EZIBUY LIMITED v GLACIER INVESTMENTS LIMITED [2020] NZHC 3158

EZIBUY LIMITED v GLACIER INVESTMENTS LIMITED [2020] NZHC 3158 [30 November 2020]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2020-404-1753[2020] NZHC 3158UNDER the Companies Act 1993IN THE MATTER of a statutory demand served on11 September 2020BETWEEN EZIBUY LIMITEDApplicantAND GLACIER INVESTMENTS LIMITEDRespondentHearing: 16 November 2020(By AVL)Appearances: C R Vinnell and C Jolliffe for the ApplicantI J Thain for the RespondentJudgment: 30 November 2020Reissued: 1 December 2020JUDGMENT OF ASSOCIATE JUDGE LESTERThis judgment was delivered by me on 30 November 2020 at 4.30 pmpursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy Registrar30 November 2020Note: This Judgment was re-issued on 1 December 2020 to reflect a change to para [87]. Thisamendment has been made under the Slip Rule.[1] The applicant, Ezibuy Limited (Ezibuy), is a clothing retailer selling bothonline and from retail outlets.[2] The respondent, Glacier Investments Limited (Glacier), had on its ownevidence, supplied garments to Ezibuy for over 30 years. Mr Sew Hoy of Glacierdescribed the process by which garments were supplied as involving Glacier meetingwith Ezibuy to review clothing samples from which Glacier would take photographs,fabric cuttings and notes. Glacier then discussed the production of those items withits suppliers, the majority being based in China. That process takes some months,from the initial meeting through until the delivery of stock. While the exacttimeframes are not agreed, the orders in issue in this case were placed in aroundOctober 2019 for delivery early May 2020.[3] This proceeding concerns a statutory demand issued by Glacier to Ezibuy inthe sum of $1,310,524.88. While in oral submissions some questions were raised byEzibuy over relatively small sums, the application to set aside the statutory demandproceeded on the basis the amount claimed in the statutory demand was not subject todispute and the goods to which the debt related were supplied by Glacier to Ezibuyand the amount of the debt has fallen due.[4] Ezibuy seeks to have the statutory demand set aside on the grounds that it hasa set-off or counterclaim which exceeds the amount of the debt.Law relating to statutory demands[5] Counsel were agreed as to the principles relating to an application to set asidea demand. The applicant must show there is arguably a genuine and substantial disputeas to the existence of the debt; a mere assertion of a dispute is not sufficient. Materialshort of proof is required to support the claim that the debt is disputed and if suchmaterial is available the dispute should normally be resolved through a process otherthan the statutory demand process. In a challenge to a statutory demand it is notusually possible to resolve disputed questions of fact.11 AAI Ltd v 92 Lichfeld Street Ltd (in receivership and in liquidation) [2015] NZCA 559, [2016]NZAR 559 at [19].[6] Both counsel recognised that this case involves a set-off or counterclaim for anunliquidated sum and so the following approach applies:2It is more difficult if, on the applicant's side, there is an indisputable liquidatedsum, but the other party's claim is for an unliquidated sum with liability and/orquantum in dispute. Then, in order to impeach the statutory demand andovercome the presumption that the company is unable to pay its debts whenit has 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[emphasis added]The terms of trade between the parties[7] There is, in this case, an element of what is referred to in Burrows, Finn andTodd on the Law of Contract in New Zealand as "the battle of the forms".3[8] On 13 December 2016, Ezibuy's terms were signed. On 20 December 2016,Ezibuy signed an application for credit to open a credit account with Glacier. Thecredit account form included a one page Terms of Trade. Ultimately, I do not considerthe dispute in relation to which Terms of Trade apply, needs to be resolved to determinethis application.Background to the counterclaim[9] At the heart of Ezibuy's counterclaim is Glacier's cancellation of the ordersplaced in October 2019 for delivery to Ezibuy in early May 2020. Ezibuy says Glacierwas not entitled to cancel those orders, giving rise to a breach of contract claim, orthat Glacier misled it in that regard, initially saying to Ezibuy that the orders were onhold, when in fact they had been cancelled with manufacturers, and Glacier only later2 Covington Railways Ltd v Uni-Accommodation Ltd [2001] 1 NZLR 272 (CA) at [11].3 Jeremy Finn, Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contractin New Zealand (6th ed, Lexis Nexis Wellington) at [3.39].disclosing cancellation to Ezibuy in breach of the Fair Trading Act 1986. Ezibuy saysit suffered loss of profits in relation to stock Glacier wrongly failed to deliver, or asa result of it being misled as to the status of its orders.[10] As the following review of the correspondence shows, the above is the broadestof summaries of the counterclaim and it is necessary to examine in detail how andwhen the orders were put on hold/cancelled, what Ezibuy was told in that regard,and what Ezibuy did in response.[11] The key communications in relation to Ezibuy's orders occurred between3 March 2020 and 1 May 2020. The starting position is Ezibuy placed orders in late2019 for garments to be delivered in early May 2020 (the orders).4[12] The orders were accepted by Glacier. Prior to the orders being placed, Ezibuyhad an overdue debt to Glacier of approximately $1,500,000. A payment plan wasagreed in July 2019, prompted by an email from Glacier to Ezibuy saying thatEzibuy's delay in payments was impacting on Glacier's relationships with itsmanufacturers in China and Bangladesh.