INTAGR8 LIMITED AND INTAGR8 SECURITY LIMITED v EZEL LIMITED [2015] NZHC 1631

INTAGR8 LIMITED AND INTAGR8 SECURITY LIMITED v EZEL LIMITED [2015] NZHC 1631 [14 July 2015]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV 2015-404-000796CIV 2015-404-000797[2015] NZHC 1631UNDER Section 290 of the Companies Act 1993IN THE MATTER OF applications to set aside a statutorydemandBETWEEN INTAGR8 LIMITED ANDINTAGR8 SECURITY LIMITEDApplicantAND EZEL LIMITEDRespondentHearing: 13 July 2015Appearances: K D Puddle for the ApplicantsD P Hoskin for the RespondentJudgment: 13 July 2015ORAL JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSENBackground[1] The respondent (Ezel) issued statutory demands upon both applicantcompanies for each company's share of outgoings for electricity usage at thecommercial premises owned by Ezel.[2] The applicants have applied to set aside the statutory demands. They dispute any liability for the electricity usage, claiming:(a) Ezel had agreed to meet those costs;(b) The applicants believed that the genuiness of the claims is in question; and(c) The applicants have offset claims.[3] The applicants each leased part of a building at Archers Road, Glenfield from Ezel. Other tenants also occupied the same premises. Apparently only one electricity meter services the usage of all tenants.[4] The applicants occupied pursuant to the terms of a deed of lease (the deed) each dated in 2010. The leases were for five years. Intagr8 Limited paid a rent of $130,920 per annum or $10,910 per month. Intagr8 Security Limited paid an annual rent of $54,360 or $4,530 per month. Each lease was subject to two yearly rent reviews. Intagr8 Limited was required to pay 42.6 per cent and Intagr8 Security Limited 12.1 per cent of the building outgoings in addition to the rental payable.[5] The deed provided that outgoings included charges for water, gas, electricity, telephones and other utilities or services.[6] It is common ground that Intagr8 Limited's lease does not record the whole agreement between the parties. There was as well a side agreement which provided for a rental holiday but only upon the basis that outgoings were paid from the lease commencement date. In this case the rental holiday comprised a discount for a period of two years and also provided that if Ezel sold the premises within that twoyear period then Intagr8 Limited would be compensated if a higher rental was payable to the new landlord.Electricity charges[7] Ms Taylor swore affidavits on behalf of the applicants and as well affidavitsin reply to Ezel's affidavits in opposition. She deposes in the reply affidavits that the applicants were told they would not be billed for electricity because Ezel hadcontacted all suppliers "and they had determined that they would not be billed for it".Ms Taylor insists they were ensured that any electricity charges would be covered byEzel. Further and because there was a single electricity meter the applicants, likeother tenants, were not able to enter into their own electricity supply agreements.[8] The applicants say the side agreements were important to the applicants because it gave them certainty as to rent and outgoings. It is not clear what Ms Taylor is referring to in that regard.[9] Meridian Energy was the electricity provider for the premises. Meridian had not issued electricity charges for power supply to the premises between 29 April 2010 and 19 May 2014. As a result the applicants as well as other tenants had not been charged for power during this period.[10] In August 2014 Meridian issued a bill for electricity usage for more than $90,000. Ezel's solicitors then wrote to the applicants with invoices requiring contributions equal to that which was required by the lease.[11] Then Ezel gave notice to Meridian Energy of its dispute with the charges claimed. A settlement was negotiated by which Ezel agreed to pay a total sum of $22,500. Ezel then reissued contribution demands in the sum of $9,585 from Intagr8 Limited and $3,847.50 from Intagr8 Security Limited.[12] Those invoices also included a request for payment of a proportionate share of the legal costs incurred by Ezel in its dispute of the Meridian claim. The statutory demands do not include a claim for those legal costs.The invoices for payment of outgoings[13] The Court has already referred to the applicants' claim that Ezel had assured them inter alia that they would not have to pay for electricity. During the course of their occupation the applicants paid fixed monthly outgoings. They say they understood those to cover any electricity charges. They say further that the outgoing invoices were unspecific and did not refer to any underlying charges.