GLW Group Limited v Lepionka & Company Investments Limited
[2015] NZHC 3339
•21 December 2015
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
CIV-2015-441-99 [2015] NZHC 3339
UNDER the Companies Act 1993 IN THE MATTER OF
an originating application pursuant to
s 290 of the Companies Act 1993 to set aside a statutory demand
BETWEEN
GLW GROUP LIMITED Plaintiff
AND
LEPIONKA & COMPANY INVESTMENTS LIMITED Defendant
Hearing: 11 December 2015 Counsel:
M Lawson for the Plaintiff
C Reid for the DefendantJudgment:
21 December 2015
JUDGMENT OF ASSOCIATE JUDGE SMITH
[1] On 29 September 2015 the defendant (Lepionka) served a statutory demand on the plaintiff (GLW), claiming payment of an alleged debt of $2,712,576.39. GLW has filed an application under s 290 of the Companies Act 1993 (the Act) to set aside the statutory demand.
[2] There is an issue as to whether the application to set aside the statutory demand was properly served within the 10 working days from service which is allowed for filing and service of such applications under s 290(2) of the Act (the service period). Whether GLW’s application was served within the service period is important, because the Act provides that no extension of time may be given for
making or serving an application to have a statutory demand set aside.1
1 Section 290(3) of the Act.
GLW GROUP LIMITED v LEPIONKA & COMPANY INVESTMENTS LIMITED [2015] NZHC 3339 [21
December 2015]
[3] Lepionka says that the setting aside application was not served in time. It acknowledges that a copy of the application to set aside and the supporting affidavit of Mr Paterson was delivered to Lepionka’s address for service on 13 October 2015, which was the last day for serving the notice. Lepionka’s issue is over what was served: it is common ground that what GLW delivered to Lepionka’s address for service on 13 October 2015 was an undated copy of the application, with no date of hearing shown, and with no “CIV number” (the number allocated to a new civil proceeding by the court registry staff when it is filed). Lepionka’s contention is that the document which was served on 13 October 2015 was not in fact service of an application which complied with s 290(2) of the Act.
[4] It is also common ground that GLW’s solicitors did send a copy of the
application, complete with CIV number and hearing date, to Lepionka’s solicitors on
21 October 2015. Lepionka accepts that what was sent to it by email on 21 October
2015 was a copy of what would have been a complying application to set aside under s 290(2) of the Act, but says that by then it was too late: service of a valid application had to be effected by 13 October 2015 and GLW failed to do that. Lepionka further notes that even service of the completed copy of the application on 21 October 2015 was defective, because its solicitors had not agreed to accept service by email, and the various ways of effecting service on a company under the Act2 do not include service by email (at least in circumstances where the company has not agreed to accept service by email).3
[5] GLW counters that it was not possible for it to serve a copy of its application with a date of hearing, within the service period, because the court registrar did not allocate any date of hearing for the application until some days after it was filed. That did not happen until on or very shortly before 21 October 2015, and GLW’s solicitors immediately then emailed a copy of the application, with the date of hearing completed and stamped with the word “duplicate”, to Lepionka’s solicitors.
[6] The “duplicate” stamp had been applied to the service copy of the application
by the Court registrar, who had also handwritten on the document the “CIV” number
2 As prescribed by s 387 of the Act.
3 A permissible means of service under s 387(1)(e) of the Act.
“2015-441-99”. The document was still undated, but the hearing date 12 November
2015 at 10am was now handwritten in the appropriate place in the body of the application.
[7] When the setting aside application was called on 12 November 2015, I directed that the question of whether service of the application to set aside the statutory demand had been properly served within the service period should be the subject of a preliminary hearing. If GLW did not effect service of the application within the service period that would be fatal to the application to set aside, and there would be no need to consider the extensive evidence which GLW had filed in support of its contention that the statutory demand should be set aside on the basis of the existence of a genuine and substantial dispute over the claimed debt. Counsel filed memoranda setting out their submissions on the service point, and I heard oral argument on it on 11 December 2015.
Relevant statutory provisions
[8] Section 290 of the Act relevantly provides:
290 Court may set aside statutory demand
(1) The court may, on the application of the company, set aside a statutory demand.
(2) The application must be—
(a) made within 10 working days of the date of service of the demand; and
(b) served on the creditor within 10 working days of the date of service of the demand.
(3) No extension of time may be given for making or serving an application to have a statutory demand set aside, but, at the hearing of the application, the court may extend the time for compliance with the 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.
