IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE	
CIV-2019-409-50
[2019] NZHC 1180	

UNDER	the Companies Act 1993	
IN THE MATTER	of an application to set aside a statutory demand pursuant to s 290	
BETWEEN	AW ROBERTSON CONSTRUCTION LIMITED
Applicant	
AND	JAMES TRUONG
Respondent	

Hearing:	20 May 2019	
Appearances:	A N Riches for Applicant
S C Cowan and H M Cassin for Respondent	
Judgment:	28 May 2019	

JUDGMENT OF ASSOCIATE JUDGE LESTER

[1]	AW  Robertson  Construction  Ltd   (“the  Company”)  applies  to  set   aside a statutory demand issued by Mr Truong on 25 January 2019 demanding the sum of
$170,000.

[2]	The statutory demand says that the $170,000 claimed is:

… the sum which AW Robertson Construction Limited admits is due and owing and has agreed to pay to the creditor as a refund in respect of the cancelled building contract between you and  the  creditor  for  works  at  348 Blenheim Road dated 11 August 2017.

AW ROBERTSON CONSTRUCTION LTD v TRUONG [2019] NZHC 1180 [28 May 2019].

[3]	The written submissions filed by the parties canvassed a number of issues. The Company disputed that:

(i)	a contract existed in relation to 348 Blenheim Road, Christchurch between the Company and Mr Truong;

(ii)	in the event that such a contract did exist, that Mr Truong had paid
$170,000 in respect of that contract; and

(iii)	if it is wrong on that issue, then an overall accounting between the Company and Mr Truong, that is looking at all amounts invoiced and all identified payments including the $170,000 was required. When that is done, the Company does not owe Mr Truong any money, but in all likelihood was owed a sum of about $16,000 by Mr Truong.

Principles that apply to the setting aside of a statutory demand

[4]	Mr Riches for the Company referred to the principles set out in
AAI Ltd v 92 Lichfield Street Ltd (in rec and in liq):1

[19]	There was no dispute on appeal as to the relevance of the following principles identified by the Associate Judge in relation to the application of   s 290(4) [of the Companies Act 1993]:

[17]	For the purposes of this hearing I adopt as a general approach to the exercise of this jurisdiction these five principles –

As to s 290(4)(a)

(a)	The  applicant  must  show  that  there  is   arguably a genuine and substantial dispute as to the existence of the debt.

(b)	The mere assertion that the dispute exists is not sufficient. Material short of proof is required to support the claim that the debt is disputed.

(c)	If such material is available, the dispute should normally be resolved other than by means of proceedings in the Court’s Companies Act jurisdiction.

1	AAI Ltd v 92 Lichfield Street Ltd (in rec and in liq) [2015] NZCA 559, [2016] NZAR 1338.

As to s 290(4)(b)

(d)	Alternatively, an applicant must establish that any counterclaim, cross demand or set-off is reasonably arguable in all the circumstances.

As to both ss 290(4)(a) and (b)

(e)	It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise.

[18]	The discretion under s 290(4)(c) – whereby the Court finds that the demand ought to be set aside on other grounds – is a residual discretion which enables the Court to do justice between the parties. As Tipping J indicated in Commissioner of Inland Revenue v Chester Trustee Services Ltd, the exercise of the discretion comes down to the Court’s judgment as to whether the creditor’s prima face entitlement to liquidate the company is outweighed by some factor making it plainly unjust for liquidation to occur.

[Footnotes omitted]

[5]	The applicable principles are not in dispute.

[6]	I am satisfied that the statutory demand should be set aside. I have reached that conclusion because it is at least reasonably arguable on the material before the Court that on an overall accounting between the parties there is no indebtedness owed by the Company to Mr Truong. Before discussing that in more detail, I will briefly address the other points being:

(i)	the identification of the contracting parties; and

(ii)	the issue as to whether in fact the payments were made.

The contracting parties

[7]	As recorded in the statutory demand, the claim relates to a contract said to exist between  the  Company  and  Mr  Truong   relating   to   a   building   project   at   348 Blenheim Rd (“the Project”).

[8]	The Company accepts that it had a contractual relationship with Mr Truong in relation to the Project, but the real issue is the scope of that contract.

[9]	The Company says that the contract it had with Mr Truong was limited to assessing  the  feasibility  of  the  Project.   The  Company  engaged   an   architect  to undertake some preliminary drawings. It also appears that the architects were instructed to apply for a Project Information Memorandum to allow them to identify any resource consent issues arising from the Project.

