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Setting aside a statutory demand for payment under s 290 of the Companies Act 1993, by Eugene Duhovnikoff BA/LLB

Section 290 of the Companies Act 1993 provides as follows:

 

290 Court may set aside statutory demand

(4) The Court may grant an application to set aside a statutory demand if it is satisfied that- There is a substantial dispute whether or not the debt is owing or is due; …

In 2014 the law regarding section 290 of the Companies Act 1993 was clarified in Leamington Holdings Ltd v Commercial and Industrial Consultants Ltd.[1] This case involved a dispute regarding the commission of a real estate agent who has assisted in the promotion of a proposed retail shopping center development at Leamington.

 

The Associate Judge Doogue has adopted the approach from the Fletcher Homes Ltd v Ellis[2]and from Taxi Trucks Ltd v Nicholson[3]stating that the main principles applicable to the applications under the section 290 are[4]:

(a) The onus is on the applicant to establish a fairly arguable case for its claim that it is not liable for the amount claimed;

(b) A mere assertion that a dispute exists is insufficient. The applicant must put forward material which, although short of actual proof, nevertheless supports the claim that the amount is in dispute; and

(c) If such material is available, the dispute should be tried elsewhere and not on application to set aside the statutory demand.

 

Furthermore the applicant must demonstrate that the dispute which it raises is genuine. The applicant must show a genuine and substantial dispute as to the existence of the debt, and that it would be unfair - as it usually would be - to allow that dispute to be resolved by the Companies' Court rather than by action commenced in the usual way.[5]

 

In Leamington's caseit was found that there was a substantial dispute as to whether the agent was indeed entitled to commission and the substantive hearing is to follow. The agreement was not particularly well drafted which was evidenced by the fact that disputes have arisen between the parties as to its meaning.[6]

The Leamington's case outlines the importance of drafting agency agreements in clear terms, with clear provisions as to agents’ entailment to remuneration as well as with arbitration clauses in order to avoid unnecessary litigation.

 

 

No advice

This article contains general information about legal matters. The information is not advice, and should not be treated as such.

 

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The legal information on this website is provided “as is” without any representations or warranties, express or implied. Reeves Duhovnikoff and Associates Limited makes no representations or warranties in relation to the legal information on this website. Without prejudice to the generality of the foregoing paragraph, Reeves Duhovnikoff and Associates Limited does not warrant that: the legal information on this website will be constantly available, or available at all; or the legal information on this website is complete, true, accurate, up-to-date, or non-misleading.

 

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[1] [2014] NZHC 589.

[2] HC Auckland M471im99, 23 July 1999.

[3] [1989] 2 NZLR 297 (CA) at 299 per Hardie Boys J.

[4] Leamington Holdings Ltd v Commercial and Industrial Consultants Ltd [2014] NZHC 589 at para 17.

[5] Ibid at para 18.

[6] Ibid at para 1.

Reeves/Duhovnikoff & Associates Ltd. 2017

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