Active Trucking Limited v Intercivil Limited

[2018] NZHC 690

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-93

[2018] NZHC 690

UNDER

the Companies Act 1993

IN THE MATTER OF

an application for the liquidation of a company

BETWEEN

ACTIVE TRUCKING LIMITED

Substituted Plaintiff

AND

INTERCIVIL LIMITED

Defendant

Hearing:

12 April 2018

Appearances:

C I Paterson for the Plaintiff

N W Woods for Waiau Pa Bulk Haulage Ltd S S Cook and N Kuypers for Radich Civil Ltd James Burt for Forte Civil Ltd

R Rao for Peter Robinson Paving & Concrete (2015) Ltd P Kim for Gameon @ Contractors ZLtd

Bruce Pamatatau for Porter Hire Ltd

P M Webb for Warwick Smith Contracting Ltd A J Best for Amax Ltd (t/a Pronto Hire)

R B Hucker for the Defendant, Intercivil Ltd

Judgment:

12 April 2018

ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL

[1]                  This is a liquidation application. The proceeding was originally brought by Kaipara River Park Ltd. On its first call on 2 March 2018 Associate Judge Johnston made an order substituting Active Trucking Ltd as plaintiff, because Kaipara River Park Ltd had been paid in full. The matter was adjourned until today, 12 April 2018.

ACTIVE TRUCKING LIMITED v INTERCIVIL LIMITED [2018] NZHC 690 [12 April 2018]

[2]                  There are other creditors who support the liquidation application. Two of them have also begun proceedings in their own right—Radich Civil Ltd and Waiua Pa Bulk Haulage Ltd. They have filed their own proceedings for their own statutory demands. Their statements of claim have been filed in this proceeding as well. On my calculation, the creditors in this proceeding total over $1,958,000.

[3]                  The director of Intercivil Ltd has filed an affidavit accepting that there are yet more creditors with claims against the company. The director says that the company has claims for projects it has undertaken and for which it is unpaid, and it is making payment claims. In short, it asserts a case of cashflow difficulties, but being able to clear its creditors if given time. The director also says that the company is no longer taking on new work.

[4]                  The company says, however, that this proceeding has failed because Active Trucking Ltd did not comply with r 31.24(5) of the High Court Rules in carrying out the substitution. It says:

The addition or substitution of a person as a plaintiff under sub-clause (4) must be subject to the condition that that person file in the registry of the Court and serve on all the other parties to the proceeding within five working days after the day on which the omission or substitution is made:

(a)    A statement of claim in form C1 and

(b)    A notice of proceeding in form C3 and

(c)    An affidavit in form C4.

[5]                  Active Trucking Ltd did file its documents in court on 9 March—that is within the five working days of Associate Judge Johnston making his order, but service was not carried out then. The lawyers for Active Trucking Ltd sent the documents by email to Mr Hucker. He had appeared before Associate Judge Johnston on 2 March 2018 although no documents had been filed in court on behalf of the company. Mr Hucker takes two points: service was late—it should have been made by 5:00pm on 9 March 2018 to comply with the five working days requirement—and the mode of service was defective because the company had not given any address for service at his office. It was not permissible to send the documents by email to his office at 12:59 pm on Monday 12 March.

[6]                  So far as the mode of service is concerned, the point is no longer a live issue because the company filed a statement of defence. By filing a statement of defence, it has treated itself as having been served. I would, in any event, regard the court as having the power to approve the mode of service that was adopted, that is, to give retrospective approval in appropriate cases to give effect to steps taken to accomplish service. That power falls within the court’s power to give directions under s 387(d) of the Companies Act. It is comparable to the court’s power to approve substituted service retrospectively under r 6.8 of the High Court Rules.

[7]                  The matter really turns on the timing question, whether the entire proceeding has failed because of the late service of the documents. The primary authority that Mr Hucker relies on is Spicers Paper New Zealand Ltd v BPK and GA Buckley Ltd.1 There, Master Williams QC dealt with r 700X of the former High Court Rules. That is in substantially the same terms as r 31.24 of the current rules.     In particular,        r 31.24(5) is in substantially the same terms as the provision before Master Williams. He held that the requirements are mandatory and that a failure to meet them meant that the proceeding had come to an end and could not be resurrected. He said that the paragraph was “very strongly worded” and he was not aware of any other provision that expressly made a court order subject to a condition that certain action be undertaken.2 He considered that r 6 (which has its counterpart in r 1.19 of the current rules) could not be invoked. He held that non-compliance with the rule was comparable to non-compliance with an “unless” order.3

[8]                  Subsequent decisions have not followed that decision entirely. In Commissioner of Inland Revenue v Seafood and More Hospitality Ltd,4 Associate Judge Abbott held that the court could grant relief under r 1.19 to extend the time for service, although in the circumstances of that case he did not exercise that discretion in favour of the substituted plaintiff. Master Kennedy-Grant also accepted that there was power under the equivalent of r 1.19 in Regal Haulage v Palmford Investments Ltd.5

1      Spicers Paper (NZ) Ltd v BPK and GA Buckley Ltd (1993) 6 PRNZ 16.

2      At 20.

3      At 20.

4      Commissioner of Inland Revenue v Seafood and More Hospitality Ltd [2013] NZHC 339 at [5].

5      Regal Haulage v Palmford Investments Ltd HC Hamilton M48/93, 1 November 1993.

[9]                  I find myself in respectful disagreement with Master Williams’ approach in Spicers Paper (NZ) Ltd v DPK and GA Buckley Ltd. I do not accept Mr Hucker’s submission that Part 31 of the High Court Rules is a stand-alone code for liquidation applications. That appears clear from r 31.1(3) which indicates that the rules and general practice of the High Court apply unless they are modified or are inconsistent with this part. I do not regard the requirement under r 31.24(5) as excluding the general powers of the court to adjust time under r 1.19.

