CAMSING TRADING LTD v PARKERS BEVERAGE COMPANY LTD [2018] NZHC 2289

CAMSING TRADING LTD v PARKERS BEVERAGE COMPANY LTD [2018] NZHC 2289 [31 August 2018]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2018-441-000036[2018] NZHC 2289UNDER the Companies Act 1993BETWEEN CAMSING TRADING LIMITEDApplicantAND PARKERS BEVERAGE COMPANYLIMITEDRespondentHearing: 23 August 2018Appearances: D Bennington for ApplicantN Gray for RespondentJudgment: 31 August 2018JUDGMENT OF ASSOCIATE JUDGE OSBORNE(application to set aside statutory demand)Introduction[1] The applicant, Camsing Trading Ltd (Camsing), exports water to China. Therespondent, Parkers Beverage Company Ltd (Parkers) bottles and boxes water from amanufacturing and packing facility in Hawkes Bay.[2] As a result of trading between the two, Parkers asserts that by 31 March 2018,Camsing owed it $89,865.38.[3] In this proceeding, Camsing applies for an order setting aside a statutorydemand issued by Parkers in relation to the claimed debt.The statutory demand[4] On 23 April 2018, Parkers issued a statutory demand for the claimed debt($89,865.38) under s 289 Companies Act 1993 (the Act) on Camsing.The setting aside application and opposition[5] Camsing applied to set the demand aside.[6] Camsing disputed the amounts claimed on three grounds:(a) Sale transactions were not validly completed by Parkers becauseParkers refused to provide the product documentation as required bythe terms of a strategic relationship and manufacturing agreement (theAgreement) entered into between the parties on 16 June 2017;(b) The charges included the costs of testing by third parties which Parkerswas required by the agreement to undertake at no cost to Camsing;(c) Parkers had incorrectly purported to revoke a credit note earlier issuedby Parkers in relation to an October 2017 shipment of bottled water.[7] Additionally, Camsing asserted by its notice of application that it has a set-offin the sum of $217,262.07 for the costs Camsing has incurred through the rejection ofdefective products supplied by Parkers.[8] Subsequently, Camsing's sales and marketing manager, Lei Ding, filed anaffidavit. She has given evidence of further issues with product supplied by Parkers.Ms Ding deposes that (without taking into account losses associated with what isdescribed as the "contaminated November 2017 shipment") the costs which Camsinghas incurred to date or is likely to incur through defective product amount to$242,871.84.[9] Parkers opposes the setting aside application. It asserts that:(a) Camsing has failed to make payment by due date for the goods andservices (including monthly charges) provided by Parkers; and(b) Camsing's defence or cross claim relies entirely on unsubstantiatedassertions relating to quality issues;(c) Camsing's cross claim is precluded through Camsing having failed tocomply with the requirements of the agreement in relation to therejection of defective products.The trading relationship[10] The contractual relationship between the parties is central. It has had twocomponents.[11] First, beginning in September 2016, there was trading between the partiesbased on Parkers' usual terms of trade which require payment of 50 per cent of thetotal invoice before production and the remaining 50 per cent on release of customsand testing documentation. Between September 2016 and March 2017, Camsingpurchased through five separate orders, water products costing approximately$134,694.[12] In mid-2017, the parties negotiated what became the strategic relationship andmanufacturing agreement executed in August 2017. Camsing was thereby to obtain asignificantly larger volume of bag-in-box water products under its own brand. Forthis purpose, Parkers was to install additional plant in its factory. The pricing termsof the agreement included:(a) Under Schedule One, Camsing was to pay $25,000 per month (plusGST) for the exclusive use of Parkers' bag-in-box production lines (the"monthly charge");(b) Under Schedule One, Camsing would pay additional charges per unitproduced, together with the cost of box labels, pallets, adhesive andpallet wrap ("the packaging costs");(c) By clause 9.2, Camsing was required to pay the total price of theproducts packed on the 20th day of the month following the date ofpackers' invoice in respect of the relevant completed purchase order.The fate of the agreement[13] The agreement contains provisions as to how it may be terminated. Its term isfor a period of 18 months. Clause 18 deals with earlier termination. Either party mayterminate the agreement for any reason by giving the other party six months' notice inwriting. Camsing has a number of rights of termination including where Parkerscommits a material breach of the agreement and does not remedy it to Camsing'ssatisfaction within 14 days of receipt of a notice to remedy.