Waikato Topsoil Company Limited v Adolph
[2020] NZHC 2949
•9 November 2020
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2020-419-000184
[2020] NZHC 2949
UNDER The Companies Act 1993 IN THE MATTER OF
An application to set aside a statutory demand
BETWEEN
WAIKATO TOPSOIL COMPANY LIMITED
Applicant
AND
JONATHAN LLOYD KENNETH ADOLPH
Respondent
Hearing: On the papers Counsel:
K A Fitz-John for Applicant Respondent in person
Judgment:
9 November 2020
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by Associate Judge Andrew on 9 November 2020 at 3.00 pm
pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar
Date………………………..
WAIKATO TOPSOIL CO LTD v ADOLPH [2020] NZHC 2949 [9 November 2020]
Introduction
[1] This is an application to set aside a statutory demand pursuant to s 290 of the Companies Act 1993.
[2] The respondent, Mr Adolph, was previously employed by the applicant, Waikato Topsoil Company Ltd (Waikato Topsoil). In July 2020, he issued a statutory demand against Waikato Topsoil for $34,861.72, said to be due and owing for unpaid holiday pay and entitlements. Mr Adolph had previously raised a personal grievance with Waikato Topsoil pursuant to the Employment Relations Act 2000. He had sought compensation for unjustified dismissal and payment of alleged outstanding holiday pay.
[3] Waikato Topsoil seeks to set aside the demand on the basis that there is a genuine and substantial dispute (it claims Mr Adolph resigned) and that in accordance with s 161 of the Employment Relations Act 2000, it is only the Employment Relations Authority that has jurisdiction to resolve the matter.
[4] In accordance with earlier timetable directions, the application to set aside is being determined on the papers.1
Background facts
[5] Mr Adolph was employed by Waikato Topsoil in 2012. His employment contract notes that he was employed pursuant to an individual employment agreement for casual employment pursuant to the Employment Relations Act 2000. That contract provided that the Holidays Act 2003 and its amendments would apply. It further stated that 8 per cent of the employee’s earnings as defined in the Act would be paid on the conclusion of each period of casual employment.
[6] Mr Adolph ceased working for Waikato Topsoil in September 2019. Mr Adolph claims that he was unjustifiably dismissed. Waikato Topsoil claims that he resigned.
1 See my minute of 24 August 2020.
[7] On 24 October 2019, and by way of letter from Anderson Employment Law, Mr Adolph raised a personal grievance with Waikato Topsoil under s 114 of the Employment Relations Act 2000.
[8] By letter dated 29 November 2019, Waikato Topsoil responded to the raising of the personal grievance disputing the claim of unjustified dismissal, denying the claim for outstanding holiday pay and alleged that Mr Adolph owed his former employer some $26,000 for diesel.
[9] There followed further correspondence between the parties in relation to their dispute. This includes a further letter from Anderson Employment Law dated 9 March 2020, and a response from Waikato Topsoil’s solicitors dated 12 May 2020.
[10] Mr Adolph issued the statutory demand in the sum of $34,861.72 on 3 July 2020. That sum was expressed to be due and owing to the creditor (Mr Adolph) for “unpaid holiday pay and entitlements (debt)”.
[11] In response, Waikato Topsoil’s solicitors emailed Mr Adolph on 9 July 2020, disputing the alleged debt of $34,861.72.
[12] There followed further communication between the parties with a view to try and settle the dispute.
[13] Mr Adolph says that on Friday, 21 August 2020, he went to the High Court Registry in Hamilton to try and withdraw the statutory demand. At that time the hearing had been scheduled for the following Monday, namely 24 August 2020.
[14] In an email to Waikato Topsoil’s solicitors of 21 August 2020 at 4.20 pm, Mr Adolph stated:
After taking legal advice regarding your last email [from Edwards Law, Waikato Topsoil’s solicitors] I was advised that I was better to take it through the employment relations as you requested and deal with all the matters at once being the personal grievance and the minimum entitlements that were being claimed in the statutory demand.
I have been to the High Court in Hamilton to request that the statutory demand be revoked and the case moved to the employment relations authority. They
have advise me that the matter needs to be done by yourself as I am not the person who has made the application.
If you can please advise how you wish to proceed.
Relevant legal principles
[15] The Court’s jurisdiction to set aside a statutory demand is contained in s 290(4) of the Companies Act 1993. That section reads:
290 Court may set aside 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.
[16] The Court of Appeal has recently confirmed the principles the Court should apply in exercising this jurisdiction.2 The principles are:
(a)The applicant must show that there is arguably a genuine and substantial dispute as to the existence of the debt;
(b)The mere assertion the dispute exists is not sufficient. Material short of proof is required to support the claim that the debt is disputed;
(c)If such material is available, the dispute should normally be resolved other than by means of proceedings in the Court’s Companies Act jurisdiction;
2 AAI Ltd v 92 Lichfield Street Ltd (in rec and in liq) [2015] NZCA 559, [2016] NZAR 1338 at [17]. See also Carroll Civil Ltd v Texco Drilling and Piling Ltd [2019] NZHC 260 at [19].
