Your Builder Limited v Ruban

[2024] NZHC 2462

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-000499

[2024] NZHC 2462

UNDER

Section 290 of the Companies Act 1993 and Part 19 of the High Court Rules 2016

IN THE MATTER

of an application to set aside a statutory demand

BETWEEN

YOUR BUILDER LIMITED

Applicant

AND

DMITRY RUBAN and ALEXANDRA MATVEEVA

Respondents

Hearing:	19 August 2024
Appearances:	K R Narayan / N Toma for the Applicant D A Cowan for the Respondents
Judgment:	29 August 2024

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 29 August 2024 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date.......................................

Solicitors:

Martelli McKegg, Auckland D A Cowan, Auckland

YOUR BUILDER LTD v RUBAN [2024] NZHC 2462 [29 August 2024]

Introduction

[1]    Dmitry Ruban and Alexandra Matveeva (the Owners) engaged Your Builder Ltd (Your Builder) to renovate and extend their house and construct swimming and spa pools on their property in Mt Eden. They paid a deposit and building work began.

[2]    Work was suspended after around four months to renegotiate the scope of works. Then, the Owners purported to cancel the building contract on the basis that Your Builder’s work was defective. Your Builder disputed that the Owners were entitled to cancel the building contract, and purported to cancel the building contract themselves, forfeiting the deposit and applying it towards unpaid invoices, interest, lost profit, and legal fees.

[3]    The Owners issued a statutory demand demanding repayment of the deposit. Your Builder applies to set aside the statutory demand on the grounds that it is solvent, and the debt claimed in the statutory demand is disputed. The Owners say that a statutory demand may be issued where a creditor is solvent, and there is no dispute that Your Builder is indebted to them for the deposit.

[4]    The Owners have referred the wider dispute to adjudication under the Construction Contracts Act 2002.

[5]    The issue for determination here is whether there is a genuine and substantial dispute that the deposit is owing and due to the Owners as a debt.

Further background

[6]    On 24 July 2022, Your Builder and the Owners entered into a New Zealand Certified Builders Association Cost & Mark-Up (Renovations) contract (the building contract). The estimate for the scope of work was $1,244,786.62. The expected completion date was 16 August 2023, with allowances for automatic extensions of time for variations and unforeseen physical conditions (amongst other things).

[7]    On or around 9 February 2023, the Owners paid the deposit required under   cl 6.2 of the building contract in the sum of $124,478.66. Work commenced on or about 8 February 2023.

Work informally suspended

[8]    In June 2023, an issue arose relating to the Owners’ budget for the work. On or about 8 June 2023, the Owners advised that they would not be able to pay more than $1,209,301.61. Work paused. The parties amended the building contract by email so that Your Builder would carry out work to the sum of $1,209,301.61 (and no more), and the parties would determine what work could be done for that sum as follows:

(a)Your Builder would provide a budgeting spreadsheet which would set out the total cost of the build to date and the likely cost to complete the work.

(b)Your Builder and the Owners would go through the budgeting spreadsheet and decide which items would be completed with what remained of the $1,209,301.61 that the Owners were willing to pay.

(c)No work would be planned and no funds would be committed beyond the roofing stage until this had been done.

[9]The agreed budgeting exercise did not occur.

[10]   On 24 August 2023, solicitors engaged by the Owners requested a forecast to finish the work. Your Builder provided the solicitors with a forecast on 28 August 2023.

Defects alleged

[11]   In an email dated 19 September 2023, the Owners’ solicitors forwarded an email to Your Builder from QBS Ltd (QBS). The solicitors described QBS as “the

new builders on the site”. QBS alleged problems with the building work following a site meeting with Auckland Council.

[12]   On 28 September 2023, the Owners’ solicitors sent an email to Your Builder contending that there were serious defects in the work carried out at the property. They said that QBS had secured the site for the Owners. The solicitors requested the immediate payment of the deposit into their trust account.

[13]   On 6 October 2023 QBS produced a report identifying a large list of defects and examples of poor workmanship at the property.

