Turner Systems Limited v Datamonde Limited HC Auckland CIV 2010-404-7071

[2010] NZHC 2027

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-7071

IN THE MATTER OF     Section 290 of the Companies Act 1993

BETWEEN  TURNER SYSTEMS LIMITED Applicant

ANDDATAMONDE LIMITED Respondent

Hearing:         17 November 2010

Appearances: Mr A Gilchrist for applicant

Ms E M Tobeck for respondent

Judgment:      18 November 2010 at 2 pm

JUDGMENT OF LANG J [on Costs]

This judgment was delivered by me on 18 November 2010 at 2 pm, pursuant to Rule

11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors/Counsel: Burton & Co, Auckland

Fletecher Vautier Moore, Nelson

Morgan Coakle, Auckland

Mr A Gilchrist, Auckland

TURNER SYSTEMS LTD V DATAMONDE LTD HC AK CIV-2010-404-7071  18 November 2010

[1]      On 27 September 2010 Datamonde Limited (“Datamonde”) issued a statutory demand under s 289 of the Companies Act 1993 seeking payment from Turner Systems (“Turner Systems”) Limited of the sum of $39,071.25.  It arranged for the demand to be served on Turner Systems on 12 October 2010.

[2]      On 21 October 2010 Turner Systems filed an application seeking an order under s 290 of the Act that the demand be set aside.  The application was listed for first call before me today.

[3]      On 15 November 2010 Datamonde filed a notice of opposition to Turner Systems’ application, together with a supporting affidavit.  At the same time, counsel filed a memorandum in which he confirmed that Datamonde did not oppose an order being made setting the demand aside.   It did, however, oppose any order of costs being made in favour of Turner Systems.  The basis for its opposition was set out in the affidavit filed in support of the notice of opposition.

[4]      When the proceeding was called today, I made an order by consent setting the demand aside.  I then heard argument from both counsel in relation to the issue of costs.

The arguments

[5]      Datamonde maintains that it was entitled to serve the statutory demand on Turner Systems when it did.  It says that, although Turner Systems had earlier made general allegations regarding the existence of a dispute, it never substantiated those allegations in any correspondence between its solicitors and the solicitors acting for Datamonde.  Datamonde therefore contends it was entitled to presume that no real and substantial dispute existed, and that it was appropriate to continue with service of the statutory demand.

[6]      Turner Systems disagrees.   It points out that the correspondence from its solicitors placed Datamonde firmly on notice that a significant dispute existed regarding the invoices that Datamonde had issued.  That correspondence also made it

clear  that  Turner  Systems  proposed  to  issue  a  counterclaim  in  the  event  that

Datamonde attempted to enforce payment of the invoices.

Decision

[7]      It is difficult for me to reach any final conclusion regarding Datamonde’s submission that Turner Systems never provided any details of the alleged dispute. Much of the correspondence between the parties appears to have been on a without prejudice basis and is not before the Court.  For that reason it is not possible for me to determine whether Datamonde was on notice regarding the precise nature of the dispute.

[8]      It is clear, however, that Datamonde knew, well before the point at which it issued the statutory demand, that Turner Systems claimed that the invoices were in dispute.   It is perhaps for that reason that, in a letter dated 27 August 2010, Datamonde’s solicitors advised the solicitors acting for Turner Systems that, unless payment was made within five working days, they had instructions to issue proceedings.  That would have been an appropriate course of action given the fact that Turner Systems was disputing the debt.

[9]      I infer, however, that by 20 September 2010 Datamonde was considering using the statutory demand procedure to enforce payment of the debt.  I reach this conclusion because, in a letter dated 22 September 2010, the solicitors acting for Turner  Systems  responded  to  a  letter  from  Datamonde’s  solicitors  dated  20

September 2010 by advising them that, if Datamonde proceeded with the issue of a statutory demand, it would be “strongly resisted with the appropriate applications for costs being made”.  The same letter advised Datamonde’s solicitors that, in the event that they issued any form of proceedings, Turner Systems would file a counterclaim seeking judgment for a sum considerably in excess of those sums claimed by Datamonde.

[10]     Given that correspondence, there can be no doubt that Datamonde took a risk when it issued a statutory demand.  The risk was that Turner Systems would be able

to provide details of a dispute that was sufficiently arguable to persuade the Court to set the statutory demand aside.  That risk has now materialised into fact.

[11]     In my view the usual principle that the unsuccessful party should contribute to the costs of the successful party should apply.   Turner Systems has been the successful party in this case because it has obtained an order (albeit by consent) that the demand be set aside.

Result

[12]    I award costs to Turner Systems on a Category 2B basis together with disbursements as fixed by the Registrar.   Costs will include the costs and disbursements associated with sealing the order.

Lang J