SAFARI BBQ PRODUCTS LIMITED v SAFARI VERVAARDIGING CC [2022] NZHC 2741 [21 October 2022]

SAFARI BBQ PRODUCTS LIMITED v SAFARI VERVAARDIGING CC [2022] NZHC 2741[21 October 2022]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2022-404-691[2022] NZHC 2741BETWEEN SAFARI BBQ PRODUCTS LIMITEDApplicantAND SAFARI VERVAARDIGING CCRespondentHearing: 30 September 2022Appearances: S Jeffs for ApplicantJ Marcetic for RespondentJudgment: 21 October 2022JUDGMENT OF ASSOCIATE JUDGE LESTER[1] Safari BBQ Products Ltd (SNZ) is owned and operated by an expatriateSouth African, Mr Erasmus. To cater for other expatriate's love of traditional SouthAfrican braii (BBQ), Mr Erasmus has through different companies importedSouth African BBQ briquetts and other products from Safari Vervaardiging CC(SVC).[2] Since June 2017, Mr Erasmus has run his importing business through SNZwhich signed a Credit Application Form (the Terms) with SVC on 26 June 2017.While Mr Erasmus accepts this Form was signed, he says it was not a feature of thebusiness relationship between SNZ and SVC.1[3] The companies ceased trading together in early 2021 – the date of the lastinvoice issued by SVC to SNZ being 12 January 2021.[4] SVC says as at 10 May 2021 (the date of the last payment by SNZ), it wasowed ZAR 1,147,061.35 which is about NZD$113,500.00.[5] SVC issued a statutory demand for ZAR 1,007,162.36 plus interest from10 May 2021 to 12 April 2022 (the day prior to the date of the statutory demand). Theinterest claimed is ZAR 139,898.99 at the rate specified as the default rate inthe Terms.[6] I note here a Distribution Agreement was provided by SVC to SNZ inOctober 2017 but it was not signed by SNZ. Clause 4.1 of the Terms provides:No variations of the terms of any contracts, including these conditions, shallbe of any force unless agreed and committed to writing.[7] As the October 2017 Distribution Agreement was not signed by SNZ, I do notconsider those terms apply. Mr Erasmus says he does not recall signing theDistribution Agreement. He does not claim to have signed it or to have agreed to itsterms or communicated that agreement to SVC. In the absence of evidence that1 The Terms contain a clause that the contract shall be interpreted and enforced in accordance withSouth African law. Both counsel confirmed the present hearing could proceed on the basis of NewZealand law. Mr Marcetic said that agreement was not a waiver of his client's entitlements underthe relevant clause. Whether SVC's agreement to the present application being determined underNew Zealand law would amount to a waiver is not for me to determine.Mr Erasmus, on behalf of his company, agreed to the Distribution Agreement eitherby signing and returning it to SVC or confirming in some other way its terms wereagreed, I do not consider the Distribution Agreement has any application.[8] Mr Jeffs, counsel for the applicant, submitted the Terms were not signed bySVC. The Terms do not contemplate being signed by SVC. The Terms were advancedby SVC as the basis on which it would do business with SNZ. SVC could not say itwas not bound by its own terms and SNZ bound itself to those terms by signing.[9] Mr Jeffs submitted further that the informal, even casual, manner of tradingbetween parties meant they were not treating the Terms as continuing to apply. I donot accept that. First, cl 4.1 of the Terms requires variations of the terms to be agreedin writing but, more fundamentally, that the trading relationship operated in a relaxedway does not amount to a waiver by SVC of the benefit of the Terms.[10] I agree with Mr Marcetic, counsel for the respondent, that the informal wayorders were placed does not mean the Terms were overtaken or abandoned.Principles applying to the setting aside of a statutory demand[11] The following principles apply:2[16] The general principles under s 290(4) are well settled:(a) The onus is on the applicant seeking to set aside the statutory demandto show that there is arguably a genuine and substantial dispute as tothe existence of the debt. The Court's task is not to resolve the disputebut to determine whether there is a substantial dispute that the debt isdue.(b) The mere assertion that a dispute exists is not sufficient. Materialshort of proof is required to support the claim that the debt is disputed.(c) If such material is available, the dispute should normally be resolvedfirst in ordinary civil proceedings before any statutory demand isissued.