AEL Group Limited v Kensington Swan Lawyers HC CHCH CIV 2008 409 1225

[2008] NZHC 2451

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV 2008 409 1225

UNDER  the Companies Act 1993

BETWEEN  AEL GROUP LIMITED Applicant

ANDKENSINGTON SWAN LAWYERS Respondent

Appearances: P A Robertson for Applicant

C Grenfell for Respondent

Judgment:      31 July 2008

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

[1]      An issue has arisen whether the applicant (AEL) has served within time, or otherwise  appropriately,  its  application  to  set  aside  the  respondent’s  statutory demand.

The statutory demand

[2]      It claims the sum of $16,173.77 for legal services provided.

[3]      The application to set it aside was filed on 11 June 2008.  The following day AEL filed the affidavit of Mr Tremewan in support.   In essence, Mr Tremewan claims Kensington Swan’s legal work was not done for AEL but for different corporate entities with which he is associated.

Chronology

AEL GROUP LIMITED V KENSINGTON SWAN LAWYERS HC CHCH CIV 2008 409 1225  31 July 2008

[4]      Counsel have filed an agreed statement of facts.  Included are the following facts:

(a) Kensington  Swan’s  statutory  demand  was  served  on  27  May

2008.

(b) The statutory demand included at the base of the document:

The address for service of Kensington Swan and the place for payment of the amount specified in this demand is at the Wellington office of Kensington Swan, 89 The Terrace, PO Box

10 246, Wellington.  Attention: Chris Grenfell, Solicitor.

Alternatively payment can be made by depositing the amount specified in this demand into Kensington Swan’s bank account at ANZ , account number …. Payment will be deemed to have been received  when  the  bank  sends  through  confirmation  to Kensington Swan, by way of fax or email, that the funds have been deposited.

(c) Counsel  for  AEL  emailed  Mr  Grenfell  at  4.28pm  on

Wednesday 11 June 2008, advising as follows:

My instructions are to file an application to set aside the demand against AEL Group Limited.  It is about to be filed and will be served shortly.

An Affidavit in support likewise.

I am not taking issue with the fact the demand refers to ‘Napier’.

(d) AEL’s  originating  application  to  set  aside  the  statutory demand was filed in Christchurch High Court on 11 June

2008.

(e) It  was  sent  by  facsimile  to  the  Wellington  offices  of

Kensington  Swan,  and  received  at  4.50pm  on  11  June

2008.

(f) The  application  came  to  the  attention  of  Mr  Grenfell, solicitor, between 5.02pm and 5.05pm on 11 June 2008.

(g) The affidavit of Mr Tremewan in support of the originating application was filed in the Christchurch High Court on 12

June 2008.

(h) A true copy of the affidavit was delivered physically to the receptionist at the Wellington office of Kensington Swan,

89 The Terrace, Wellington, at 5.15pm on 11 June 2008,

and came to the attention of Mr Grenfell the following morning.

(i)  AEL acknowledged an amount of $4,394.25 was due and this was paid to Kensington Swan within the expiry period of the demand.

(j)  In  ensuing  correspondence  Mr  Grenfell  asserted  service was a nullity, and the solicitors for AEL asserted the irregularity was capable of remedy under r 5.

Kensington Swan’s submissions

[5]      The statutory demand contained an address for service, either by post or by personal service.  No provision was made for service to be effected otherwise.

[6]      Service was not effected within the time frame required by s 289(2)(c) of the

Companies Act 1993 and, accordingly, the application was a nullity.

[7]      There is a strict time limit on an application to set aside a statutory demand, and the Court has no jurisdiction to extend the time.

[8]      Service on a partnership is governed by High Court Rules 197 and 201. These rules state that service is to be effected by personal service, either on a partner of the firm, or on a person appearing to have control of the place of business.  In this case, personal service was not effected.

[9]      Concerning  AEL’s  reliance  upon  rr  5  and  11,  the  Court  in  Northshore Nurseries Limited v Wearmouth (1999) 12 PRNZ 672 (HC), relied on the case of Invercargill City Council v Hamlin (1994) 7 PRNZ 674, where the Court said:

Rule  5  proceeds  on  the  footing  that  non-compliance  with  the  Rules, including for present purposes time, place, and manner of service, is prima facie treated as an irregularity not such as to nullify any step taken.  It must be a question of fact in each case.  And how serious was the irregularity.

[10]     In Northshore Nurseries the Court used r5 to correct an irregularity because the application to set aside came to the knowledge of appropriate persons within the time limit, and the statutory demand did not contain an address for service.

[11]     Cases in which the Court have been prepared to use r 5 have a common factor, namely that the creditor did not provide  an  address  for  service  on  their statutory demand.