[14] In 2018, Camsing has given two notices of cancellation. First, on 12 February2018 it gave, as of right, six months' notice of termination (that is, to have expired on12 August 2018). Secondly, by letter dated 27 March 2018, Camsing gave Parkersnotice that unless specified breaches of the Agreement (including Parkers' non-provision of documents) were remedied by 10 April 2018, the agreement wouldterminate with immediate effect. It is common ground that Parkers did not providethe requested documents by 10 April 2018. Camsing says that the agreement wastherefore cancelled with effect from 10 April 2018.Parkers' claimBreak-down[15] The break-down of Parkers' claim is set out in Table 1:Table 1 Parkers' InvoicesNumber Subject "Due date" Amount1 Monthly Jan charge* 31 Dec 2017 $24,105.79*2 Monthly Mar charge 28 Feb 2018 $28,750.003 Packaging costs 20 Mar 2018 $2,627.064 Packaging costs 20 Mar 2018 $2,455.055 Packaging costs 20 Mar 2018 $2,512.556 Water testing costs 20 Mar 2018 $664.937 Monthly Apr charge 31 Mar 2018 $28,750.00Total $89,865.38($24,105.79 being the subject of a credit note issued by Parkers on 1 February 2018,"reversed" on 23 March 2018).What Camsing accepts[16] Camsing accepts that of the $89,865.38 claimed by Parkers, $57,500(representing the March and April 2018 monthly charges) is owing. The basis uponwhich Camsing has not paid that undisputed sum is Camsing's assertion of a set-off.What Camsing disputes[17] Camsing's dispute of Charges claimed by Parkers falls into three categories.(a) Reversed credit note[18] Parkers had issued in the usual course, on 1 December 2017, an invoice for theDecember 2017 monthly charge. Camsing did not pay the charge by the due date(31 December 2017). Through October 2017 to January 2018, Camsing raised issuesas to an allegedly rejected shipment of bottled water provided under the standard termsof trade (not the agreement). Camsing delayed payments under the agreement. Apoint was reached where Camsing owed Parkers on unpaid invoices approximately$86,500. By February 2018, there had been a discussion between the parties as to theobtaining of test results but no results had been produced. In order to obtain paymentof everything other than the costs relating to the "rejected shipment", Douglas Speedy(the managing director of Parkers) agreed to issue a credit note. He emailed the creditnote (for $24,105.79) on 2 February 2018 to Wei Xhong, a director of Camsing.Mr Speedy recorded:I am sending this to you in good faith to keep everything going. As you knowwe have not seen any tests results etc. We are 100% trusting you in thisinstance.[19] The email did not record any conditions attaching to the issuing of the creditnote.[20] Differences between the parties were coming to a head in late-March 2018,with further money withheld by Camsing. Mr Speedy notified Camsing's solicitorsthat Parkers was revoking the credit note because Camsing had not produced therequired evidence to support their claim (as to the October "rejected shipment").Mr Speedy has deposed that he revoked the credit note because:I considered that the basis on which the credit note had been issued was notmet.[21] For Camsing, Ms Bennington notes correctly that there is no evidence ofMr Speedy pursuing test results from Camsing between the time he issued the creditnote and the time he purported to revoke it. At the time of revocation, Parkers wastrying to extract further delayed payments from Camsing. The appearance ofMr Speedy's notice of revocation was that it was a reaction to the withholding of fundsrather than the non-production of expected test results.[22] Given both the simple wording of the email by which the credit note was sent– "in good faith", without reference to any conditions – and the lack of subsequentrequests by Parkers for test results, it is arguable that Parkers was not entitled to revokethe credit note in the way it did. It is therefore arguable that the balance of the monthlyJanuary charge ($24,105.79) did not become once again due and owing.(b) Packaging costs[23] The agreement entitled Parkers to invoice Camsing for packaging costs. Thethird, fourth and fifth items claimed by Parkers (above at [15]) related to suchpackaging costs for a February 2018 shipment. The agreement stipulated that Parkerswas to provide for each purchase order, upon the transfer of risk,1 five particulardocuments. During the period of differences between the parties in March 2018,Mr Speedy refused to provide the product documentation pending resolution ofoutstanding charges.1 The agreement provided that risk passed to (Camsing) when the goods were made available toCamsing's (shipping) agents at Parkers' premises.[24] Camsing's termination of the agreement for alleged cause then occurred witheffect from 10 April 2018. The product documentation for the February shipment wasfinally provided by Parkers' solicitors to Camsing's solicitors on 18 April 2018.[25] Camsing relies on clause 19.1 of the agreement for the proposition that it is notrequired to pay the packaging costs. Clause 19.1 provides:19.1 Payment for completed Products: In the event this Agreement isterminated, Camsing shall pay the Price in respect of all Products thatthe Packer has validly completed as at the date of termination and thePrice for such Products will automatically become due and payable.