(d)It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise.
[17]The Court of Appeal also stated:3
[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 the requirement that what is intended to be a summary hearing should not be converted into a full-blown trial.
Analysis and decision
[18] The critical issue to determine is whether there is a substantial and genuine dispute as to the existence of the debt.
[19] I find that it is clear from the evidence before the Court, and in particular the exchange of correspondence between the parties following the raising of the personal grievance, that there is a genuine and substantial dispute as to the existence of the debt at issue. I also find that in accordance with s 161 of the Employment Relations Act 2000, that this is a dispute which can only be resolved in the Employment Relation Authority. That section expressly provides that it is the Employment Relations Authority which has exclusive jurisdiction to deal with personal grievances and employment disputes relating to holiday pay.
[20] Mr Adolph appears to have recognised, albeit somewhat late in the process, that it is inappropriate to use the statutory demand process where the underlying debt is genuinely disputed.
[21] Having said that, the position of Mr Adolph, on the papers before me, is far from clear. While he says he went to the Court on 21 August 2020 seeking to withdraw the statutory demand, his written submissions dated 22 August 2020 seek to defend Waikato Topsoil’s application and argue that the statutory demand should not be set aside.
3 AAI Ltd v 92 Lichfield Street Ltd (in rec and in liq), above n 2.
[22] I am in no position to resolve the underlying dispute. It is clearly a matter for the Employment Relations Authority. There is a substantial and genuine dispute and the statutory demand must accordingly be set aside.
[23]I now turn to address the question of costs.
Costs
[24] Having succeeded with its application, Waikato Topsoil is, in my view, clearly entitled to costs. The critical issue is whether there should be an award of indemnity and/or increased costs, as sought by Waikato Topsoil, or 2B costs (i.e. those calculated in accordance with the High Court schedule).
[25] The threshold for an award of indemnity costs is a high one. Indemnity costs are awarded where a party has behaved either badly or very unreasonably, for example, a breach of confidence or flagrant misconduct.4
[26] Increased costs may be ordered where there is a failure by the paying party to act reasonably.5 The Court needs to consider the extent to which the failure to act reasonably contributed to the time or expense of the proceedings. Only to that extent can any percentage uplift from scale be justified.6
[27]Both parties have filed submissions addressing the question of costs.
[28] I find that the high threshold for an award of indemnity costs has not been made out. In reaching that conclusion I acknowledge that the amount sought by Waikato Topsoil, namely a total of $14,272.65 appears to be entirely reasonable for the services provided.
[29] Mr Adolph is self-represented and appears to have received advice from an employment law specialist that he had valid claims against his former employer, Waikato Topsoil. I note also that in the letter from Edwards Law to Mr Adolph dated
4 Bradbury v Westpac Banking Corp [2009] 3 NZLR 400, (2009) 19 PRNZ 385 (CA) at [27]–[28].
5 Bradbury v Westpac Banking Corp, above n 4, at [27].
6 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400, (2010) 24 NZTC 24,500 at [165].
29 November 2019, Waikato Topsoil acknowledges that although Mr Adolph was initially employed on a casual basis, he was subsequently “paid a salary on the basis of 40 hours per week”. The letter does also claim that Mr Adolph’s hours continued to fluctuate depending on the work available.
[30] Mr Adolph says that he was advised that his claim for holiday pay and days worked on statutory holidays were wage arrears claims and that he was able to pursue the statutory demand process. Against the background of the correspondence relating to the raising of the personal grievance, it is surprising that advice of that kind was given.
[31] In viewing matters overall, I find that an award of increased costs, being a 25 per cent uplift from scale, should be awarded. Even if he genuinely believed it was appropriate in the first instance to issue a statutory demand, Mr Adolph’s conduct subsequent to that was unreasonable. The solicitors for Waikato Topsoil responsibly sought to engage with Mr Adolph and clearly pointed out to him the flaws with the statutory demand and the clear evidential basis for Waikato Topsoil’s contention that there was a substantial and genuine underlying dispute as to the existence of the debt, the subject of the statutory demand. Ultimately, Mr Adolph did not make his position sufficiently clear as to whether he wished to continue to defend the proceedings or whether he was genuinely withdrawing the demand. In the circumstances, it was necessary for Waikato Topsoil to file submissions in relation to its substantive application and for me to issue a judgment dealing with the merits of it. Waikato Topsoil has been put to unnecessary expense.
[32] I find that it is appropriate to apply a 25 per cent uplift in relation to each of the steps set out in Schedule A to counsel for Waikato Topsoil’s memorandum dated 21 August 2020 (memorandum as to costs and disbursements).
Result
[33] The application by Waikato Topsoil Company Ltd to set aside the statutory demand is granted. The statutory demand dated 3 July 2020 is set aside.
[34] I order that the respondent, Mr Adolph, is to pay costs to the Waikato Topsoil Company Ltd on a 2B basis (as calculated in the memorandum of counsel dated 21 August 2020) together with a 25 per cent uplift, plus disbursements.
Associate Judge P J Andrew
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