Coljon Limited v Riccarton Construction Limited HC Auckland CIV 2010-409-848
[2010] NZHC 1970
•9 November 2010
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2010-409-848
BETWEEN COLJON LIMITED Plaintiff
ANDRICCARTON CONSTRUCTION LIMITED
Defendant
CIV-2010-409-1440
AND BETWEEN RICCARTON CONSTRUCTION LIMITED
Plaintiff
ANDCOLJON LIMITED Defendant
Hearing: 9 November 2010
Appearances: Mr S W Rollo for Coljon Ltd
Ms R P Harley for Riccarton Construction Ltd
Judgment: 9 November 2010
(ORAL) JUDGMENT OF LANG J
[on application for order placing company in liquidation]
Solicitors/Counsel:
Lane Neave, Christchurch
Cousins & Associates, ChristchurchMs R P Harley, Wellington
COLJON LTD V RICCARTON CONSTRUCTION LTD HC CHCH CIV-2010-409-848 9 November 2010
[1] There are two proceedings before the Court today. In the first, Coljon Limited (“Coljon”) seeks an order that Riccarton Construction Limited (“Riccarton Construction”) be placed in liquidation: CIV 2010 409 848. In the second, Riccarton Construction seeks an order setting aside a statutory demand served upon it by Coljon: CIV 2010 409 1440. The demand sought payment in the sum of $2,760.00, being costs awarded in Coljon’s favour when Riccarton Construction discontinued an application seeking an order staying the liquidation proceeding.
[2] The debt that gave rise to the statutory demand has now been paid in full, albeit only yesterday. The application to set aside the statutory demand is accordingly granted and the demand is set aside.
[3] The liquidation proceeding is based on a debt of $300,000 that Coljon alleges is owing to it by Riccarton Construction. The debt arises as a result of the fact that Riccarton Construction refused or failed to pay a deposit under an agreement for sale and purchase. The proceeding has a lengthy history, to which I will refer shortly.
[4] Riccarton Construction opposes the application. It contends that there are defects in the affidavit filed in verification of the statement of claim. It also argues that the Court should exercise its discretion not to make an order placing the company in liquidation.
[5] In order to understand these issues, it is necessary to set out the history of the proceeding.
Factual background
[6] The statement of claim and notice of proceeding were filed on 29 April 2010. Unusually, those documents were not accompanied by a verifying affidavit as required by r 31.5 of the High Court Rules. The proceeding was duly served on Riccarton Construction and it then applied for an order restraining or staying the proceeding. Ultimately it elected to discontinue that application, and this led to the award of costs that is the subject of the application to set aside the statutory demand under CIV-2010-409-1440.
[7] The story does not, however, start with the documents filed in this proceeding. Rather, it starts with the statutory demand that underlies the proceeding.
[8] Coljon served a statutory demand on Riccarton Construction on
11 September 2009. On 25 September 2009, Riccarton Construction applied for an order setting aside the demand. That application was heard before Associate Judge Osborne, and was dismissed in a decision delivered on 4 March 2010: Riccarton Construction Ltd v Coljon Ltd HC Christchurch CIV-2009-409-2301. The Associate Judge directed Riccarton Construction to pay the sum of $300,000 to Coljon no later than 20 April 2010.
[9] Riccarton Construction appealed to the Court of Appeal against the Associate Judge’s decision, and applied again for a stay of the liquidation proceeding until after its appeal had been determined. In a judgment delivered on 6 July 2010, Associate Judge Doherty dismissed that application.
[10] Riccarton Construction failed to pay the security for costs on the appeal, and
Coljon applied for the appeal to be struck out. In a judgment delivered on 21
September 2010 the Court of Appeal granted this application and struck the appeal out: Riccarton Construction Ltd v Coljon Ltd: [2010] NZCA 430.
[11] Against that background I turn to consider the first issue.
The validity of the affidavit filed in verification of the statement of claim.
[12] When Associate Judge Doherty dismissed the application by Riccarton Construction for an order staying the liquidation proceeding, he directed that Coljon was to file and serve an affidavit verifying the statement of claim no later than 9 July
2010.
[13] In compliance with that direction, Coljon filed an affidavit by Jessica Jayne
Craighead on 9 July 2010. Ms Craighead’s affidavit is in the following terms:
I, Renee Jayne Craighead, of Christchurch, swear:
1.I am a Personal Assistant at the firm Lane Neave. I have spoken to a director of the plaintiff and I am authorised to swear this affidavit on the plaintiff’s behalf.