[13] By the start of March 2020, Ezibuy was in arrears again. Agreed paymentterms were 90 days from the date of delivery to Ezibuy. As at 3 March 2020, Ezibuyaccepts it had an overdue balance, that is, beyond 90 days, of $178,000.[14] While from late March 2020 to 1 May 2020, Ezibuy asserted that its accountwith Glacier was within trading terms, Glacier did not accept that. A reconciliation ofthe balance between Ezibuy and Glacier as to what, in fact, fell due from lateMarch 2020 has not yet been agreed, so it is not possible in this application todetermine whether, once the arrears of $178,000 had been paid, Ezibuy's account wasever current.[15] However, the key point is Ezibuy accepts it was in arrears as at 3 March 2020.4 The exact date the orders were placed is disputed, but is not material.[16] On 3 March 2020, Ms Rees of Ezibuy sent Mr Sew Hoy of Glacier, an emailwhich listed the following six points under the heading "Notes from our meetingtoday":1. We will reconcile the accounts for Glacier using your info provided tounderstand where the differences are occurring – finance will provided[sic] this info and Ill feedback [sic] back to you by Friday (accounts todo this recon)2. You will send me examples of [where] the team are wanting to fine youfor late deliveries either due to production issues (coronavirus) orpayment issues3. You will email examples of interest charges on invoices that are overdue.4. I will confirm with you weekly via email the estimated amounts we willpay Glacier these payments are made on Wednesday and Fridays. Ourplan is to get you back to your TT as soon as possible.5. If you wish to halt production or cancel any orders you have alreadyreceived from us to reduce your exposure to Ezibuy this is yourprerogative. We only ask that you let us (buying team) know which orderswill be affected.6. Richard and I will work with the new team in Sydney to ensurecommunications are improved and your enquiries to accounts areresponded to in a timely manner.\[17] Paragraph 5 in the preceding paragraph is central to this application.[18] In a separate email of 3 March 2020, Ms Razak of Ezibuy advised Glacier thatEzibuy would not place any new orders with Glacier until it " can meet payments"and if Ezibuy " is up to date with payment prior to June 2020 - Ezibuy is welcomedby Glacier to start raising orders on the 90day payment terms". The email concludedthat Ezibuy would be in contact " to confirm x3 fortnightly payments of $150k byFriday 6 March".[19] Glacier says, and Ezibuy does not dispute, that Ezibuy did not complete thesteps set out in the preceding paragraphs.[20] On 20 March 2020, Glacier sent the email set out below to Ezibuy (the Holdemail). It is not entirely clear on the evidence whether as at 20 March 2020, Ezibuyhad paid the $178,000 accepted as overdue or not, as I will refer to below. The email,which is also central to this application, is as follows:From: Helen Meisner []Sent: Friday, 20 March 2020 3:27 p.m.To: Marielle Le Couteur []Dear Marielle, Leigh, Katy, Natalia & Noemie, It is with greatest regret weneed to advise, that as of today, all Ezibuy bulk deliveries are on hold.It is unfortunate that the payment contract made with Ezibuy managementsome weeks ago, to catch up on overdue payments has been reneged on andthe amount outstanding continues to increase.This leaves our hands tied. Over and above it being unwise to increase ourrisk by incurring even larger outstanding amounts, we quite simply cannotafford to pay for goods and delivery until sufficient payments are receivedfrom Ezibuy to enable us to continue with current orders.For your understanding of the situation, our terms of trade are 90days andthere is currently a significant amount overdue beyond that by a further 30daysand more. A payment schedule to try to catch-up was agreed and signedbetween Ezibuy management & Glacier. This payment schedule has not beenupheld by Ezibuy.Now, suppliers are withholding the issue of Original Bill of Lading documentsuntil payments are received. Without these docs, the goods cannot be upliftedfrom bond.Helen.Helen MeisnerProduction ManagerGlacier Investments Limited[address and contact details][21] As I have said, as at the end of March 2020 there was significant disagreementbetween the parties as to whether Ezibuy was in arrears. As at 25 March 2020, Glaciersaid Ezibuy was in arrears by $306,216.83. However, Ezibuy, having paid the$178,000, says it was within the agreed 90 day terms.[22] In response to the Hold email, Mr Rees of Ezibuy replied on the followingworking day, Monday 23 March 2020, in an email which includes the following:We will commence a review this week of all our commitments with Glacierand work on cancelling orders and shifting production. Lynette and Julia willcoordinate this with your team to mitigate both parties risks. Currently ourforward commitments with Glacier are showing NZD$2,576,059. Note, theteam will require samples back of those PO's that we cancel. [PO's beingpurchase orders][23] The email concluded by referring to the payment of $178,000 and said: "Weare also asking all our suppliers to support us in 150+ days terms during thischallenging time." This is a reference to the COVID-19 pandemic. The email alsoasserted that Ezibuy was within payment terms.[24] Glacier rejected the request for 150 days payment terms in an email sent toEzibuy on the afternoon of 24 March 2020.[25] The request for payment terms of 150 days from receipt of goods was repeatedin a further email from Ezibuy sent on the evening of 24 March 2020 in which itreferred to New Zealand going into level 4 lockdown that evening. The email soughtconfirmation by the end of the week that Glacier confirm it agreed to the new paymentterms and "[t]hat you are able to continue BAU [business as usual] with our team thisincluded [sic] production order movements etc.?".