IMMIGRATION ADVICE NEW ZEALAND LTD v SALES NAVIGATOR LTD [2023] NZHC 3394 [28 November 2023]

IMMIGRATION ADVICE NEW ZEALAND LTD v SALES NAVIGATOR LTD [2023] NZHC 3394[28 November 2023]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2023-404-823[2023] NZHC 3394BETWEEN IMMIGRATION ADVICE NEWZEALAND LIMITEDApplicantAND SALES NAVIGATOR LIMITEDRespondentHearing: 28 August 2023Appearances: K J M Robinson for the ApplicantG Jindal for the RespondentJudgment: 28 November 2023JUDGMENT OF ASSOCIATE JUDGE SUSSOCKThis judgment was delivered by me on 28 November 2023 at 4 pmpursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarSolicitors:WynyardWood, AucklandOrmiston Legal, AucklandIntroduction[1] Immigration Advice New Zealand Limited (IANZ) applies to set aside astatutory demand served on it by Sales Navigator Limited (SNL) dated 3 April 2023.The statutory demand seeks recovery of $11,270 that SNL says is due following thefailure to pay an invoice issued for their marketing and technology services.[2] IANZ submits it has consistently disputed the invoice since first receiving it inOctober 2021, raising queries in respect of the services completed compared with theservices charged for, the quality of work and the quantum charged.[3] IANZ acknowledges that some amount is owing but says it is not appropriateto resolve that amount before the High Court sitting in a summary jurisdiction in thecontext of a statutory demand. Instead IANZ says the dispute is properly determinedin ordinary proceedings, most appropriately in the Disputes Tribunal.[4] SNL responds that IANZ waited for six months before raising any issues bywhich time SNL had already paid all contractors and employees for the workcompleted by SNL. In addition, SNL says that when issues were finally raised byIANZ, the issues raised were superficial and are contradicted by evidence before theCourt so that they are nothing more than mere assertions.[5] I set out the legal principles applying to the setting aside of a statutory demandbefore considering whether IANZ has established that there is a substantial disputewhether or not the debt is owing.Legal principles applying to setting aside a statutory demand[6] Failure to comply with a statutory demand is one of the mechanisms by whichinsolvency is established under part 16 of the Companies Act 1993. A creditor mayserve a statutory demand on a company in respect of any debt owed that is not lessthan the prescribed amount of $1,000.1 A company served with a statutory demandmay apply to the court to set it aside but must do so within 10 working days of service.21 Companies Act 1993, s 289; Companies Act 1993 Liquidation Regulations 1994, cl 5.2 Section 290(2).[7] The court's power to set aside a statutory demand is provided by s 290(4) ofthe Companies Act:(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.[8] The Court of Appeal confirmed the principles a court should apply whenexercising the s 290(4) discretion in Confident Trustee Ltd v Garden and Trees Ltd:3[16] The general principles under s 290(4) are well settled:(a) The onus is on the applicant seeking to set aside the statutorydemand to show that there is arguably a genuine andsubstantial dispute as to the existence of the debt. The Court'stask is not to resolve the dispute but to determine whetherthere is a substantial dispute that the debt is due.(b) The mere assertion that a dispute exists is not sufficient.Material short of proof is required to support the claim thatthe debt is disputed.(c) If such material is available, the dispute should normally beresolved first in ordinary civil proceedings before anystatutory demand is issued.(d) If a counterclaim, cross-demand or set-off is suggested anapplicant must establish that this is reasonably arguable in allthe circumstances.(e) It is not usually possible to resolve disputed questions of facton affidavit evidence alone, particularly when issues ofcredibility arise unless such evidence is contrary to theavailable documents or earlier statements made by the parties.Section 290(4)(a): A substantial dispute[9] IANZ's application is pursuant to s 290(4)(a), that there is a substantial disputewhether or not the debt is owing, rather than s 290(4)(b), that it has a counterclaim.To succeed in an application under s 290(4)(a) the applicant must demonstrate a "fairly3 Confident Trustee Ltd v Garden and Trees Ltd [2017] NZCA 578 (footnote omitted); confirmedby the Court of Appeal in Demasol Ltd v South Pacific Industrial Ltd [2022] NZCA 480 at [26].arguable" basis for the alleged dispute.4 The onus of establishing the dispute is on theapplicant. In AAI Ltd v 92 Lichfield Street Ltd (in rec and liq) the Court of Appealsummarised the applicant's task:5What the applicant must show is that the dispute it raises hassubstance; the applicant must explain to the court what the dispute is;and the dispute so shown must be a real and not a fanciful orinsubstantial dispute. The Court must bear in mind that it is operatingin the summary jurisdiction, with the accompanying disadvantagesthat brings for any applicant. The Court must also keep in mind therequirement that what is intended to be a summary hearing should notbe converted into a full-blown trial.