…
[9] Applications to set aside statutory demands are commenced as originating applications under Pt 19 of the High Court Rules.4 A proceeding that may be commenced by originating application is commenced “when the originating application is filed in the proper registry of the court …”.5
[10] Certain provisions in the High Court Rules relating to interlocutory applications are deemed to apply to proceedings which are commenced by way of originating application. These rules include r 7.20 (affidavit to be filed with application), r 7.21 (which provides for filing by post), r 7.22 (relating to service of the application and supporting affidavit), and r 7.24 (prescribing time limits for the respondent to file any notice of opposition to the application).
Lepionka’s submissions
[11] For Lepionka, Mr Reid submits that the originating application purportedly served on 13 October 2015 is a nullity. He refers to the absence of any CIV number or hearing date on the document served on 13 October. In its notice of opposition Lepionka had also identified as a defect the failure of GLW’s solicitor to sign the originating application, but that contention was abandoned by Mr Reid at the hearing.
[12] Mr Reid relies on two decisions of the High Court. The first of these authorities is the decision or Associate Judge Gendall (as he then was) in Hyro Australia Pty Ltd v The Commissioner of Inland Revenue.6 In Hyro, the application to set aside the statutory demand was filed in court within the service period. The contention was that the application had not been served within the service period. As
the Associate Judge put it:
4 Rule 19.2(c) of the High Court Rules.
5 Rule 19.7 of the High Court Rules.
6 Hyro Australia Pty Ltd v The Commissioner of Inland Revenue HC Wellington CIV-2011-485-
1953, 16 December 2011.
At best, the respondent received an unendorsed copy of the application [within the service period] but an endorsed copy of the application was only received by the respondent by email [after the service period].
Service of the application, thus was probably not carried out in a strict sense within the methods expressly provided for in s 287 of the Act.
[Service of the application was required] by 28 September 2011 and the applicant seems to acknowledge that in a technical sense this did not occur.
[13] What saved the applicant in Hyro was that when the Commissioner received the unendorsed copy of the application (within the service period), an officer of the Inland Revenue Department sent an email acknowledging “service” of the application to set aside and the supporting affidavit. The officer said: “We look forward to receipt of details regarding CIV Number and hearing date in due course.”
[14] The Associate Judge concluded that, in light of that acknowledgement, the applicant was entitled to assume that service of the demand had been properly completed “in accordance with an agreement made with the company”. His Honour considered that any other conclusion would have been entirely unjust:7 having received the email from the Inland Revenue Department officer, the applicant was entitled to conclude that the document had been sufficiently served, even though the application itself had not been filed at that time. His Honour noted that the applicant had been led to believe all was in order, and any ability for the applicant to remedy any service deficiencies evaporated as time elapsed.
[15] Associate Judge Gendall concluded that, while the position was not entirely clear, the application to set aside the statutory demand was filed and served in time.
[16] The second authority relied upon by Mr Reid is the decision of Dobson J in Daisy Ltd v Wellington Distributors Ltd.8 Daisy was similar in some respects to Hyro, in that the copy of the application to set aside the statutory demand which was served on the respondent was not endorsed with any CIV number, and it did not contain any date of hearing. However, those deficiencies were rectified later the same day, when the applicant provided details of the CIV number and date of
hearing to the respondent.
[17] Dobson J referred to Hyro as authority for the proposition that service had not been effected (on the facts in Hyro) in compliance with the statutory requirements.9
His Honour noted that, without the acknowledgement of service provided by the
Inland Revenue Department officer in Hyro, the service would have been inadequate.
[18] What determined the matter in favour of the applicant in Daisy was that the respondent did receive all of the requisite details before the expiry of the service period.10 His Honour also noted that the respondent was not prejudiced in any respect in responding to the application to set aside the statutory demand by virtue of having received the requisite information in two separate communications, rather than one. His Honour considered that the two separate communications met the statutory purpose of enforcing a strict time limit for the making of the application.
[19] Mr Reid also points to the provisions of r 7.24 of the High Court Rules, dealing with the period within which a respondent is required to file his or her notice of opposition to an application. Mr Reid submits that if a respondent is served with an application which has no date of hearing on it, the respondent may be prejudiced in its ability to comply with the time period within which a notice of opposition must be filed.