[26] On 25 March 2020, Glacier sent an email to Mr Sam Spibey of Ezibuy whichsaid:Hi Sam, While it is true there are some orders on the way, unfortunately at thisstage we will not be able to deliver them. Suppliers prefer to have the stockshipped back than to deliver and not be paid for it.[27] Mr Spibey then circulated the Hold email to a number of recipients withinEzibuy under the subject line "Glacier Orders on Hold" saying:Hi all,Just spoke to Helen at Glacier and she confirmed that anything already on thewater will also not belong to us. I quickly spoke to Roger about Glacierorders and their current status last week and his amazing report showed whatwe were still expecting from Glacier.Lynette how would you like us to approach managing this?.[emphasis added][28] On 26 March 2020, Ms Lynette France of Ezibuy, forwarded the emailexchange to Ms Meisner of Glacier. The email began:I appreciate you have been communicating with Dawn Rees on paymentissues, however I need to be clear on the production of our future orders.Please continue to work with Dawn on outstanding payments.My challenge is to continue to manage the production and supply of goodsordered to fulfil the ranges we have created.[29] One of Glacier's manufacturers in China is James Knitwear. On20 March 2020, Ms Meisner emailed James Knitwear cancelling a number ofEzibuy's orders because of a combination of factors beyond Glacier's control. Thereasons related to measurements being out of tolerance and late deliveries, in part dueto the impact of COVID-19 in China. The email concluded:We are telling you this immediately so that you do not proceed with furtherbulk production. We are currently in negotiation with our buyer to try andsave some of the orders of goods on the water.[30] The email did not refer to any default by Ezibuy, nor was it copied to Ezibuy.Then, on 27 March 2020, Ms Meisner sent a further email to James Knitwear whichbegan:Hi James, This email is to re-iterate and ensure you are very clear, that as myemail below and Jialins information that ALL orders to Ezibuy that are not yetdelivered to the buyer, are cancelled. You should not proceed any further withproduction or shipping.Please confirm you understand clearly that this applies to ALL ORDERS.[31] The email goes on to refer to difficulties in obtaining payments from Ezibuy.[32] As at 20 March 2020, Glacier had informed Ezibuy that its orders were onhold,5 and that orders that were on the way were not able to be delivered.6 Glacier didnot tell Ezibuy that the orders had been cancelled until 1 May 2020.[33] The theme of the correspondence through April 2020 is Glacier calling forpayment of sums that Glacier considers were overdue, and Ezibuy asserting that it was5 See [20] above.6 See [26] above.current. To address Glacier's concerns, Ezibuy made a number of further payments inApril 2020 expressly on the basis that it said it was current.[34] On 17 April 2020, Ezibuy emailed Glacier seeking an update as to the statusof its purchase orders. Glacier replied confirming that it could not provideinformation about the purchase orders until a further $600,000 was paid.[35] On 18 April 2020, Ezibuy renewed its request for an update on purchase ordersand, again, Glacier said it would not provide an update unless $600,000 was paid.[36] On 22 April 2020, Ezibuy provided Glacier with a reconciliation showing$267,944 was currently due and that it would be paid on 23 April 2020, and soughta meeting to understand the status of its other orders.[37] On 23 April 2020, Ezibuy paid a further $287,426.54 to Glacier.[38] On 24 April 2020, Ezibuy emailed Glacier confirming its belief that alloutstanding invoices were paid and, again, it sought an update on the purchase orderswhich, by that stage, were due the following week, that is, early May 2020. Glacierresponded with a statement alleging $957,258.95 was overdue. Ezibuy responded thesame day pointing out discrepancies in Glacier's statement and repeating Ezibuy'sbelief that it was up to date with payments. Glacier then emailed Ezibuy anotherstatement showing that the overdue amount was in fact $525,486.57, and again,Ezibuy replied pointing out issues with Glacier's statement.[39] Notwithstanding that Ezibuy believed that it was current, it made a furtherpayment of $333,332.69 on 28 April 2020 expressly as a good faith payment.[40] As at this time, there was some $400,000 worth of Ezibuy's orders in a bondedwarehouse in Auckland, New Zealand. Ezibuy confirmed it would pay for the$400,000 worth of stock in the warehouse on 90 day terms and sought an update as tothe balance of the orders which, again, Ezibuy was expecting to be delivered at aroundthat time.[41] Glacier replied on 1 May 2020 advising simply that "goods" would bedelivered on 2 May 2020, but what was delivered was only the $400,000 worth ofgoods in the bonded warehouse.[42] On 1 May 2020, Ezibuy, referring to the balance of the orders (other than thosein the bonded warehouse), sought an update in respect of those purchase orders saying:I have repeatedly asked for this information but have been unable to geta response. These are critical orders for Mothers day sales. Are these ordersnot going to make todays deliver date?