Forest Trustee Limited v Auckland Council

[2014] NZHC 137

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-4687 [2014] NZHC 137

UNDER  Sections 289 and 290 of the Companies

Act 1993

IN THE MATTER OF       an application to set aside a statutory demand

BETWEEN  FOREST TRUSTEE LIMITED Applicant

ANDAUCKLAND COUNCIL Respondent

Hearing:                   4 February 2014

Appearances:           Mr Chambers for Applicant

Mr J Hilario for Respondent

Judgment:                12 February 2014

JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

This judgment was delivered by me on

12.02.14 at 5 pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

FOREST TRUSTEE LIMITED v AUCKLAND COUNCIL [2014] NZHC 137 [12 February 2014]

Background

[1]      The respondent Auckland Council (“Auckland Council”) which claims that it is owed rates by the applicant Forest Trustee Limited (“Forest Trust”) issued a statutory  demand  dated  15  October  2013  demanding  payment  of  the  sum  of

$67,174.01.   The statutory demand was sent as an email attachment from a staff member at Auckland Council, Ms C Bonilla, on 15 October 2013.  Whether or not Auckland Council was justified in serving the statutory demand by email is a central aspect of the dispute before me.

[2]      Forest Trust filed an originating application to set aside the statutory demand on or about 30 October 2013.   Amongst other grounds given for bringing the application was the assertion that there was a substantial dispute whether or not the debt claimed was owing.

[3]      A notice of opposition was filed dated 11 November 2013.   The relevant parts of that document will be referred to in due course in this judgment.

[4]      In an affidavit which he provided to the Court, Mr Wardlaw, an employee of Auckland Council deposed that previous attempts had been made to recover the rates and arrears of rates from other entities before pursuing Forest Trust.  Those entities were previous  registered proprietors of the property.   That issue is  not directly relevant to the question of liability in this case.  There would seem to be little doubt that the ratepayer, as that term is defined in s 10 of the Local Government (Rating) Act 2002 (the Act), is liable to pay the rates that are due on the property pursuant to s 12 of the Act.   That is the position that was authoritatively decided by King v

Mayor etc of Inglewood1 at page 202 which in turn was applied by Lang J in Bryan v

Opotiki District Council.2

1 King v Mayor etc of Inglewood [1931] NZLR 177.

2 Bryan v Opotiki District Council HC Tauranga CIV-2006-470-703, 26 September 2006 at [69].

[5]      As Lang J determined in his judgment the ratepayer is liable to pay the rates that are due on the unit including arrears of rates.3

[6]      As part of the background it should also be mentioned that the Auckland Council had earlier issued a statutory demand.  However, that statutory demand was set aside by Associate Judge Christiansen in an oral judgment he gave on 14 June

2013.4     The primary ground which the Court relied upon was that the Auckland

Council had not properly delivered the rates invoice. There was apparently no evidence that the property in question contained a post box or other object to which mail could be delivered and further that there was evidence to suggest that the invoice was not sent to the ratepayer’s address but to a neighbouring property.5   The circumstances relating to the service of the latest invoice are referred to in more detail further on in this judgment.

Principles

[7]      The legal position relating to the setting aside of statutory demands is based upon s 290 of the Companies Act 2003 which so far as relevant provides:

290     Court may set aside statutory demand

(1)      The Court may, on the application of the company, set aside a  statutory demand.

……..

(4)      The Court may grant an application to set aside a statutory demand if it is satisfied that—

(a)      There is a substantial dispute whether or not the debt is owing or is due; or

(b)       The company appears to have a counterclaim, set- off,  or  cross-demand  and  the  amount  specified  in  the demand  less  the  amount  of  the  counterclaim,  set-off,  or cross-demand is less than the prescribed amount; or

(c)       The demand ought to be set aside on other grounds.

3 At [73].

4   Forest Trustee Limited v Auckland Council [2013] NZHC 1440.

(5)       A demand must not be set aside by reason only of a defect or irregularity unless the Court considers that substantial injustice would be caused if it were not set aside.

