CONFIDENT TRUSTEE LIMITED v GARDEN AND TREES LIMITED [2017] NZCA 578

CONFIDENT TRUSTEE LIMITED v GARDEN AND TREES LIMITED [2017] NZCA 578 [8 December 2017]IN THE COURT OF APPEAL OF NEW ZEALANDCA144/2017[2017] NZCA 578BETWEEN CONFIDENT TRUSTEE LIMITEDAppellantAND GARDEN AND TREES LIMITEDRespondentHearing: 7 September 2017Court: Asher, Courtney and Gendall JJCounsel: W A McCartney for AppellantD A Jaques for RespondentJudgment: 8 December 2017 at 10 amJUDGMENT OF THE COURTA The appeal is allowed.B The statutory demand served by the respondent on the appellant is setaside.C The order for costs in the High Court in favour of the respondent isquashed.D The appellant is entitled to costs in the High Court on a category 2B basistogether with any disbursements to be approved by the Registrar.E The respondent must pay the appellant costs for a standard appeal on aband A basis and usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Gendall J)[1] The appellant, Confident Trustee Ltd (CTL), appeals against a decision ofAssociate Judge Christiansen in the High Court at Auckland dated 16 March 2017refusing to set aside a statutory demand served on it by the respondent, Garden andTrees Ltd (Garden and Trees).1 The statutory demand claimed payment of $21,753.36described as "the balance cost of services provided under invoice 1057 dated8 March 2016".Background[2] Garden and Trees were contracted by CTL to clear a large 7.3 hectare site priorto earthworks for a residential subdivision development CTL was to undertake there.A contract price quote/estimate for the work of $58,420 was provided on 1 February2016.[3] Timing was important. It is accepted by the parties that Garden and Trees hadagreed to complete the required work under the contract within three weeks ofcommencement. CTL says time was of the essence because it had contracted withCameron Civil Ltd for civil engineering earthworks to commence on the site inmid-February 2016. Garden and Trees says, however, that when it planned to start thework early in February 2016 CTL advised it that it could not commence due to"consent" not being issued.[4] Although there is some dispute over what this might have meant, it is acceptednow that earlier on 26 January 2016 resource consent for the work on the property hadbeen issued to CTL.[5] Garden and Trees' position, however, is that CTL did not advise it until 4 pmon 15 February 2016 that work could commence to clear and remove the vegetationon the site and it commenced work shortly thereafter. CTL says this was clearly notthe case. It maintains that Garden and Trees had started work early in February 20161 Confident Trustee Ltd v Garden and Trees Ltd [2017] NZHC 470.but it was incapable of fulfilling the contract because its machinery was not suitableand it had insufficient labour to complete the work within the required three-weekperiod. Bearing in mind that crucial and mandatory three-week requirement forcompletion, this progress was entirely unacceptable.[6] On 24 February 2016, CTL brought in another contractor to the site,Tree Safe Ltd (Tree Safe) to assist in completing the work.[7] CTL says that two days later, Garden and Trees refused to carry out any furtherwork and unilaterally left the site. Garden and Trees disputes this and says effectivelyit was dismissed by CTL at the time so it left. Later, Garden and Trees issued aninvoice to CTL for $56,753.36 for what Garden and Trees said was the amount duefor work under the charge-up contract actually carried out. Earlier, Garden and Treeshad been paid by CTL under the contract an advance payment of $20,000. A furtherpayment of $5,000 was made on 11 February 2016, and another payment of $10,000followed some time after.[8] Garden and Trees maintains CTL has never challenged the quality of its workor the price charged for it. It says that CTL has only ever claimed a set-off for a greateramount arising from its claim that Garden and Trees was not able to complete the workwithin the required three-week period.[9] In response, CTL says that Garden and Trees unilaterally left the site on26 February 2016 having completed no more than 40 per cent of the job. The totalpayments of $35,000 it has made CTL says amount to more than 50 per cent of the$58,420 contract price. In addition to the amounts it paid to Garden and Trees, CTLsays it had to pay another $66,684.02 to the second contractor, Tree Safe, to completethe job.[10] It was not until November 2016 that Garden and Trees issued the statutorydemand requiring payment of the $21,753.76, being the amount it had invoiced lessthe $35,00 already paid by CTL. CTL then applied to set aside this demand.[11] Later, in January 2017, Garden and Trees issued another invoice to CTL withrespect to this contract. This invoice was for $22,996.15. Garden and Trees maintainsthis related to additional work undertaken including the removal of a shed and concretepad carried out as part of the contract. Subsequently Garden and Trees issued a secondstatutory demand based on this invoice (the second statutory demand). CTL hasapplied to set aside this second statutory demand but that application has beenadjourned pending the determination of the present appeal. This appeal relates onlyto the first statutory demand.The High Court decision[12] In his decision, Associate Judge Christiansen dismissed the application to setaside the statutory demand finding there was no substantial dispute over the debt, anddirected a one-week period for CTL to comply with the demand.[13] In doing so, Associate Judge Christiansen made a number of findings:[31] There are some elements of fact which are in dispute. Primarily theyconcern the engagement of Garden and Trees to do work when relevantconsent or approval considerations clearly affected the ability of that work tobe undertaken.