[10] The court is not required to accept without question a bare assertion of facts,or "whatever unvarnished statements may happen to be made on affidavit",6 and thedebtor company must point to evidence, short of proof, of its claim.[11] Because applications to set aside statutory demands are determined by thecourt in its summary jurisdiction, the principles developed in caveat applications andfor summary judgment apply by analogy.7 The following passage from the Court ofAppeal's decision in Krukziener v Hanover Finance Ltd, the leading authority onsummary judgment, is useful:8The Court will not normally resolve material conflicts of evidence or assessthe credibility of deponents. But it need not accept uncritically evidence thatis inherently lacking in credibility, as, for example, where the evidence isinconsistent with undisputed contemporary documents or other statements bythe same deponent, or is inherently improbable In the end the Court'sassessment of the evidence is a matter of judgment. The Court may take arobust and realistic approach where the facts warrant it.4 Forge Holding Ltd v Kearney Finance (NZ) Ltd HC Christchurch M149/95, 20 June 1995; UnitedHomes (1998) Ltd v Workman [2001] 3 NZLR 447 (CA) at [32].5 AAI Ltd v 92 Lichfield Street Ltd (in rec and in liq) [2015] NZCA 559, [2016] NZAR 1338 at [22];referring to Re A Company [1991] BCLC 737 (Ch) at 740.6 United Homes (1988) Ltd v Workman, above n 4, at [34].7 At [34].8 Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162 (citations omitted) at[26].Solvency[12] If an application to set aside a statutory demand is made on the basis that thedebt is disputed, proof of solvency is not determinative but will support the applicant'scase that the dispute is genuine.9Factual background[13] The applicant, IANZ, provides immigration advice and services. Mr SarfrazShaikh is a director and has sworn two affidavits in support of the application to setaside.[14] The respondent, SNL, is a company providing marketing and technologyservices. Its director, Mr Taufeeq Rashid, has sworn an affidavit in support of itsopposition.[15] In March 2021 Mr Shaikh and Mr Rashid met and discussed the possibility ofSNL providing marketing and technology services for IANZ's business. This resultedin Mr Rashid sending a quote to Mr Shaikh on 30 March 2021 initially for $17,440.This quote was revised downwards to $13,440 on the same day because, in MrRashid's evidence, SNL had another client who could utilise the same resources andso cost savings of $4,000 were possible.[16] The quote was sent under the cover of an email which said "[p]lease see theattachment for a list of my primary areas of focus (inclusive of the cost)". The quotethen listed various services including:(a) a professional corporate photoshoot for $800;(b) creating a new website (initial scoping) for $5,000;(c) a Facebook campaign structure for product sale for $2,400;9 AMC Construction Ltd v Frews Contracting Ltd [2008] NZCA 389, (2008) 19 PRNZ 13 at [5]–[6].(d) Google AdWords for $1,200;(e) advertising/lead generation for $1,320;(f) website on-page search engine optimisation for $1,520; and(g) website off-page search engine optimisation (backlinks increase) for$1,200.[17] Mr Shaikh's evidence is that he contacted Mr Rashid the next day to set up ameeting to go through the quote and clarify the scope of work, arranging ateleconference for 7 April 2021. However that telephone conference never wentahead.[18] It is difficult from the evidence to work out the sequence of events from thenon in terms of requests for work, feedback on that work and whether the work wasaccepted or not. There is contemporaneous evidence however that Mr Shaikh was nothappy with some of the work and the invoice itself records in respect of five out of sixof the tasks charged for that approval was pending.[19] Furthermore, Mr Rashid does not directly dispute some of Mr Shaikh'sevidence, including that he informed Mr Rashid that the company profile prepared forIANZ was of poor quality. An email dated 15 September 2021 is also included in theevidence in which Mr Shaikh raises issues in respect of a logo provided and aPowerPoint presentation and company profile that had been prepared, saying the fontsize is difficult to read, the photos overpower the written material, and the focus needsto be on the written material. Mr Rashid says in his evidence that these suggestionswere accepted by SNL but there is no correspondence supporting this, and Mr Shaikh'sevidence in reply is that this email was ignored.