(d) If a counterclaim, cross-demand or set-off is suggested an applicantmust establish that this is reasonably arguable in all the circumstances.2 Confident Trustee Ltd v Garden and Trees Ltd[2017] NZCA 578.(d) It is not usually possible to resolve disputed questions of fact onaffidavit evidence alone, particularly when issues of credibility ariseunless such evidence is contrary to the available documents or earlierstatements made by the parties.[12] United Homes (1988) Ltd v Workman assists in determining the type ofmaterial an applicant must produce and how that material will be assessed.3 In thatcase the applicant asserted a "clear express agreement" without substantiating thebackground. That assertion was considered bare to the point of being unconvincing.The Court said:If an agreement is clear and express, there should be no difficulty inidentifying the date and place of its making, the persons involved in itsmaking, and the manner of its statement and/or recording. No such details aregiven.[13] Equivocal evidence will not be a proper foundation for a set-off.4 An applicantneeds to produce evidence showing a real basis for a claimed set-off. Estimates ofloss without an explanation as to how the estimate is arrived at will be insufficient.5An outline of a claim is not enough.6SNZ's challenges to the statutory demand[14] The first ground of challenge is that there is a substantial dispute as to whetherthe debt is owing. SNZ says the sum claimed in the demand includes "unspecifiedamounts for damages for lost income". SNZ says SVC has not explained the basis for,or calculation of, the amounts claimed for lost income.[15] The amount claimed is also challenged on the basis that the demand haswrongly charged interest twice.[16] The second ground is that the applicant has a counterclaim, set-off orcross-demand arising from SVC supplying contaminated charcoal and mouldybriquetts.3 United Homes (1988) Ltd v Workman [2001] 3 NZLR 447 (CA) at [35].4 Covington Railways Ltd v Uni-Accommodation Ltd [2001] 1 NZLR 272 (CA).5 Jacobsen Creative Surfaces Ltd v Mapei Spa HC Auckland M967/02, 5 February 2003 at [23].6 Jacobsen Creative Surfaces Ltd v Mapei Spa, above n 5, at [25].[17] The third and alternative ground is that the statutory demand is an abuse ofprocess having been issued to obtain a collateral advantage in respect of a disputebetween the parties in relation to a trademark.First basis of challenge: QuantumInterest claim by SVC[18] The Terms provide:Interest shall accrue on any amount due to Seller calculated from due date at15% per annum [19] Prior to the issuing of the statutory demand, none of SVC's invoices includeda particularised claim for interest. The claim for interest is first raised in the statutorydemand itself.[20] A statutory demand can only be issued for an amount that is due and owing.At no time prior to the issuing of the statutory demand has SVC calculated or invoicedand demanded interest from SNZ.[21] The statutory demand is set aside in respect of the interest claim on the basisinterest was not due and owing at the date the demand was issued. While the interestclause provides that interest shall accrue on overdue amounts, unless and untilthe interest is calculated and invoiced, there is not in terms of s 289(1) of theCompanies Act 1993 (the Act), a debt owing by SNZ.[22] Under s 289(2) of the Act, the demand must be in respect of a debt that is due.It cannot be said interest was due in the absence of interest being quantified andinvoiced.Balance of amount demanded[23] However, the addition of that sum does not invalidate the statutory demand.[24] The second challenge to the quantum in the demand is based on whether anincrease in shipping costs per container of product payable by SNZ, from ZAR 45,000to ZAR 75,000, in fact camouflaged what amounts to a damages claim by SVC orwhether the whole increase is attributable to an increase in shipping costs.[25] Mr Erasmus says that he was told by Mr Reinstorf of SVC that SVC wascharging SNZ ZAR 10,000 or ZAR 11,000 per container for interest and "lostincome". That claim is disputed.[26] Mr Reinstorf, in his affidavit, says that the increased shipping cost ofZAR 75,000 is made up of a number of components. He says:It covers our costs of fulfilling orders, all freight costs to the local port, portcharges and arranging for their shipping – by itself around ZAR 30,000 per40ft container. The shipping costs then include the price for that specificcontainer as well as the cost of servicing the account with the shippingcompany. The longer the delay in receiving payment, the greater the interestwe have to pay on our account with the shipping line. Safari NZ's irregularpayment increased our costs in that regard, and we passed that on to SafariNZ. The need to cover for Safari NZ's lack of payment also restricted ourability to expand our business and take on new customers.