HUTCHISON PLUMBING GASFITTING & DRAINLAYING LIMITED v PELICONSTRUCTION LIMITED [2023] NZHC 1229

HUTCHISON PLUMBING GASFITTING & DRAINLAYING LIMITED v PELICONSTRUCTION LIMITED[2023] NZHC 1229 [24 May 2023]IN THE HIGH COURT OF NEW ZEALANDROTORUA REGISTRYI TE KŌTI MATUA O AOTEAROATE ROTORUA-NUI-A-KAHUMATAMOMOE ROHECIV-2022-463-103[2023] NZHC 1229UNDER the Companies Act 1993IN THE MATTER OF an application to set aside a statutorydemandBETWEEN HUTCHISON PLUMBING GASFITTING& DRAINLAYING LIMITEDPlaintiffAND PELICONSTRUCTION LIMITEDDefendantHearing: 11 May 2023 at 2:15pmAppearances: D B Rendall for the PlaintiffJudgment: 24 May 2023JUDGMENT OF ASSOCIATE JUDGE C B TAYLORApplication to set aside statutory demandThis judgment was delivered by me on 24 May 2023 at 4:00pmpursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors:OSC Law (David B Rendall), Rotorua, for the PlaintiffIntroduction[1] Peliconstruction Limited (Peliconstruction) applies to set aside a statutorydemand that Hutchison Plumbing, Gasfitting and Drainlaying Limited (Hutchison)has made on it.Background[2] On 21 September 2022, Hutchison served Peliconstruction with a statutorydemand (the demand). The demand relates to two invoices issued by Hutchisons forplumbing work done on a strip drain for Peliconstruction.[3] On 5 October 2022, Peliconstruction filed an application to set aside thestatutory demand pursuant to s 290 of the Companies Act 1993. As no notice ofopposition had been filed by the respondent, on 8 February 2023 this proceeding wasset down to be heard unopposed.Peliconstruction's application to set aside statutory demand[4] Peliconstruction seeks orders setting aside Hutchison's demand and costs. Thegrounds on which the orders are sought are: 11. The Application is made by the Plaintiff to set aside the Statutory Demandissued by Hutchinson Plumbing and Drainlaying Limited dated 1st day ofSeptember 2022 and served on the Applicant on 21 September 2022.2. Section 290 (2) provides for an application to set aside the statutorydemand within 10 days of the date of service. That Application needs tobe made by 6th October 2022.3. Section 290(2)(b) requires the creditor to be served within the same tenday period as the application is heard by the Court.4. The Court has the jurisdiction to grant an application to set aside astatutory demand if it is satisfied that there is a substantial dispute as towhether or not the debt is owing or is due; or the Company appears tohave counterclaim, set off or cross demand and the amount specified in1 Application to set aside a statutory demand dated 5 October 2022 at [1]–[8].the demand is less the amount of the counterclaim, set off or crossdemand.5. The Notice of Defence details that there is a counterclaim for a sum morethat the demand itself and accordingly meets the criteria for the Court togrant an application to set aside such summary judgement.6. The Notice of Defence and Affidavit in Support both outline the details asto the set off, counterclaim and accordingly this application is seeking theCourt to set aside the application in terms of Section 290 of the CompaniesAct 1993.7. Costs are sought in the manner as the Court sees fit, and in light of theprevious offers that this matter should be determined in the DisputesTribunal.8. Seeking that the statutory demand be set aside. The application meets thecriteria required for such decision to be granted by the Courts as it meetsthe requirements of Section 290(4) (A&B) as detailed in the Notice ofDefence and AffidavitAffidavit of Steven Ross dated 4 October 2022[5] Mr Steven Ross, Director of Peliconstruction, has made an affidavit in supportof his set aside application.2[6] Mr Ross deposes that Hutchison issued two invoices, 9155 for $6,356 and 9170for $15,015.88, for work they carried out for Peliconstruction. Peliconstruction paida $10,000 deposit leaving $11,371.88 owing, which Mr Ross claims Hutchison hasignored.[7] He deposes the invoices were for a house renovation which required someplumbing work, including a strip drain outside the house. Peliconstruction have thefollowing four disputes over the work carried out for that strip drain:(a) Hutchison invoiced for installing 25 metres of drain, but the floor planis for 15 metres, of which Peliconstruction provided 12 metres, fittings,corners and sumps;(b) Hutchison cut the lugs in breach of the manufacturer's specificationsand without Peliconstruction's approval to do so;2 Affidavit in support of a statutory demand being set aside dated 4 October 2022.