[20] Mr Reid also refers to prejudice allegedly suffered by Lepionka, in that it proceeded immediately to file and serve a liquidation claim against GLW on the basis that GLW’s application to set aside the statutory demand had not been served in time and was therefore a nullity. The liquidation claim was commenced before Lepionka received notice of the CIV number and date of hearing for the setting aside application.
GLW’s submissions
[21] Mr Lawson accepts that the time limit for filing and serving an application to set aside a statutory demand is strict. However he submits that GLW did meet that strict time limit. He makes two substantial points in support.
[22] First, Mr Lawson identifies the relevant issue as being whether what was clearly served within the service period was an “application” to set aside the statutory demand, within the meaning of s 290 of the Act and the relevant provisions of the High Court Rules. Mr Lawson submits that the effect of r 19.7(1) is that the “application” is the document received by the court registry staff, in which the applicant applies for the order setting aside the statutory demand. At that point in time the application is deemed to have been commenced (r 19.7(1)), and it immediately then qualifies as an “application” for the purposes of the Rules. There is no requirement that the document must have endorsed on it either a CIV number or a date of hearing for it to qualify as an “application” made under the Rules.
[23] Mr Lawson develops his argument by submitting that r 7.22 expressly contemplates that an applicant may validly serve a copy of an application, and at some later time notify the respondent of the hearing date for the application. He submits that that is precisely what has occurred here – GLW was unable to notify any date of hearing to Lepionka within the service period, because no such date of hearing had been provided by the Court. Once GLW had the hearing date from the Court, it complied with r 7.22(2) by promptly notifying Lepionka of the hearing date.
[24] Mr Lawson submits that there might be any number of reasons why the endorsements on the service copy of an application might be delayed. For instance, the next available date might not be known to the registry staff at the date of filing. Mr Lawson submits that it would be an absurd result if an application was deemed not to be an application until the duplicate document or hearing date was released by the Court, endorsed with the CIV number and the date of hearing.
[25] Neither Mr Reid nor Mr Lawson was able to identify any Rule dealing with the significance of the allocation of a CIV number to a file, and the endorsement of that number on the service copy of the application.
Discussion and conclusions
[26] I think there is force in Mr Lawson’s submission that r 7.22 expressly contemplates the situation where an application may be validly served notwithstanding that it does not show any date of hearing.
[27] Rule 7.22 provides:
7.22 Service of application and supporting affidavit
(1) After filing an application and any affidavit in support of it, the applicant must promptly serve a copy of the application and affidavit on every party.
(2) After the applicant is notified of the hearing date for the application, the applicant must promptly notify every respondent of the hearing date.
….
[28] If service in accordance with r 7.22(1) required that a date of hearing be inserted in the service copy of the application, r 7.22(2) (providing for the prompt notification of the date of hearing) would appear to be redundant.
[29] If that is right, the absence of a date of hearing on the service copy of the application does not mean that the document cannot be served under the Rules. And section 290(2) and (3) of the Act is concerned with when service of the application is effected, not with when the respondent is notified of a date of hearing.
[30] Mr Reid refers to r 7.24 of the Rules, under which a respondent who intends to oppose an application is required to file and serve a notice of opposition within 10 working days after being served with the application or, if the date of hearing is within that period, three working days before the date of hearing. He submits that the absence of a date of hearing on the service copy of the application (or at least provided with it) deprives the respondent of the ability to calculate when notice of opposition is required to be filed. That is clearly not the case in respect of the 10 working day period prescribed in the rule, which can be calculate easily enough without reference to the date of hearing. And in my view any theoretical difficulty which might arise in cases where a hearing is scheduled within 3 working days after
service are not sufficient to trump the implication which I think is created by r 7.22, that service of an application may be validly effected before any date of hearing is notified to the respondent. If no hearing date is advised to the respondent at the time of service, the respondent will normally be entitled to proceed on the basis that he or she has 10 working days to file a notice of opposition, and in the event of a hearing being scheduled within that period it is difficult to imagine circumstances where the Court would not allow the respondent some leeway on the 3 working day period, if the respondent would otherwise be prejudiced by the applicant’s lateness in providing notification of the hearing date.
[31] On my reading of the Rules, and for the moment putting on one side the decisions in Hyro and Daisy, the absence of a date of hearing from the document served on Lepionka’s solicitors on 13 October 2015 did not mean that the application was not sufficiently served on that date. The issue (on the date of hearing point) is whether that reading of the Rules should be modified in light of the decisions in Hyro and Daisy.
