Commissioner of Inland Revenue v Brak Burns Limited
[2023] NZHC 2144
•10 August 2023
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2023-419-41
[2023] NZHC 2144
UNDER The Companies Act 1993 IN THE MATTER OF
The Liquidation of BRAK BURNS LIMITED
BETWEEN
THE COMMISSIONER OF INLAND REVENUE
Plaintiff
AND
BRAK BURNS LIMITED
Defendant
Hearing: 9 August 2023 Counsel:
C D Walmsley for the Commissioner of Inland Revenue J Taylor for the Defendant
Judgment:
10 August 2023
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 10 August 2023 at 4.00 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors/Counsel:
Brookfields Lawyers, Auckland Bytalus Legal, Hamilton
Inland Revenue Legal Services, Hamilton
THE COMMISSIONER OF INLAND REVENUE v BRAK BURNS LTD [2023] NZHC 2144 [10 August 2023]
Introduction
[1] In this proceeding, the Commissioner of Inland Revenue seeks an order placing the defendant, Brak Burns Limited (Brak Burns), into liquidation. The proceeding was originally commenced by Service Foods Limited (Service Foods) as plaintiff.
[2] The liquidation proceeding was advertised by Service Foods in The Waikato Times on 28 February 2023, and in the New Zealand Gazette on 1 March 2023. On 3 March 2023, the Commissioner filed an appearance in support of the proceeding.
[3] On 14 April 2023, Brak Burns filed an application for leave to file a statement of defence out of time, together with a supporting affidavit and a draft statement of defence. That application is yet to be determined.
[4] On 5 May 2023, counsel for the Commissioner filed a memorandum confirming that the Commissioner would seek leave to substitute as the plaintiff if Service Foods did not wish to pursue the liquidation proceeding. The memorandum confirmed that the Commissioner would abide the Court’s decision on the application by Brak Burns to file its defence out of time.
[5] On 10 May 2023, counsel for Service Foods filed a memorandum confirming that Service Foods no longer wished to pursue the liquidation proceeding and seeking leave to discontinue.
[6] On 15 May 2023, I issued a minute making an order in Chambers substituting the Commissioner as plaintiff and giving directions for the Commissioner to file and serve a statement of claim, notice of proceeding and affidavit verifying the statement of claim.
[7] On 17 May 2023, the Commissioner filed his statement of claim, notice of proceeding and affidavit verifying the statement of claim. On that same day, the Commissioner purported to serve the documents on the defendant by sending them to the email address of the defendant’s solicitor, Mr Gloyn.
[8] On 1 June 2023, Brak Burns filed an appearance under protest to jurisdiction, relying on two grounds: first, that the High Court Rules 2016 (HCR) do not allow for substitution to be effected by an order made in Chambers and that such an order can only be made on an oral application under r 31.24(4); and, secondly, that the Commissioner had failed to validly serve his statement of claim and supporting documents.
[9] Brak Burns has not filed an application for a stay of the proceeding. The Commissioner has filed an application for an order dismissing the protest to jurisdiction.
Substitution
[10]Rule 31.24 of the HCR provides:
31.24 Additional and substituted plaintiffs in liquidation proceeding
(1)This rule applies to any person who is entitled to make an application to the court for putting a company into liquidation under section 241(2)(c) of the Companies Act 1993.
(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.
(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.
(5)The addition or substitution of a person as a plaintiff under subclause (4) must be subject to the condition that that person file in the registry of the court and serve on all the other parties to the
proceeding, within 5 working days after the day on which the addition or substitution is made,—
(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.
(6)If a person to whom rule 31.16(2) applies is a person on whom the statement of claim is served under this rule, that person must file a statement of defence within 10 working days after the date on which the statement of claim is served upon that person.
[11]A creditor wishing to join as a plaintiff has two options:
(a)under r 31.24(2), the creditor may file a statement of claim, notice of proceeding and verifying affidavit not later than two working days before the first call of the proceeding; or
(b)alternatively, under r 31.24(4), on the first call of the proceeding or on any adjourned date, the creditor may make an oral application to be substituted as plaintiff.
[12] I accept the submission on behalf of Brak Burns that r 31.24 does not expressly permit the order for substitution of a plaintiff to be made in Chambers. However, the failure to comply with r 31.24 is an irregularity under r 1.5 and does not nullify the proceeding.