(6)       In subsection (5) of this section, “defect” includes a material misstatement  of  the  amount  due  to  the  creditor  and  a material  misdescription  of  the  debt  referred  to  in  the demand.

(7)       An  order  under  this  section  may  be  made  subject  to conditions.

[8]      I respectfully agree with the following statement of principle which is taken from the judgment of Associate Judge Faire in Italia Motorsport Ltd v European Motors Ltd:6

The approach, which the Court takes to applications on each ground, can beshortly  summarised.  When  considering  an  applicationpursuant  to  s

290(4)(a) of the Companies Act 1993 the Court is required to determine if the applicant can show a fairly arguable basis upon which it is not liable for

the  amount  claimed.  Forge  Holdings  Limited  v  Kearney  Finance  (NZ) Limited (High Court, Christchurch, M 149/95, Tipping J, 20 June 1995) at

page 2 and Queen City Residential Limited v Patterson Co-Partners Architects (No 2) (1995) 7 NZCLC 260,936. That formulation was approved by the Court of Appeal in United Homes (1988) Ltd v Workman [2001] 3

NZLR 447, 451 - 2.

[9]      In this case, as with the previous one heard by Associate Judge Christiansen, the application to set aside is based upon, amongst other grounds, the contention that Auckland Council did not properly deliver the rates invoice which is the basis for the debt that Auckland Council seeks to enforce through the statutory demand that it served.   The details of that contention will be examined in the next part of this judgment.

Applicant’s contention that applicant not indebted to Auckland Council because respondent did not follow requirements of Local Government (Rating) Act 2002 when rendering invoice to applicant

[10]     This ground is summarised by the applicant’s counsel, Mr Chambers, in his

submissions in the following terms:

6   Italia Motorsport Ltd v European Motors Ltd HC Hamilton CIV-2004-419-950,

18 October 2004 at [4].

1.1The  evidence  shows  that  [Auckland  Council]  has  never delivered a rates invoice as  required by s 49 and s 136 Rates Act for alleged debt set out in the Statutory Demand.  The only evidence of delivery is by email. That is not the type of notice required by s 136 Rates Act for a rates invoice.

1.2Section 136 requires that notice of a rates invoice must: (a) be in writing; and

(b)      be delivered by one of the four methods prescribed in s 136(2) Rates Act.

1.3Transmission by e-mail is not one of those methods. As regards the   reference in s146(2)(d) to “any other means (including  electronic  means)  acceptable  to  the  person”, email  is  not  acceptable  to  FTL,  because,  amongst  other things, it does not provide an original document (as set out at paragraph 3.2 2nd affidavit P W Mawhinney  B.Pl/Ev p109). Original documents are required, for instance, when the Goods and Services Tax component claimed.

[11]     A further proposition which is implicit in the applicant’s argument is that if the local authority does not comply with the requirements of ss 49 and 136 of the Act, no debt which would otherwise be enforceable under the Act comes into existence.   If that is the position in the present case, then there is no basis for the statutory demand which the respondent has served and it ought to be set aside.

[12]     The opposing argument which the respondent puts forward can be stated in the following terms:

a)        There is no substantial dispute of the debt, because:

i)        The applicant is the ratepayer;

ii)The rates bill was delivered to the applicant, pursuant to a High Court order authorising email as a mode of delivery to the applicant.

[13]     It would appear that the respondent does not dispute that if the invoice had not been delivered in accordance with the Act, then there would not be a debt owing by the applicant to the respondent upon which the statutory demand could properly be based.

[14]     Sections 49 and 136 of the Act provide as follows:

46       Rates invoice

(1)       If a rates payment is due for a particular period, the local authority must deliver to the ratepayer a rates invoice for the rating unit for that period.

(2)      A rates invoice must clearly identify all of the following: (a)        the name and address of the local authority:

....

136     Notification

(1)       This section applies to the notification of a matter and the delivery   of a notice, including a rates assessment or rates invoice.