[34] The evidence strongly suggests that 15 February 2016 was the startingdate of Garden and Trees' services the consent or approval even for thepreliminary vegetation clearance work had not been authorised.[41] In the Court's view it is clear Garden and Trees' invoice is acalculation of actual costs and that its earlier estimate did not preventinvoicing for actual costs that were incurred.[49] CTL's case is not supported by evidence disputing claims that thework invoiced for was done. There was no suggestion of that work not havingbeen done adequately. Courts will usually grant a setting aside applicationwhere facts and assessment suggests there are serious questions to be tried. Inthis case CTL's focus is about claims that there was a fixed price contract; thatGarden and Trees has been adequately paid; and that Garden and Treesbrought that arrangement to an end when they withdrew their services.[50] While it is not this Court's function at this time to resolve questionsof conflict in evidence, nor is it required to accept without question whateverstatements may be made.[51] The Court has already detailed reasons why the evidence of Mr Welch[from Garden and Trees] is to be preferred. The estimate did not includereference to shed clearance or concrete slab removal. Nor is it likely that workwould have been requested initially if the vegetation clearance work wasrequired to be done within a tight timeframe — as CLT claims was required.[52] The evidence of Mr Welch is supported in part at least by the evidenceof Mr Gibbons and Mr Pope. On the other hand, and as Mr Jaques [counselfor Garden and Trees] submits CTL has no paperwork, no emails, no recordsof phone calls to support Mr Yuan's [from CTL] contentions. Claims of therebeing no obligation to pay, were not raised until the statutory demands wereserved, despite frequent requests for payment having earlier been made.[56] Finally, it is clear for reasons already detailed that CTL effectivelycancelled its contract with Garden and Trees thereby justifying them leavingthe site.Grounds of appeal[14] The specific grounds of appeal advanced by CTL here involve claims that:(a) The number and extent of conflicts of evidence are such that it cannotbe said that CTL does not have a credible defence to Garden and Trees'statutory demand.(b) The judgment under appeal turns on credibility findings as to witnesseswho were not present or cross-examined.(c) There is no reasonable basis for the High Court's preferring of theevidence of witnesses for Garden and Trees over the evidence ofwitnesses for CTL.(d) A finding central to the judgment that there was no resource consent (orany consent) for the contract works to begin before 15 February 2016is contradicted by material before the Court.(e) Associate Judge Christiansen did not apply the correct legal test whichis whether CTL had established a fairly arguable basis on which it isnot liable on the statutory demand.Relevant principles[15] It is clear from s 290(4) of the Companies Act 1993 that a Court may grant anapplication to set aside a statutory demand if it is satisfied there is a substantial disputewhether or not the debt is owing or is due, or the debtor company appears to have acounterclaim set-off or cross-demand which generally is near to or exceeds the amountof the claimed debt.[16] The general principles under s 290(4) are well settled:2(a) The onus is on the applicant seeking to set aside the statutory demandto show that there is arguably a genuine and substantial dispute as tothe existence of the debt. The Court's task is not to resolve the disputebut to determine whether there is a substantial dispute that the debt isdue.(b) The mere assertion that a dispute exists is not sufficient. Material shortof proof is required to support the claim that the debt is disputed.(c) If such material is available, the dispute should normally be resolvedfirst in ordinary civil proceedings before any statutory demand isissued.(d) If a counterclaim, cross-demand or set-off is suggested an applicantmust establish that this is reasonably arguable in all the circumstances.(e) It is not usually possible to resolve disputed questions of fact onaffidavit evidence alone, particularly when issues of credibility arise2 See for example Carpet Plus 2003 Ltd v A Team Flooring Specialist Ltd HC Auckland CIV-2008-404-4725, 19 January 2009 at [4]; and Risecorp Investment Trustee Ltd v Staywell HospitalityManagement Ltd [2015] NZHC 1277 at [12]–[13].unless such evidence is contrary to the available documents or earlierstatements made by the parties.Analysis[17] In the present case we are unable to agree with Associate Judge Christiansen'sconclusion that CTL had not raised a genuine and substantial dispute that the debt inquestion is outstanding. We find that there are some significant factors that indicatethere is a real dispute between the parties here. In reaching this view we have takeninto account a number of factors which include:(a) The largely oral contract between the parties was concluded on or about1 February 2016 and required the site clearance work to be undertakenas a matter of urgency. This contract had a mandatory three-weekcompletion requirement.(b) The contract seemed to reflect what was likely to be a price estimate,but arguably could have been a quote of $58,420. This was outlined inan email from Garden and Trees dated 1 February 2016.(c) All parties accept there was clear urgency under the contract to havethe work completed (given that programmed earthmoving works byCTL's engaged contractors, Cameron Civil, were to follow) with thethree-week mandatory timeframe agreed to.