[32] The first thing to note is that neither Judge referred at all to r 7.22, or the argument advanced in this case by Mr Lawson on when a document becomes an “application”. The cases contain no discussion of the question of whether notification of a date of hearing may legitimately be given after service has been effected. In Hyro, the Associate Judge appears to have been concerned with the effect of s 387 of the Act (which I apprehend is not relevant to any issue presently before me), and then noted that “the applicant seems to acknowledge” that “in a technical sense” service did not occur. His Honour said that service “thus was probably not carried out in a strict sense within the methods expressly provided for in s 387 Companies Act 1993.” In the event, the Associate Judge appears to have found in the applicant’s favour on the basis of the acknowledgment of service provided by the officer of the Inland Revenue Department, but the Associate Judge noted at [30] of the judgment that “the position nevertheless is not entirely clear …”.
[33] Hyro then was essentially decided on different grounds, which appear to have been influenced by something akin to an estoppel arising out of the acknowledgement of service provided by the officer of the Department. It would
have been quite unjust for the Commissioner to have succeeded on the service point given the acknowledgement which one of her officers had provided.
[34] I accept that the Associate Judge does appear to have proceeded on the assumption that failure to provide the notice of hearing date in the service copy of the application was probably enough to render the service deficient. But the judgment is not particularly clear on that point, and as I have said, it contains no discussion of r 7.22 and the argument run in this case that subsequent notification of a hearing date does not render earlier service of an application with no such date deficient. In those circumstances, I do not consider myself bound to apply Hyro in Lepionka’s favour, as Mr Reid has invited me to do.
[35] Similarly, the judgment of Dobson J in Daisy does not refer at all to r 7.22 and the argument now being advanced by GLW. Dobson J did note that the copy of the application served on the respondent was incomplete in that it was not endorsed with the CIV number allocated to the proceedings by the court registry, or the date on which the application would be called in court. But to the extent those matters may have been deficiencies they were rectified within the service period.
[36] Dobson J appears to have proceeded on the basis that it was held in Hyro that service of the document minus the CIV number and date of hearing did not constitute compliance with the statutory requirements.11 His Honour noted that, without the acknowledgement of service provided by the Inland Revenue Department officer in Hyro, service as effected within time would have been inadequate.12
[37] As I read the judgment of Dobson J in Daisy, his Honour was able to decide the case on a different point from that which is raised squarely in this case. Understandably in those circumstances, there is no significant discussion in the judgment about the correctness or otherwise of the view expressed by the Associate Judge in Hyro on the need for the service copy to contain a date of hearing
for service of the setting aside application to be effective. In those circumstances, I
11 Daisy Ltd v Wellington Distributors Ltd, above n 8, at [8].
12 At [8].
do not consider that Daisy is either binding or authoritative on the particular issue which arises in this case.
[38] I conclude that the absence of a date of hearing on the service copy of the setting aside application in this case did not, by itself, render the service defective. To the extent that the learned Judges in Hyro and Daisy may have taken a different view, I respectfully disagree.
[39] The other deficiency alleged by Lepionka is the absence of a CIV number on the service copy of the application. Neither counsel could refer me to any provision in the High Court Rules which requires the insertion of such a number on the service copy of a document before the application can be regarded as properly served. The prescribed form G1 In the High Court Rules, which prescribes the general heading to be used for documents filed in a proceeding, does require that a proceeding number be inserted, but apart from that the practice of inserting such numbers, and the word “duplicate”, on the service copy of an application appears to be an administrative step not governed by any express rule.
[40] Mr Lawson points to the fact that what his client was obliged to serve under s 290 of the Act was “the application”. He submits that the “application” came into existence as soon as it was passed over the counter at the Court office with the appropriate filing fee. He submits that that is the point at which GLW’s proceeding is deemed by r 19.7 to have commenced, not when a CIV number was allocated to it at some later point. What was passed over the counter at the Court office was in fact identical to what was later served on Lepionka.
[41] I accept that it is probably not an infrequent situation for there to be some delay before a CIV number is allocated to a proceeding. For example, in cases where the application is filed by post under r 7.20, it seems likely that there will be occasions where no CIV number will be allocated immediately. But whatever might be the case in practice, I think Mr Lawson is right in submitting that the effect of r
19.1 is that for some period, whether it be minutes or days, there will usually be in existence a document which can properly be called an originating application, which does not bear any CIV number.