[27] There are four of shipments that make up the amount in the statutory demand.23 containers were invoiced at a freight cost of ZAR 75,000 which, at ZAR 11,000 percontainer, would mean on SNZ's case an overcharge of ZAR 253,000. Mr Erasmussays that if the claimed overcharge had been applied to all shipments from March 2019the total would be ZAR 572,000.[28] If SNZ is correct it has paid ZAR 11,000 per shipment it should not have beencharged, then it will have a claim against SVC in respect of that alleged overpayment.The no set-off clause[29] Clause 1.4 of the Terms provides:Unless otherwise stated, all prices are net. and exclude VAT. Payment mustbe made by Purchaser to Seller without deduction, set-off or demand atSeller's address.[30] SVC's submissions did not rely on the no set-off clause. When raised by theCourt, counsel sought and were given time to file further submissions on whetherthe clause applied. Mr Marcetic submitted that, while SNZ could raise otherchallenges to the statutory demand, the no set-off clause prevented it from doing so byway of a set-off or a counterclaim.7[31] Mr Jeffs noted during the course of the parties' trading relationship, SVC neverinsisted on its invoices being paid without deduction or set-off. Mr Jeffs noted SVChad given SNZ a number of credits arising from product quality claims made by SNZ.However, SVC allowing a credit against SNZ's debit balance did not representSNZ refusing to pay an amount due because of a set-off or a counterclaim. SNZ raisedquality issues with products supplied by SVC. SVC considered that claim andaccepted a credit was due, albeit not at the level sought.[32] In particular, Mr Jeffs referred to events in 2021 when the parties' positionshad hardened. He noted:The parties differed as to what would be an appropriate allowance, but it wasnever disputed that any allowances would be off-set against [SVC's] invoices.[33] In response, Mr Marcetic noted: the purpose of cl 1.4 is that [SNZ] pays [SVC] in full first, with furtherarguments to follow about any credits or deductions. That is exactly whathappened in relation to the credits applied in February 2021: product wassupplied in 2019, was paid in full by [SNZ], and issues of credits weresubsequently resolved in full in February 2021. That is entirely consistentwith clause 1.4.[34] Mr Jeffs submitted SVC ignored the no set-off clause as it was not referred toby its South African solicitors in their November letter of demand and was not reliedon by SVC in its opposition or submissions.[35] Mr Jeffs submitted all these factors should be taken into account when theCourt considers how to exercise the Court's discretion under s 290(4)(b). Mr Jeffssubmitted that the Court ought to decline to give effect to cl 1.4.[36] Ultimately, SVC has demanded an amount it says is payable pursuant to itscontractual terms. SNZ does not assert SVC is estopped from relying on its terms or7 New Zealand Dairy Processing Ltd v Schenker (NZ) Ltd [2012] NZCA 343, [2012] NZCCLR 28at [35]-[41].it somehow waived its ability to rely on the clause. I have some sympathy for Mr Jeffs'submission that, had the no set-off clause been expressly relied on earlier, SNZ maywell have re-assessed its approach to the demand. That is an issue for costs in respectof this application rather than an issue that undermines whether SNZ owes the moneypursuant to the Terms it signed. I am satisfied that the no set-off clause can be reliedon by SVC in this application.[37] Clause 1.4 of the Distribution Agreement does not prevent SNZ prior topayment disputing that the amount claimed is properly calculated. However, once theinvoiced amount is paid, any dispute SNZ has relating to historical invoices cannot beset-off against current unpaid invoices.[38] In respect of claimed historical overpayments, such may not be relied on toavoid paying amounts otherwise now due to SVC.[39] The Court of Appeal has said that a contractual no set-off will normally resultin the Court's discretion being exercised against an applicant who seeks to set asidea statutory demand where the basis of the application is the existence of a set-off,counterclaim or cross-demand the applicant has expressly agreed cannot be raised.8[40] However, as to the four unpaid invoices that make up the amount in the demandit is necessary to examine whether they may include the alleged ZAR 11,000 "levy".SNZ disputing the quantum of an unpaid invoice is not it raising a set-off. SNZ isentitled to ensure the amount it is being called upon to pay is correctly calculated.