[43] The reply sent later that day by Ms Meisner of Glacier was as follows:From: Helen Meisner Sent: 01 May 2020 16:43To: Steve GosneyCc: Donald Sew Hoy Subject: FW: Glacier – Orders at Auckland Bonded warehouse TO BEOURCHASEDHi Steve. Donald and Jialin are currently working through forward ordersnow and will get back to you with details as soon as they are able. (our pastfew days have been taken up with trying to get the available stock to youquickly the stock has now been loaded. Just under 120cbm of goods and hasbeen a huge challenge to get cleared and delivered all at once).I can however advise that due to Ezibuy cancelling more than 29,000 units ofmostly finished goods, just at the start of lockdown, (26th & 31st of March)"effective immediately" and without discussion, and delayed payment ofprevious deliveries we are not able to deliver all orders.The orders had already been cancelled for 5 weeks when you advised youwanted them after all so it is only those that had already been shipped that weare able to deliver. Obviously those that were not on a boat already at the timethey were cancelled, were not shipped.Suppliers were so shocked by the cancellations that they stopped shipment ofother orders too.These cancellations of finished goods combined with previous late paymentissues and the new insistence on even longer payment terms by Dawn Reesmany of our devastated suppliers have now said they have suffered too muchloss already and can no longer afford the risk of supplying Ezibuy and refuseto continue production or shipment of Ezibuy orders.Regards HelenHelen MeisnerProduction ManagerGlacier Investments Limited[ address and contact details][44] The reference to cancelling more than 29,000 units of mostly finished stockrefers back to the email Ms France sent Ms Meisner on 26 March 2020, referred to inpart at [28] above. In that email, Ms France said:Given there is now 27k units that have passed the due date, I will be actioningorder cancellations for the attached styles given the goods were not releasedand is [sic] likely to be held further due to the current lockdown. I alsoappreciate Helen has stated your suppliers would rather have the stock back.[45] Ms Meisner's reference back to this cancellation was, in my view,disingenuous. There was no response in the evidence from Ms Meisner to Ms Francecancelling the 27,000 units said to have passed their due date. Ezibuy's Terms ofTrade expressly permit it to reject goods not supplied in accordance with the terms ofthe contract. The terms of the contract include delivery, with time for delivery beingmade of the essence in Ezibuy's Terms.[46] In any event, it is clear that Glacier had cancelled Ezibuy's orders for deliveryat the end of March 2020 and only informed Ezibuy of the cancellation on1 May 2020. The issue in this application is whether Glacier's actions found anarguable counterclaim by Ezibuy for loss of profits in respect of the stock, the subjectto the cancelled orders.Ezibuy's argument[47] Ezibuy says Glacier was not entitled to cancel its orders as Ezibuy was not inarrears at the time of cancellation.[48] As at 20 March 2020, the date Glacier cancelled at least some of Ezibuy'sorders with James Knitwear, Glacier says Ezibuy was in arrears. Ezibuy did not clearthe $178,000 it accepts was overdue as at 3 March 2020 until later in March 2020.Ezibuy says on 27 March 2020, it paid a further $237,521.73 to Glacier, being slightlymore than what was due in the 61-90 day category.[49] In his written submissions, Mr Vinnell, counsel for Ezibuy, says that Ezibuywas current as at 20 March 2020, having paid $178,000 to Glacier by 19 March 2020.In Mr Gosney's first affidavit at para 21, he refers to the Hold email and then at para22, he says:Ezibuy maintains that by 23 March 2020 its ledger with Glacier was currentand that only $215,000 was in the 61-90 day stage. Glacier had been paid theoverdue $178,000 amount by 23 March 2020.(my emphasis)[50] In Mr Gosney's second affidavit, he says the $178,000 was paid between4 March 2020 and 19 March 2020, hence the uncertainty as to when the $178,000 waspaid in full. In any event, the offer to put orders on hold, or to cancel orders, was notexpressed to only be available while Ezibuy was in arrears, but was made for thebroader purpose of giving Glacier the option of reducing its overall exposure toEzibuy.[51] Ezibuy says that because it was, at least by 23 March 2020 up to date in itspayment terms, Glacier was not entitled to cancel all orders Ezibuy had placed with it.[52] Ezibuy refers to the terms of the 3 March 2020 email set out at [16] above, andto the fact that at para 5 it draws a distinction between Glacier being able to haltproduction on the one hand and to it cancelling orders on the other. Ezibuy saysGlacier recognised the distinction between the halting of production and the cancellingof the orders as the Hold email, set out at [20 ] above, refers to Ezibuy's bulk deliveriesbeing on hold and not cancelled. (It was not suggested that there was anything materialin the reference being to both deliveries as opposed to all purchase orders).[53] While Glacier did not inform Ezibuy of the cancellation of its orders until1 May 2020, on 13 April 2020 James Knitwear contacted Ezibuy directly andprovided Ezibuy with a copy of the email it had received on 27 March 2020 fromGlacier cancelling all orders. Ezibuy says, however, that as at 13 April 2020, it didnot have visibility of the extent to which Glacier had cancelled all of its orders fromall suppliers.[54] Ezibuy says it has a claim against Glacier under s 193 of the Contract andCommercial Law Act 2017 (CCLA) which provides a buyer has, against a seller,a right to claim damages for non-delivery if the seller wrongfully neglects or refusesto deliver the goods to the buyer. The section provides that the measure of damagesis the estimated loss directly and naturally resulting, in the ordinary course of events,from the seller's breach of contract. A claim for damages would also lie, Ezibuy says,under the terms of its Purchase Terms which also include a general indemnity.[55] Further, Ezibuy claims Glacier engaged in misleading and deceptive conductin breach of s 9 of the Fair Trading Act 1986 (the Act). The basis for this claim isGlacier's failure to inform Ezibuy that it had cancelled its orders and its subsequentconduct in response to Ezibuy's request for information regarding its orders.[56] Ezibuy's position is that Glacier was saying one thing to its suppliers andanother thing to its buyers.