[26] Counsel made differing submissions as to what constituted "valid completion"for the purposes of clause 19.1. Ms Bennington submitted that "valid" has a primarymeaning of "taking legal effect". Chambers Dictionary offers similarly "legallyadequate" and "fulfilling all the necessary conditions".2[27] On this basis, Ms Bennington submitted that, as at 10 April 2018, Parkers hadnot "validly completed" the products comprising the February shipment because theproduct documentation required in relation to them had not been provided.Ms Bennington noted parallel use of "validly" in the succeeding clause (19.2) of theagreement. Clause 19.2 required Camsing to also pay the price for all products"validly commenced" as at the date of termination. As the agreement contains detailedprovisions as to how Camsing was to submit purchase orders and the point at whichCamsing could cancel purchase orders, Ms Bennington submitted that the concept of"valid commencement" of products necessarily incorporated reference to the requireddocumentation. In her submission the concept of "valid completion" under clause19.1 is to be similarly interpreted as importing compliance with documentationrequirements.[28] For Parkers, Mr Gray focussed his submissions on this point entirely uponclause 19.1. As the term "products" was defined in the agreement by reference to thephysical water products which Parkers was to produce, Mr Gray submitted that suchproducts were "validly completed" when they were physically completed in2 Vivian Marr (ed) The Chambers Dictionary (11th ed, Chambers Harrap Publishers Ltd Edinburgh,2008) at 1728.accordance with the agreement specifications, whether or not their relevant productdocumentation had also been completed and provided.[29] In the present context it is unnecessary that the Court determine which is thecorrect interpretation. The interpretation submitted by Ms Bennington is at leastarguable, which is sufficient for the purposes of setting aside the statutory demand inthat regard.Water testing[30] The sixth item claimed by Parkers relates to water testing costs of $664.93.[31] Mr Speedy exhibited the relevant invoice and explained that that charge wasfor water testing conducted "as requested". He further explained, in relation to theCertificate of Analysis which Parkers was to provide in relation to supplied goods, thatParkers itself undertakes testing of water at its site itself, with further testing completedby an outside party. Mr Speedy deposed that some customers ask for additional testingwhich is done at the customer's cost. He exhibited a September 2017 request from"Ellyn" of Camsing in which she confirmed the request for identified tests, and notthe total analysis which had previously been requested. She commented that "[t]hisexpense is not in our budget".[32] Camsing's witnesses did not contradict this evidence.[33] I am satisfied that it is beyond argument that Parkers was requested by Camsingto obtain the additional testing for which Camsing was charged.Indebtedness of $58,164.93 established beyond argument[34] Parkers has established beyond argument that at the date of the statutorydemand Camsing owed it $58,164.93. The balance of the statutory demand($31,700.45) is the subject of a genuine and substantial dispute.Defect in a statutory demand[35] Section 290(5) of the Act requires that a demand not be set aside by reason ofa defect or irregularity unless the Court considers that substantial injustice would becaused if it were not set aside.[36] In compliance with this requirement, the courts have consistently alloweddemands to stand in reduced figures which represent items not open to dispute.3. Thestatutory demand is then set aside except as to the indisputable sum.4[37] In this case, unless Camsing can establish to the required standard thearguability of its set-off claim, Parkers will be entitled to have its demand stand to theextent of $58,164.93. Ms Bennington responsibly did not submit that substantialinjustice would result through curing the defect under s 290(5).Camsing's set-off claimCamsing's total set-off claim[38] By the amended figures provided by Camsing's Ms Ding, Camsing asserts thatthe costs which it has occurred to date or is likely to incur through defective productamount to at least $242,871.84.The statutory test[39] Under s 290(4)(b) Companies Act the Court may set aside a statutory demandif satisfied that the company appears to have a counterclaim, set-off, or cross-demandand the amount specified in the demand less the amount of the counterclaim, set-off,or cross-demand is less than the prescribed amount. The prescribed amount is $1,000.The correct approach to considering a claim of set-off was identified by the Court ofAppeal in Covington Railways Ltd v Uni-Accommodation Ltd:5[11] Where a company which is the subject of a liquidation application isindisputably in debt to the applicant creditor, it may nonetheless be able toshow that it has a claim against the applicant which reduces the net balance3 United Homes (1998) Ltd v Workman [2001] 3 NZLR 447 (CA) at [46].4 United Homes (1998) Ltd v Workman, above n 3, at [49].5 Covington Railways Ltd v Uni-Accommodation Ltd [2001] 1 NZLR 272 (CA).owing to the creditor or even offsets it altogether. Where there are liquidatedsums due each way, that is simply an arithmetical exercise. It is more difficultif, on the applicant's side, there is an indisputable liquidated sum, but the otherparty's claim is for an unliquidated sum with liability and/or quantum indispute. Then, in order to impeach the statutory demand and overcome thepresumption in s 287(a) that the company