[41] SNZ's claim is that SVC padded its invoices by adding ZAR 11,000 percontainer representing interest and damages for late payment which frustrated SVC'sability to take on new clients as the late payment impacted on SVC's cashflow.[42] Mr Reinstorf denies making the statements asserted by Mr Erasmus. SVCprovided to SNZ an explanation for the increase of shipping costs from ZAR 45,000to ZAR 75,000 in a WhatsApp message on 1 May 2020. The shipping company SVC8 Browns Real Estate Ltd v Grand Lakes Properties Ltd [2010] NZCA 425, (2010)20 PRNZ 141 (CA) at [17].had been using was no longer available. The new shipping company's rate wasZAR 30,000 higher per container than the previous shipping company. ZAR 30,000is the difference between the old rate of ZAR 45,000 and the new rate of ZAR 75,000.Mr Erasmus confirmed orders based on this information.[43] Of the old rate of ZAR 45,000, ZAR 18,000 represented the previous shippingcompany's rate. When Mr Erasmus was contemplating arranging his own shippingin mid-2019, Mr Reinstorf sent him an email which included a breakdown of the "landside costs", that is, the costs in addition to the shipping rate. Those costs were:(a) marine surveyor ZAR 2,000 per container;(b) transport from George to PE ZAR 13,000 per 40 ft container;(c) loading costs at the factory ZAR 1,500 per 40 ft container;(d) land side rates (PE Port) ZAR 8,500 per 40 ft container;Giving a total of ZAR 25,000. "PE" is Port Elizabeth.[44] Those land side costs coupled with the ZAR 18,000 shipping rate arrives ata total of ZAR 43,000. There is reference to SVC charging ZAR 2,000 per containerfor administrative costs (that explanation being provided in the context of a breakdownof the ZAR 75,000 rate).[45] It seems that the exact shipping cost per container was not always ZAR 45,000or ZAR 75,000 – there were "unders and overs" but a flat rate gave SNZ predictability.Against the above information, as Mr Marcetic put it, there is no room to hide animpost of ZAR 11,000.[46] Mr Erasmus has not produced any evidence that the shipping rate increase ofZAR 30,000 did not in fact occur or was inflated. SVC has produced an invoice fromthe shipper dated 4 June 2020. The total of that invoice is ZAR 65,441.22.[47] The additional ZAR 10,000 in round numbers, includes a claim by SVC for itsloading costs including forklift rental, administrative costs of ZAR 2,000, obtainingcertain certificates for export and banning costs being portside container loading costs.[48] The shipping invoice does include a charge under the heading "ClearingCharges" being a finance fee of ZAR 723.14. The other items listed in the invoiceare all disbursements so the finance fee may represent the shipping company's costsassociated with having carried those disbursements during the invoice period – theinvoice, as I have said, being dated 4 June 2020 but not due until 31 July 2020.It would seem that the invoice has charged an interest cost in respect of thosedisbursements representing the shipper being out of its funds for the period betweenthe period of the issuing of the invoice and its due date.[49] Mr Erasmus' evidence is that ZAR 11,000 had been added per container forinterest and loss of income. That claim was repeated in Mr Erasmus's reply.[50] While Mr Erasmus says he did not agree to SVC's increased shipping costs,that is inconsistent with the WhatsApp exchange where the increase to ZAR 75,000 isoutlined and then Mr Erasmus confirms that he wanted to order more product.[51] Mr Reinstorf's evidence set out at [26] above is that:The shipping costs then include the price for that specific container as well asthe cost of servicing the account with the shipping company.[52] Given the invoice produced shows a finance cost, a straight pass through ofthis cost is not the type of unauthorised padding claimed by Mr Erasmus.Conclusion on over charging claim[53] The claim of historical overcharging cannot be raised as a set-off against theamount in the statutory demand. As to the four unpaid invoices that make up thedemand, the overpayment would be ZAR 44,000. The last line of Mr Reinstorf'sevidence at [26] above could be read as suggesting SVC included a charge tocompensate for its inability to take on new business. I cannot be satisfied thatMr Erasmus' sworn evidence can be disregarded. There is a straight conflict ofevidence on this issue. I set aside the statutory demand to the extent of ZAR 44,000under this head.Second ground of challenge: Counterclaim[54] This is the counterclaim or set-off relating to the defective products. Thisground of challenge runs squarely into the no set-off clause.