Wimplex v Open Country Dairy Limited - [2023] NZHC 1476

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2023-409-136

[2023] NZHC 1476

UNDER the Companies Act 1993 in the matter of an application to set aside a statutory demand

BETWEEN

WIMPEX LIMITED

Applicant

AND

OPEN COUNTRY DAIRY LIMITED

Respondent

Hearing: On the papers

Counsel:

C J Shannon and I Cummings for Applicant K E Cornegé for Respondent

Judgment:

13 June 2023

COSTS JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 13 June 2023 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

WIMPEX LTD v OPEN COUNTRY DAIRY LTD [2023] NZHC 1476 [13 June 2023]

[1] The applicant applied to set aside a statutory demand issued to it by the respondent. The respondent did not oppose the application except as to costs. Directions were made by consent for the filing of submissions as to costs on the basis that the Court would deal with the matter on the papers. Those submissions have now been filed.

Factual background

[2] On 19 May 2022, the applicant and the respondent entered into a supply agreement pursuant to which the respondent agreed to supply and the applicant agreed to purchase a large quantity of A2 milk powder. There were several shipments of the goods to be made, with the first shipment in October 2022.

[3]The agreement included a clause which read:

In the event that a Contract is fully or partially cancelled … without prejudice to any other rights or remedies the Customer must reimburse the Company for any costs incurred as a consequence of such cancellation or suspension, including without limitation, packaging and re-packaging costs, storage costs, financing costs, foreign exchange losses, loss of profits and any diminution in the value of the Goods due to price movements. …

[4] Before the first shipment, the applicant indicated that it no longer required the goods and it sought to cancel the supply agreement. This was because its Chinese clients, to whom the goods were to be on-sold, had cancelled their orders due to the re-emergence of COVID-19. After attempts in correspondence to have the applicant take the goods, the respondent cancelled the supply agreement on 4 January 2023, giving notice that it intended to recover its full losses.

[5] On 9 March 2023 the respondent’s solicitors, Tompkins Wake, wrote to the applicant demanding payment of $527,939 said to be “for the loss suffered by OCD as a result of Wimpex’s failure to discharge its contractual obligations” within 10 working days failing which the respondent would be taking further steps to enforce its claim along with default interest, enforcement costs and legal fees.

[6] The applicant did not respond to the demand until 29 March 2023 when its solicitors, Duncan Cotterill, sent an email to Tompkins Wake advising that it had been instructed, was reviewing the documents, and would be preparing a response.

[7] By that stage, Tompkins Wake had already received instructions from the respondent…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] NZHC 1476
Decision Date: 13 June 2023

CaseChat Overview and Summary

In the High Court of New Zealand, Associate Judge Paulsen addressed an application by Wimpex Limited to set aside a statutory demand issued by Open Country Dairy Limited. The central dispute centred on the validity of the statutory demand, which was issued by Open Country Dairy to recover a substantial sum claimed as losses from Wimpex's alleged breach of a supply agreement. The respondent contested the application only regarding costs, while Wimpex sought indemnity costs, arguing that the statutory demand was flawed and an abuse of process.

The court was tasked with determining whether the statutory demand was appropriately issued and, if not, what costs should be awarded to the successful party, Wimpex. The legal issues involved interpreting the criteria for issuing a statutory demand, assessing whether the demand was made in good faith, and determining the appropriate costs to be awarded under the High Court Rules. The court examined whether the statutory demand was an abuse of process, and if so, whether the circumstances warranted indemnity costs.

In his judgment, Associate Judge Paulsen found that while the statutory demand should not have been issued, the respondent did not act vexatiously, frivolously, improperly, or unnecessarily. The court acknowledged that the statutory demand was flawed as it was based on unliquidated damages, which is not a proper basis for such a demand. However, the judge also noted that the respondent had genuine concerns about the applicant’s solvency and had taken legal advice before issuing the demand. Despite these concerns, the court found that the respondent’s insistence on leveraging the demand to extract concessions from Wimpex prior to its withdrawal was inappropriate. The judge concluded that while the statutory demand was an overreach, it did not meet the threshold for awarding indemnity costs. Instead, the court awarded Wimpex increased costs, amounting to $10,396.50, reflecting a 50 per cent markup on scale costs.

Orders