is unable to pay its debts when ithas failed to comply with the demand, it must be able to do more than merelyassert that there is an available set-off. It must be able to point to evidencebefore the Court showing that it has a real basis for the claimed set-off andthat accordingly the applicant's claim to be a creditor is, to the extent of theset-off, seriously in doubt. In the words of Buckley LJ in Bryanston FinanceLtd v de Vries (No 2) [1976] Ch 63 at p 78, it must show that there are "clearand persuasive grounds" for the set-off claim. Where this can be done, theparty who has issued the statutory demand against the company will be shownto be using the statutory demand and liquidation procedures improperlybecause there is a "genuine and substantial dispute" about the net amount ofthe company's indebtedness (Taxi Trucks Ltd v Nicholson [1989] 2 NZLR 297at p 299). The dispute should then be resolved in the ordinary way – exceptas to any undisputed balance – rather than upon the hearing of a liquidationapplication.[40] The Court of Appeal, in Alfex Doors & Windows Ltd v Alutech Windows &Doors Ltd,6 established that an unquantified claim of liquidated damages which iscontingent on the outcome of an unresolved dispute between the applicant companyand a third party may not be the subject of a set-off or claim asserted under s 290 ofthe Act. In Alfex, the applicant company was seeking to set off a sum on account ofan unresolved claim for damages made against it by the third party. The applicantcompany was asserting that it need not pay under the statutory demand until it wasestablished that it was not liable to the third party for the damages claimed (whichwould, if proved, have been able to be passed on to the respondent).7 The Court ofAppeal therefore held there was no sufficient basis for Alfex to continue to retain partof the purchase price against the unquantified contingent claims.[41] Associate Judge Sargisson discussed Alfex and earlier authorities in BeckettBooks Ltd v Moving Out 2012 Ltd.8 Her Honour, having first recognised that anunquantified set-off may be recognised in appropriate circumstances under s 290, wenton to consider the separate question of a cross-claim based on a contingent claim,where the very existence of the cross-claim and not just the value of it is an issue. Shestated:6 Alfex Doors & Windows Ltd v Alutech Windows & Doors Ltd (2001) 16 PRNZ 963 (CA) at [15].7 Alfex Doors & Windows Ltd v Alutech Windows & Doors Ltd, above n 6, at [9].8 Beckett Books Ltd v Moving Out 2012 Ltd [2015] NZHC 669.[13] The question of a contingent claim may be more serious, but again,the central question appears to be whether the claim has a substantialenough basis to place the debt in doubt. In Datasouth Holdings, MasterVenning found that contingent and unquantified counter-claims or set-offscould not assist an applicant to set aside a statutory demand in this situation,because the counterclaim or set-off must be quantified so that the Courtcould determine whether the amount specified in the demand less theamount of the counterclaim or set-off was less than the prescribed amount.But in that case, it was unclear whether the applicant would actually be ableto identify any quantifiable sum at all, because no claim could exist unlessand until its customers decided to make claims. The applicant was not incharge of that process. So the existence of the counterclaim, not just thevalue of it, was in issue. It was not clear that the counterclaim was worthanything at all.[14] Likewise, in Alfex Doors and Windows it was unclear whether thecounterclaim was worth anything at all, because there was insufficientevidence to show that it had any merit, let alone whether it was worthenough to place the debt in doubt. It was the contingent nature of the claim,not the fact that it was unquantified, that was decisive. It was contingentin that it was dependent on the outcome of litigation between the applicantand a third party. [17] The claim in the present case is unquantified, but it is not contingentin the sense contemplated by the above cases. Those cases are contingentin the sense that the very existence of a counterclaim or debt to set offagainst the statutory demand depends on the outcome of an external eventover which the applicant party has no control. In this case, the existence ofa counterclaim is not dependent on such an external event. It is indeedunquantified, but it is capable of quantification and, as pleaded by theapplicant, appears to be of a substantial size. So long as there is someevidential foundation establishing that there is a real possibility of asuccessful counterclaim, and the counterclaim is not excluded by thecontract, Beckett Books will have established what it needs to establish inorder for s 290(4) to apply.[42] In United Homes (1988) Ltd v Workman, decided shortly after CovingtonRailways, the Court of Appeal returned to the requirements of proof of an applicant'sassertions of circumstances said to cut across an entitlement to payment:9[24] Mr Grant amplified by two further affidavits. The first (24 January 2001)stated the directors had not authorised a distribution; and had not signed acertificate of solvency under s52(2) in relation to those accounts. Thedocuments on which the Workmans were relying were, Mr Grant deposed, nomore than a "proposal" by two others (Mathers and Johnson) for payment ofdividends, reflected in the "draft" accounts.9 United Homes (1988) Ltd v Workman [2001] 3 NZLR 447.