[20] On 8 October 2021 Mr Shaikh sent an email saying "[t]here has been anannouncement made by Immigration New Zealand recently so [IANZ] have beenextremely busy with phone calls and emails etc." He then says: "At this stage, I wouldlike to put this project on hold and we will review it once things are settled".[21] An email was sent on the same day from SNL attaching an invoice for $9,800,with the cover email recording that payment was due by 15 October 2021. An emailwas then sent on 13 October 2021 reminding Mr Shaikh that $9,800 was due forpayment on 15 October 2021 and then a further follow up on 16 October 2021 at 8.05am confirming that no payment had yet been received.[22] Mr Shaikh replied on Monday, 18 October 2021 saying:As you may understand in today's time it is impossible for any company topay such a large amount. And I would appreciate it if you could send aninvoice only for the work that has been carried out till date and I will be happyto look into it.[23] On 27 October 2021, SNL's accounts team sent an email to Mr Shaikh sayingthat Mr Rashid had agreed to partial payments. The final invoice was said to beattached with two payment due dates. The email says: "I hope this helps and pleasedon't forget about the payment due dates as I have a payroll to process on 1November". Mr Shaikh responded by email on 28 October 2021 saying that he hopesto review all the information and will respond within a week.[24] On 29 October 2021, Mr Rashid sent an email to Mr Shaikh confirming thathe had agreed to the invoice being paid in two stages and saying that he did not knowwhat was causing the delay but that he was attaching the costs for the services on theproject. Mr Rashid said that this information normally would not be provided toclients and that he would appreciate it if Mr Shaikh could look into it because it wascausing him hardship and would cause the payroll to be in deficit.[25] The affidavits filed do not describe whether there was any correspondence inthe interim but on 1 February 2022, Mr Rashid sent an email to Mr Shaikh saying:I was wondering if you had any time to process my invoice, which has nowbeen overdue for more than four months. Could you please complete thepayments as soon as possible? As previously stated, I had to pay the businessaccount from my personal account in order to pay the resource because theywill not wait this long for their payments.I am personally in need of funds and would greatly appreciate it if you couldrelease the payments as soon as possible.[26] Mr Shaikh responded on 3 February 2022 saying:I still haven't had a chance to look into it. I appreciate your patience. As youmay have noted, the 2021 Resident Visa was announced, and most of my staffhave been working for nearly 12 hours a day. Once the Phase 2 applicationsfizzle out. I hope to look into it and respond to you.[27] On 7 April 2022, Mr Shaikh then sent a lengthy email saying he had nowreviewed the invoice and commenting on each of the tasks charged for in the invoice.[28] In respect of logo design, the first task for which $600 was charged, Mr Shaikhsays that he would have expected certain steps to have been completed but none were,including a failure to discuss IANZ's requirements. When the logo concept wasprovided, Mr Shaikh says he immediately raised concerns that the logos seemedextremely close to Immigration New Zealand's logo and redirected SNL to the IPONZ(New Zealand Intellectual Property Office) website to ensure it would not be a breachof copyright. Mr Shaikh says that he had not heard back from SNL on this and so didnot consider this work has been completed. Furthermore, Mr Shaikh said he hadrecently contacted a logo designer for another venture in Rotorua who followed thesteps he would have expected and cost a total of $175 plus GST.[29] The second task discussed in the email was the company profile for which$1000 was charged. Mr Shaikh accepts that a draft of the company profile wasprovided but says that he raised concerns with Mr Rashid that the content seemed"substandard and below par to NZ standards". Mr Shaikh says in the email thatMr Rashid agreed the language did not meet New Zealand standards and thatMr Rashid informed him that he would be discussing this with SNL's "outsourcedagency in India".[30] Mr Shaikh noted however that there were minimal changes made and he wasstill unhappy with the outcome. Mr Shaikh said he therefore contacted a localcopywriter who understood the contents that needed to go in the company profile, toldhim the estimates of the costs involved, waited for approval from IANZ before goingahead and provided a draft for him to review. Mr Shaikh says he sent a copy of thefinalised version to Mr Rashid by email on 6 September 2021 and no response hasbeen received. Mr Shaikh says that sourcing it locally cost him less than one third ofthe amount now charged by IANZ.