating to ongoing projects by Trow would have likely been in place at some time in advance of October 2023.

(g)As to Trow’s solvency, the Court is unable to form any view on this. Horotiu have pointed to Trow being slow at paying of a number of invoices and to the non-payment of the invoices in dispute. This evidence on its own certainly does not establish Trow’s insolvency. The invoices which were paid late were ultimately paid and Mr Latu had clearly signalled to Mr Holland at Horotiu as to why the disputed

invoices were not being paid. On the other hand, there is the assertion by Mr Latu that Trow is solvent, which is unsupported by any evidence.

Orders

[65]I make the following orders:

(a)the statutory demand issued by Horotiu is set aside;

(b)as Trow is the successful party, costs should follow the event. Counsel are directed to endeavour to agree costs and failing agreement being reached within a period of 20 working days from the date of this judgment, counsel for Trow will file a memorandum as to costs (not to exceed five pages) within 5 working days after the expiry of the 20 working day period, and counsel for Horotiu will file a memorandum (not to exceed five pages) in response within 5 working days of receipt of counsel for Trow’s memorandum. A decision as to costs will then be made on the papers.

…………………………….. Associate Judge Taylor