Ace Education New Zealand v Oak Tree Home Care Limited

[2017] NZHC 375

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-002270 [2017] NZHC 375

UNDER

Section 290 of the Companies Act 1993

IN THE MATTER OF

an application to set aside a statutory demand

BETWEEN

ACE EDUCATION NEW ZEALAND LIMITED

Plaintiff

AND

OAK TREE HOME CARE LIMITED AND LANHUA ZHANG AND THE TRUSTEES OF THE OAK TREE TRUST Defendants

Hearing:	8 March 2017
Appearances:	B Rooney for Defendants J Ussher for Non Party Qifei (Sean) Pan
Judgment:	8 March 2017

JUDGMENT OF GILBERT J

This judgment is delivered by me on 8 March 2017 at 1.30 pm pursuant to r 11.5 of the High Court Rules.

..................................................... Registrar / Deputy Registrar

Solicitors:

James Keat, Auckland

B Rooney, Barrister, Auckland

J Ussher, Auckland

ACE EDUCATION NZ LTD v OAK TREE HOME CARE LTD AND ANOR [2017] NZHC 375 [8 March 2017]

[1]      The defendants served  a statutory demand dated 29 August 2016 on the plaintiff in the sum of $193,521 including GST being the net amount allegedly owing for advances severally made by them between 28 April 2015 and 12 July

2016.

[2]      At that time, Qifei Pan claimed to be the sole director of the plaintiff and the owner of 30 per cent of its shares.  Acting on legal advice, he considered that the statutory demand was defective because it purported to combine unrelated claims by various creditors in a single demand and most, if not all, of the amounts claimed were in dispute.   Accordingly, he gave instructions on behalf of the plaintiff  to Mr Ussher to apply to set aside the statutory demand.

[3]      The application was opposed by the defendants.   However, the matter has effectively been resolved by Mr Pan “walking away” from the company and leaving it under the control of the other shareholder, Yufeng Cao.

[4]      Because Mr Pan is no longer a director of the company, he cannot continue to give instructions on its behalf to Mr Ussher.   In these circumstances, Mr Ussher invited the plaintiff to file and serve a notice of change of solicitor.  Despite repeated requests, the plaintiff has not done so.  This has necessitated a formal application by Mr Ussher for an order pursuant to r 5.41 of the High Court Rules declaring that he has ceased to be the solicitor on the record for the plaintiff. There is no opposition to that application and it is granted accordingly.  Mr Ussher is entitled to costs against the plaintiff calculated on a 2B basis in relation to this application.

[5]      The  application  to  set  aside  the  statutory demand  is  not  pursued  and  is accordingly dismissed.

[6]      The defendants seek costs against Mr Pan personally in relation to the proceeding.   Mr Rooney submits that Mr Pan should pay costs because filing the application to set aside the statutory demand was not a reasonable course for him to have adopted.  In particular, he submits that Mr Pan should have consulted with his fellow shareholder before bringing the application, at least part of the debt claimed in the statutory demand was due and the plaintiff was insolvent.

[7]      I do not accept that this is a proper case to award costs against a non party.  I am not persuaded that it was unreasonable for Mr Pan, in his capacity as a director of the plaintiff, to issue instructions to Mr Ussher to set aside the statutory demand.  On its face, the demand appears to have been defective in that it does not comply with s 289 of the Companies Act 1993.   Further, it appears that there was a substantial dispute about whether the amount claimed was  properly due and owing by the company.   The plaintiff was at that time operating a business and meeting its obligations from income and with the ongoing support of its shareholders including Mr Pan.     I consider that Mr Pan was justified in taking steps to set aside the statutory demand.   He appears to have acted in what he perceived to be the best interests of the company and in accordance with the company’s legal advice.  There is no basis for any suggestion that Mr Pan acted in bad faith or for an improper purpose  in  bringing  this  proceeding.    The  application  for  costs  against  Mr Pan

personally is accordingly dismissed.

M.A. Gilbert J