2.Having reviewed the documents that are evidence of each allegation in the statement of claim I have knowledge of the facts stated in the statement of claim and in this affidavit.
3.Those statements in the statement of claim (copy of which is attached to this document marked “A”) that relate to the acts and deeds of the plaintiff are true, and I believe to be true those statements that relate to the acts and deeds of others.
SWORN by Jessica Jayne Craighead ) [Signed] At Christchurch this 9th day of July 2010 )
[14] Counsel for Coljon advised me from the bar that Ms Craighead is his secretary, and that it was necessary for her to swear the affidavit verifying the statement of claim because the company’s director, Mr Shields, lives in Nelson and it was going to be difficult to have him swear and return an affidavit within the three day timeframe permitted by the Associate Judge.
[15] Counsel for Riccarton Construction contends that the affidavit by Ms Craighead does not meet the requirements of r 31.5. She points out that r 9.82 governs the situation in the case of affidavits made on behalf of the corporation. It provides as follows:
9.82 Affidavits made on behalf of corporation
A person may make an affidavit on behalf of a corporation or body of persons empowered by law to sue or to be sued (whether in the name of the body or in the name of the holder of an office) if the person—
(a) knows the relevant facts; and
(b) is authorised to make the affidavit.
[16] Counsel submits that a legal secretary is not a person who is in a position to know the relevant facts and that, at the very least, an affidavit of this type ought to be sworn by a solicitor or other qualified person who can properly say that he or she knows the relevant facts that underline the affidavit.
[17] I accept that it may be best practice for an affidavit verifying a statement of claim in liquidation proceedings to be sworn by either a director of the plaintiff
company or by a solicitor in the firm of solicitors acting for the plaintiff. I do not accept, however, that the fact that an affidavit that is sworn by a legal secretary is sufficient to render the affidavit invalid. The key point is whether the person knows the relevant facts and is authorised to make the affidavit. In the present case Ms Craighead has deposed that she has spoken to a director of the plaintiff and that she is authorised to swear the affidavit. She also confirms that she has read the relevant documents on her firm’s file and that she is able to complete her affidavit based on that inspection.
[18] In this context it is appropriate to set out the relevant passages from the statement of claim:
The plaintiff by its solicitor says: Parties:
1. The plaintiff is an incorporated company with its registered office in
Christchurch and carries on business as a motelier in Blenheim.
2. The defendant is a construction company which was incorporated on 10
December 2001 and which has its registered office at level 1, Sol
Square, Christchurch 8011.
A statutory demand was served
3.On 11 September 2009 a statutory demand for the sum of $300,320.00 was served on the registered office of the defendant in respect of a deposit owed under an agreement for sale and purchase of real estate.
An application was filed to have it set aside
4.On 25 September 2009 the defendant filed an application for an order setting aside the statutory demand.
The application failed the company was ordered to pay
5. The defendant was unsuccessful in its application and on 19 March
2010 Associate Judge Osborne made the following orders:
(a) That Riccarton Construction Limited pay the sum of $300,320.00 to Coljon Limited by 4 pm, 20 April 2010 (such payment to be in cleared funds), failing which Coljon Limited may make an application to put Riccarton Construction into liquidation; and
(b) That the applicant shall pay the respondent costs of $6,640.00 together with disbursements of $78.75.
A second statutory demand was served
6. A second statutory demand was served on the defendant on 25 March
2010 for the amount of $6,960.
Nothing has been paid
7.Payment by the defendant has not been made in respect of either: (a) Associate Judge Osborne’s orders of 19 March 2010; and
(b) The second statutory demand.
The defendant is insolvent
8. The defendant company is insolvent.
…
[19] The purpose of an affidavit verifying a statement of claim in a liquidation proceeding is two-fold. First, it serves to ensure that liquidation proceedings are not commenced unless there is a proper jurisdictional basis for them. This requires the person who swears the affidavit of verification to ensure that the jurisdictional requirements have been met. In this case that required the deponent to know that a statutory demand had been served and not complied with.
[20] I consider that all of the factual matters referred to in the statement of claim are matters that Ms Craighead could have ascertained from the file held by her employer and, indeed, many of them are matters of public record. The only issue that she may not have been able to give evidence about personally is the allegation that Riccarton Construction was insolvent. That, however, is a matter that is ultimately for the Court to determine. For that reason no deponent verifying a statement of claim will ever be in a position to make an authoritative statement about that issue. I therefore take the view that Ms Craighead has sufficient knowledge to swear an affidavit verifying the statement of claim in the present case.
