JOBX NEW ZEALAND LIMITED v UMBRELLAR LIMITED [2016] NZHC 2018

JOBX NEW ZEALAND LIMITED v UMBRELLAR LIMITED [2016] NZHC 2018 [29 August 2016]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV 2016-404-001660[2016] NZHC 2018IN THE MATTER OF Section 290 of the Companies Act 1993BETWEEN JOBX NEW ZEALAND LIMITEDApplicantAND UMBRELLAR LIMITEDRespondentHearing: On the papersCounsel: J M Skinner for the ApplicantA L Davis for the RespondentJudgment: 29 August 2016COSTS JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSENThis judgment was delivered by me on29.08.16 at 3:00pm, pursuant toRule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate[1] On 18 July 2016 the applicant applied for an order setting aside therespondent's statutory demand. That application asserted there was a substantialdispute about whether a debt was owing to the respondent, and asserted that theamount claimed to be owing by the respondent had been in dispute for some time.[2] The affidavit of Mr O'Meara on behalf of the applicant referred to thebackground of the parties' issues.[3] The respondent's claim related to a range of services and products deliveredby the respondent to the applicant. The parties' business relationship had endured for10 years but in the last two years, issues arose regarding product and service provided.[4] Mr O'Meara deposes that the respondent acknowledged the need to providecompensation but that none was forthcoming. Through 2015 and the first half of 2016the parties discussed whether compensation be paid to the applicant and if so in whatamount. In June 2016 the respondent offered an account credit of $6,500. This wasdeclined. Shortly after the respondent issued a demand for $14,616.89. Followingthis the statutory demand that is the subject of the present application, issued.[5] The respondent's statutory demand has now been withdrawn and in issue iswhether costs should be paid to the applicant. The applicant applies for 2A costs. Therespondent's position is that costs should lie where they fall but if costs are awardedthen those should be fixed on a 1A basis.[6] Ms Davis for the respondent says the issue of an initial informal demandfollowed failed settlement negotiations. Ms Davis says the applicant was advised thatif payment of the respondent's claim was not made within a week then the respondentwould proceed on the basis that the applicant was insolvent and a statutory demandwould issue for the full amount outstanding under the unpaid invoices.[7] The statutory demand was served on 5 July 2016. On 13 July the applicantapplied to set aside the statutory demand.[8] The parties renewed their negotiations. Ms Davis asserts that despite therespondent's view that the setting aside application would fail a settlement proposalwas made in order to avoid the costs of a defended High Court hearing.[9] The offer was refused and no agreement since has been reached.Considerations[10] The setting aside application succeeded. Prima facie costs should be payableto the applicant. Routinely costs awards address issues of complexity andsignificance. In the Court's experience, actual costs routinely exceed the daily ratesprovided by the scale. Notwithstanding this, applications for costs according to thescale rate must be endorsed by advice from counsel that the scale rates do not exceedactual costs incurred.[11] Usually costs awards do not take into account the pre litigation steps of theparties1. In this case however both counsel agree that pre litigation steps be reviewableby this judgment, if appropriate.[12] Ms Davis submits the applicant failed on two occasions to advise that therewas a dispute as to the amount demanded by both its informal and formal demands.Had the applicant advised the debt was disputed following issue of the informaldemand, the respondent says it would not have issued the formal second demand.[13] Ms Davis submits it is common practice for solicitors to advise the solicitorsfor the issuing party that an application to set aside will be filed – for the purpose ofavoiding costs associated with such an application. In this case Ms Davis says no suchadvice was received and therefore the respondent had no opportunity to withdraw thestatutory demand.[14] In the Court's view the respondent should pay the applicant's costs on a 2Bbasis as applied for – subject to confirmation from applicant's counsel that those costsdo not exceed costs actually incurred.1 Paper Reclaim Limited v Aotearoa International Limited [2006] 3 NZLR 188.[15] There has been a long enduring dispute between the parties. Settlementnegotiations had taken place over many months. It does not seem to the Court thatclaims of insolvency assumed any significance for the respondent's purposes when itsformal statutory demand was served. In the Court's view some other formal processought to have been engaged to resolve the parties' issues.[16] Costs are awarded to the applicant on a 2A basis together with disbursements,as requested.Associate Judge Christiansen