Burgess v The Raindance Company New Zealand Limited

[2013] NZHC 930

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV2012-404-003954 [2013] NZHC 930

UNDER  the Companies Act 1993

IN THE MATTER OF     the liquidation of Advocate Advertising

Limited

BETWEEN  RAYMOND GORDON BURGESS AND CRAIG ANDREW YOUNG

Applicants

ANDTHE RAINDANCE COMPANY NEW ZEALAND LIMITED

Respondent

Hearing:         12 December 2012

Appearances: C D Boell for applicants

A J Houghton, director of the respondent (by leave) Judgment:  1 May 2013

JUDGMENT OF ASSOCIATE JUDGE ABBOTT

This judgment was delivered by me on 1 May 2013 at 12.45pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:

R J Macdonald/C M Boell, Short & Partners, PO Box 137 241, Parnell

Also to:

A Houghton, 22 Hastings Parade, Devonport 0624

RAYMOND GORDON BURGESS AND CRAIG ANDREW YOUNG V THE RAINDANCE COMPANY NEW ZEALAND LIMITED HC AK CIV 2012-404-003954 [1 May 2013]

[1]      This  is  an  application  by  the  liquidators  of  Advocate  Advertising  Ltd (Advocate) for an order to set aside voidable transactions between Advocate and the respondent, The Raindance Company New Zealand Ltd (Raindance).

[2]      The liquidators have sought an order on the basis that Raindance has failed to take valid steps in opposition.  Mr A J Houghton, a director of Raindance, was heard on the application, by leave of the Court.  He contends that documents that he has filed constitute valid opposition by Raindance.

Background

[3]      Advocate was put into liquidation by resolution of its shareholders on 7 May

2010.   Mr J A Walker was appointed liquidator.   He subsequently resigned and Raymond Gordon Burgess and Craig Andrew Young (the liquidators) were appointed on 29 October 2010.

[4]      The liquidators served notice to Raindance on 21 December 2011 that they wished to set aside five payments made by Advocate to Raindance between 26

November 2009 and 23 March 2010, totalling $33,227.90.   Raindance objected to the setting aside (the liquidators accept that Mr Houghton emailed them, and that that was a sufficient objection on behalf of Raindance).

[5]      The liquidators filed an application to set aside the payments as voidable transactions, on 11 July 2012.  Prior to the first call of the application (and before service) the liquidators found that Raindance had been struck off the register of companies.  The application was enlarged to allow time for the liquidators to have Raindance reinstated on the register.

[6]      Raindance was reinstated, and the application came back before the Court on

7 November 2012.  At that point the application had been served but Raindance had taken no steps.  Mr A J Houghton attended Court and was given leave to be heard. He had not appreciated that Raindance was obliged to file notice of opposition

before the hearing (and had not appreciated that it had been removed from the

companies’ register).

[7]      The liquidators sought an order in terms of their application, in the absence of opposition.  Notwithstanding that position, I granted Raindance an indulgence, and extended time for filing of notice of opposition and adjourned the application to 12

December 2012.  I set a reasonably generous timetable in the hope that the parties would take the opportunity to resolve matters but, if they were unsuccessful, also to allow Raindance to take legal advice and arrange legal representation.

[8]      On 5 December 2012, Mr Houghton filed a notice of opposition on behalf of Raindance.   He also filed what was described  as  an affidavit in support of the opposition, although it did no more than confirm that the information in the notice of opposition was “true and correct to the best of [his] knowledge”.

[9]      Raindance was again not represented by counsel when the application came back before the Court on 12 December 2012.  Counsel for the liquidators submitted that the liquidators were entitled to the orders sought in the applicant because the notice of opposition was a nullity.  The reason for advancing this was that it had been filed by Mr Houghton rather than by a solicitor.  Mr Houghton (who had again been given leave to address the Court for the purpose of the argument over the validity of the notice of opposition) said he had overlooked the direction to obtain legal representation.

[10]     As the matter came before me in a full court list, I had no time to give a decision on the day.

The opposing positions

[11]     Counsel for the liquidators argued that the opposition was a nullity on the following grounds:

(a)       It  was  filed  by Mr  Houghton  personally rather  than  as  agent  for

Raindance, as the company was struck off at material times.

(b)A  company  must   file   documents   through   a  solicitor,   save  in exceptional circumstances (relying on Re G J Mannix Ltd)1 and there were no such circumstances in this case – Raindance had been given the opportunity to arrange representation, and had failed to do so.

[12]     Mr Houghton said he overlooked the direction to obtain legal representation, but that he had addressed the other matters required of him at the hearing on 7

November 2012: he attempted to meet with the liquidators to try to resolve matters (he alleged that he had had no response to two requests to meet), he took some legal advice, and he spoke to Court staff and was advised as to the procedure to be followed (he was referred to the requisite form in the High Court Rules).  He also said that he had formed the view that the cost of obtaining legal representation was too high to justify it, and contended that he was not in a position, in any event, to pay for such representation.

[13]     There is nothing in the liquidators’ point that Mr Houghton is acting for himself rather than for Raindance.  I accept that he has done what he has on behalf of Raindance.     There  is  nothing  in  the  applicants’  argument  that  until  recently Raindance was struck off the companies register: it has been reinstated, and the documents filed make it clear that Mr Houghton believed he was preparing and presenting these documents on behalf of Raindance.