[57] It is necessary to consider each cause of action. Before doing so, I addressEzibuy's reliance on the following clause from its Terms of Trade:12 Force MajeureWe reserve the right to defer the date of delivery or payment or reduce thevolume of the Goods ordered if we are prevented from or delayed inthe carrying on of our business due to circumstances beyond our reasonablecontrol.[58] Ezibuy says it was not in arrears once it cleared the $178,000. It also requestedsupplies and agreed to 150 days terms as a resulted of the COVID-19 pandemic whichit says it was entitled to do pursuant to the above clause.[59] On this issue, I accept Mr Thain's submission (counsel for Glacier) that at notime prior to 1 May 2020 did Ezibuy seek to invoke cl 12. All its references to 150days payment terms were framed as requests to suppliers to agree to extended terms –which Glacier did not accept. Assuming cl 12 is enforceable, Ezibuy would need tohave relied on it to require Glacier to extend payment terms. In any event, given theterms of the 3 March 2020 emails, I do not see cl 12 as having any relevance. Ratherthan seek to rely on any rights created by cl 12, Ezibuy committed to bring itself backwithin trading terms and gave Glacier the hold/cancel option.Breach of contract[60] Glacier's Terms of Trade provide "Glacier Investments Ltd may cease toprovide any goods and/or grant further credit while any overdue amounts are owing."[61] However, Mr Thain's primary argument is based on the email of 3 March 2020referred to at [16] above, hence it not being necessary to resolve the "battle of theforms".[62] Mr Thain says, and I accept, that para 5 of the email of 3 March 2020represented Ezibuy granting to Glacier the right to reduce Glacier's exposureto Ezibuy by halting production or cancelling orders already received. Mr Thain seeksto characterise the balance of para 5, that is, "[w]e only ask that you let us (buyingteam) know which orders will be affected" as no more than a request. Mr Thainsubmits that Ezibuy only asked that Glacier let Ezibuy Buying Team know whichorders would be affected – the implication being Glacier was free not to agree thatrequest.[63] In my opinion, such is not a reasonably tenable construction of the email. Insubstance, Ezibuy granted to Glacier an option to halt production or cancel orders onthe condition that Glacier advise Ezibuy of which orders were affected. The idea thatEzibuy was agreeing to Glacier having such ability, but without having to informEzibuy of the affected orders, is entirely uncommercial.[64] Mr Thain's response is that Glacier did comply with Ezibuy's request, in thaton 20 March 2020 Glacier advised Ezibuy that all of its orders were on hold.[65] Mr Thain makes the point that the invitation to halt production or cancel ordersis not expressed in the email of 3 March 2020 to apply only while Ezibuy is in arrears.His submission is that the offer was to allow Glacier to reduce its overall exposure toEzibuy.[66] Mr Thain develops his argument by saying that as at the end of March 2020,Ezibuy was aware that all of its orders were on hold and that it had not received anyinformation about the status of its orders from Glacier, at least none to suggest that thehold had been released.[67] The terms of the email of 3 March 2020 do not set out what was to occur beforeGlacier would be obliged to lift the hold on production. Again, Mr Thain's point isthat the halt in production is not expressed to apply only until Ezibuy's account wasup to date.[68] In short, Glacier submits it cannot have breached its contract to supply stockwhen Ezibuy gave it the right to halt orders on 3 March 2020. Having exercised thatright, Glacier says it never agreed to lift the hold so as to reinstate an obligation tosupply Ezibuy, or led Ezibuy to believe it would do so. Further, Mr Thain submitsnothing in the Hold email suggests Glacier would agree to deliver any further goodsat any further time.[69] I do not agree with that submission – placing an order on hold is different froman order being cancelled. Glacier opting for advising that orders were on hold, asopposed to cancelled, carried with it the possibility that the hold would be lifted, butI accept Mr Thain's alternative submission that the preconditions for the hold beinglifted were not stated. Ezibuy at no time requested that the hold be lifted or enquiredas to the precondition it would have to meet in that regard.[70] Mr Gosney, in his reply affidavit, referring to the Hold email "[w]hen DawnRees advised Glacier that Ezibuy was within its payment terms (on 23 March 2020) itwas assumed that any hold on Glacier deliveries would be lifted". Mr Gosney,however, does not suggest this assumption was brought about by anything told to himby Glacier.[71] A further difficulty is that whatever an accurate reconciliation may now showwas the status of the account between Ezibuy and Glacier to have been, Ezibuy knewfrom 20 March 2020 to 1 May 2020 that Glacier considered Ezibuy to remain inarrears, so it would have been aware that Glacier would not be lifting the hold. Itcannot be enough for the hold to be lifted that Ezibuy simply had to assert, or evendemonstrate on its own reconciliation, that it was current. Ezibuy does not say it madeits assumption known to Glacier. It is noteworthy that in the emails in which Ezibuyasserts its account was current, it did not say, words to the effect, "now we are currentplease confirm the hold on our orders is lifted". Albeit, I accept that Ezibuy soughtupdates on its orders.