How to apply the Disputes Tribunal’s financial limit when there is a counterclaim

The Disputes Tribunal can only award damages up to the small limit prescribed by law.  In a recent case, the High Court clarified how to apply that limit where the person sued also has a complaint or claim against the claimant. In short, the amount of the counterclaim will be deducted from the total amount in dispute, not from the sum the Tribunal can award. #Trotman v Disputes Tribunal [2020] NZHC 2040.

The facts are straightforward. Mr Trotman engaged a company called ELMZ to install a swimming pool at his house. There were issues with the way the pool was installed. Mr Trotman refused to pay one of ELMZ’s progress invoices. ELMZ brought a claim in the Disputes Tribunal for the outstanding sum of $13,500. Mr Trotman counterclaimed for about $5,000 he spent in remedying the defects. The Tribunal found that ELMZ was entitled to payment but with a deduction of $5,000. The Tribunal awarded ELMZ $8,400. Following the decision, ELMZ issued its final invoice of $11,500. Mr Trotman again refused to pay. ELMZ went back to the Tribunal which awarded it $6,600. In total, the Tribunal awarded $15,000 across the two claims. This was the maximum the Tribunal could award at the time.*

Mr Trotman was unhappy with the outcome. He applied to the High Court to judicially review the Tribunal’s decision. One of the main issues was whether the Tribunal should have deducted the $5,000 counterclaim from the total amount the Tribunal could award. On Mr Trotman’s argument, the calculation should have been as follows:

  • $15,000 maximum available to claim under the Tribunal’s authority
  • -$5,000 deduction for counterclaim
  • $10,000 – maximum that ELMZ could recover.

The Court decided that any deductions for counterclaims are to be taken from the total entitlement rather than the Tribunal’s limit. So, applied in practice, the calculation should be as follows:

  • $25,000 total entitlement (ELMZ’s two invoices combined)
  • -$5,000 deduction for counterclaim
  • -$5,000 ELMZ’s abandoned claim so to fit within the Tribunal’s authority
  • $15,000 maximum award within the Tribunal’s power.

A useful court decision that clarifies practical points, this can make a big difference to a claimant that has a claim which exceeds the Tribunal’s limit.

*On 29 October 2019, the jurisdiction of the Tribunal increased from $15,000 to $30,000.