Invoices issued

[14]   Your Builder issued five invoices between August and October 2023 for work it had completed. These were:

(a)INV-1048 issued on 9 August 2023 for the amount of $7,080.07 (including GST), due on 15 August 2023;

(b)INV-1062 issued on 23 August 2023 for the amount of $1,626.38 (including GST), due on 29 August 2023;

(c)INV-1068 issued on 6 September 2023 for the amount of $12,812.76 (including GST), due on 13 September 2024;

(d)INV-1074 issued on 6 September 2023 for the amount of $19,530.03 (including GST), due on 12 September 2023;

(e)INV-1113 issued on 4 October 2023 for the amount of $2,958.78 (including GST), due on 10 October 2023.

[15]    On 8 November 2023, Your Builder demanded payment of the amount outstanding under these invoices of $44,008.02 (the Outstanding Amount) within five working days, or that the Owners pay the amount into escrow in accordance with cl 22.10 of the building contract.

[16]   Your Builder also said that it was ready, willing and able to continue with the project once the Outstanding Amount was paid and the parties had determined the amended scope of the work, and asked that the parties follow the agreed process at  cl 22.9 of the building contract for disputes relating to defective work. This process required the parties to engage a jointly appointed building surveyor to assess the alleged defects and issue a report determining whether the work was defective, unfinished, or without issues.

[17]   On 14 November 2023, Your Builder suggested Peter Beran of Northbridge to be the jointly appointed building surveyor. On 17 November 2023, the Owners agreed, provided the scope and terms of engagement were agreed. The Owners advised that Auckland Council would inspect the site on 22 November 2023 and that Your Builder was welcome to attend. The Owners refused to pay the Outstanding Amount into escrow.

[18]   On 22 November 2023, the Owners withdrew their consent to the appointment of Mr Beran and said they would be engaging their own expert.

[19]On 29 November 2023, the Owners’ solicitors advised that they held the

$44,008.02 in escrow in their trust account.

Contract cancelled

[20]   On 8 December 2023, the Owners purported to cancel the building contract. The letter sent by the Owners’ solicitors to the solicitors acting for Your Builder stated that:

Our client cancels the Contract pursuant to section 37 of the CCL Act 2017. In short, the standard of workmanship and defects in the construction to date meet the “substantial” test in that section. The costs to remedy the defects, which are highly likely to involve removing the roof, are expected to exceed

$500,000, exclusive of GST.

[21]   On 20 December 2023, the director of Your Builder, Hamid Zwart, attended the property to inspect the alleged defects. However, on 17 January 2024 the Owners advised that QBS had commenced the remedial work.

[22]   On 14 February 2024, Your Builder purported to cancel the building contract under cl 19.3. Through their solicitors they contended that the Owners had no right to cancel the building contract. They contended that by purporting to cancel the building contract and engaging another builder to do the work that Your Builder was entitled to perform, the Owners had repudiated the building contract.

[23]   Your Builder stated that it had forfeited the deposit of $124,478.66, and applied it to its unpaid invoices, contractual interest, lost profit, and legal fees in accordance with cl 20.4 of the building contract.

[24]On 23 February 2024, the Owners issued the statutory demand.

[25]   The Owners served Your Builder with the claim for adjudication under the Construction Contracts Act on 2 July 2024. The Owners claim $494,441 from Your Builder for remedial works at the property and related costs, and an additional

$168,478 for the deposit and funds held in escrow.

Legal principles

[26]   Section 290(4) of the Companies Act 1993 sets out the grounds on which the Court may decide to set aside a statutory demand:

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.

…

[27]   The general principles that apply to applications to set aside statutory demands are well-settled:1

(a)The applicant must show there is arguably a genuine and substantial dispute as to the existence of the debt. The Court’s task is not to resolve the dispute, but to determine whether there is a substantial dispute that the debt is due.

(b)The mere assertion of a dispute is insufficient. Material short of proof is required to support a claim that a debt is disputed.

(c)If such material is available, the dispute should normally be resolved first in ordinary civil proceedings before a statutory demand is issued.

(d)An applicant must establish that any counterclaim, cross-demand or set-off is reasonably arguable in all the circumstances. It does not need to prove the actual claim.

[28]   It is not usually possible to resolve disputed questions of fact based on affidavit evidence alone, especially when issues of credibility arise, unless such evidence is contrary to the available documents or earlier statements made by the parties. The Court's discretion as to whether to set aside a statutory demand is wide, but it will be a rare occasion where an application is refused when one of the grounds in s 290(4) is made out.2

Is there a genuine and substantial dispute that the debt exists?