[12]     AEL’s faxed application came to the attention of Mr Grenfell (indeed any solicitor at all from Kensington Swan) after 5pm on 11 June 2008.  Therefore, even if what would otherwise be acceptable as “personal service” is curable by r 5, the effective time of service was after the last working day available for service. Accordingly, the application is statute barred and a nullity.

[13]     High Court Rule 11 enables the Court to amend “defects” and “errors” in proceedings.  The use of r 11 is not limited to mere correction of defects and errors, but should allow all amendments necessary to determine the real controversy unless satisfied that the applicant was acting in bad faith, or that the order would cause some prejudice which could not be remedied by an appropriate award of costs. (Wright Stephenson & Co. Limited v Copland [1964] NZLR 673, Wilson J).

[14]     In this case any defect or error is non-compliance with the High Court Rules in respect of service, and in that result the proceeding is statute barred.  Therefore, it is not proper for the Court to cure service defects under r 11.

Considerations

[15]     AEL acknowledges service was irregular.   Further, it acknowledges that if service has not been validly effected within the required time (by 5pm 11 June 2008) then the application is a nullity and must fail.

[16]     In this case the issue of service falls for consideration under the High Court Rules.   Kensington Swan is not a company, and the service provisions under the Companies Act 1993 do not apply to the same extent as would be required by that Act.   Likewise, little assistance is available from authorities that dealt with issues arising out of non-compliance with provisions of the Companies Act.  Whether rules

5 and 11 can be invoked in this case is a matter of factual assessment.   It also

involves consideration of the seriousness of the irregularity (Northshore Nurseries

(supra)).

[17]     In this case, the circumstances are (adopting Ms Robertson’s general outline): (a) The  statutory  demand,  while  not  required  to,  did  include  an

address for service.

(b) The statutory demand provided a place for payment and contained Kensington Swan’s physical and post box addresses, and referred to Mr Grenfell.

(c) It did not provide, as it could have done, for service by facsimile, as provided for in r 192(1)(a)(iii) and which case service by that mode would have been required by 5pm on 11 June 2008 ( r 206).

(d) Kensington Swan was content to have advice of payment faxed or emailed.

(e) An address for service is not mandatory for it was open to AEL to serve  in  accordance  with  r  201,  as  if  no  address  had  been provided, and in which case service could have been effected on a partner of the firm at any time up until midnight on 11 June 2008.

(f) Although not required, the statutory demand did include reference to whom documents should be referred.

(g) Mr Grenfell was informed by email at 4.28pm on 11 June 2008 of

AEL’s intention to apply to set aside the demand.

(h) The application was served by facsimile at Kensington Swan’s offices, and within minutes of 5pm, upon Mr Grenfell.

[18]     Although the affidavit in support was not served before 5pm, it was served shortly after.  In any event, the requirements pertaining to service of the application

do not directly apply to service of an affidavit.  Although the rules require the filing and service of affidavits at the same time as the filing of applications, it is correct that standard practice allows affidavits to be filed and served subsequently.

Conclusion

[19]     The purpose of strict rules for filing applications within time are designed to ensure that within those limits the application comes to the notice of persons who should receive them.  In the case of a large law firm, it does not require service upon a particular solicitor or partner of that firm, provided it has, within time, come to the notice of the firm.

[20]     Were  it  otherwise,  service  could  effectively  be  frustrated  because  the particular solicitor concerned was unavailable, away from the office, or, indeed, on leave.  In this case the firm received notice by facsimile within time, even if some 2

– 5 minutes outside of that time frame, it did not reach the particular solicitor whose name appeared on the firm’s address for service.

[21]     Rule 206A provides that a person is served by facsimile on the day on which that facsimile was transmitted, unless served after 5pm on that day, in which event is shall be deemed to have been served upon the first working day thereafter.

[22]     Although service may have been irregular in terms of meeting Kensington Swan’s  requirements,  it  is  clear  any  irregularity  is  of  a  minor  nature.    In  my judgment, service was effected within the 10 working day period required, for within that time Kensington Swan, for themselves and not on behalf of any other, received a facsimile copy of AEL’s application.  If I am wrong in that, then I would not hesitate to  exercise  the  Court’s  discretion  under  r  5  to  direct  service  had  been  validly effected.   Even if I was of the view that the application failed because of invalid service, then I would exercise the Court’s discretion under s 291(1)(a) by extending the time for compliance with the statutory demand for 15 days of the date of this judgment.

Judgment

[23]     AEL’s originating application for setting aside Kensington Swan’s statutory demand is ruled to have been served appropriately and within time.

[24]     Costs are reserved.

Solicitors
Mortlock McCormack Law, Christchurch for Applicant
Kensington Swan, Wellington for Respondent