Golden Land Civil Ltd v Baseline Survey Ltd
[2021] NZHC 1373
•9 June 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-404
[2021] NZHC 1373
UNDER the Companies Act 1993, section 290 BETWEEN
GOLDEN LAND CIVIL LIMITED
Applicant
AND
BASELINE SURVEY LIMITED
Respondent
Hearing: 9 June 2021 Appearances:
Helen McDermott for the Applicant L X Huang for the Respondent
Judgment:
9 June 2021
ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL
Solicitors:
Righteous Law, Auckland, for the Applicant
McVeagh Fleming (J D Turner/L X Huang), Auckland, for the Respondent
GOLDEN LAND CIVIL LIMITED v BASELINE SURVEY LIMITED [2021] NZHC 1373 [9 June 2021]
[1] Golden Land Civil Ltd applies to set aside a statutory demand of Baseline Survey Ltd dated 22 February 2021 for $13,269.89. Golden Land Civil Ltd says that there is a substantial dispute whether the debt is owing.
[2] There are two parts to the application: substantive and procedural. The substantive aspect is whether Golden Land Civil has shown that the debt is subject to a substantial dispute. The procedural aspect goes to whether Golden Land Civil correctly served its application to set aside the statutory demand in time under s 290(2) of the Companies Act 1993. The hearing focused more on the substantive aspect, which I regard as more important. I will deal with that first.
[3] Baseline Survey Ltd carries on business as a civil construction surveyor. Golden Land Civil Ltd is a civil contractor. The amount in the statutory demand,
$13,269.89, is the sum of two invoices: 1326 dated 31 December 2020, and 1333 dated 25 January 2021 for surveying work by Baseline Survey Ltd for Golden Land Civil. The 1326 invoice is for $4,237.20, and the 1333 invoice is for $9,032.69. Golden Land Civil has already paid Baseline Survey $6,726.92. The balance outstanding is
$6,542.97. Golden Land Civil says that it has paid that amount into its solicitors’ trust account to demonstrate its solvency. Both invoices were for work at a site at 824 Great South Road. Going back to August 2020 Baseline Survey had done work on sites for Golden Land Civil. Invoices issued between August and November 2020 have all been paid, although Baseline alleges that they were all paid late. Under Baseline Survey’s terms of trade, invoices were payable on the 20th of the following month. Baseline Survey’s invoices were not payment claims under the Construction Contracts Act 2002, but they are itemised, giving a description of the work done each day, the hours spent on the job, the unit price and a charge per day, all added up to give a total charge for that month. It has invoiced that way since the first invoice issued in August 2020. The charges in the two invoices in this case follow the pattern of charging in the earlier invoices.
[4] Golden Land Civil’s project engineer, Mr Kanniyan, says that he had queries about charges for “office work” and “travel” because supporting details for those items
were not given in the invoices and time sheets have not been provided. Attached to his affidavit is a copy of an email where he raised queries. There are also internal emails of Golden Land in January 2020 asserting that Baseline Survey will have to justify their charges. Mr Kanniyan says that the respondent cannot expect the company to pay for the invoices without knowing full details of the work. Golden Land’s assertion of a dispute does not get any higher than that.
[5] The affidavit in opposition by Baseline Survey’s general manager, Ms Ruoyang Shi, points out that the charges for travel and office work are consistent with charges in earlier invoices. Throughout, travel has been charged at $1.00 plus GST per kilometre. The invoices show the dates of travel and the distances claimed for. Golden Land Civil has not shown any reason to dispute those travel charges.
[6] As for office work, the surveyor who worked on the job has prepared a schedule describing the actual work claimed as “office work”. As an example, I cite one entry from the schedule:
30 November 2020 – office work: check on my computer from stake out data on site comparing to the design for the heights and position within the tolerance.
Golden Land Civil complains about not having enough information to know whether the office work charges are justified, but in my judgment that narration is sufficient to inform it.
[7] Baseline Survey Ltd also points out that in an email of 25 January 2021, Mr Kanniyan agreed that the December invoice would be paid. He agreed after Baseline Survey said that it would not hand over plans that had been prepared for Golden Land Civil. Although this was not relied on in submissions, it appears that Baseline Survey had a lien over its plans and was entitled to hold onto them until it was paid. In the event, Baseline did hand over the plans but Golden Land Civil still did not pay.