[31] Mr Shaikh then says his experience in respect of the third and fourth tasks, thebrochure and company presentation was similar to the logo design. $800 was chargedfor the brochure and $1200 for the company presentation. Mr Shaikh's email saysthere was no discussion of IANZ's requirements or what the costs involved would be.Mr Shaikh says he was not happy with the font size, the photos were not relevant asthey did not depict New Zealand or its culture and various other feedback wasprovided. Again, Mr Shaikh says no response has been received.[32] Mr Shaikh's email did not refer to the fifth task charged for in the invoice, thebrand guide for which $200 was charged.[33] With the final task, the company website for which $6000 is charged, MrShaikh said that during a Zoom meeting he was shown a sample of a website. Onceagain, Mr Shaikh says there were no discussions held to understand IANZ'srequirements and the written content of the sample was not related to IANZ's business.Mr Shaikh records in his email that IANZ's website is "informative only and does notrequire any highly technical programming". Mr Shaikh said in his experience mostwebsite development companies present such samples for free during their initialpresentation. He continues that, once again, the costs were not discussed prior to thework being started and no approval was obtained.[34] In conclusion, Mr Shaikh expressed his disappointment with the failure todiscuss costs before the project started, to obtain written approval and to ensure clientexpectations were met. The email finishes by saying:Your invoice consists of work that has not been approved by me prior to itcommencing, nor has it been confirmed by me as completed. I would furtherlike to add that I have not been using any of the work mentioned in yourinvoice. However, it is my intention to recognise the effort put in by you andyour team. Hence, please review your invoice and resend reasonable costs foronly the work that was carried out. My current budget will allow me toconsider reasonable costs in three figures only.I look forward to receiving your reviewed invoice.[35] On 9 April 2022, Mr Rashid sent a reply to Mr Shaikh saying that he hadattempted to respond to Mr Shaikh's points "because a few details and discussionswere overlooked" with the email saying, "see highlighted below". However, the copyof the email annexed to Mr Rashid's affidavit does not include the earlier email withMr Rashid's responses and Mr Rashid does not go into detail in his evidence on thepoints that were made in response. Mr Rashid does however say that a project costestimate was provided to Mr Shaikh on 30 March 2021 and, although Mr Shaikh tooka while to respond, he then requested that SNL begin working on the project. As aresult, Mr Rashid says that he does not accept that it was an exorbitant fee or that thecosting was not approved.[36] In response to Mr Shaikh's point that nothing has been finished, Mr Rashidsays: "there was no feedback from the team to take anything to the finish line" andthat SNL was then asked to put the project on hold. Mr Rashid says it took six monthsfor Mr Shaikh to get back to him in regard to the invoice and asking him to revise theinvoice now is not an option because the business had already paid the resources. Theemail finishes by saying he expected the debts to be paid as soon as possible.[37] A further email does not appear to have been sent until almost a year later, on3 April 2023, when Mr Rashid emailed Mr Shaikh saying: "You have outstandinginvoice payments of $11,270 since October 15, 2021. It is the business's year-end,and I would like the payment to be made as soon as possible." Mr Rashid then says ifthe invoices are not paid in full by 6 April 2023, he will hand the matter to "mylegal/recovery".[38] On 13 April 2023 the statutory demand was served.[39] On 21 April 2023, IANZ's solicitors wrote to the respondent advising the debtis disputed, referring to previous correspondence, and asking for the demand to bewithdrawn or this application to set aside would follow. The respondent refused towithdraw the statutory demand.[40] Prior to the hearing, IANZ paid the total disputed sum into its lawyer's trustaccount to demonstrate its solvency.[41] Counsel for SNL sent an email to the solicitors for IANZ on 25 May 2023asking them to confirm that the amount had been received and to provide assurancethat the solicitors for IANZ would not release the funds until the conclusion of theseproceedings "nor adjust this amount towards any fee payable by [IANZ]". Noresponse was received to this email. Mr Robinson confirmed for IANZ that theundertakings sought were not given.Is there a genuine and substantial dispute?[42] I consider that the factual chronology set out above shows that there was asubstantial dispute between the parties as to the existence of the debt before thestatutory demand was served.