[13] In Mao v Inno Capital No 4 Ltd,1 the Court of Appeal considered a submission that a liquidation proceeding was a nullity because a party substituted as a plaintiff had failed to file and serve a fresh notice of proceeding, as required by r 31.24(5). The Court found that there was no procedural irregularity, but went on to state:
… In any event, to the extent there was any defect in the way the substitution was dealt with procedurally, it was of a nature which the Court would readily excuse under r 1.5.
[22] Rule 1.5 is broad in its application. It enables the Court in an appropriate case to allow any amendments and to make any order dealing with the proceeding generally as it thinks just. Importantly it confirms that a failure
1 Mao v Inno Capital No 4 Ltd [2018] NZCA 433, [2019] NZCCLR 16.
to comply with the rules is to be treated as an irregularity and does not nullify any order in the proceeding. There is no reason to read the operation of r 1.5 down, particularly in the context of this case.
[14] No prejudice has resulted to Brak Burns from the order for substitution being made in Chambers, rather than in Court. There is no basis on which Brak Burns could have opposed the making of the order.
[15] In my minute dated 15 May 2023, I did not expressly grant leave to Service Foods to discontinue the proceeding. At all times, the proceeding has remained extant. The Court has jurisdiction to hear the liquidation proceeding.
[16] I confirm the order made on 15 May 2023, substituting the Commissioner as plaintiff in this proceeding.
Service
[17] The Commissioner submits that the statement of clam and supporting documents were served on Mr Gloyn in accordance with an agreement under s 387(1)(e) of the Companies Act 1993.
[18] Tessa Te Whareturoroa has sworn an affidavit on behalf of the Commissioner. She deposes that she telephoned Mr Gloyn on 5 May 2023 and obtained from him an email address for the purpose of service on the defendant of a memorandum on behalf of the Commissioner to be filed in this proceeding. Ms Te Whareturoroa confirms that she then emailed the memorandum to Mr Gloyn that same day, as agreed. Mr Gloyn has not filed an affidavit in reply.
[19] On 17 May 2023, Ms Te Whareturoroa sent a copy of the Commissioner’s statement of claim, notice of proceeding and verifying affidavit to Mr Gloyn to the same email address. Mr Gloyn did not take issue with the email. The defendant has not taken issue with the mode of service until filing its appearance under protest to jurisdiction.
[20] I find that the telephone call between Ms Te Whareturoroa and Mr Gloyn amounts to an agreement under s 387(1)(e) of the Companies Act that documents in this proceeding can be served on the defendant by sending them to Mr Gloyn by email.
[21] If I am wrong about that, I would have found that service was valid under s 387(1)(d) of the Companies Act.2
[22] Mr Gloyn is the solicitor on record for the defendant. He has filed numerous documents in this proceeding:
(a)The defendant’s application for leave to file a statement of defence out of time, dated 14 April 2023. This document did not include a memorandum confirming that documents could be served on Mr Gloyn by email, however, the cover page of the document confirmed that Mr Gloyn was the solicitor for the defendant. Filed contemporaneously was a supporting affidavit from Murray Osmond which produced as an exhibit the proposed draft statement of defence, which stated that documents for service could be sent to Mr Gloyn by email.
(b)The defendant’s appearance under protest to jurisdiction dated 1 June 2023. Although this document was filed after the Commissioner served his statement of claim and supporting documents, the appearance under protest to jurisdiction confirms that Mr Gloyn remains the solicitor on record and that documents can continue to be served on him by email.
[23] Accordingly, I would have been prepared to make an order, pursuant to s 387(1)(d) of the Companies Act, retrospectively approving service of the Commissioner’s statement of claim, notice of proceeding and affidavit verifying the statement of claim by the sending of those documents to Mr Gloyn by email.
Result
[24]I make the following orders:
2 Active Trucking Ltd v Intercivil Ltd [2018] NZHC 690 at [6].
(a)the Commissioner’s application to dismiss the protest to jurisdiction is granted;
(b)the defendant is granted leave to file a statement of defence;
(c)the defendant shall file and serve its statement of defence, and any further evidence in support of its defence, by 18 August 2023;
(d)the Commissioner shall file and serve any affidavits in reply by
25 August 2023;
(e)the liquidation proceeding is set down for a two-hour defended hearing on 4 September 2023 at 3 pm;
(f)the Commissioner shall file and serve written submissions and authorities, and a bundle of the pleadings and affidavits, by 30 August 2023;
(g)the defendant shall file submissions by 1 September 2023;
(h)costs are reserved.
Associate Judge Brittain
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