(2)       The  notice  must  be  in  writing  and  must  be  sent  or delivered—

(a)       personally; or

(b)      by post addressed to the person at the person's—

(i)       postal   address,   as   notified   to   the   local authority by the person; or

(ii) last known business or residential address; or

(c)       by fax addressed to the person at the person's fax number; or

(d)      by  any  other  means  (including  electronic  means)

acceptable to the person.

(3)       A  notice  that  is  posted  to  a  person  must  be  treated  as received  by that person not later than 7 days after the date on which it is posted.

[15]     While s 136 requires that a notice of rates invoice must be “in writing”, the same provision contemplates that such a document can be sent to the recipient by way of a facsimile copy.

[16]     This suggests that the legislature intended that a faxed copy will for the purposes of s 136 constitute a notice in writing as well as notices in electronic form under s 136(d).  I mention that because Mr Chambers made the submission that an email would not suffice because it does not satisfy the definition of “writing” in s 29

of the Interpretation Act 1999.7     He submitted that an email attachment was not tangible in the sense that it could be sensed by touch.

[17]     However,  the  more  persuasive  consideration  I  see  is  that  the  legislature specified in detail the means by which a notice of invoice was to be conveyed to ratepayer.   Had it wished to, it could have, but did not, make provision for transmission of the invoice for rates as an email attachment in the absence of an agreement on the part of the ratepayer to receive the invoice in that form.  At the time when the legislation was enacted, email was not unknown.   It is therefore unlikely  that  the  Act  was  drafted  in  ignorance  of  the  possibility  that  it  was technically possible for our rates invoice to be communicated to the ratepayer in such a form.  The exclusion of the email attachment option (again, in the absence of agreement) must therefore be interpreted as a deliberate choice on the part of the legislature.   While it is not necessary for the Court to come to any view on the matter, it is not apparent why such an approach was taken at the time of enactment. It may have been due to concerns that given the importance of a rates demand and

the  significance  of  a  failure  to  pay it,8   a  reasonable  level  of  certainty  that  the

document had actually been received by the party liable was important and that only those  means  which  the  legislature prescribed  gave  rise to  the required  level  of assurance  that  the  document  would  actually be  received  and  that  the  territorial authority would be able to prove that fact conclusively.

[18]     However that may be, and subject to three additional arguments that need to be dealt with, my view is that transmitting an invoice by means of an email attachment does not satisfy the requirements of s 136 in cases where the ratepayer has not agreed to receive notice by that means.

[19]     The first argument was  that the rates bill was delivered to the applicant pursuant to an order of the High Court authorising email as a mode of delivery to the

applicant.

7  “Writing” means representing or reproducing words, figures, or symbols in a visible and tangible form and medium (for example, in print).

8 Which would include the possibility of a rating sale under s  67(1) of the Act.

[20]      The specific terms in which the ground of opposition is stated is as follows: 9

(a)       The  (combined)  rates  assessment  and  invoice,  as  well  as  the statutory   demand, were validly delivered to and/or served on the applicant, pursuant to paragraph [63] of the court’s judgment in CIV

2013-404-270 dated 14 June 2013.

[21] The judgment in question was given by Associate Judge Christiansen, referred to earlier in this judgment at [6]. When concluding his judgment the Judge made the following remarks:

[63]      As advised to the Court, in the presence of Mr Mawhinney10 the Court has ordered for future purposes that service or delivery of documents upon FTL or upon Peter Mawhinney or Anthony Mawhinney may be effected upon:

(a)       Peter Mawhinney at: [email protected]

And for

(b)      Anthony Mawhinney at: [email protected].

[22]     As I understand it the respondent argues that the invoice on this occasion was sent to the first of the two email addresses described in the passage above.

