Body Corporate 392619 v Yee Good Fortune Investments Limited

[2018] NZHC 515

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-Ā-TARA ROHE

CIV-2016-485-823

[2018] NZHC 515

UNDER

Section 289 of the Companies Act 1993

IN THE MATTER

of an application for putting a company into liquidation

BETWEEN

BODY CORPORATE 392619

Plaintiff

AND

YEE GOOD FORTUNE INVESTMENTS LIMITED

Defendant

Hearing:

20 March 2018

Appearances:

No appearance by or for plaintiff N B Dunning for defendant

D H Hunt for Body Corporate 81340

Judgment:

23 March 2018

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]    On 20 October 2016 the plaintiff, Body Corporate 392619 (BC392619), commenced  this  proceeding  seeking  an  order   winding   up   the   defendant,   Yee Good Fortune Investments Ltd (Yee). The basis for BC392619’s proceeding was an alleged failure on the  part  of Yee  to  comply  with  a  statutory  demand  dated 23 August 2016 and served shortly thereafter, which statutory demand was in turn based on allegations of unpaid body corporate levies said to have fallen due between February 2013 and December 2015 together with other charges and interest. The total demand was for $25,497.01.

BODY CORPORATE 392619 v YEE GOOD FORTUNE INVESTMENTS LIMITED [2018] NZHC 515

[23 March 2018]

[2]    The full history of the prolonged interlocutory stages of the proceeding is set out in the various judgments of Associate Judge Smith, and I will not describe it here.

[3]    Long after the original hearing date had passed, in the midst of these interlocutory stages, on 15 March 2017, Body Corporate 81340 (BC81340) filed a notice of appearance pursuant to r 31.18 supporting the winding up proceeding.

[4]    Ultimately, BC392619’s proceeding was adjourned to 31 July 2017 for hearing, and was heard on that date. Associate Judge Smith’s reserved judgment was delivered on 21 February 2018. He concluded that there was a “… genuine and substantial dispute over liability for the 2014 and 2015 levies…” and that that meant “… that the liquidation claim must be stayed or dismissed.”. He went on to say:

[94]      But for the position of the supporting creditor, the appropriate course would be to dismiss the liquidation claim. There may well be further appeals from the Tribunal’s decision on the issues that have been referred back to it, and there could be substantial further delays before all issues over the 2013 levies have been resolved. It is better that the Body Corporate’s liquidation claim be bought to an end now. Against that, the right of the supporting creditor to make any application it might wish to make to be substituted as a plaintiff in the proceeding, needs to be considered. There will need to be a valid liquidation claim still foot when any such substitution application is made (if it is made).

[95]      In those circumstances the appropriate course is to order, as I do, that the Body Corporate’s liquidation claim is stayed, with the proceeding adjourned to the list on 20 March 2018 to deal with any application by the Body Corporate 81340 for substitution as a plaintiff.

[5]    On 14 March 2018 BC81340 filed a notice of proceeding, a statement of claim and an affidavit verifying the latter. The intitulements to these documents indicate that the draftsman thought that an order had already been made adding BC81340 as a plaintiff or substituting it for BC392619 as the plaintiff in the proceeding. As will already be apparent, that was not the case. In his judgment Associate Judge Smith merely foreshadowed the possibility of an application by BC81340 for such an order.

[6]    Before me, Mr Hunt for BC81340 appeared to accept that because he effectively made an oral application for an order adding BC81340 as a plaintiff or substituting it for BC392619.

[7]    Rule 31.24 provides two paths by which BC81340 might become a, or the, plaintiff in this proceeding:

(a)Pursuant to r 31.24(2) and (3) which provide:

(2)The person may become a plaintiff in that proceeding by filing in the registry of the court and serving on all the parties to the proceeding—

(a)a statement of claim in form C 1; and

(b)a notice of proceeding in form C 3; and

(c)an affidavit in form C 4.

(3)Those documents must be filed and served not later than 2 working days before the date of hearing of the proceeding.

(b)Pursuant to r 31.24(4) which provides:

(4)If a person has filed an appearance under rule 31.18 in a proceeding to put a company into liquidation and, on the day appointed for the hearing, or on any day to which the hearing has been adjourned, no plaintiff wishes then to proceed with the hearing of the application to put the company into liquidation, the court may, on the oral application of that person,—

(a)add that person as a plaintiff in the proceeding; or

(b)substitute that person for the plaintiff or plaintiffs or any of the plaintiffs in the proceeding.