[21] In case I am wrong in that, I propose to make an order under r 1.19 extending until today the time for filing an affidavit verifying the statement of claim. During the hearing today counsel for Coljon provided me with an affidavit by Mr Shields,
the director of Coljon Limited, verifying the statement of claim in the usual form. This places the matter beyond doubt. I therefore do not accept that any issue arises in relation to the affidavit of verification.
Should the Court exercise its discretion in favour of Riccarton Construction?
[22] I now turn to the substantive argument, which is as to whether or not the
Court should make an order placing Riccarton Construction in liquidation.
[23] Counsel for Riccarton Construction frankly accepts that her client is unable to pay the debt currently due to Coljon Limited. It has no option but to accept the validity of that debt given the findings of both Associate Judge Osborne and the Court of Appeal. She argues, however, that the Court should permit Riccarton Construction to remain in existence so that it can complete Court proceedings in which it is currently engaged with the Commissioner of Inland Revenue.
[24] Those proceedings are currently before the Court of Appeal and, if successful, could result in Riccarton Construction receiving more than $1 million. The proceedings before the Court of Appeal are currently parked awaiting the outcome of another allied proceeding in respect of which judgment is awaited from the Supreme Court.
[25] Counsel for Riccarton Construction says her client is hopeful that a favourable decision in the other proceeding from the Supreme Court could lead to the Commissioner effectively conceding the proceeding in which Riccarton Construction is a party. That would provide Riccarton Construction with the necessary funds to meet the debt owing to Coljon and to carry on in business.
[26] Coljon opposes any suggestion that the liquidation proceeding should be delayed further. It points out that Riccarton Construction is insolvent and that, in addition to the debt of $300,000, it has a contingent liability to Coljon in respect of the losses that Coljon will suffer in reselling the property that was the subject of the agreement for sale and purchase.
[27] Counsel for Coljon also points out that when it struck out Riccarton
Construction’s appeal the Court of Appeal had this to say:
Secondly, Riccarton is trying to preserve its position in relation to collateral litigation. There may occasionally be a good and sufficient reason for such a stance. But there is no such reason here. The liquidator could still carry on that litigation, if he considered it meritorious, and worth powder and shot.
[28] I acknowledge the desire of Riccarton Construction to continue in existence to see the proceeding with the Commissioner of Inland Revenue through to a positive conclusion. In the end, however, and as the Court of Appeal observed, that is a matter that can be undertaken by the liquidator. If matters proceed favourably in relation to the other proceeding that is before the Supreme Court, it is possible that the liquidator will not be obliged to take any further steps in order to obtain a positive result for Coljon in its proceeding with the Commissioner of Inland Revenue. For this reason I do not consider that the continuation of the appeal is a factor that ought to justify the withholding of an order placing the company in liquidation.
[29] For these reasons I now make an order placing Riccarton Construction Limited in liquidation. I appoint Malcolm Grant Hollis and Rhys James Cain as liquidators. The order is timed at 4.05 pm.
Costs
[30] In relation to the statutory demand proceeding, I make an order granting costs in favour of Coljon on a Category 2B basis together with disbursements as fixed by the Registrar. The award of costs is increased by 50 per cent to recognise the fact that the application to set aside the demand was based on a false premise. The application to set aside the demand recorded that the order for costs was contained in a judgment that was subject to an appeal to the Court of Appeal. That was patently incorrect, because the order for costs related to the discontinuance of the first application for a stay of the liquidation proceeding. That order was never the subject of an appeal to the Court of Appeal.
[31] In relation to the liquidation proceeding, I make an order for costs on a Category 2B basis in respect of the period up to the delivery of the judgment of the Court of Appeal on 19 September 2010. Coljon is also entitled to disbursements as fixed by the Registrar. I apply an uplift of 50 per cent in respect of the steps taken after the delivery of the judgment of the Court of Appeal. Although the issue relating to the verifying affidavit remained on the table, the Court of Appeal made it clear that the argument based on the need to keep the appeal alive was highly unlikely to succeed. I accept that costs in relation to that latter period should be increased to reflect the fact that Riccarton Construction continued to defend the proceeding when it must have known that its chances of success were minimal.
[32] Coljon has foreshadowed the possibility that it may wish to apply for an order that costs be paid by the persons who have been responsible for funding these two proceedings. If any such application is to be pursued, it must be filed and served within 21 days of today’s date.
Lang J
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