[10]	It appears the Project did not go any further once it was identified that neighbours’ approval would be required for a resource consent.

[11]	The Company says its involvement with the Project came to an end at that time and no building work ever commenced.

[12]	Mr Truong on the other hand produces a signed building contract and a quote from the Company both dated 11 August 2017. The Company says the signature of director Andrew Robertson on the contract is a forgery and that Mr Truong has photocopied the signature from another document. This is denied by Mr Truong. This is an issue that cannot be resolved in this context.

[13]	The documents that have been produced show that the engagement of the architects to advise on town planning matters took place between March and the end of May 2017.

[14]	Mr Truong says he made the following payments in respect of the Project:

Date	Amount	Payment type	
24 February 2017	$30,000	cash	
24 February 2017	$48,000	cash	
28 February 2017	$2,000	cash	
20 March 2017	$40,000	cash	
23 May 2017	$38,000	cash	
20 June 2017	$33,750	cash	
20 June 2017	$2,500	cash	
31 October 2017	$35,000	Andrew Robertson bank account	
Total	paid	for Blenheim Road	$229,250		

[15]	While these payments  total  nearly $230,000, the  statutory demand  was  for
$170,000: this is the amount Mr Robertson agreed to pay to Mr Truong in an email of 12 October 2018. I will turn to the significance of this email at the conclusion of this judgment.

[16]	There is a reasonable argument that any continued statements by Mr Robertson about the Project were made in his capacity as director of the Company. The Company accepts that it had the initial contractual relationship with Mr Truong. If Mr Robertson wished to enter into a personal arrangement with Mr Truong against a background of there being a contractual relationship with the Company and Mr Truong, then the onus was on Mr Robertson to make it clear to Mr Truong that the existing contract with the Company was at an end  and  any  new  dealings  were  between  Mr Truong  and  Mr Robertson, that is to bring about a new contract.2 The evidence is far from clear on that point.

[17]	The situation is not helped through the lack of formality in the dealings between Mr Robertson and Mr Truong. It is common ground that there was at least one personal property deal between them, but the Project was mentioned in the same context as the personal transaction and other Company contracts.

The payment of money

[18]	Stephanie Robertson, who is also a director of the Company, says she is in charge of accounting and administration. She says that the Company’s records show that Mr Truong had been invoiced a total of $516,316 for various projects. She identifies against that sum the following receipts:

(a)	$172,020	Paid by Mr Truong into the Company’s bank account	
(b)	$158,300	Payments to Mr Robertson’s personal bank account	
(c)	$170,000	Cash payments alleged to have been made by
Mr Truong as set out above,	
	$500,320	Total	

[19]	There is no suggestion that Mrs Robertson, who was responsible for financial administration, was chasing unpaid invoices issued to Mr Truong. I put to Mr Riches

2	Papanui Timber Co Ltd v Parsons. HC Christchurch CP19/86, 9 April 1987.

that if the money had not been received then there would have been well in excess of
$150,000 of unpaid invoices owed to the Company. Had that been the case then the Company would have been chasing payment and Mrs Robertson does not suggest that they were treating Mr Truong’s account as being substantially in arrears.

[20]	It seems clear from the position adopted by Mrs Robertson, and the absence of the Company chasing Mr Truong for unpaid invoices, that the $170,000 factored into Mrs Robertson’s figures was received by the Company, but I need not make a finding on that issue.

Taking of an account

[21]	The primary point behind Mrs Robertson’s evidence was that even accepting Mr Truong’s argument that he contracted with the Company and paid it $170,000 on the Project which did not go ahead, then nonetheless there is no debt owed by the Company to Mr Truong because on an overall accounting there is still approximately
$16,000 owed by Mr Truong to the Company as set out at [18] above.

[22]	Prior to the issue of the present demand, there was correspondence between the parties’ solicitors prompted by an earlier demand in essentially the same terms. That earlier demand has been withdrawn.

[23]	The issue of the overall accounting between the parties is one that was touched on in the correspondence between the solicitors. In Mrs Robertson’s affidavit in support of the application to set aside the statutory demand, she stated that assuming
$170,000 was paid, there was still an amount owing by Mr Truong.