[29]   The debt that forms the basis for the statutory demand is the deposit paid by the Owners at the commencement of the building work.

[30]   Your Builder claims that it is not indebted to the Owners for the deposit. Rather, it is entitled to forfeit the deposit and apply it to the Outstanding Amount,

1      See Confident Trustee Ltd v Garden and Trees Ltd [2017] NZCA 578 at [16].

2      Alfex Doors and Windows Ltd v Alutech Windows and Doors Ltd (2001) 16 PRNZ 963 (CA) at [14].

interest on that amount, costs and its lost profit arising out of the Owners’ breach and/or repudiation of the building contract.

[31]   The Owners contest that, saying that Your Builder is not entitled to forfeit the deposit and apply it to any of those items when the Owners were entitled to cancel the building contract under s 37 of the CCLA because of Your Builder’s poor workmanship, which also breached the Consumer Guarantees Act 1993.

Unpaid invoices, interest and costs

[32]   In my view, Your Builder’s claimed entitlement to forfeit the deposit and apply it to unpaid invoices, interest on the invoiced amounts, and related costs raises different issues to its claimed entitlement to apply the deposit to its alleged lost profit.

[33]   The analysis starts with the provisions of the building contract concerning the deposit and payment of invoices.

[34]Under the heading “Invoices and Payments”, the building contract provides:

6.1   The Builder is not obliged to commence the Building Work until any deposit payable in accordance with clause 6.2 has been paid.

6.2   The Deposit shall be paid by the Owner upon signing the Contract. The Deposit shall be held by the Builder and applied towards payment of the final invoice, or as provided by clause 19.9 or clause 20.4. The Deposit is therefore not be treated as a progress payment. If the final invoice is less than the Deposit then the Builder shall pay the Owner the balance of the Deposit upon issuing the final invoice.

…

6.7   The Owner must pay the invoiced amount in full within 5 Working Days of the invoice being delivered or sent to the Owner or such other time as is stated in Part E of the Schedule. If the Owner does not consider that all or any part of the invoiced amount is payable, the Owner must, within 5 Working Days after the invoice was delivered or sent to the Owner:

a.     reply in writing to the Builder stating the amount that the Owner considers payable (the undisputed amount), and specifying the reasons why any part of the invoiced amount is disputed, and the method in which the disputed amount has been calculated; and

b.   pay the undisputed amount.

…

(emphasis added)

[35]   The Owners did not dispute any of the invoices according to cl 6.7 of the building contract. Therefore, they were obliged to pay the invoiced amounts within five working days.

[36]   According to cl 6.2, Your Builder was entitled to apply the deposit towards the final invoice. By necessary implication, Your Builder was entitled to apply the deposit to any undisputed amounts in preceding invoices that remained unpaid.

[37]   If there is any doubt over whether Your Builder was entitled to forfeit the deposit and apply it to the Outstanding Amount under cl 6.2, Your Builder was also entitled to forfeit the deposit and apply it to the Outstanding Amount, interest and related costs under cl 19.9.

[38]Under the heading “Owner Default”, the building contract provides:

19.1     If at any time the Owner fails to pay any sum owed to the Builder in full by the due date, the Owner shall pay interest on the amount outstanding from the due date until the date of payment. The interest rate shall be the Builder’s default bank overdraft borrowing rate, or one and a half times the Builder’s non-default bank overdraft borrowing rate, whichever is the higher. The entitlement to interest is without prejudice to any of the Builder’s rights and remedies in respect of the non-payment.

19.2     If at any time the Owner fails to pay any sum owed to the Builder in full by the due date, or any act, omission or default by the Owner effectively precludes the Builder from continuing the Building Work or performing or complying with the Builder’s obligations under this Contract, then without prejudice to the Builder’s other rights and remedies, the Builder may suspend the Building Work immediately after serving on the Owner a written notice specifying the payment default or the act, omission or default upon which the suspension of the Building Work is based. All costs and expenses incurred by the Builder as a result of such suspension and any recommencement shall be payable by the Owner as if they were a Variation.

…

19.9     If at any time the Owner has failed to comply with any of the Owner’s obligations under this Contract then without prejudice to the Builder’s other rights and remedies the Builder may forfeit the deposit or any sum paid in advance of the Builder’s entitlement to payment, and apply it to any damages, costs, interest or other sums to which the Builder is entitled.