[14] Ms Taylor has deposed that between 1 August 2012 and 31 March 2015 Intagr8 paid $30,606.08 in outgoings and Intagr8 Security Limited paid $12,285.44.[15] In the outcome of the parties' dispute the applicants have conducted areconciliation of the amounts paid for outgoings under their leases. They now believe that because Ezel "has not provided [them] with reasonable details of actual outgoings for the term of the lease to enable [them] to determine whether anyoverpayment should be credited"[16] Ms Taylor expresses genuine concern that there has been overcharging for outgoings under the lease. It is not clear on what basis she expresses this concern.[17] It was not until her affidavit in reply that Ms Taylor refers to there being a single electricity meter or to there being a side agreement and the significance of that for the applicants. Ms Taylor had not earlier said how or why the side agreements provided certainty regarding outgoings. Certainly she had not earlier said that the applicants had received an assurance that electricity charges would be covered by(i.e. paid by) Ezel.[18] The applicants also claim Ezel has provided them with insufficient detailsregarding the settlement of Meridian Energy's claim.[19] They say they asked Ezel for details to enable them to verify the revisedaccounts agreed with Meridian, but that none was given until 26 March 2015 whenthe settlement details were confirmed.Legal principles[20] Under s 290 of the Companies Act 1993 the Court may set aside a statutorydemand if it is satisfied:(a) There is a substantial dispute as to whether or not the debt is owing or is due;(b) The company appears to have a counterclaim, set off, or cross demand of an amount not less than that sought by the statutory demand; or(c) The demand ought to be set aside on other grounds.[21] The applicants say there is a substantial dispute that the amount claimed in the statutory demands are due and owing. Also the applicants say they are solventbecause they have deposited in their solicitors' trust account an amount sufficient topay both statutory demands.The applicants' case - summary[22] Mr Puddle for the applicants submits the dispute is comprised as follows:(a) That Ezel agreed to cover electricity outgoings at the start of the leases, and no invoices for outgoings received specified that they were for electricity.(b) The statutory demand served on Intagr8 Limited is incorrect becauseit does not take into account the $1000 setoff regarding thekitchenware that it was agreed would be purchased from it by Ezel.(c) Based on their dealings and because of the side agreements theapplicants have substantial doubts that the outgoings they have paidover the course of the lease are genuine.(d) The applicants do not know of the Meridian Energy settlement terms despite having requested that information. Therefore they have genuine doubts about settlement as it may have contained additional conditions relating to Ezel which could have impacted on the settlement figure.(e) All of this information could have been provided prior to issuing statutory demands and the matter could have been resolved without the issue of a statutory demand.[23] It is the applicants case that from the beginning they were assured no electricity was payable because Ezel said it would pay that cost. Mr Puddle relies on two pieces of evidence to support the submission namely:(a) Ezel's email of 26 August 2014; and(b) The side agreements.[24] The applicants' position is that the payment of outgoings needs to be analysedby somebody appropriately qualified and that because this has not been done the Court cannot be satisfied the potential of a claim cannot be ruled out.Considerations/conclusion[25] A great deal of reliance has been placed by the applicants upon Ms Taylor's claims in her reply affidavit (and not before then) that it was agreed the applicants would not be billed for electricity; that they were assured Ezel would meet those costs.[26] Understandably counsel for Ezel objects to this evidence which is not at all supported by reference to exhibited correspondence. Ms Taylor suggests Ezel'semail dated 26 August 2014 provides proof of such an arrangement, but clearly it does not do so.