(d) The resource consent for development work on this site was issued on26 January 2016. It may have been that informal "approval" wasneeded from the Auckland Council before several pine trees standingnot on CTL's site but on a neighbouring Council reserve were removed.However, there seems little doubt from the evidence that Garden andTrees began work on the site itself (including vegetation clearancework), as they were allowed to, from early February 2016.(e) There was a site meeting on 15 February 2016 which includedrepresentation from Cameron Civil by its managing director,Mr Wilson, who attended at that time. The purpose of this meeting wasto plan for the further site development work which Mr Wilson sayswas expected to commence soon after 15 February 2016. Mr Wilsonwent on to say in his evidence, however, that this could not happenbecause of the parlous condition of the site with substantial vegetationand trees still to be cleared. And, both independent parties at the15 February 2016 meeting, Mr Wilson from Cameron Civil andMr Pope from the Council, confirmed in their evidence that vegetationclearance across the majority of the site had already commenced at thatpoint.(f) On 24 February 2016 CTL employed the other contractor, Tree Safe,on the site because of what it said were the delays on the part of Gardenand Trees in completing the work. That new contractor, it appears,attacked the clearance work with great urgency, as the evidence ofMr Wilson of Cameron Civil and Mr Pope from the Council confirmed.(g) CTL says that Garden and Trees was paid a sufficient amount totalling$35,000 for the work it had completed, comprising only about40 per cent of the total required, prior to termination of its contract onor about 24 February 2016. Given the amount of work done, it is atleast arguable that this was sufficient payment. The subsequentengagement of Tree Safe to complete the work, at a further cost to CTLexceeding $66,000, would tend to support this conclusion.(h) As to the disputed question over whether CTL effectively dismissedGarden and Trees when the other contractor, Tree Safe, arrived on siteon 24 February 2016, or whether instead Garden and Trees unilaterallyleft the site, the evidence on that is equivocal, and needs to be tested onthe basis of all the evidence.(i) CTL contends that Garden and Trees brought to the site insufficientlabour and inadequate machinery and, therefore, was quite incapable ofcompleting the work in the short timeframe agreed to. AlthoughGarden and Trees disputes this claim, evidence from Mr Yuan andindependently from Mr Wilson provides support for the contention.(j) It is a matter that raises a question as to the bona fides ofGarden and Trees that almost one year later in January 2017 it belatedlyissued a further invoice to CTL for $22,996.15 followed by the secondstatutory demand for work said to be carried out under the originalcontract. On its face, the invoice appeared to show charges for the sameitems.[18] With all these matters in mind we are of the clear view that, notwithstandingAssociate Judge Christiansen's conclusions to the contrary, this is a case wheresignificant material conflicts of evidence were before the Court. Disputed questionsof fact needed resolution here before it could be said that there was a genuine andundisputed debt in existence.[19] As we have indicated, there are significant issues as to the quantum of damagesclaimed. We say this bearing in mind two matters. First, amounts which would nowtotal about $57,000 are claimed by Garden and Trees for what CTL says was onlyabout 40 per cent of completed original contract work (and this excludes Garden andTrees' second statutory demand for a further $22,996.15). Secondly, a substantialadditional amount of something in excess of $66,000 was incurred by CTL to have thework completed after 24 February 2016 by the second contractor, Tree Safe.[20] An issue has arisen, too, over removal by Garden and Trees of a shed and aconcrete pad from this site sometime between early February and 15 February 2016.It is claimed by Garden and Trees this was outside the original clearance contract andamounts charged to CTL for this work were additional. This issue, however, is outsidematters relevant to the present application to set aside the first statutory demand.Mr Welch in his affidavit, in addressing this aspect on behalf of Garden and Trees,deposes:I have issued Jeff [Mr Yuan] and the Applicant an invoice for this workseparately and it does not form part of the Statutory Demand at the centre ofthis application.(Emphasis added.)Result[21] We cannot agree with Associate Judge Christiansen's finding that CTL had notraised a genuine and substantial dispute as to the existence of the debt or acounterclaim which exceeded amounts that may have been due. As we have set outthere are substantial conflicts in the evidence, and there are arguable inherent problemsin the claim, and the amount claimed. The true position cannot be resolved in thecontext of this setting aside application.[22] Accordingly, the appeal is allowed. The whole of the High Court judgment,including the costs order, is set aside. The result is that the statutory demand is setaside.[23] The appellant is entitled to costs in the High Court on a category 2B basistogether with any disbursements to be approved by the Registrar.[24] The respondent must pay the appellant costs for a standard appeal on a band Abasis and usual disbursements.Solicitors:Carson Fox Legal, Auckland for AppellantAurora Law Limited, Waiuku for Respondent