19.10   The Owner shall be liable for all costs and expenses incurred by the Builder as a result of the Owner’s default, including but not limited to all costs

of debt collection, suspension, and (if applicable) recommencement of work, preparation, execution, registration and discharge of securities, and the Builder’s actual and reasonable legal costs, including those incurred in the course of litigation, adjudication, negotiation, mediation, arbitration, or any other method of dispute-resolution.

(emphasis added)

[39]   The Owners were in default of their obligation under cl 6.7 to pay the undisputed invoiced amounts. As such, Your Builder was entitled to forfeit the deposit and apply it to “any damages, costs, interest or other sums to which the Builder is entitled”. Your Builder is entitled to the Outstanding Amount (cl 6.7), interest on that amount (cl 19.1) and related legal costs (cl 19.10).

[40]   Therefore, of the $124,478.66, $44,008.02 (the Outstanding Amount) plus interest (calculated by Your Builder to be $3,932.29), plus legal costs, is not owing by Your Builder to the Owners as a debt. The building contract entitled Your Builder to forfeit this portion of the deposit.

[41]   Your Builder is entitled to be paid the undisputed invoiced amounts, interest and costs irrespective of whether it has breached the building contract entitling the Owners to cancel it. That is confirmed by cl 20.6 which provides:

20.6   If either party exercises a right to cancel this Contract, then without prejudice to each party’s other rights and remedies:

a.     The Owner shall pay the Builder for all materials delivered and all Building Work performed up to the date of cancellation, calculated in accordance with Part 4 of this Contract and Part F of the Schedule.

b.       Upon payment pursuant to paragraph (a), the Builder shall deliver up possession of the Building to the Owner (if not already done) and remove from the Property all materials, tools, plant, equipment, appliances or vehicles belonging to the Builder or the Builder’s subcontractors.

c.       All provisions of this Contract which expressly or by necessary implication are intended to continue in force beyond cancellation (including, without limitation, the provisions of this clause 20.6 and the dispute-resolution provisions of Part 22) shall continue to bind the parties.

d.       Subject to paragraph (c), each party shall be immediately discharged from any further obligation or liability in respect of the Building, the Building Work and this Contract, without

prejudice however to any right or remedy arising out of either party’s prior breach of this Contract or unlawful act or omission occurring prior to cancellation.

[42]   In practical terms, if Your Builder breached the building contract by failing to carry out the work to the required standard, thereby entitling the Owners to cancel the building contract and claim damages for the cost of remedial works, the forfeited deposit will be set off against any damages payable by Your Builder to the Owners. Whether Your Builder is liable to the Owners for damages will be determined in the adjudication proceeding.

[43]It follows that the statutory demand must be set aside for at least the amount of

$44,008.02, plus interest (calculated by Your Builder to be $3,932.29), plus related legal costs.

Compensation for lost profit

[44]   Your Builder has purported to retain the balance of the deposit on the basis that it is entitled to compensation for lost profit caused by the Owners’ repudiation and/or breach of contract by wrongfully cancelling the building contract.

[45]   Your Builder has calculated its damages for lost profit of $74,622.81 by taking the original estimated contract price of $1,244,786.62 (including GST), deducting the amount invoiced to date of $747,301.20 (including GST) and multiplying the difference by the profit margin allowed for in the building contract of 15 per cent.3

[46]   Your Builder submits that the Owners were not entitled to cancel the building contract when they did. It says that the Owners have failed to prove that the defects were Your Builder’s fault.

[47]   Furthermore, it says that when the Owners cancelled the building contract, they could not have known that the possible effects of any genuine defects for which Your Builder was responsible would substantially decrease the benefit of, or substantially increase the burden of, the building contract on them.

3      Affidavit of Hamid Zwart in Support of Originating Application to Set Aside Statutory Demand, affirmed 8 March 2024, at [68.3].

[48]   Your Builder says that it tried to follow the dispute resolution process for alleged defects in the building contract but was frustrated when the Owners withdrew their agreement to the joint independent surveyor. Your Builder says that the Owners did not give it the opportunity to rectify any defects for which it was responsible in accordance with cl 18.3 of the building contract.