[55] SNZ is faced with a pay now argue later provision. Despite the parties ceasingtrading at the start of 2021, SNZ has taken no steps to pursue its alleged claims. Theshort point is that the no set-off clause is a barrier to these claims being raised even ifthey were reasonably arguable.Third ground of challenge: Abuse of statutory demand process[56] SNZ says that on 24 January 2022 SVC applied for a declaration of invalidityof the Safari trademark of which SNZ is the registered owner. SNZ opposes thechallenge to its trademark.[57] SNZ submits that the statutory demand has been issued to obtain a collateraladvantage in respect of the trademark. SNZ says if it was put into liquidation, theliquidators would be unlikely to oppose the declaration of invalidity application orwould sell the trademark to SVC. It is therefore submitted that the demand should beset aside as it has been issued for a purpose not contemplated by the Act.[58] The first point against this argument is that the last payment received by SVCwas in May 2021. If SVC is owed a debt it is entitled to issue a demand to collect it.Second, Mr Erasmus does not say that SNZ will be unable to pay the debt if thedemand is not set aside it is not asserted liquidation will follow if SNZ's applicationis unsuccessful.[59] Mr Jeffs noted that before SVC made demand for payment of its debts, itsNew Zealand solicitors made demand that SNZ stop using the Safari trademark andthreatened to commence High Court proceedings if it did not. That letter is dated8 October 2021. A demand for the debt was made by SVC's South African solicitorson 11 November 2021.[60] The submission is:[SVC's] statutory demand must have been intended to pressure SNZ intopaying an amount that SVC knew was disputed, to bring this application, orto risk an application for liquidation.[61] Mr Jeffs submitted this application has distracted SNZ's attention andresources from the trademark proceeding which involves the most substantive issuebetween the parties.[62] A statutory demand can legitimately be used to recover a debt. The Court ofAppeal has acknowledged that statutory demands:9"are, in a practical sense, important enforcement mechanisms",notwithstanding that they may ultimately lead to a process which focuses onliquidity and asset worth rather than the payment of a particular creditor.[63] I do not accept SVC had to wait until resolution of the trademark dispute beforeit could take steps to collect a debt it had been owed since 2021 at the latest. I was nottold of progress or otherwise in the trademark dispute so I have no idea of what, if any,impact this application has had on its progress. Through raising the abuse of processclaim SNZ in effect seeks a stay of enforcement of a debt that it owes. Just whatshould happen to that debt in the meantime was not explained by SNZ. The debt doesnot go away.[64] I do not accept that SNZ has demonstrated that the issue of a statutory demandby SVC was an abuse of process.Conclusion[65] The statutory demand is set aside to the extent of the interest claim and theZAR 44,000 discussed at [52].9 Manchester Securities Ltd v Body Corporate 172108 [2018] NZCA 190, [2018] 3 NZLR 455at [34].[66] I order that the time for the payment of the remainder of the demand isextended for 15 working days and pursuant to s 291(1)(a), that SNZ is to pay theamount claimed in the statutory demand, save for the interest claim and ZAR 44,000to SVC within 15 working days of the date of this Judgment. If that payment is notmade, SVC may apply to put SNZ into liquidation.Costs[67] SVC is entitled to costs. A memorandum of not more than five pages is to befiled by SVC within five working days of the date of this judgment. If nomemorandum is filed, the order of the Court will be that SVC is entitled to costs ona 2B basis plus disbursements as fixed by the Registrar. If SVC files a costsmemorandum, SNZ is to reply within five working days of receiving it._____________________________________Associate Judge LesterSolicitors:Bell Associates Lawyers, Auckland (for Applicant)Chapman Tripp, Auckland (for Respondent)Copy to counsel:S Jeffs, Barrister, Auckland (for Applicant)