[72] As to the email of 3 March 2020, Mr Vinnell submitted that Ezibuy havingcleared the $178,000 arrears, made it clear that Ezibuy wanted to continue to dobusiness with Glacier and to work with it on potential shipping dates et cetera. Thedifficulty with this submission is that Glacier did not agree to lift the hold or respondpositively to the invitation to work on shipping dates. Indeed, on 25 March 2020,Glacier sent the email referred to at [26] confirming that orders on the water were alsocancelled and Ezibuy, in its email of 23 March 2020 to Glacier, referred to it working" cancelling orders and shifting production.". Mr Spibey's internal email of25 March 2020, referred to at [27] above, was under the subject line "Glacier Orderson Hold", as was the email Ms France sent to Glacier on 26 March 2020 – the verytime Mr Gosney says he assumed the hold had been lifted.[73] The short point is, Ezibuy's submissions do not explain how it was that thehold was agreed to be lifted. We are back to Ezibuy saying it assumed it would belifted when it became current with its payments, but again, that assumption is not basedon representations from Glacier. The fact is Glacier was asserting Ezibuy remained inarrears and therefore in breach of what Ezibuy assumed was the precondition for thehold to be lifted. It is said that silence is inherently equivocal. Ezibuy knew thatGlacier was not responding to its requests for an update. On one view of it, Ezibuy'srepeated requests for updates indicates it knew the situation was uncertain. It knewthe hold had not been lifted and it knew it did not have correspondence with shippingdates et cetera. Despite Ezibuy being aware of the hold, it appears to have assumedthat delivery dates and the like would remain unaffected.[74] Given Ezibuy had actual knowledge from 13 April 2020 that the JamesKnitwear orders had been cancelled, it is not clear to me how Ezibuy can say itassumed that the hold had been lifted as a result of having (it says) brought its accountup to date by 23 March 2020. Given the time it takes from the placement of orders todelivery, learning on 13 April 2020 that on 27 March 2020 Glacier cancelled the JamesKnitwear orders for delivery in May 2020, it was not merely a case of the hold beinglifted, but of a cancelled order being reinstated.[75] On the material that has been produced, Ezibuy has not satisfied me that it hasa reasonably arguable case for breach of contract in relation to non-delivery of productby Glacier. While there remains an issue as to the exact contents of the Terms of Traderesulting from the "battle of the forms", such is overtaken by the terms of the3 March 2020 email. No agreement to lift the hold was made. The obligation tosupply was suspended by Glacier pursuant to the option granted to it on 3 March 2020.[76] As Glacier's contractual obligation to meet the orders placed in October 2019was suspended, before it could be liable in contract, an obligations to supply had to beresurrected. No such agreement was made – nor alleged by Ezibuy – the high pointbeing its own assumption – not communicated to Glacier – that the hold would belifted.The Fair Trading Act 1986[77] The alternative basis advanced for Ezibuy's counterclaim is that Glacier failedto advise Ezibuy that Glacier had cancelled its orders, which was conduct that waslikely to mislead or deceive giving rise to liability under s 9 of the Act.[78] I am satisfied that Ezibuy has established it is at least reasonably arguable thatGlacier's conduct was in breach of s 9 of the Act for the following reasons:(a) As I have already found at [62] above, the terms of the email of3 March 2020 giving Glacier the option to cancel orders or place themon hold required Glacier on taking up that option to inform Ezibuywhich of its orders would be affected. Glacier failed to meet thatobligation.(b) Glacier informed Ezibuy on 20 March 2020 that its orders were on holdwhen, on the same day, it cancelled some of those orders that Glacierhad placed on Ezibuy's behalf with James Knitwear.(c) When Glacier cancelled the balance of Ezibuy's orders with JamesKnitwear on 27 March 2020, it failed to inform Ezibuy of thatcancellation. Glacier, being under an obligation to inform Ezibuy as tothe status of Ezibuy's orders which Glacier elected to cancel or placeon hold, means its silence in the face of that obligation was conductlikely to mislead.(d) Not all of Ezibuy's orders were with James Knitwear and at some pointGlacier cancelled Ezibuy's orders with other suppliers and, again,Glacier did not inform Ezibuy.(e) In response to a number of direct questions from Ezibuy as to the statusof its orders, Glacier failed to provide an answer until 1 May 2020. Itis at least arguable in the face of a direct enquiry, that it had anobligation to correct its advice that the orders were on hold.[79] Mr Sew Hoy, on behalf of Glacier, does not offer a good – indeed any –explanation for the incorrect advice that orders were on hold, when some wherecancelled, or why he did not inform Ezibuy of their cancellations. His position thatEzibuy, in the email of 3 March 2020, only asked to be kept informed, is without merit.[80] However, for Ezibuy to establish it has a reasonably arguable counterclaimunder the Act, it must go on to show that there are "clear and persuasive grounds" forthe other elements of a cause of action under the Act. Ezibuy must demonstrate thatit was in fact misled by the conduct, and that it was reasonable for it to have beenmisled by that conduct and finally, demonstrate causation and a proper basis for itsdamages calculation. I deal with those elements in reverse order.Damages calculation[81] The damages calculation is presented on a loss of profits basis. Ezibuy saysGlacier failed to deliver stock worth $1,200,000. Ezibuy mitigated its loss by sourcingsome product directly from factories and paying air freight to get the stock delivered.The cost of the undelivered stock that was not able to be replaced was almost$720,000. Ezibuy's evidence starts with the retail value of the undelivered stock, andapplying a discount and deducting the cost price from the retail, gives a loss of profitfigure of $1,358,785.