[35] Mr Grant's simple assertion of a "clear express agreement" withoutsubstantiating background is bare to the point of being unconvincing. If anagreement is clear and express, there should be no difficulty in identifying thedate and place of its making, the persons involved in its making, and themanner of its statement and/or recording. No such details are given. If it isclear and express, corroboration might be expected from the other twoshareholding interests involved. There is none. The only word is that of MrGrant. In a matter of such importance, effectively amounting to a freeze uponthe payment of indebtedness and enjoyment of profits, documentation wouldbe expected. There is none produced.Camsing's three heads of set-off[43] Camsing's total set-off claim of at least $242,871.84 comprises alleged costsand losses through three events:(a) October 2017 – alleged defective bottled water - $46,196.41(b) November 2017 – alleged defective boxing - $111,406.93(c) February 2018 – alleged rejected shipment - $85,268.50First set-off: October 2017 bottled water[44] Mr Zhong deposes:Camsing's first issue with Parkers arose in October 2017, when a shipment ofbottled Pure Artesian Water produced by Parkers for Camsing, under Parkers'standard terms and conditions, was rejected by Camsing's Chinese distributorsdue to unidentified foreign particles floating in the bottled water.[45] Mr Zhong exhibits four (photocopy) photographs stated to have been takenfrom a video of a sample of the defective bottled water and said to be showing "foreignmatter found within those bottles".[46] Following a discussion on 2 October 2017, Mr Zhong emailed Mr Speedyconcerning the bottled water in question. He stated that Camsing had been notifiedthat afternoon by Camsing's distributors that they would be lodging a claim in relationto the products.[47] Correspondence followed between Camsing and Parkers, Mr Speedy notingthat Parkers would obtain tests but that it would be unlikely that they would showanything as the shelf samples looked perfect. Mr Speedy requested that Camsingcheck all bottles and then advise costs, good stock and waste stock, whereupon onceParkers had a monetary figure, it would replace the waste stock at no cost.[48] There is no evidence that Camsing responded to the request for a check of allbottles and for details of cost, good stock and waste stock. However, the unresolvedissue over the October shipment together with Camsing's delayed payments in relationto subsequent shipments led to Parkers' issuing the credit note of $24,105.79 (whichParkers subsequently purported to revoke).[49] Against that background Mr Zhong deposes that Parkers owes Camsing inrelation to the October bottled water $24,105.79 and RMB¥100,000. He explains theRMB¥100,000 claim in this way:Camsing had also paid marketing costs of RMB¥100,000 to its Chinesedistributors, who had installed booths in tourist attractions to sell the bottledwater. However, in order to maintain its business relationship with Parkers,Camsing made the decision at that time not to seek reimbursement of theMarketing Costs.[50] Once the Court determined to set aside the statutory demand to the extent ofthe $24,105.79 (representing the revoked credit note), there is no longer a basis toinclude that figure in any set-off claim.[51] That leaves the alleged marketing costs of RMB¥100,000. Mr Gray submitsthat the evidence of Camsing in relation to the marketing costs amount to mereassertion and should be disregarded on that basis if no other. It is clear that Camsingis referring to its own marketing costs for which it must have records. Yet it hasproduced no records to substantiate any figures, let alone a loss. Its evidence is devoidof any analysis of the extent to which its marketing costs had a benefit in relation tothe numerous shipments over which Camsing has made no complaint.[52] The evidence as to this head of set-off also fails at a more fundamental level inthat there is inadequate evidence as to the defects alleged and their extent. Parkersreasonably requested that Camsing check all bottles and advise details of cost, goodstock and waste stock. Camsing does not suggest that it provided such information toParkers. Nor has it given evidence of the details requested. Equally, it has failed toprovide any documentary evidence of any notification by distributors of defect or ofthe lodging of claims by those distributors. Any liability of Camsing to suchdistributors is by its nature contingent. Finally, the quality of the four photographsproduced is such that they carry no evidential weight, particularly in relation to theproposition that Parkers supplied defective product.[53] Camsing does not have a set-off in relation to the October bottled water whichqualifies in terms of s 290(4)(b) of the Act.Second set-off – November 2017: defective packaging[54] Camsing asserts a set-off of $111,406.93 for what it described as "defectiveboxed water costs".