WEALAND INTERNATIONAL (NEW ZEALAND) LIMITED V ACCORD INTERNATIONAL LIMITED HC AK CIV 2008-404-5392

WEALAND INTERNATIONAL (NEW ZEALAND) LIMITED V ACCORD INTERNATIONAL LIMITED HC AK CIV 2008-404-5392 30 January 2009IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2008-404-5392BETWEEN WEALAND INTERNATIONAL (NEW ZEALAND) LIMITED Applicant AND ACCORD INTERNATIONAL LIMITED Respondent Hearing: 19 Decemeber 2008 Appearances: Mr Hucker for applicant Mr Ewan and Ms Brugeyroux for respondent Judgment: 30 January 2009 at 11 a.m.JUDGMENT OF ASSOCIATE JUDGE DOOGUEThis judgment was delivered by me on30.01.09 at 11 am, pursuant to Rule 540(4) of the High Court Rules. Registrar/Deputy Registrar DateSolicitors:Mr Hucker & Associates, P O Box 3843, Shortland Street, Auckland Wynyard Wood Lawyers & Notaries, P O Box 2217, AucklandService of the statutory demandBackground[1] The applicant, ("Wealand") is in the business of placing international graduates with New Zealand employers. In or about February 2008, Wealand and and the Respondent ("Accord") signed a document headed "International Student Training Grant Acceptance Form" ("the Agreement"). [2] The parties' agreement provided for Wealand to pay $10,000 ("the grant") to Accord in relation to the employment of a graduate, Liu Yu. Payment would be in two amounts: $2,000 on acceptance of an employment agreement with Ms Yu, and $8,000 payable after 30 days - subject to satisfaction of terms and conditions. [3] Ms Yu was duly employed by Accord. Wealand paid Accord the initial $2,000 at the outset but refused to pay the further $8,000. Accord issued a statutory demand for the $8,000 under s 289 of the Companies Act 1993 on 8 August 2008. Whether or not the statutory demand was properly served is a matter that is in dispute. [4] Wealand asserts that it is not obliged to pay the $8,000 because there is no satisfactory evidence that the funds have been spent or will be spent training Ms Yu for her new position as required by the agreement. Wealand also contends that to advance the $8,000 when it would not be used for training purposes would be contrary to s 12A of the Wages Protection Act 1983 and consequently illegal. [5] Section 290 of the Companies Act 1993 sets out the circumstances in which the Court may set aside a statutory demand. It provides as follows:290 Court may set aside statutory demand (2) The application must be— (a) Made within 10 working days of the date of service of the demand; and (b) Served on the creditor within 10 working days of the date of service of the demand. (4) The Court may grant an application to set aside a statutory demand if it is satisfied that— (a) There is a substantial dispute whether or not the debt is owing or is due; or (b) The company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or (c) The demand ought to be set aside on other grounds.[6] Wealand relies on the ground set out in s 290(4)(a), namely that "there is a substantial dispute whether or not the debt is owing or due". Mr Ewen for Accord submits that Wealand has no seriously arguable defence to Accord's claim so there cannot be a "substantial dispute" over the debt. [7] It is common ground that not every dispute will be sufficient to satisfy a court; the dispute must be "substantial". What constitutes a "substantial" dispute is ultimately a question of fact to be decided after taking into account all the relevant circumstances: Re Lympne Investments Ltd [1972] 2 All ER 385; Lockwood Buildings Ltd v Hunter Douglas Coilcoaters Ltd (1988) 4 NZCLC 64,295. [8] Wealand submits that the agreement imposed a contractual condition requiring Accord to spend all of the $10,000 grant on training courses. It submits that Accord has not shown that the first $2,000 paid to Accord was spent on training Ms Yu. Wealand submits therefore that Accord has not complied with the conditions in the agreement necessary to trigger Wealand's obligation to pay the further $8,000. [9] The agreement is a short one-page document. It states that the International Student Employment Service (effectively Wealand) would through its "benefactors" make $10,000 funding available to eligible employers to support the hiring of international graduates within New Zealand organisations. It states:The intent of this program is to support employers with training expensesassociated [sic] during first 90 days of employment and furthermoreencourage the employers' cooperation to support the graduate to have the required skills to perform the duties required. [emphasis added][10] A little later the agreement states that Wealand agrees to pay $10,000 to Accord, being "$2,000 on acceptance of the employment agreement and the balance of $8,000 payable after 30 days subject to the terms and conditions below". [11] The "conditions" of the grant then set out are:• The Employer offers full time permanent employment paying a minimum $15.00 per hour with a NZ employment agreement signed by both parties.• The employee must still be employed by the employer after 90 days from the starting day.• The employer will arrange the training required for the position.• If the employee terminates the employment, the employer is able to keep any grant monies paid till that time.• If the employer terminates the employment within 90 days of the starting day the employer will repay ISES any grant monies paid.• The grant must be spent on training costs associated with the graduate.[emphasis added][12] There is no doubt that Accord offered full-time employment to Ms Yu. Mr Durainayagam of Accord has filed an affidavit which confirms that this was so. [13] There is no dispute that Ms Yu was still employed after 90 days. [14] It was a term of the agreement that the whole of the grant be spent on training costs associated with Ms Yu. [15] Mr Durainayagam for Accord deposed that since 5 March 2008 Accord has provided training to Ms Yu. He produced a document described as a 'training schedule' for Ms Yu from 5 March 2008 to 14 May 2008 totalling $10,010.30. He said in his affidavit (but ought not to have – the matter being one of submission) that the grant conditions do not require that the training be provided by a third party and that the cost of that training be supported by invoices and nor is there any provision in the contract that the training must be completed within 90 days of Ms Yu'semployment commencing. The same arguments