[27] Also claims of an agreement were not referred to in Ms Taylor's originalaffidavit in opposition. The reply affidavit does not say who, when or why that claim was made. Indeed, it appears that not before the 25 June 2015 when the reply affidavit was sworn, was any mention made of the issue that the applicants were not liable for electricity because Ezel had agreed to cover that cost for them. Until thenthe applicants' primary focus concerned proof of Meridian's debt. Further it appearsclear that following service of the statutory demands neither the applicants'solicitor's correspondence nor by the reconciliation prepared by the applicants, was it suggested that the applicants were not liable for electricity charges. Further, and since the Meridian debt was paid and the services of another electricity provider had been engaged, it appears the applicants have since met their proportionate share of the electricity outgoings on the building.[28] Too much emphasis has been placed by the applicants upon the "side agreement". Clearly that agreement was designed to provide a rental discount during the first two years of the lease. The added requirement to ensure payment of certain outgoings did not absolve the applicants of their responsibility for a proportionate share of all named obligations provided by the deed of lease.[29] The applicants claim that there are good reasons to doubt the accuracy Ezel'speriodic accounts for payment of outgoings because of the lack of information provided in support of those. However no question was ever raised in that regard until receipt of Meridian's account requiring payment for four years of electricitysupplied, when for reasons best known to Meridian, it had not provided any invoices before then.[30] The applicants' responsibility for the payment of electricity outgoings is clearly set out in clause 3 of the deed of lease. That obligation was not altered by a further deed or indeed even the side agreement. Each deed set out the proportionate share of outgoings required to be paid by tenants.[31] Ezel has incurred and indeed paid a total sum of $22,500 to Meridian Energy for which sum it is clearly entitled to reimbursement from its tenants. That sum is one quarter of the amount originally sought by Meridian for payment. Acompromise was negotiated using services provided by the Office of the Electricity and Gas Complaints Commissioner. There is no reason to think the applicants have been prejudiced in that outcome. Indeed if Meridian has pursued the matter through Court proceedings then likely the applicants and other tenants would have been joined to any proceeding dispute. The Court is satisfied sufficient evidence has been provided of the amount paid to Meridian for the supply of electricity to the applicants' tenanted premises.[32] The Court does not accept submissions or Ms Taylor's evidence regardingclaims of insufficient evidence being provided to support the invoices submitted to justify the amounts charged in the monthly payments. The clear answer to those claims is provided by the evidence of Ms Gonzur for Ezel at paragraphs 33 – 40 of her affidavit and also in various annexures to her affidavit.[33] The Court agrees that Ms Taylor's reconciliation exercise does not provide sufficient evidence of reasons to review invoices over the term of each party's lease.[34] The applicants urge that the statutory demand is inappropriate because theyare solvent and indeed have placed a fund in trust to meet Ezel's debt if these presentapplications should fail.[35] In response to claims of solvency Ms Gonzur has provided evidence of numerous examples over the last two years of Ezel chasing the applicants for overdue rental and outgoings.[36] This application is clearly more than just about insolvency. The Court'sfocus is upon whether or not there is arguably a genuine and substantial dispute as to the existence of the debts. Clearly the debts exist.[37] The remaining element of the applicants' case concerns claims of a"legitimate" setoff. The claim concerns an amount of $1000 which the applicants say was agreed to be paid for kitchenware left by Intagr8 Limited when its lease terminated earlier this year.[38] However there is no evidence by way of invoice to show a debt is due or that there is that value in the items as claimed. The Court agrees there is no evidence that Ezel is the entity responsible for payment of the setoff amount.[39] In a Court's view clear and persuasive grounds for a setoff claim does not exist here.Result[40] The Court is of the view that neither statutory demand should be set aside.Judgment[41] Both applications are dismissed.[42] The time for payment of the amounts due by the statutory demand is extended to 4:00pm, 17 July 2015.[43] Each applicant shall pay costs to Ezel calculated on a 2B basis, together with disbursements approved by the Registrar.Associate Judge Christiansen