Chappel v Swindells

[2018] NZHC 506

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2017-419-357

[2018] NZHC 506

IN THE MATTER

of the Judicial Review Procedure Act 2016

IN THE MATTER

of the Construction Contracts

BETWEEN

MATTHEW CHAPPEL and CHERIE CHAPPEL

Applicants

AND

EDWARD SWINDELLS - ADJUDICATOR

First Respondent

AND

ANNEX CONSTRUCTION LIMITED

Second Respondent

Hearing:

On the papers

Appearances:

KA Badcock for the Applicants First Respondent, self-represented

No appearance by the joint liquidators for the Second Respondent who have not taken any steps in the proceeding

Judgment:

22 March 2018

JUDGMENT OF TOOGOOD J

This judgment was delivered by me on 22 March 2018 at 3.00 pm Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Chappel v Swindells [2018] NZHC 506 [22 March 2018]

[1]    In this proceeding for judicial review of an adjudicator’s decision under the Construction Contracts Act 2002, the statement of claim and notice of proceeding were served on the adjudicator, Mr Swindells, by substituted service and he has since filed a memorandum saying that he does not oppose the proceedings and will abide the decision of the Court. He has not filed a defence.

[2]    The second respondent (Annex) was served, on 18 December 2017, when the documents were left with a person at the registered address for service of the company as listed in the Companies Register.

[3]    In the proceeding, the applicants seek an order quashing Mr Swindells’ determination on or about 9 November 2017, that the applicants were required to pay to Annex the sum of $50,737.10 including GST. The applicants had complied with the determination and paid Annex the full amount ordered. The relief sought includes an order that Annex should repay to the applicants all moneys paid by them as a result of the determination, and indemnity costs.

[4]The applicants allege in the statement of claim that:

13.The procedures and processes adopted by the Adjudicator during the CCA Adjudication were procedurally wrong, unfair, not compliant with law, not consistent with principles of natural justice, and therefore biased against the applicant [sic].

14.The procedures and processes adopted by the second respondent [Annex] during the CCA Adjudication were procedurally wrong, unfair, not compliant with law, not consistent with principles of natural justice, and therefore biased against the applicant [sic].

Twelve separate causes of action or particulars of improper conduct are alleged. The relief sought includes an order that Annex should repay to the applicants all moneys paid by them as a result of the determination, and indemnity costs.

[5]    When the matter  was  called  in  a  Duty  Judge  List  before  Hinton  J  on  14 February 2018, the Judge issued a Minute setting the matter down for listing on Wednesday, 21 March 2018. The Judge said:

If the respondents intend to defend the proceeding, they will need to ensure that statements of defence are filed before then.

[6]    The liquidators have told Mr Badcock, the lawyer for the applicants, that they do not consent to a continuation of the proceeding against Annex. They have taken no step in the proceeding, however, and they have not filed any protest to jurisdiction.

[7]    The applicants now seek an order under s 248 of the Companies Act to continue the proceeding. Mr Swindells and the liquidators have been served with a copy of that application.

[8]    The matter was due to  be  called  in  the  Chambers  List  on  Wednesday,  21 March 2018, but in view of Mr Swindells’ position and the fact that the liquidators had taken no steps, I determined I would deal with the matter on the papers. For that reason, I asked the Registrar to indicate to Mr Badcock that I proposed to grant the application for reasons to be explained; that the matter would be taken out of the Chambers List and that counsel’s appearance would be excused.

[9]    Section 248 of the Companies Act 1993 addresses the effect of the commencement of liquidation of a company. So far as is relevant, it provides:

248 Effect of commencement of liquidation

(1)With effect from the commencement of the liquidation of a company—

(a)The liquidator has custody and control of the company's assets:

(b)The directors remain in office but cease to have powers, functions, or duties other than those required or permitted to be exercised by this Part of this Act:

(c)Unless the liquidator agrees or the Court orders otherwise, a person must not—

(i)Commence or continue legal proceedings against the company or in relation to its property; or

(ii)Exercise or enforce, or continue to exercise or enforce, a right or remedy over or against property of the company….

[10]   Once a company has been put into liquidation, the rights of an unsecured creditor are limited to proving his or her claim on a pari passu basis. The rationale for the rule is to prevent the assets of an insolvent company from being dissipated in wasteful litigation.1

[11]   In determining whether to grant leave under s 248(1)(c)(i), I have had regard to the principles discussed by Master Faire in Fisher v Isbey:2

(a)There must be equality amongst various creditors and the bringing of proceedings should not produce a comparative advantage to any particular creditor. In view of the history of the matter, I am satisfied the applicants are not seeking to obtain an advantage over other creditors.

(b)The assets of a company should not be dissipated in wasteful litigation. In that regard, I have noted that there is no other method for determining the applicants’ claim.

(c)Considering whether it is appropriate for the creditor’s claims to be proved in the liquidation or whether leave should be given to allow the claims to be established by way of civil proceedings, I have recognised that the present proceeding affords the only basis upon which the applicants might establish their right to claim the repayment of the moneys paid as a consequence of the adjudicator’s determination.

(d)Without making any determination of the merits, I am satisfied that the proposed claim is not clearly unsustainable.

[12]   I have also considered whether there has been any delay by the applicants and I am satisfied that they have acted promptly.3  I do not know whether the proceedings,

1      Commissioner of Inland Revenue v Robertson [2017] NZHC 31 at [113] and [114].

2      Fisher v Isbey (1999) 13 PRNZ 182 at [19].

3     McPhail v Durbridge Developments Ltd (in liq) (1998) 8 NZCLC 261,610.

if successful, will be fruitless.4 The mere fact that the company is now in liquidation does not justify an inference that that is the case.

[13]   I am influenced by the timing of the voluntary liquidation. There is no reason to think that it was merely a coincidence that Annex was placed in voluntary liquidation on 14 February 2018. In the absence of any evidence to the contrary, I infer there was a connection between Hinton J’s Minute following the callover that day and the company’s decision to liquidate. The Minute signalled to Annex that the applicants were pursing their claim for recovery of the moneys paid and explained the procedural steps needed to be taken by Annex if it was to resist the claim. The liquidation has the effect of making available for all creditors the $50,000.00 paid by the applicants in good faith in November 2017.

[14]   As the respondents have failed to take any steps in the proceeding, it is open to the applicants to apply to the Court for judgment on a formal proof basis. That should be done promptly so that the Court may make a determination of the applicants’ claim.

[15]   I grant the applicants’ application for an order granting leave to continue the proceeding against the second respondent, now in liquidation, to establish their status as unsecured creditors in the liquidation of the second respondent. Costs on the application are reserved.

[16]I direct that:

(a)this matter shall be listed for mention in the first available Chambers callover list after 20 April 2018 to monitor progress; and

(b)the applicants shall send a copy of this judgment to Mr Swindells at his postal address and by email to the joint liquidators at the address shown in the records of the Companies Office.

..........................................

Toogood J

4      Johnson v CBD Real Estate Ltd (in liq) (1999) 14 PRNZ 320 at 322.