[49]   Consequently, Your Builder says that the Owners have not proved that Your Builder could not have remedied any defects for which it was responsible within the time for practical completion or by the expected completion date as extended under the building contract.

[50]   The Owners claim that they were entitled to cancel the building contract because Your Builder was in breach of the “Builder’s Primary Obligations” at cl 2 of the building contract, and the Consumer Guarantees Act. They say that the effect of the breaches at the point of cancellation was such that there was a substantial negative impact on the owners, meaning they were entitled to cancel the building contract under of the CCLA (presumably s 37(2)(b)) and the Consumer Guarantees Act. The owners have claimed $494,441 from Your Builder in the adjudication claim for remedial works and related costs, and a further $168,478 for the deposit amount and funds held in escrow for Your Builder invoices. The Owners say this demonstrably satisfies any relevant “substantial” test.

[51]   The Owners dispute that Your Builder was not given the opportunity to remedy the defects. They state that from 28 September 2023 until 8 December 2023 they wrote on several occasions to Your Builder, stating that there were severe defects at the property, and inviting them to inspect the defects. They rely on the report prepared by QBS that identified many defects, and the provision of this report to Your Builder on 6 October 2023. They say that Mr Zwart never accepted their invitation to inspect the property prior to cancellation.4

[52]   Whether the Owners were entitled to cancel the building contract (and are entitled to damages) or whether their purported cancellation was a repudiation of the building contract entitling Your Builder to cancel the building contract (and claim

4 Affidavit of Alexandra Matveeva, affirmed 22 March 2024, at [11].

damages) is not an issue to be resolved in a statutory demand proceeding. That issue will be determined in the adjudication proceeding. This Court is only concerned with whether there is a genuine and substantial dispute about whether the portion of the deposit Your Builder has retained for damages for its lost profit has been wrongly retained as an amount “to which [it] is entitled” (referred to in cl 19.9 of the building contract), and is in fact a debt due to the Owners that should be paid immediately.

[53]   I find that there is a genuine and substantial dispute about whether the remainder of the deposit is a debt presently owing and due.

[54]   First, there is a factual dispute about the nature and extent of the defects claimed by the Owners. The Owners say that the defects were severe and much of Your Builder’s work had to be demolished and redone. They rely on the QBS report, a report by Steve Alexander of ACL Building Science, a report by Chris W Howell & Associates Ltd, the engineer on the project, and an Auckland Council inspection report dated 30 November 2023 which identifies a number of issues with the work.

[55]   Mr Zwart has affirmed an affidavit in which he disputes that the defects identified by QBS were as significant as they reported. He has identified specific concerns with the QBS report at [34]– [39] of his affidavit. He emphasises that work had been paused due to the Owners’ financial constraints and was mainly unfinished rather than defective.

[56]   Second, there is a factual dispute over whether Your Builder was given a reasonable opportunity to remedy any defects for which it was responsible before QBS was engaged to do the remedial work and the Owners cancelled the building contract, as required under cl 18.3.

[57]   The building contract sets out a mandatory dispute resolution procedure which the parties must follow if there is a dispute relating to alleged defects in the workmanship or materials of the builder, or their subcontractors.5

5      Cost & Mark-Up (Renovations) Building Contract, cl 22.9.

[58]   The building contract requires the parties to jointly engage a suitably qualified and independent building surveyor to make a ruling on the alleged defects before initiating any of the dispute resolution procedures referred to in cl 22.4 (adjudication under the Construction Contracts Act or before the Disputes Tribunal, arbitration, or legal proceedings in any court). If the parties are unable to agree on the building surveyor within 10 working days, either party may request the New Zealand Institute of Building Surveyors or Building Officials Institute of New Zealand to nominate a building surveyor. The building surveyor must be instructed to identify what workmanship or materials are defective and require rectification at the builder’s expense; are merely unfinished rather than defective and are required to be completed by the builder (or another builder if the building contract has been validly terminated) at the owners’ expense; or meet the required legal standards and are not required to be rectified or completed. The building surveyor must conduct one or more site visits in the presence of the owner and the builder, and interview each of the parties. The building surveyor’s written determination is final and binding on the parties.