were reproduced in Mr Ewen's submissions. He said that a copy of the training schedule which he annexed to his affidavit had been sent to Wealand. The training schedule shows that the training was not provided by third parties who invoiced Accord. It is unclear from the limited evidence available what if any accounting consequences entries of the various amounts specified for training and which were entered on the 'training schedule' had. The document may only have been generated to provide a summary of training which Accord provided and the costs which is set out in the training schedule may be no more than a notional cost showing what the training cost Accord to provide. [16] The question is then whether there is evidence of a breach of the term of the agreement that the grant must be spent on training Ms Yu. The defences put forward by Accord in its notice of opposition and pleadings do not articulate the consequences of the alleged breach. [17] If there is evidence of a breach of the agreement by a failure to spend the grant on training costs, then there may be a "substantial dispute" in terms of s 290. [18] Wealand has not been able to provide any direct evidence of a failure by Accord to spend the grant it has received so far on training expenses. It relies rather on an assertion of such a failure and more importantly on Accord' failure to provide satisfactory information showing that the part of the grant it has received so far has been spent on training costs. [19] Mr Hucker's submission was as follows:32. Mr Kim on behalf of the Applicant at paragraph 6 of his Affidavit submits that the agreement was conditional upon: (a) The employee being employed for a 90 day period. (b) The employee being provided with training from third parties; and (c) Third party invoices being provided to the applicant. 33. This raises two sub-issues: firstly whether it is arguable that the terms of the contract (once the factual matrix is considered) requiresonly reimbursement of third party costs and secondly whether the grant has been spent on bona fide training expenses of the employee in any event assuming in house expenditure is able to be incurred in terms of the Agreement. As regards the first sub-issue in interpreting an agreement whose material terms are identical in Wealand International (NZ) Limited v Safe Kids In Daily Supervision Limited (Unreported Judgment, 3 December 2008, High Court, Auckland, Asher J), his Honour held that the interpretation of the agreement in the manner contended by the Applicant against the particular factual matrix was arguable and provided a substantive ground on which there was a substantial dispute for the purposes of section 290(4)(a) of the Companies Act 1993. The Applicant respectfully adopts the conclusions of His Honour Justice Asher at paragraphs [25] to [29] of the judgment of the Court.[20] In summary, Mr Hucker for Wealand submitted that Accord had to spend the grant on payments to third parties for the training of Ms Yu and not on in-house costs. Mr Ewen for Accord on the other hand submitted that Accord was perfectly entitled to spend the grant on expenses incurred training Ms Yu in-house. [21] The argument before me centred on two principle issues as to whether there was a substantial dispute between the parties concerning: a) Whether the respondent was able to prove that the statutory demand had been properly served on the applicant; b) Whether there was any substantial dispute concerning the applicant's alleged liability to the respondent arising out of the agreement that the parties entered into. [22] I am able to dispose of this matter on the second of the two grounds. [23] In the Safe Kids judgment Asher J had before him an agreement in almost identical terms to the present case and a similar issue arose concerning the question of whether the training costs needed to be third party training costs. Asher J commented:27. It is not possible to discern from the words of the agreement a requirement that the training costs need be third party training costs. However, the use of the phrase "training expenses" in the first paragraph gives some indication that expenses must be spent on third parties, as the word "expenses" in context may well connote "disbursements". Equally, however, the word "costs" in the agreement might be seen as indicating that any incurring of financial cost is sufficient. The agreement is unclear on the point. 29. It is not appropriate to venture a determinative interpretation of the agreement without full evidence as to its commercial background. I do, however, consider that it is arguable that the agreement could be interpreted so that the grant must be spent on third party costs only, and that it would be a breach to spend the money on in-house costs. Given the fact that Accord has spent and clearly intends to spend some of the $13,000 on in-house costs, that would be not only a breach, but also an anticipatory breach. That means that there is also a substantial dispute on this second basis.[24] I respectfully agree with the conclusions reached by Asher J in the Safe Kidsdecision. [25] Such evidence as there is before me would suggest that none of the payments were made to third parties. The same point of contractual interpretation as Asher J encountered in Safe Kids emerges in this case as well. There is therefore dispute between the parties relating to how the agreement that they entered into should be interpreted. If the agreement did in fact contemplate recovery of only those payments that were made to third parties, then Accord cannot, to that extent, recover such payments. It follows from that that there is a substantial dispute whether or not the debt is due to Accord. All that being so, the proper conclusion is that the present application should be granted and I make an order setting aside the statutory demand. [26] The parties should come to agreement on the matter of costs and if they do not, should file memorandum not exceeding four pages within 20 working days of the date of this judgment. One matter that will be relevant to the question of costs is the breach of timetable orders by the applicant leading down to the hearing of the application and I would like to hear from the parties concerning the issue of what relevance that matter might have on the question of costs._____________ J.P. Doogue Associate Judge