[82] Glacier, in its reply, pointed out that some fixed costs had not been deductedand Ezibuy in its reply evidence adjusted the figure to a loss of profit figure of$1,342,283.[83] Accordingly, the loss of profit calculation is on the contractual measure, thatis, the amount required to put Ezibuy in the position it would have been in had thecontract been performed, that is, had the stock been delivered.[84] The measure of damages under the Act was confirmed by the Court of Appealin Zurich Australian Insurance Ltd v Withers, where the Court said:7Damages awarded under s 43 of the FTA for loss caused by a breach of s 9 areassessed on a compensatory or restorative basis. The wronged party is entitledto reimbursement of all expenditure wasted in changing its position in relianceon the misleading or deceptive conduct. This measure is analogous to thetortious measure, not to the contractual measure of a lost expectation fora failure to perform a material representation. The appropriate monetaryaward is the amount necessary to put the wronged party in the same positionas it would have been but for the wrong. The position to be restored is thatwhich would have existed without the misrepresentation.8[85] While Mr Thain did not expressly challenge this cause of action on the groundsthat the wrong measure of loss had been adopted, in substance, his argument coveredthe same grounds. He submitted there was no evidence as to what Ezibuy would havedone had it been informed at the outset that its orders had been cancelled. In short, asMr Thain put it, what difference did the month of April 2020 make? Mr Thainsubmitted the onus was on Ezibuy to demonstrate what it could have done differentlyif it had known at the end of March 2020 that its orders had been cancelled. A findingof misleading and deceptive conduct of itself was not enough to found a counterclaim.Ezibuy had to demonstrate the consequences of the misleading conduct. In short,Mr Thain submitted that if, on 20 March 2020, Glacier's email had said all orders werecancelled, there is no evidence that Ezibuy could have done anything different.[86] Mr Thain emphasised that on this issue the onus was on Ezibuy to demonstrateclear and persuasive grounds existed for each element of the set-off. His submission7 Zurich Australian Insurance Ltd v Withers [2016] NZCA 618, [2017] 2 NZLR 745 at [36].8 Cox & Coxon Ltd v Leipst [1999] 2 NZLR 15 (CA) at 23 and 26, applied in Harvey CorporationLtd v Barker [2002] 2 NZLR 213 (CA) at [13] and [19]; Narayan v Arranmore Developments Ltd[2011] NZCA 681, (2012) 13 NZCPR 123 at [49].was that, if anything, the time lag between the placing of the orders and their deliverysuggests that if the email of 20 March 2020 had advised Ezibuy that the orders hadbeen cancelled, the outcome for Ezibuy would have been no different.Reliance[87] Mr Thain also submitted that whether Ezibuy knew the orders were on hold orcancelled, it knew there were no further supplies from Glacier until Glacier agreed tolift the hold on the orders and, as already discussed, at no point did Glacier do that.Accordingly, Ezibuy did nothing in reliance of receiving the Hold email.The direct contact from James Knitwear[88] On 13 April 2020, Ezibuy was contacted directly by James Knitwear.James Knitwear informed Ezibuy of Glacier's cancellation of Ezibuy's orders andsought to supply the orders which, it seems, were largely complete directly to Ezibuy.Ezibuy did not accept the direct approach, referring to its relationship with Glacier.[89] That Ezibuy on 13 April 2020 learnt that at least some of its orders had beencancelled rather than being on hold, must cast doubts on the reasonableness of Ezibuyrelying on Glacier's statement that the orders were only on hold.[90] In any event, after 1 May 2020, Ezibuy did buy stock directly fromJames Knitwear and incurred the air freight cost of the stock being delivered toNew Zealand, being $26,543.15. However, I have no way of knowing whether thestock could have been delivered by sea freight in a timely way, had Ezibuy been toldthat all orders were cancelled either on 20 March 2020 or on 27 March 2020 when thebalance of the James Knitwear orders were cancelled.[91] Ms Rees email of 23 March 2020, referred to at [22] above, referring to Ezibuycommencing a review of its commitments with Glacier and to working on cancellingorders with Glacier and shifting production, also speaks against Ezibuy's reliancebeing reasonable. Indeed, the question must be, exactly what did Ezibuy do in relianceon being told the stock was on hold rather than cancelled, other than to assume if itsaccount was current that the hold would be lifted?[92] There is no explanation as to why the review in shifting production, referred toby Ms Rees, did not occur. Glacier is not responsible for Ezibuy's assumption thatthe hold would be lifted. It seems Ezibuy took no positive steps after receiving theHold email, other than to continue to make payments albeit of some amounts itbelieved had not yet fallen due and to enquire about the status of its purchase orderswithout getting a reply from Glacier, other than Glacier deferring a response.[93] Mr Vinnell, in his reply submissions said, had Ezibuy been told the orders hadbeen cancelled rather than on hold, it could have advanced shifting of production andthe other steps referred to in Ms Rees' email of 23 March 2020. There was nothingstopping Ezibuy taking those steps following the Hold email. Ms Rees' email of23 March 2020 states as much, indeed, it states such was commencing. Ezibuy doesnot say that email was a bluff to prompt Glacier to soften its stance, nor does it saythat had it been told the orders were cancelled, it could have arranged supplies fromother manufacturers in time to meet the deadline of the beginning of May 2020.