[24]	In reply Mr Truong said that the approach adopted by Mrs Robertson did not recognise that he had made a number of payments direct to Mr Robertson which had not been included in Mrs Robertson’s approach. However, Mrs Robertson’s approach does take into account the payments claimed to have been made in respect of the Project, as set out at [18] above, albeit reduced to $170,000 being the amount in demand.

[25]	Mr Truong then says that there are costs and payments on other jobs not taken into account. He refers to a job at Exe St, Oamaru.

[26]	Mr Truong also says the approach adopted by Mrs Robertson in terms of the costs due from him to the Company did not take into account that the contracts were fixed price and not on a charge-out basis, and nor did they take into account agreed discounts. This amounts to Mr Truong disputing the invoices Mrs Robertson says were sent to him. There is no evidence of contemporaneous complaints by Mr Truong in relation to any invoices sent to him by the Company.

[27]	Mr Truong in a supplementary affidavit sworn 13 May 2019, produced an invoice he was sent by the Company dated 5 April 2017 for Exe St, Oamaru for
$144,000.32. In a reply to that supplementary affidavit, Mrs Robertson says that while she agrees the invoice was produced, it was afterwards reversed by her and says the invoice was not  paid.  Reaching  a  net  position  between  the  Company  and Mr Truong is not a straightforward exercise. I also note that the payment of $33,750 dated 20 June 2017 set out in the table at [14] above, is referred to in a document which has 20 June 2017 written on it as a saving not a payment.

[28]	The statutory demand issued is in respect of an overpayment for the Project. The statutory demand was not issued on the basis that on the taking of an account in respect of all amounts paid by Mr Truong to the Company on the one hand, and all the charges properly raised by the Company on the other, there has been an overpayment by Mr Truong.

[29]	I consider that the applicant has demonstrated there is a reasonably arguable case that there is no indebtedness owed by the Company to Mr Truong. Essentially, this amounts to the Company having an arguable counterclaim that money it was not entitled to on the Blenheim Rd Project was applied to other unpaid invoices. Accordingly, the statutory demand should be set aside.

Estoppel

[30]	To meet the argument that on the taking of an account there is nothing owed to Mr Truong, Mr Cowan for Mr Truong says that irrespective of the difficulties in

concluding the net position between the parties, the doctrine of estoppel by convention applies and the Company cannot “go back” on Mr Robertson’s acknowledgement that the Company was indebted to Mr Truong of at least $170,000 being the amount in the statutory demand.

[31]	This submission is based on  an  email  dated  23  September  2018  which  Mr Robertson  sent  to  Mr Truong  and  it  includes  the  following  statement   by Mr Robertson:
Settlement for first stage of blenheim road. 170k paid to you on 12th October.

[32]	In a further email on 12 October 2018 it includes:

On 19th nov 2018 all funds of 170k will be paid in full to James…

[33]	It is not clear from these emails in what capacity Mr Robertson was writing, that is personally or as director of the Company. In the email of 23 September 2018 there is also reference to a project at Main South Rd which is agreed to be a private project between Mr Robertson and Mr Truong. The emails are not sent from the Company’s email address.

[34]	Be that as it may, I am not satisfied that these emails create an estoppel against the Company which would prevent the Company denying that $170,000 for the Project was payable to Mr Truong.

[35]	Mr Cowan relies on National Westminster Finance NZ Ltd v National Bank of NZ Ltd, where the principles of estoppel by convention are set out.3

[36]	It is clear that Mr Truong would have to show reliance on the emails of September and October 2018. He does not say what his reliance was given the money had been paid over a considerable time before the emails, nor is he able to identify the detriment he would suffer if the Company was allowed to resile from the common assumption being $170,000 was owed.

3	National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] NZLR 548 at 550.

[37]	If on a proper accounting between the parties there is no money owed  to    Mr Truong, then he can suffer no detriment through the Company (assuming the emails were sent on behalf the Company) resiling from the statement that it would pay.

Conclusion

[38]	The application to set aside the statutory demand issued by Mr Truong against the Company is granted.

Costs

[39]	I did not address costs with counsel, but I see no reason why costs should not follow the event. If counsel disagree then the applicant may file submissions on costs of not more than five pages within 10 working days of the date of this Judgment (that is by Wednesday 12 June 2019) and the respondent may reply, again not more than five pages, within a further five working days (that is by Wednesday 19 June 2019).

Associate Judge Lester

Solicitors:
Saunders & Co., Christchurch Cavell Leitch, Christchurch