[55] The issue over allegedly defective packaging appears to have been first raisedduring the March 2018 period when Camsing was pursuing third party test reportsfrom Parkers. Mr Zhong has deposed that Camsing rejected the February shipmentfor two reasons. First because Parkers was refusing to provide Camsing with the thirdparty test reports. He then explains that the second reason was: because a shipment of the Products supplied by Parkers were defective,both in respect of the packaging, which became unglued and therefore couldnot be used, and in the water quality, which appeared cloudy and to haveunidentified particles in it.It is apparent from Mr Zhong's evidence that the shipment he refers to in this evidenceis an earlier shipment, which can be identified as the November shipment.[56] Mr Zhong exhibited photos of a number of cartons showing defects which"rendered the [bag-and-box] products unusable" and photos showing "the foreignparticles in the bag-and-box water". Mr Zhong did not exhibit the contemporary emailcorrespondence concerning the allegation of defective packaging.[57] Towards the conclusion of his affidavit, Mr Zhong quantified the set-off claimfor the February shipment with a table:64 Camsing will also incur further costs in relation to the rejection of the7560 cartons of 10L Pacific Natural BIB water, which were rejected dueto issues with the packaging.NZD RMBCost of goods $32,886.00Sea freight (AKL-SHA)+ (SHA-AKL)(conservative estimate)$6,600.00VAT (China) 31,808.70ClearCustom/Freight(SHA-WUXI)18,000.00China inland goodsreturn freight(conservative estimate)15,120.00Inspection fee 6,048.00Storage fee 74,520.00Distribution fee 150,000.00Admin fee 30,000.00$39,486.00 325,496.70FX 4.76$68,401.78 $68,401.78Total costs incurred $107,887.78Mr Zhong attached invoices from which the freight and other costs were derived. Bythe time of this hearing, the foreign exchange rate had altered. This led Ms Benningtonto update the set-off claim under this head from $107,888.78 to $111,406.93.[58] Mr Speedy responded in detail in his opposition evidence to the allegations ofdefective packaging. He exhibited a chain of email correspondence commencing19 March 2018 with an email from Regina Ding of Camsing. The email states "Creditnote" as the subject-matter and states:dear DougFor the del date Aug/10/2018 : total del qty is 9600 boxesBcz of the broken bottom part of the box, we got a lot of complain from ourcustomerWe checked the bulk and found 60% of the bulk have such problemWe are repairing those qty .unit repairing charge is $0.3/boxHere is the credit qty, 9600*60%*0.3$=$1728pls send us the credit note and we will pay balance part.Then for the next step :1. You must type the batch number on the box2. how can you avoid such problem again in the next order – pls list out yrimprove plan, before we place the new orders3. another quality complain photo is attached, the black "unknown item" fromthe bag, pls check out[59] Ms Ding attached, as she indicated, a (photocopy) photograph of what she hadreferred to as the black "unknown item". As with other photographs produced byCamsing in this proceeding, the image is poor.[60] Mr Speedy deposes that he understood (clearly correctly) that Ms Ding wasreferring to goods delivered in August 2017 (with August 2018 still months away).Mr Speedy in his evidence refers to clause 81 of the agreement which requiredCamsing to give written notice to Parkers of any failure of any products within 45 daysafter Camsing took risk in the product. Camsing had not done so.[61] Mr Speedy replied to Ms Ding by email on 19 March 2018, stating that Parkerscould not accept the claim on so little evidence, noting also that the goods had beendelivered six months previously.[62] In his email, Mr Speedy also referred to the fact that under the agreement itwas Camsing's responsibility to provide both the boxing and the glue. He indicated itwould be good to know if the glue was separating or the box was separating from theglue. He observed, however, that Parkers had given their staff further training onquality control to ensure boxes were glued well.[63] Mr Speedy concluded his email with the observation that it was very hard totell from the photo what the "black item" was, stating – "it could be anything fromanywhere". He requested that Camsing courier it to Parkers.[64] It does not appear that Ms Ding (or anyone else at Camsing) responded directlyto Mr Speedy's email.[65] Ms Ding, in Camsing's reply evidence, rejected any suggestion implicit inMr Speedy's email correspondence to the effect that any problem with the boxing mayhave arisen from the quality of the components provided by Camsing. Ms Ding notesthat only some of the boxes were broken which she suggests would indicate that therewas nothing wrong with the glue or the boxes provided. She states that it is Camsing'sbelief that the issue arose through a failure of Parkers' staff to use sufficient glue.