[59]   The contractual dispute resolution process survives cancellation of the building contract.6

[60]   Your Builder contends that the Owners obstructed the dispute resolution process provided for in cl 22.9 of the building contract, because on 24 November 2023 they withdrew their approval of the building surveyor that Your Builder had suggested engaging, having previously agreed to engage this building surveyor on 17 November 2023. Your Builder claims that the Owners subsequently refused to engage a jointly appointed building surveyor, and that when the Owners purported to cancel the building contract on 8 December 2023, Your Builder had not been given an opportunity to inspect or rectify any defects for which it was responsible.

[61]   In contrast, the Owners claim that the building surveyor suggested by Your Builder was never “jointly appointed” under the building contract because they had not engaged with this surveyor. They also claim that they wrote to Your Builder inviting them to inspect the alleged defects on numerous occasions between

6      Cost & Mark-Up (Renovations) Building Contract, cl 20.6(c).

28 September 2023 and 8 December 2023, and that the report by QBS identifying several defects was sent to Your Builder on 6 October 2023. The Owners claim that Your Builder did not accept their invitations to inspect the alleged defects.

[62]   Third, and critically, there is a factual dispute about whether Your Builder could have remedied any issues with its workmanship by the completion date, or any later date as extended according to the building contract, had the owners not engaged another builder and cancelled the building contract.

[63]   In Yu v T & P Developments Ltd, Elias CJ, delivering the unanimous judgment of the Court, stated:7

[51] … The implied term relied upon by the Yu family as justifying cancellation was a term that “all work be completed in a proper, thorough and workmanlike manner”. Although there may be clear cases when it sufficiently emerges before completion that such a term will not be complied with, it was a bold move to cancel on that basis. A breach itself might not be established if the defects at the time of cancellation can be rectified before completion, at least where there is no suggestion that the party in default will refuse to do so.

…

[56] Whether T & P was in breach of the implied term to complete the house in a proper thorough and workmanlike manner required the Judge to consider whether the term would have been complied with, had the contract proceeded. Cancellation in advance of completion has been considered by this Court recently in Oxborough v North Harbour Builders Ltd [2002] 1 NZLR 145 and Adkin v Brown (Court of Appeal, CA 2/02, 11 March 2002). Those decisions emphasise that a stipulation as to completion in accordance with a contractual standard is only broken if the work is not in accordance with the contract “at completion”, or if the work during construction is such that it cannot be made to conform with what the contract requires. If any defects can be remedied before completion, the builder will be in breach only where he has made it clear he does not intend to rectify.

[64]   It may prove to be the case that the issues with Your Builder’s work identified by QBS prior to the Owners’ purported cancellation of the building contract were so serious that there was no prospect of Your Builder remedying them by practical completion date or a later completion date as extended under the building contract. However, Your Builder has met the threshold of showing that there is a genuine and

7      Yu v T & P Developments Ltd [2003] 1 NZLR 363 (CA).

substantial dispute over whether that was the case, and therefore whether the Owners were entitled to cancel the building contract.

[65]   It follows that the statutory demand must be set aside in relation to this portion of the forfeited deposit as well.

[66]   It is unnecessary to consider the submissions made in relation to Your Builder’s solvency, because I have found that the statutory demand must be set aside because there is a genuine dispute over whether the debt exists. Had the application turned on this issue, I would not have set aside the statutory demand simply because Your Builder has paid the disputed sum into its solicitor’s trust account as a means of showing that it is solvent. While evidence of a company’s solvency may inform the Court’s assessment of the genuineness of any “substantial dispute” an applicant raises regarding whether the relevant debt is owing, the authorities have established that it will be “extremely rare” for a company’s solvency to suffice as a standalone ground for granting an application to set aside a statutory demand.8 As the Court of Appeal has acknowledged, this is because “it is difficult to imagine circumstances in which

[a] company should be able to avoid paying a debt, merely by proving that it is able to pay that debt”.9

Result

[67]   I order that the statutory demand issued by the Respondents dated 23 February 2024 is set aside.

[68]   As the successful party, Your Builder is entitled to costs. If costs cannot be agreed, then the parties are to file written submissions of not more than four pages within 10 working days.

Associate Judge Gardiner

8      AMC Construction Ltd v Frews Contracting Ltd [2008] NZCA 398, (2008) 19 PRNZ 13 at [5]–[7].

9      AMC Construction Ltd v Frews Contracting Ltd, above n 8, at [7].