[42] On the other hand, there is a certain practical benefit in applications being endorsed with a proceeding number before they are served on respondents. Without that number, a respondent receiving an application has no guarantee that the application has actually been filed in court. It might perhaps be argued that a respondent should not be put to the expense of responding to something which appears to be a court application when in fact nothing may have been filed.
[43] But I think that is a remote scenario, which if it arose could be met by other remedies such as costs awards or (if no proceeding has been filed at all) damages for any deceit or negligence which may have caused the respondent to incur unnecessary costs. I think the absence of a proceeding number on the service copy of an application will normally best be dealt with not by the application of any “blanket rule” covering that situation, but by the application of the relevant remedial provisions in the High Court Rules in a way which is appropriate to the circumstances of the particular case.
[44] In this case, I think any irregularity in the form of the application served by GLW is capable of being “cured”, and should be cured, by the application of r 1.5 of the High Court Rules.
[45] Rule 1.5 governs non-compliance with the Rules. It provides:
1.5 Non-compliance with rules
(1) A failure to comply with the requirements of these rules—
(a) must be treated as an irregularity; and
(b) does not nullify—
(i) the proceeding; or
(ii) any step taken in the proceeding; or
(iii) any document, judgment, or order in the proceeding.
(2) Subject to subclauses (3) and (4), the court may, on the ground that there has been a failure to which subclause (1) applies, and on any terms as to costs or otherwise that it thinks just,—
(a) set aside, either wholly or in part,—
(i) the proceeding in which the failure occurred;
or
(ii) any step taken in the proceeding in which the failure occurred; or
(iii) any document, judgment, or order in the proceeding in which the failure occurred; or
(b) exercise its powers under these rules to allow any amendments to be made and to make any order dealing with the proceeding generally as it thinks just.
(3) The court must not wholly set aside any proceeding or the originating process by which the proceeding was begun on the ground that the proceeding was required by the rules to be begun by an originating process other than the one employed.
(4) The court must not set aside any proceeding or any step taken in a proceeding or any document, judgment, or order in any proceeding on the ground of a failure to which subclause (1) applies on the application of a party unless the application is made within a reasonable time and before the party applying has taken any fresh step after becoming aware of the irregularity.
[46] The powers and discretion of the Court to fix any irregularities under r 1.5 are clearly very wide, and I think the originating application in question here was a
‘document’ within the meaning of r 1.5. Also, I think the service of the application was a “step taken in the proceeding” for the purposes of rule.
[47] In my view, any irregularity in the document created by the absence of a proceeding number has not prejudiced Lepionka to an extent that the irregularity cannot be cured by using the powers contained in r 1.5(2)(b). The fact that Lepionka elected to proceed immediately with the filing of a liquidation claim (in the belief that the setting aside application was a nullity) was a choice made by Lepionka, and cannot affect the above conclusion.
[48] While I appreciate that the requirements of s 290 of the Act are strict, in this case Lepionka had full notice of the fact and substance of the setting aside application, within the service period. And while the time period imposed by s 290
of the Act may be strict, that does not necessarily mean that the remedial provisions of r 1.5 should not be available in an appropriate case to cure a technical irregularity, where the respondent has in fact had the full substance of the application, signed on behalf of the applicant, within the service period.
[49] I accordingly make an order under r 1.5(2)(b) directing that service of the form of originating application that was served on Lepionka on 13 October 2015 was sufficient service of the originating application under the High Court Rules. The effect of that order is that the application to set aside the statutory demand was sufficiently served within the service period.
[50] A teleconference is to be scheduled on the first practicable date after
8 February 2016 for the purpose of giving directions for the future conduct of the proceeding. In the meantime, costs are reserved.
[51] Before leaving the matter I record that, following the hearing, Mr Reid filed a memorandum in which he sought to provide further information as regards the filing of the originating application and the delay in the allocation of the hearing date. Mr Lawson objected to the filing of this memorandum, on the grounds that it set out matters of evidence, and did not comply with the practice note relating to the making
of submissions after a hearing has concluded.13 I agree with Mr Lawson on both
points. What Lepionka sought to produce was in fact evidence which could have been provided at the hearing but was not. Nor would that evidence have affected this decision, given that I have found that valid service can be effected in advance of the notification of a hearing date.
Associate Judge Smith
Solicitors:
Lawson Robinson, Napier for the plaintiff
Gibson Sheat, Wellington for the defendant
13 Practice Note relating to further submissions of counsel, [1968] NZLR 608.
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