[94] Ezibuy's willingness to pay Glacier sums that Ezibuy believed were not due,suggests that Ezibuy did not see itself as having the option of going elsewhere forproduction. Even when Ezibuy learnt on 13 April 2020, directly from James Knitwear,that its orders with that supplier had been cancelled rather than being on hold, Ezibuycontinued to make payments to Glacier of amounts Ezibuy believed were not yet due.[95] Mr Gosney says, Ezibuy "acted in reliance on the orders, and the notificationof cancellation occurred after the items were published in catalogues." If the itemswere placed in catalogues before the Hold email, then Ezibuy was already committedto the publication or at least there is no evidence it could have cancelled or amendedthe catalogue. If it was after, then Ezibuy made that commitment knowing the orderswere on hold. It comes back to Ezibuy assuming it could get the hold lifted.[96] Mr Vinnell, in reply on this issue, also referred to an email Ms France sent toMs Meisner on 26 March 2020. In that email, Ms France says "[m]y challenge is tocontinue to manage the production and supply of goods ordered to fulfil the ranges wehave created." No doubt Ms France was facing such a challenge, but this email doesnot take Ezibuy's case any further, in that it does not indicate what steps Ezibuy wastaking, or refraining from taking, on the strength of being told the orders were on holdrather than cancelled. The difficulty for Ezibuy is there is no evidence that if it wastold its orders were cancelled and not on hold, that it could have sourced stock fromelsewhere or otherwise reduced its loss.[97] Given the short time between the Hold email and the start of May 2020, atsome point, in practical terms, the hold became tantamount to a cancellation, or at leastthe passage of time meant it became practically impossible for the hold to be lifted andthe goods produced and delivered to New Zealand on time for delivery at the start ofMay. There is no evidence that with urgency, or with the paying of a premium or thelike, that goods could have been substituted for the cancelled orders. The exceptionis, as I have said, the issue of the air freight of the cancelled but manufactured stock.Again, that Ezibuy persisted with Glacier after, on what from Ezibuy's point of view,was an incorrect insistence by Glacier that Ezibuy pay hundreds of thousands ofdollars not yet due, suggests Ezibuy did not have the option to drop Glacier and goelsewhere.[98] I queried with Mr Thain whether Ezibuy had lost the opportunity to go to othersuppliers as a result of not being told of the cancellations. I accept his submissionthat Ms Rees' email of 23 March 2020 shows that Ezibuy was aware of its options inthat regard. The inference is open that being so aware, and then not placing orderselsewhere, that it was not possible for Ezibuy to replace the stock in the timeframeavailable.[99] However, the short point is, at the end of the day the onus was on Ezibuy togive evidence of what it did in reliance on the advice that the orders were on holdrather than cancelled or of the opportunity it lost because of that misleading conduct.To the extent that such evidence might arguably exist, or to the extent that inferencescan be drawn from the evidence before the Court as to what might have been done byEzibuy, there remains no separate quantification of loss engaging with the measure ofdamages that applies to the Act. The fundamental issue for Ezibuy in respect of theFair Trading Act claim is that the only loss calculation before the Court is not onthe correct basis.[100] It follows while there was at least arguably misleading conduct by Glacier, theapplicant has not demonstrated to the standard referred to at [6] that it has a set-off orcounterclaim arising from such conduct.Solvency[101] Ezibuy, in its notice of opposition, asserted that it was solvent. Glacier, in itsopposition, noted the absence of evidence from Ezibuy that it was solvent. To meetthat criticism, Ezibuy has paid the amount claimed in the statutory demand into itssolicitor's trust account.[102] However, in its written submissions, Ezibuy did not advance the propositionthat such a payment alone would be enough to lead to the statutory demand being setaside.[103] McGechan on Procedure provides:9Evidence of solvency by itself will not generally justify the setting aside ofa demand where there is no good reason for non-payment: Walter Larson &Sons Ltd v Department of Corrections (2006) 18 PRNZ 55 (HC); AMCConstruction Ltd v Frews Contracting Ltd [2008] NZ CA 389 (208)19 PRNZ 13.[104] I have concluded that Ezibuy does not have a "good reason for non-payment".The fact it has paid the funds into trust is not of itself sufficient to result in the demandbeing set aside.[105] However, the fact that the funds have been paid into trust means it isappropriate that Ezibuy be given time to pay the debt or make any other application itthinks appropriate in the circumstances.[106] Accordingly, there is an order that unless the amount in the statutory demandis paid within 10 working days of the date of this Judgment, that Glacier shall beentitled to proceed with its winding up proceedings of Ezibuy. Time for compliancewith the statutory demand is therefore extended for 10 working days.9 Andrew Beck (ed) McGechan on Procedure (online ed, Thomson Reuters) at [HR31.11.10(2)].Costs[107] I did not hear argument on costs, but on the strength of what I have heard todate, there seems no reason why costs should not follow the event on a 2B basis. Ifthe respondent does not file a memorandum as to costs (not more than five pages inlength) within five working days, then the order in respect of costs shall be that Glacieris entitled to costs on a 2B basis together with disbursements as fixed by the Registrar.__________________________________Associate Judge LesterSolicitors:Anthony Harper, ChristchurchDLA Piper, Auckland