[14]     The second point is more problematic.  Representation of companies in legal proceedings was considered by the Court of Appeal in Re G J Mannix Ltd.2  The case was concerned primarily with representation in Court, but Cook J also commented in relation to filing of documents:

There is a cognate rule that, apart from statutory exceptions, a corporation has no right to bring or carry on proceedings in a Court except by a solicitor. This refers to the filing of documents – writs, statements of defence, notices of appeal, etc.

1 RE G J Mannix Ltd [1984] 1 NZLR 309 (CA).

2 At 311.

[15]     The “well settled” rule in Mannix was endorsed recently by the Court of

Appeal in the Commissioner of Inland Revenue v Chesterfields Preschools Ltd.3

Although there is an exception to the rule that a company can only be represented in Court through a solicitor, there is no such exception in relation to the filing of documents.4

[16]     The next question is whether the notice of opposition is a nullity, or merely an irregularity which can be cured.  This point was considered by this Court in Time Ticket International Ltd v Broughton5 where the Court considered that the failure to

file through a solicitor was an irregularity, and noted comments in Mannix6 that the

Court had an inherent power to regularise proceedings before it (arising from the inherent power to regulate its own proceedings), whilst noting that this should only be in exceptional, or at least unusual, circumstances.

[17]     I have given Raindance an opportunity to comply with the requirements to file its notice of opposition through a solicitor.  It is unfortunate that it has not done so.  Nevertheless, I must take into account the overall justice of the case.  In the non- complying notice of opposition filed by Mr Houghton, he has advanced identifiable grounds,  at  least  two  of which  would  provide a valid  basis  for opposition:  the contentions that Advocate was able to pay its due debts when the payments were made, and that the payments did not result in Raindance receiving more than it would have in the liquidation.

[18]     I do not accept Mr Houghton’s contention that he ought to be allowed to file the documents on the grounds that the cost of engaging a solicitor is not justified. However, I will allow him one final opportunity to cure the irregularity, by extending time for filing a valid notice of opposition through a solicitor. This will also have the value both for the Court and for the liquidators that only properly arguable grounds

of defence will be advanced.

3 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA53, particularly at

[25] – [27].

4 See Time Ticket International Ltd v Broughton [1996] 2 NZLR 176, at 177 – 180.
5 Ibid at 180.

6 Re G J Mannix Ltd at 316.

[19]     I consider that the interests of the parties can be balanced by awarding the liquidators the wasted costs of two appearances.   That will put them back in the position that they would have been had Raindance engaged a solicitor.

[20]     Before making the appropriate orders, I also wish to comment on the future representation of Raindance.  Under the Mannix principles, Raindance has no right to be represented in Court except by a barrister or solicitor with rights of audience, but the Court has a discretion to allow other persons to represent a company in some

situations:7

...as a reserve of occasional expedient, for use primarily in emergency situations when counsel is not available or in straightforward matters where the assistance of counsel is not needed by the Court or where it would be unduly technical or burdensome to insist on counsel.   Especially in minor matters, cost-saving could also be relevant factor.  A “one-man” company might be allowed to be represented by its owner if the Judge saw fit in a particular case.  But it could not be right, for instance, to issue some sort of tacit continuing or general licence to an unqualified agent to appear in winding up or any other class of proceedings.

[21]     Applications to set aside transactions can raise complicated issues of fact and law.   The Court  and the liquidators  will be assisted  by clear identification  and presentation of those issues for Raindance.  That was most likely done by a legally qualified  representative  such as  a practising barrister or solicitor.    Indeed,  non- professional representation of a company is rarely allowed,8 and lack of funds is not an exceptional circumstance (indeed, it is not uncommon for a company to plead this as inevitable effect of the rule).9   In any event, there is no evidence before the Court that Raindance lacks the ability to pay for legal representation (and cannot be funded by its shareholder, Mr and Mrs Houghton).

[22]     However, if Mr Houghton considers that he is capable of identifying valid legal grounds for opposition, and presenting the argument on them, he should file a formal application for leave to represent Raindance10 as was done in Commissioner

of Inland Revenue v Chesterfields Preschool Ltd.

7 Re G J Mannix Ltd at 314.

8 YPG IP Ltd v Yellow Pages Group Ltd, HC Auckland CIV 2007-404-2839, 29 June 2007.

9 Radford v Freeway Classics Ltd [1994] 1 BCLC 445 (CA) at 448-9, followed in Business Associates

Ltd v New Zealand Post Ltd (1998) 12 PRNZ 497 (HC).

10 N. 3.

Decision

[23]     I  find  that  the  notice  of  opposition  filed  on  behalf  of  Raindance  is  an irregularity that can be cured by a solicitor filing an amended notice of opposition.

[24]     I make the following directions:

(a)       The  liquidators’  application  is  to  be  re-listed  for  further  call  at

11.45am on 19 June 2013.

(b)The time for Raindance to file and serve a valid notice of opposition is extended to 31 May 2013.

[25]     Raindance is to pay the liquidators the wasted costs of their appearances at the hearings on 7 November 2012 and 12 December 2012, on a scale 2B basis.  Any issues over the quantum of those costs can be addressed at the hearing on 19 June

2013.

[26]     If Raindance does not file and serve notice of opposition through a solicitor as ordered, the liquidators will be entitled to seek an order on their application on 19

June 2013.

[27]     If Raindance wishes to be represented in Court by Mr Houghton, it is to file and serve an application (again through a solicitor) also by 31 May 2013, with that

application to be given a first call at the hearing on 19 June 2013.

Associate Judge Abbott