[66] There is sufficient evidence provided by Camsing to indicate that there was anarguable defect with the boxes received in the August 2017 shipment. But, assubmitted by Mr Gray, the best evidence of the likely cost of repair lies in thecontemporary email sent by Ms Ding. Given Ms Ding's statement that Camsing wasrepairing the defective quantity at a cost of $1,728, that represents the maximum set-off established by Camsing as arguable,[67] To overcome this evidence, Ms Bennington in her submissions provided afurther explanation of Camsing's alleged loss occasioned by the August 2017shipment. Ms Bennington's synopsis records: because Parkers refused to provide the Verifying Third-Party Test Results,Camsing is not able to sell any of its defective products from China.Therefore, it contend (sic) that it is entitled to seek reimbursement of allwasted costs it has incurred in respect of all the defective products producedand supplied by Parkers.[68] I first observe that Camsing provided no evidence to support the impliedassertions of causation contained in Ms Bennington's submission. There is no basison the evidence to accept the theory of causation advanced by Ms Bennington. Theproducts in question had been delivered in 2017. As stated by Ms Ding, repairs werebeing attended to, meaning that the product was already in Camsing's hands. Camsinghas not produced documentary evidence to support a proposition that it is unable tosell products which are already in its control (as against products which agovernmental authority may be refusing to release). Finally, I note that Camsing hasproduced no evidence as to what must have been (on Ms Ding's account of it) 40 percent of product which had been received in August in sound packaging and able to besold.Third set-off – February 2018 shipment costs[69] Mr Zhong in his affidavit referred to the deterioration of the Camsing/Parkers'relationship from February 2018. He explained that in that month: following repeated issues with the quality of the Products being suppliedby Parkers, and complaints by Camsing's Chinese customers to its distributorsand to the Chinese Government authorities, Camsing made the decision toterminate the Agreement. Hence, the first notice of cancellation on12 February 2018.[70] That month Parkers produced and shipped to China six further containers ofbox-and-bag products (the February shipment). The issues ensued between the partiesas to payments held back by Camsing and documents held back by Parkers. Mr Zhongdeposed as to what happened then:Camsing had explained to Parkers that it had been experiencing a high rate ofreturn of the Parkers-packaged Products, and that a number of Camsing'sChinese-based customers had laid complaints with the relevant ChineseGovernment authorities regarding the water quality. Camsing also explainedto Parkers that, as a result of these complaints, the Chinese Government wasrequiring Camsing to provide proof of third-party testing in relation to theCertificate of Analysis that were provided with each shipment of the Products("Third-Party Test Reports"). Camsing refused to pay the March Paymentbecause Parkers refused to provide the Third-Party Test Reports, which theChinese Government was seeking as a pre-condition to it releasing theFebruary shipment.[71] Emails were exchanged through this period, but the stand-off continuedthrough to Camsing's purported termination of the agreement on 10 April 2018.[72] Parkers in that period maintained that under the agreement it was required toprovide its Certificate of Analysis, but was not required to provide Third Party TestReports (which sit behind the Certificate of Analysis).[73] Mr Zhong in his affidavit explains the claim for costs incurred due to therejection of the February shipment:Camsing cannot address the issues raised by the Chinese Government, orprovide the Chinese Government with the evidence it requires, becauseParkers refuses to provide the Third-Party Test Reports to confirm its reportsof "not detected" in respect of the ND Contaminants in the water produced byParkers. Therefore, the Chinese Government is rejecting the Products. As aresult of that rejection Camsing will incur the following costs:NZDCost of goods $58,508.50Sea freight (Napier-China) $7,800.00Sea freight (China-Napier)conservative estimate)$7,800.00Storage in port fee $11,160.00Total $85,268.50[74] Mr Zhong did not provide a breakdown of the alleged cost of goods of$58,508.50. He exhibited four documents of which two were in Chinese anduntranslated. Each of the documents bore someone's handwriting with calculationswhich were not explained by Mr Zhong.[75] Ms Bennington, in her written submissions, did not explain how the cost itemsclaimed by Mr Zhong were justified by the documents exhibited. In her oralsubmissions (in reply), Ms Bennington accepted that the $58,508.50 figure for "costof goods" could not be justified on the documents. She suggested that she couldestablish that a figure of $37,132.41 was justified for cost of goods and proceeded toseek to demonstrate that by reference particularly to handwritten notations on theexhibited documents. Her explanation in oral submissions did not flow naturally fromwhat is in evidence.[76] Equally for the other costs items claimed (freight and port fees) I have beenunable to determine by reference to the documentary evidence that any of the figuresclaimed are reliable.