[8]    With respect to sub-rules (2) and (3), the position is very clear. Rule 31.6 provides that following the filing of proceedings under pt 31 the Registrar must appoint a date for the hearing. In BNZ v Radar Corp Ltd1 the Court of Appeal concluded that the date first entered by the Registrar pursuant to r 31.6 is the date of hearing for the purposes of sub-rules (2) and (3). BC81340 did not file its originating documentation two working days before the original hearing date. Indeed, it did not do so until after Associate Judge  Smith  had issued his  substantive  judgment  on  21 February 2018. No application for an extension of time was made before me. I conclude that BC81340 cannot bring itself within sub-rules (2) and (3).

1      BNZ v Radar Corp Ltd [1989] 1NZLR750.

[9]    Mr Hunt submitted that BC81340 could bring itself within r 31.24(4). He said that BC81340 had filed an appearance under r 31.18. He said that as Associate Judge Smith had adjourned the proceeding to 20 March 2018 at the conclusion of his substantive judgment, that was a day to which the proceeding had been adjourned. Whilst accepting that this was not a situation in which there was a plaintiff that did not wish to proceed, but rather a situation in which the original plaintiff, BC392619, was precluded from proceeding by Associate Judge Smith’s substantive judgment, he contended that there was no reason in principle why those two situations could not be treated in the same way.

[10]   Mr Hunt went on to make some further points. He emphasised the substantive merits of BC81340’s claim against Yee. I have formed no view as to that. I cannot see that it is a matter in respect of which I am in the position to form a view at this stage. Nor do I perceive it to be relevant to the issue that I must resolve. He said that before today no question had been raised about BC81340 being substituted as the plaintiff in this proceeding. Whilst that may be so, I am unable to see how the point assists BC81340. Finally, he said that there were sound policy reasons to justify the order sought by BC81340. For myself I would have thought that policy considerations

— some of which were identified by Associate Judge Smith in the paragraphs I have quoted from his Honour’s 21 February 2018 judgment — were finely balanced. But, be that as it may, such matters need only be considered if the rule is susceptible to more than one interpretation.

[11]   For Yee, Mr Dunning contended that r 31.24(4) did not apply to the current situation.

[12]   He developed this submission by drawing a distinction between those situations in which an original plaintiff is able but does not wish to proceed, and another party who has given the necessary notice elects to apply to be substituted, on the one hand, and the situation in this case, on the other hand, where the original plaintiff, far from not wishing to proceed, has proceeded to a hearing, following which the court has come to the conclusion that it’s claim cannot succeed.

[13]   Mr Dunning’s  submission was that only in the first of those situations does    r 31.24(4) apply. I agree, for the reasons set out below.

[14]    The position under sub-rule (4) is not as straight forward as the position under sub-rules (2) and (3). Under sub-rule (4), an oral application must be made “… on the day appointed for the hearing, or on any day to which the hearing has been adjourned

…”.

[15]   In Radar the Court of Appeal made it clear that the phrase “hearing date” in sub-rules (2) and (3) and the phrase “the day appointed for the hearing” in sub-rule (4) bear the same meaning, that is to say the day first allocated by the Registrar. But of course, in sub-rule (4), the reference is extended to include “… any date to which the hearing has been adjourned ...”.

[16]   As far as I am aware there is no authority as to exactly how far that extends the definition, or which covers the circumstances of this case. Certainly counsel were unable to refer me to any such authority. And my own researchers uncovered none.

[17]   However, in my judgment, the meaning is quite plain. It appears to me that it would be quite wrong to confuse the terms “proceeding” and “hearing”. They are not synonymous. The focus in sub-rule (4) is on the date originally allocated by the Registrar for the hearing, or on any subsequent date to which the court adjourns the case for the hearing.

[18]   In this case, the proceeding was ultimately adjourned to 31 July 2017. That was the date of the hearing. Associate Judge Smith’s substantive judgment followed. In my view, that hearing date was the cut-off point for any application by BC81340 pursuant to sub-rule (4).

[19]   As Mr Hunt emphasised, Associate Judge Smith adjourned that proceeding to today’s date, and it would appear from paras [94] and [95] of his Honour’s judgment that he contemplated the possibility of an application being made by BC81340 before or on that date. If that means that I am differing from the Judge as to whether sub-rule

(4) can be invoked following the hearing, then I would observe that his Honour

received no submissions on that point, and that it was not the focus of his 21 February 2018 judgment.

[20]On those bases, I am not prepared to make the order sought.

[21]BC81340’s application is dismissed, as is the proceeding.

[22]   Of course that does not mean that BC81340 is left without a remedy; it may commence a fresh proceeding should it so wish.

[23]   If there are outstanding issues between the parties as to costs which counsel are unable to resolve, the parties can revert to me by memorandum in relation to the same.

Associate Judge Johnston

Solicitors:

John Dean Law Office, Wellington for BC392619 Nat Dunning Law, Wellington for plaintiff

Rainey Collins, Wellington for BC81340