[8] In applications under s 290(4)(a) of the Companies Act to set aside a statutory demand on the ground of a substantial dispute, the courts follow these principles:
(a)The onus is on the applicant to show there is arguably a genuine and substantial dispute as to the existence of the debt. The task for the court is not to resolve the dispute, but to determine whether there is a substantial dispute that the debt is due.
(b)Merely asserting a dispute is not sufficient. Material, short of proof, is required to support the claim that the debt is disputed.
(c)If such material is available, the dispute should normally be resolved other than by proceedings in the companies court.
(d)It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise unless such evidence is contrary to the available documents or earlier statements made by the parties.
The Court of Appeal applied these principles in Confident Trustee Ltd v Garden and Trees Ltd.1
[9] Golden Land Civil does not say that Baseline Survey delayed in carrying out the work, nor does it say that the work was not carried out, and it does not say that the work was defective. At its highest, it has queried charges in the invoices and said it will not pay until it is satisfied with them. That is a stalling device. Golden Land is in the same position as someone presented with a payment claim under the Construction Contracts Act. Typically, payment claims give itemised breakdowns of work carried out and the charges for each item. The invoices here have been prepared in a similar way. If Golden Land Civil had a genuine reason for querying any of those charges, it should be able to go through those invoices and mark off the ones it takes issue with. It has not done that. It has simply made general allegations that it is not satisfied it should pay. A dispute is asserted, without putting before the court proper material to show that there is a reason to doubt any of the charges for which it has been invoiced. If there were good reason to doubt the charges, Golden Land Civil would
1 Confident Trustee Ltd v Garden and Trees Ltd [2017] NZCA 578.
have put before the court more information to show that any of the items were not properly payable. I am satisfied that the debt is not subject to a substantial dispute.
[10] That is enough to deal with the case. The procedural aspects are less important. They are a secondary issue.
[11] Baseline Survey took a technical point about the way in which Golden Land Civil had served its application under s 290(2) of the Companies Act. It says that Golden Land Civil did not follow the rules for serving applications to set aside statutory demands. Accordingly, the application fails because it was not properly served within time.
[12] In the statutory demand, Baseline Survey gave the address of its lawyers as the place where payment could be made, and added these words:
… which is also the address for service of BSL for the purposes of this notice.
The demand did not specify any DX box, fax number, or email address for the lawyers. Baseline Survey served the statutory demand on Golden Land Civil’s registered office on 24 February 2021. The last day for Golden Land Civil to apply to set aside the statutory demand was 10 March 2021. By then it also had to serve Baseline Survey Ltd. The case law is clear that service on the creditor issuing the statutory demand must be made no later than the tenth working day after service of the demand.
[13] Golden Land Civil Ltd filed its application in court on 10 March 2021. On the same day its lawyers emailed a copy of the application and the affidavit in support to the lawyers for Baseline Survey, but the lawyers did not physically leave the application and the affidavit at the registered office of Baseline Survey or at the office of the lawyers. Baseline Survey says that that service was defective, because it did not follow s 387 of the Companies Act. That section sets out the ways in which documents in legal proceedings may be served on a company. Section 387(2) says that those are the only methods by which a document in legal proceeding may be served on a company. None of the methods in s 387(1) allows service by email to lawyers acting for the company. Baseline Survey also says that the documents its lawyers received were unstamped copies of documents filed in court and the
documents did not give the date when the case would be called in court. Service by email is not an authorised mode of service of an originating document in a proceeding.
[14] In response, Golden Land Civil says that Baseline Survey waived any irregularities by filing a notice of opposition. It says further that if Baseline Survey objected to the mode of service it ought to have filed a protest to jurisdiction under r 5.49 of the High Court Rules.
[15] Baseline Survey has referred to authorities which have held that service of applications under s 290 of the Companies Act must be served strictly in accordance with s 387 of the Companies Act. Master Lang’s decision in Arzan Investments Ltd v Beresford Apartments Ltd is important.2 There, documents had been served by fax, and Master Lang ruled that that did not meet the requirements of s 387. For a document to be left at the registered office of the company meant that it had to be physically left and sending by fax did not meet the statutory requirement.
[16] Master Lang’s approach comes from an earlier decision, Livi Investments Ltd v Butler Gilpat Ltd.3 Master Kennedy-Grant reviewed earlier decisions on service of applications to set aside statutory demands, some under older legislation, not under the Companies Act 1993. In some of those earlier decisions, Judges had exercised a discretionary power under the High Court Rules to regularise irregular service.4 The equivalent power under the current High Court Rules is r 1.5:
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
2 Arzan Investments Ltd v Beresford Apartments Ltd (2003) 16 PRNZ 825 (HC).
3 Livi Investments Ltd v Butler Gilpat Ltd (1998) 11 PRNZ 680 (HC).
4 Kirton v Prospecdev Holdings Ltd (1990) 2 PRNZ 412 (HC); and Timbalok NZ Ltd v Sky-Hi Roofing Ltd (1996) 10 PRNZ 271 (HC).