[43] Counsel for the respondent submits that "[t]he delay in raising any issueswhatsoever, until 7 April 2022, is fatal to IANZ's cause". This submission is made onthe basis that Mr Shaikh's earlier email of 18 October 2021 reads, in the respondent'ssubmission, "as an admission of work been done by SNL, [IANZ]'s inability to paythe invoice, and an attempt to get a discount". Counsel submits that nowhere in theOctober 2021 email does IANZ raise any issues with quality, scope or quantum.Instead, the respondent submits that "what was assured by [IANZ] in this email wasthat it will happily look into (i.e., pay for) work that has been carried out till date."[44] The email of 18 October 2021 reads as follows:As you may understand in today's time it is impossible for any company topay such a large amount. And I would appreciate it if you could send aninvoice only for the work that has been carried out till the date and I will behappy to look into it.[45] Although it could have been more clearly expressed, I do not consider therecan be any dispute that the above email raises issues in relation to the invoice, byasking for an invoice to be sent for the work that had been carried out to date and thensaying that Mr Shaikh would review it. Neither of these comments suggest that MrShaikh was agreeing to pay the invoice. The timing of this email is important as itwas sent only one working day after the invoice's nominated due date, which was onlyseven days after it was issued.[46] As counsel for IANZ submits, no contract or terms of payment had been signedand so no time frame for payment had previously been agreed.[47] It is unfortunate that there was then a significant delay before a detailedresponse to the invoice was provided by IANZ but the response then provided clearlyraises issues in respect of all but one of the tasks charged for in the invoice and only$200 was charged for that remaining task.[48] Mr Rashid responded to this email on behalf of SNL but his substantiveresponse in respect of each of the points raised is not included in the evidence.Mr Rashid disputes that the costs were exorbitant or not approved but his mainresponse appears to be that he is not in a position now to reduce the invoice becausethe contractors have already been paid. This latter point does not however mean thatthe amount is not genuinely disputed by IANZ. This is instead an issue for SNL itselfin terms of the payment terms for SNL's contractors.[49] I agree with counsel for the applicant that timing is a significant indicator ofwhether a dispute is genuine and substantial. If issues have been raisedcontemporaneously with the invoice rather than in response to the service of thestatutory demand, they are much more likely to indicate that the dispute is genuine.[50] In respect of issues with both the scope and quality of work, these were clearlyraised in the 7 April 2022 email and cannot now be discounted in circumstances whereany substantive response by SNL is not included in the evidence.[51] IANZ accepts that some work was completed and says that it is prepared topay a fair and reasonable amount. The question of what that amount is, however, isnot a matter that can be determined in the context of this application.[52] Counsel for SNL submits the Court ought to uphold the statutory demand onthe basis of quantum meruit. This would only be appropriate though where there is aclear method for calculating the amount owed.[53] In Mega Project Holding Ltd v Orewa Developments Ltd¸ the Court of Appealset aside the statutory demand on the basis of a substantial dispute notwithstandingthat there was an acknowledgement that fair and reasonable costs were owing.10 In10 Mega Project Holding Ltd v Orewa Developments Ltd [2020] NZCA 111.that case there was a mechanism in the contract to determine what those costs oughtto be and so various conditions were imposed by the Court. In this case, IANZ submitsthat the appropriate mechanism to determine a fair and reasonable amount isdetermination in a civil proceeding. Given the amount in issue, this would be in theDisputes Tribunal.[54] I agree as the tasks charged for are not all matters that clearly fall within theoriginal quote and nor does the quote set out an hourly rate. In addition, there aredisputes between the parties regarding the extent to which work was completed or wasof a usable quality. It is not appropriate for such disputes to be determined in thecontext of an application to set aside and so the demand cannot be upheld on the basisof quantum meruit.Result[55] The application to set aside the statutory demand is granted.Costs[56] The applicant asked to be heard on costs if it was successful. I ask the partiesto confer and only if agreement cannot be reached for memoranda of no more thanthree pages (excluding schedules) to be filed, on behalf of IANZ within 25 workingdays and SNL a further 10 working days. I record my preliminary view that increasedcosts may be appropriate as there appears to have been a clear dispute prior to serviceof the statutory demand and an application to the Disputes Tribunal would have beena more efficient and appropriate way of resolving the issues.______________________________Associate Judge Sussock