[77] Mr Zhong's affidavit was sworn on 7 May 2018, appreciably after Camsinghad raised issues as to complaints made to Chinese Government authorities, and somethree months before the hearing of this application. The failure of Camsing to properlyquantify and verify its alleged losses is unexplained. This is not a case where the Courtcan nevertheless infer that there must be a substantial set-off claim available,regardless of its uncertain amount. It would be inappropriate for the Court to treatMr Zhong's figures of alleged loss as having any reliability. That is sufficient topreclude Camsing's reliance, under s 290(4)(b) of the Act, upon its alleged loss inrelation to the February shipment.[78] Had that not been the case (by reason of Camsing's failure to adequatelyquantify its set-off), the same outcome would have occurred by reason of Camsing'sfailure to adequately document its alleged inability to take delivery of the February2018 shipment in China. In Mr Zhong's evidence (above at [70]), he states that theChinese Government was "rejecting the February shipment". It is not disputed thatParkers successfully shipped the product that month, with risk therefore passing toCamsing. Camsing in this proceeding carries the burden of establishing that thevarious components of a cause of action are made out. Just as Camsing providedinadequate evidence of quantification, it is also provided inadequate evidence of thecircumstances which it asserts prevented it from taking delivery of the goods in China.Camsing has not produced a single document from relevant third parties (whethergovernmental or otherwise) which corroborate Mr Zhong's allegations that there hasbeen a blocking intervention by the Chinese Government.[79] As in United Homes the Court is left with Mr Zhong's evidence as "the onlyword".10 Corroboration is lacking. Camsing's deponents do not explain the lack ofsupporting documentation or evidence from a third party.Conclusion on three heads of set-off[80] Camsing has established that it appears to have an arguable set-off of $1,728arising from the allegedly defective packaging. That will be taken into account in theorder to be made in relation to Parkers' statutory demand. Camsing has failed toestablish to the required standard the arguability of any of its remaining set-off claims.November 2017 shipment[81] I will briefly address Camsing's reply evidence in relation to a November 2017shipment although it does not make up any of the sums claimed by Camsing asconstituting set-offs.[82] In her reply affidavit, Ms Ding deposed that there had been "discovery of aserious contamination issue with the water supplied by Parkers in November 2017".She deposes that in July 2018 Camsing was informed by one of its customers thatcontaminated November water products had failed a basic food safety test, with theresult that the products could not be sold in China. Ms Ding stated that the financialclaims to be made by Camsing against Parkers are likely to increase significantly. Sherefers to significant claims from affected customers and the risk of civil fines. Sherefers to Camsing being "currently in negotiation with its affected customers".[83] Ms Ding attaches to her 30 July 2018 affidavit Chinese certificates, from whatappears to be a Shanghai testing agency (with certified translations attached). Thecertificates refer to the product sampled as having been produced by Parkers inNovember 2017. Ms Ding has not exhibited any of the correspondence which onewould have expected to have taken place between customers and Camsing in relationto alleged defects in the products and the outcome of testing. No evidence has beenprovided from the customer or customers said to have been involved.10 United Homes (1988) Ltd v Workman, above n 9, at [33].[84] In the event, Camsing has not asserted in this proceeding a set-off in relationto this recently-emerged evidence. Camsing did not seek an adjournment of thishearing in order to provide better evidence.[85] The evidence, such as it is, takes Camsing's response to the statutory demandno further. Even had Camsing proffered a suggested amount of loss flowing fromissues relating to the November 2017 shipment, Camsing would not have establishedany sufficient basis for the Court to find arguable an entitlement to claim damages.Outcome[86] The statutory demand will be set aside except as to the sum of $56,436.93.That sum represents the invoices indisputably owing to Parkers in the sum of$58,164.93 less Camsing's arguable set-off of $1,728. I will be reserving costs. Theparties might consider that costs should lie where they fall having regard to the part-success of each party. In the event the parties do not so agree, costs will be determinedon memoranda filed, with Camsing's memorandum to be filed within five workingdays and Parkers' within five working days thereafter (four page limit in each case).In the event no application for costs is made within five working days the Court's order(without further minute issuing) will be that there is no order as to costs.Orders[87] I order:(a) The statutory demand issued by Parkers Beverage Company Ltd on23 April 2018 is set aside except as to $56,436.93.(b) The time for Camsing Trading Ltd's payment pursuant to the demand isextended to 10 working days from the date of this judgment, and failingpayment by that date, Parkers Beverage Company Ltd will be entitled tofile an application for liquidation.(c) Costs are reserved.Associate Judge OsborneSolicitors:Duncan Cotterill, AucklandSainsbury Logan & Williams, Napier