(c) Hutchison damaged 36 square metres of painted cladding, whichrequired repainting at a cost of $1,980 plus GST; and(d) Hutchison incorrectly laid concrete in a 2.5 metre section damaging thecladding and vented cavity system, which will require the drain andcladding to be removed and reinstalled.[8] Mr Ross deposes that he suggested the matter be resolved in the DisputesTribunal, but Hutchison refused. He says Hutchison is aware of these concerns andthe counterclaim by Peliconstruction to reclaim the cost of the damage.[9] Relying on an annexed counterclaim deducted off Hutchison's two invoices,Mr Ross notes that ultimately $8,215.60 including GST is owed in Peliconstruction'sfavour. Therefore, he believes the demand should be set aside as the arguable offsetexceeds the amount sought.Legal principles[10] Section 290 of the Companies Act 1993 provides, relevantly:290 Court may set aside statutory demand(1) The court may, on the application of the company, set aside a statutorydemand.(4) The court may grant an application to set aside a statutory demand ifit is satisfied that—(a) there is a substantial dispute whether or not the debt is owingor is due; or(b) the company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less theamount of the counterclaim, set-off, or cross-demand is lessthan the prescribed amount; or(c) the demand ought to be set aside on other grounds.[11] The Court has set out the principles relevant to the application of s 290(4):3What the applicant must show is that the dispute it raises has substance; theapplicant must explain to the court what the dispute is; and the dispute soshown must be a real and not a fanciful or insubstantial dispute. The Courtmust bear in mind that it is operating in the summary jurisdiction, with theaccompanying disadvantages that brings for any applicant. The Court mustalso keep in mind the requirement that what is intended to be a summaryhearing should not be converted into a full-blown trial.[12] As to s 290(4)(a), the Court is to look at whether a genuine substantial disputeexists.4 Mere assertion of a dispute does not suffice, and the applicant has to show afairly arguable basis for it.5 In practice, it is required that there be some material shortof proof that backs up the claim that the amount is in dispute.6[13] Where a counterclaim, set-off, or cross-demand is sought to be raised, theCourt has a discretionary power to set aside the statutory demand, but the companymust show a real basis, on clear and persuasive grounds, for doing so. And "pay now,argue later" considerations have sometimes been allowed to prevail over the effect ofliquidation.7Analysis[14] The question to be determined in this judgment is whether there is a substantialdispute whether or not the debt is owing or due, for the purposes of s 290(4)(a)of theCompanies Act 1993, or whether Peliconstruction appears to have a counterclaim, set-off or cross- demand, and the amount specified in that demand less the amount of thecounterclaim, set-off or cross-demand is less than the prescribed amount for thepurposes of s 290(4)(b).3 AAI Ltd v 92 Lichfield Street Ltd (in rec and in liq) [2015] NZCA 559, [2016] NZAR 1338 at [22](footnotes omitted).4 Taxi Trucks Ltd v Nicholson [1989] 2 NZLR 297 (CA) at 301.5 N F Global Ltd v Sky Capital Management Ltd [2020] NZHC 2196 at [39]. See also United Homes(1998) Ltd v Workman [2001] 3 NZLR 447 (CA) at [27].6 Arzan Investments Ltd v Beresford Apartments Ltd (2003) 16 PRNZ 825 (HC) at [17].7 N F Global Ltd v Sky Capital Management Ltd, above n 5, at [40], citing Volcanic Investments Ltdv Dempsey & Wood Civil Contractors Ltd (2005) 18 PRNZ 97; Browns Real Estate Ltd v GrandLakes Ltd [2010] NZCA 425, (2010) 20 PRNZ 141; Covington Railways Ltd v Uni-Accommodation Ltd [2001] 1 NZLR 272 (CA) at 274–275.[15] The unchallenged evidence provided in the affidavit of Mr Steven Ross ofPeliconstruction in support of the application sets out the grounds of the dispute of theamount claimed under the statutory demand, and also the basis for a counterclaim byPeliconstruction against Hutchison which exceeds the amount of the statutory demand.As this evidence is unchallenged by Hutchison, it is accepted.[16] I am of the view that on the evidence provided in support of the application toset aside the statutory demand, with no opposition thereto, that the orders sought inthe application should be made.Orders[17] I make the following orders:(a) The statutory demand issued by Hutchison dated 1 September 2022against Peliconstruction is set aside, pursuant to s 290(4) of theCompanies Act 1993.(b) Costs should follow the event, and accordingly Peliconstruction isentitled to costs on a 2B basis together with disbursements in respect ofthe application...Associate Judge Taylor