[23]   It is not necessary to examine in detail the effect of Associate Judge Christiansen’s  order.    However,  it  is  clear  that  there  is  no  dispensing  power contained in the Act or any other legislation which would authorise the Judge to make an order abrogating a requirement established by the Act itself.  I should add that there is not the least indication that the Judge was attempting to bring about such a result.  It would appear that the Judge was giving directions about the service of documents  in  future  Court  proceedings  which  were  required  to  be  served  on Mr Mawhinney.  For the reasons I have given, the contention which the respondent puts forward that service by email was justified because of the orders that were made

in paragraph [63] of the judgment cannot be sustained.

9 At paragraph 3(a) of the notice of opposition.

10 The director of the applicant company.

[24]     The next matter that arises is the question of whether the transmission of the rates demand as an email attachment can rightly be considered to have been authorised by s 136(2)(d) of the Act in that notification by that medium amounted to “means (including electronic means) acceptable to the person.”

[25]     Mr Hilario submitted that the section did not require an express agreement such as a verbal agreement that delivery by email of a rates invoice was acceptable to the ratepayer.  The fact that the ratepayer here did not, as it could have, complain that the invoice had not been delivered by a means set out in the Act could be viewed as an indication which the Council was entitled to rely upon that delivery by email attachment was acceptable to it.  Mr Hilario also submitted that certain conclusions could be drawn to the effect that the applicant was generally disposed to receiving communications by email because in earlier proceedings between the parties it had indicated a willingness to accept service of Court documents by way of email delivery.

[26]     I consider that a territorial authority can only rely upon s 136(d) if there is some material which could reasonably be viewed as manifesting an assent on the part of the ratepayer to receive documents on the format under consideration.  It is entirely possible in my view that an individual might be prepared to accept some documents by way of email attachment but might be unwilling to accept documents in other categories by that mode of delivery.  It is a question of deciding whether the legislature by enacting s 136(d) contemplated that the territorial authority could bring itself within the provision by relying upon an inference of the kind which the respondent seeks to enlist in support of its case.  It can be assumed, I consider, that the draftsman of the Act would not have intended the provisions to be interpreted in a way that gave rise to controversy or doubt.  Nor should the legislation be given an unnecessary strained interpretation.  That is because if electronic delivery were not available, there were three other practicably workable options contained in the legislation.  My conclusion is that it is reasonably arguable that it is a requirement of the section that the territorial authority be able to demonstrate that there was either an express agreement for service by way of email or alternatively it is reasonably clear by way of inference from the surrounding circumstances that the ratepayer, while not actually saying so, was agreeing to service by that means.  Because I do

not consider that the case for the respondent reaches that level, it follows (but subject to what follows in the next sections of the judgment) that the applicant succeeds in its contention that there is a substantial dispute concerning whether the Act has been complied with.

[27]     The   next   point   concerns   whether   the   provisions   of   the   Electronic Transactions Act 2002 (ETA) nonetheless enabled the respondent to negative the existence of any substantial dispute concerning delivery of the invoice.  Mr Hilario for the Auckland Council submitted that delivery of an invoice pursuant to the Act fell within the coverage and ambit of the ETA.

[28]     Mr Chambers did not contend that provision of an invoice by way of an email attachment could not amount to an “electronic communication” within the meaning of s 5 of the ETA.  The controversy between the parties centred on the question of whether   delivery   of   an   invoice   under   the   Act   was   one   of   the   types   of communications which were subject to the exempting provision in s 14(2) of the ETA.   Without setting the argument out in complete form, it was Mr Chambers’ submission that a rating invoice corresponded to the class of documents which is described in Part 3 to the schedule of the ETA which provides that provisions of other enactments are outside the scope of the ETA where they relate to:

(b)      information that is required to be given in writing either in person or by registered post.

[29]     Mr Chambers accepted that the provisions of s 136 of the Act, although they refer to delivery by post, do not establish a requirement for registered post which is what the above section is partly concerned with.  However he said that the reference is a disjunctive one and that because there was a requirement in one part of s 136 to personal service, then that would be enough to attract the operation of the schedule and that therefore the ETA did not apply.