(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.
[17] In Livi Investments Ltd,5 Master Kennedy-Grant distinguished earlier decisions by saying that the legislation had changed. A rule (now r 6.12 of the High Court Rules) directed that documents in proceedings in this court to be served on New Zealand companies were to be served in accordance with s 387 of the Companies Act. By virtue of that provision the court no longer had a discretion to regularise irregular service.
[18] There has, however, been a change since Livi Investments Ltd. Rule 19.12A(2) has been inserted in the High Court Rules. Under that rule, an originating application under s 290 of the Companies Act may be served in accordance with r 6.5 at the address shown in the statutory demand as the creditor’s address for service and the address for payment. That rule is relevant here because the statutory demand specified an address for service and the rule allows for service by leaving a document at that
5 Above, n 3.
address. In this case the statutory demand specified an address for service. Its purpose was to state where an application under s 290 could be served.
[19] Rule 19.12A has provided an alternative mode of service outside r 6.12 of the High Court Rules and s 387 of the Companies Act. Master-Kennedy Grant’s reasoning in Livi Investments Ltd does not apply when the High Court Rules have a separate rule, allowing for an alternative method of service. Because r 19.12A stands on its own as a method of service, it is subject to other general rules, including the power to give relief for irregularities under r 1.5 of the High Court Rules.
[20] This is an appropriate case to give relief under r 1.5, notwithstanding non- compliance with r 19.12A because the documents were not physically left at the address for service in the demand:
(a)The time for filing and serving applications under s 290 is tight. Timing is critical. If the application is not served in time, it will be invalid.
(b)Against that, the mode of service is not so critical to validity. So long as the application comes to the notice of the creditor, there can be little injustice or prejudice in any irregularity in service.
(c)Email is commonly used as communication between lawyers. Indeed, Golden Land Civil and Baseline Survey had communicated by email in this case.
(d)There was the inconvenience of having to physically leave documents at Baseline Survey’s lawyers’ office. Golden Land Civil’s lawyers were in Ellerslie; Baseline Survey’s lawyers were in Albany. Anyone taking documents from Ellerslie to Albany would have to deal with Auckland’s congested motorway system.
[21] The documents did not specify the date when the case would be called in court. That is also an irregularity. It is not always possible to obtain a call date as soon as the application is filed in court. If Golden Land Civil’s lawyers had waited to obtain
a first call date, they risked not being able to serve on time. Baseline Survey was informed of the date when the case was to be called and was able to protect its position. Accordingly, I waive any irregularities in the mode of service or in the application being incomplete. Accordingly the application was properly served within 10 working days under s 290(2) of the Companies Act.
[22] Baseline Survey followed the correct procedure by raising the issue as to service in its notice of opposition. An appearance to protest jurisdiction would not have been the right way to raise that issue. The court has jurisdiction under s 290 of the Companies Act to hear applications to set aside statutory demands, but the merits of the application (including whether it has been properly served) do not go to jurisdiction. Accordingly a protest to jurisdiction would not have been appropriate.
[23] I record also that before they issued the statutory demand Baseline Survey’s lawyers wrote to Golden Land Civil making demand. They did not issue the statutory demand for a further five days, when there had been no response to its letter. Golden Land Civil criticised Baseline Survey for the issue of the statutory demand when Mr Kanniyan had challenged the charges. Given the lawyers’ letter and the absence of a response from Golden Land Civil, I do not consider that Baseline Survey can be criticised for the issue of the statutory demand in this case.
[24] The upshot is that I dismiss the application to set aside the statutory demand. Under s 291(1)(a) of the Companies Act I order Golden Land Civil Ltd to pay Baseline Survey Ltd $6,542.97 by 25 June 2021. If payment is not made by that date, Baseline Survey Ltd may begin a proceeding to put Golden Land Civil into liquidation.
[25] As Baseline Survey Ltd has succeeded, it is entitled to costs under category 2 band B. I trust that counsel will be able to agree as to costs, but if they cannot memoranda may be filed and I shall decide costs on the papers.
…………………………………….
Associate Judge R M Bell
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