[10]              I put this to Mr Hucker in argument. Suppose that a creditor seeking substitution knew that it would not be able to meet the five working days’ requirement. A case in point might be a creditor who would require a verifying affidavit to be sworn overseas. I put it to Mr Hucker that the court must have the power to adjust the time under r 31.24(5). To maintain consistency, Mr Hucker would not budge. It seems to me that it is plain that the court should be able to invoke r 1.19 to adjust times so as to accommodate exigencies such as that. Once it is accepted that the court has the power to adjust time under r 1.19 when it makes an order for substitution, it follows, in my view, that the court likewise has the power  to  adjust  the  time  after  the  event. Rule 1.19(2) makes it clear that time can be extended for compliance, even after the original time set under the rules has expired.

[11]              In my view, r 31.24(5) is simply a time limit for filing and service of a substituted application to save the Judge actually pronouncing that order in court. As happened with Associate Judge Johnston, a Judge only needs to pronounce the order for the five working days requirement to apply. That is subject to the court’s normal powers to make adjustments to time requirements under the general rules, including  r 1.19. I bear in mind also r 1.5, which indicates that non-compliance with a rule does not by itself mean that the proceeding becomes a nullity. Mr Hucker’s submission runs counter to that objective of the rules.

[12]              I also take into account r 31.26. That says that a proceeding commenced under r 31.3 may be discontinued only with the leave of the court. That means that if a creditor—including a substituted creditor—wants to give up a proceeding, he still needs the leave of the court to do so. That is dealt with in open court, to give other creditors the opportunity to be substituted. That includes creditors who may wish to

be substituted for a substituted plaintiff. If a creditor wishes to give up, he still needs the leave of the court. It seems to me to be antithetical to that if the proceeding were to be treated as abandoned when the creditor wants to maintain the proceeding but has, by a slip, failed to meet the requirements of r 31.24(5).

[13]              Accordingly, in my view, the court retains a discretion to adjust the time for compliance under r 1.19 notwithstanding that the documents had not been filed and served within time. In this case, the non-compliance was trifling. Documents should have been filed by Friday 9 March 2018. They were instead served on the lawyers for the company the following Monday, 12 March 2018, at 12:59pm. Mr Hucker accepted that the defendant has not suffered any prejudice as a result of that slip.

[14]              There are a large number of creditors who are keen to see that the company’s insolvency is addressed and they have taken proper steps to have the company’s insolvency dealt with by the court. It would be inefficient and counter-productive to declare that this proceeding has now failed by the late service of the proceedings on the company. Mr Hucker makes the point that the creditors can start again. That argument must be attractive to insolvent companies, but it does not do any good for the unpaid creditors who are put to further costs of recovery. It adds to the inefficiency and costs to the proceedings—not something that the courts should encourage.

[15]              Mr Hucker also took the point that there should be a formal application by Active Trucking Ltd to have the court excuse its non-compliance. In liquidation proceedings, I commonly see oral applications to excuse non-compliance with various steps and to extend time. Oral applications may be made under r 1.7 and are a day-to- day occurrence in a liquidation list. Mr Hucker’s appearance on 2 March 2018 can be seen in that way. He did not file any documents but he was allowed to be heard. He was able to seek leave to have the proceeding against his client withdrawn without technical points being taken whether he had filed documents or not. Similarly, times for compliance with service and for advertising are dealt with on oral applications. Given the triviality of the issue, I have no problem at all with Mr Paterson’s oral application today for an extension of time.

[16]              Accordingly, I extend time under r 1.19 to cover the service of the proceeding on 12 March 2018. The result is that the proceeding remains on foot.

……………………………….

Associate Judge R M Bell

Solicitors:

Skinners Law (J M Skinner/C I Patterson), Takapuna, for Active Trucking Ltd Buddle Findlay (Sherridan Cook), Wellington, for Radich Civil Ltd

Lowndes Law (Michael Anderson/Jennifer Tunna), Auckland, for Forte Civil Ltd Inder Lynch (Rajiv Rao), Papakura, for Peter Robinson Paving & Concrete (2015) Ltd Rice Craig (Neville W Woods), Papakura, for Waiau Pa Bulk Haulage Ltd

McVeagh Fleming (C R Andrews/P S Kim), Auckland, for Gameon 2 Contractors Ltd. Kevin McDonald & Associates (K P McDonald), Takapuna, for Porter Hire Ltd Denham Bramwell (P M Webb), Manukau, for Warwick Smith Contracting Ltd

Duncan Cotterill (Duncan McGill/Alexander Best), Auckland, for Amax Ltd (t/a Pronto Hire) Hucker & Associates, Auckland, for the Defendant, Intercivil Ltd

Copy for:

James Burt, Barrister, Auckland, for Forte Civil Ltd
Bruce Pamatatau, Barrister, Auckland, for Porter Hire Ltd