[30]     Mr Hilario in his careful submission in reply, referred to the alternative basis upon which the provision of the invoice by email could be viewed as falling within the  provisions  of  the  ETA  and  in  particular  s 16.     That  section  refers  to circumstances in which provision of information in electronic form can be permitted

where the receiving party consents to a communication of that kind.   The section provides as follows:

16       Consent to use of electronic technology

(1)       Nothing in this Part requires a person to use, provide, or accept  information  in  an  electronic  form  without  that person's consent.

(2)      For the purposes of this Part,—

(a)      a person may consent to use, provide, or accept information in an electronic form subject to conditions regarding the form of the information or the means by which the information is produced, sent, received, processed, stored, or displayed:

(b)      consent may be inferred from a person's conduct. (3)          Subsections (1) and (2)(a) are for the avoidance of doubt.

[31]     The  section  makes  it  clear  that  it  does  not  require  a  person  to  accept information in electronic form without that person’s consent.  Mr Hilario pointed out that consent may be inferred from a person’s conduct under s 16(2)(b).   He also submitted that the terms of the order which Judge Christiansen made at paragraph [63] of the judgment to which I have made earlier reference, meant that the applicant was “deemed” to have consented.  He said that the fact that the applicant received an email and did not object to it at the time provided evidence of consent.

[32]     I do not agree, in the first place, that there is any room for adopting the approach that the applicant is to be “deemed” to have consented because Judge Christiansen made an order to the effect which I have earlier set out.  I can see no ground for supposing that the legislature intended that the legal construct of a “deemed”  consent  would  satisfy  the  statutory  requirements  when  the  Act  itself makes no reference to such an outcome.   For similar reasons to those that I gave when considering whether the ratepayer had relevantly agreed to receive communications  and  electronic  means  under  s 136  of  the  Act,  I  reach  the corresponding conclusion that there is substantial doubt whether there was any explicit or inferred agreement which would satisfy the requirements of the ETA.

[33]     As well, while the Judge said that he made the order in the presence of an officer of the company, it was not made by consent.   In parts of the respondent’s submissions, there was reference to rule 1.9 HCR.  For the avoidance of doubt I hold that the rule does not assist Auckland Council to argue for validity of a rates invoice under the Act.  That is because the rule in question is an absolving provision that has effect in circumstances where there has been some procedural defect with Court proceedings.  While it was not entirely clear to me whether the respondent sought to invoke that provision with regard to the service of the invoice, I should indicate that my view is that the role must be confined to questions arising in the course of Court proceedings and cannot be invoked to salvage the position of local authorities where they experience difficulties in complying with the statutory requirements that attach to the delivery of rates invoices which on the face of it have nothing to do with Court proceedings.

Conclusion

[34]     For the reasons I have given, there was in this case no delivery of a rates invoice to the ratepayer which complied with the requirements of s 136 of the Act. For that reason, there is a substantial dispute whether the applicant is in fact indebted to the respondent.   The application can be decided on that ground alone without considering the alternative grounds which the applicant has put forward.  There will be an order that the statutory demand is set aside.  The parties should confer on the question of costs and, if they are unable to agree, are to provide memoranda not exceeding five pages on each side within 10 working days of the date of this judgment.

[35]     Before I leave this matter I should observe that the issue of whether service of an invoice by post can fail in circumstances where New Zealand Post reports that it has not been able to deliver the mail to an address which is otherwise compliant with the provisions of s 136 of the Act did not arise for consideration in this case.  I am not required to rule on the question of whether that contingency will defeat service. I confine myself to noting that it is at least arguable that one of the options under s 136 requires the Auckland Council to  do no more than arrange for the invoice to be “sent” by post.   If such a line of reasoning were to be adopted, the

rating authority could argue that it had satisfied the requirements of this section by posting the document and that it was not concerned with the question of whether it was actually delivered.  When considering those arguments, there may be room for the view that, given the fact that the postal address is one which by definition has been provided by the ratepayer, any difficulties in achieving delivery by post at the address so supplied can hardly be laid at the feet of the local authority.   However

those matters are for another day.

J.P. Doogue

Associate Judge