Holmes v Canterbury Property Services Limited

[2023] NZHC 732

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2022-409-588

[2023] NZHC 732

IN THE MATTER

of an application to liquidate a company

BETWEEN

KEITH HOLMES

Plaintiff

AND

CANTERBURY PROPERTY SERVICES LIMITED

First Defendant

MATTHEW JONES

Second Defendant

Hearing:

(On the papers)

Counsel:

S D Campbell and M L Rhodes for Plaintiff

S Caradus and A J Hopping for First and Second Defendants

Judgment:

4 April 2023

JUDGMENT OF ASSOCIATE JUDGE LESTER

HOLMES v CANTERBURY PROPERTY SERVICES LIMITED [2023] NZHC 732 [4 April 2023]

[1]    This proceeding involves an application by Mr Holmes to liquidate Canterbury Property Services Limited (CPSL). The application is made on the just and equitable ground on the basis that his relationship with his  co-shareholder and co-director,   Mr Jones (the second defendant), has broken down. Mr Jones was not named as second defendant when the proceeding was issued. Given that the relief sought was that CPSL be placed in liquidation and that Mr Jones is a 50 per cent shareholder,  Mr Jones had an interest in the proceeding.

[2]    Mr Jones is represented by Duncan Cotterill which had acted on his behalf prior to the issuing of proceedings. There was regular correspondence between counsel for Mr Holmes and for Mr Jones.

[3]    In November 2022, Mr Holmes’ lawyers informed Duncan Cotterill of this proceeding and asked if  the firm was authorised to accept service on behalf of      Mr Jones. Despite  a  follow-up,  no  response  to  that  enquiry  was  received  by  Mr Holmes’ solicitors.

[4]    The process server engaged by Mr Holmes’ solicitors was unable to achieve personal service on Mr Jones (again, Mr Jones was not named as a defendant at this time). On 1 February 2023, Mr Holmes’ solicitors tried a final time to see if Duncan Cotterill would accept service and foreshadowed an application for substituted service. Duncan Cotterill said they had no instructions to accept service. No reasons for that position were given.

[5]    Accordingly, on 17 February 2023, an order for substituted service on Mr Jones was sought that the proceeding be served on Duncan Cotterill. The order was made.

[6]    Mr Holmes seeks costs in respect of his need to apply for substituted service on Mr Jones. In short, Mr Holmes’ solicitors say there was simply no justification for Mr Jones not instructing his solicitors to accept service. At the same time, there is the suggestion  that  Mr Jones  appeared  to  be  evading  personal  service.  In  short,  Mr Holmes’ solicitors submit that Mr Jones took steps that were unnecessary, uncooperative and put Mr Holmes to unnecessary expense. In doing so, Mr Holmes

says that Mr Jones has exposed himself to the risk of increased costs pursuant to      r 14.6(3)(b) of the High Court Rules 2016.

[7]    There would seem to me little point in Mr Jones not cooperating with service. The address for service for CPSL was Mr Jones’ residential address. The proceedings were served on CPSL on 14 December 2022 thus making Mr Jones aware of the proceedings.

[8]    Mr Campbell, counsel for Mr Holmes, notes that in accordance with the order for substituted service the proceedings were emailed to Duncan Cotterill and Mr Jones at around 1:30 pm on 20 February 2023 and also left at Mr Jones’ address at 11:15 am on 21 February 2023.

[9]    On 21 February  2023 at  10:32 am, Duncan Cotterill served on Mr Holmes   a statement of defence on behalf of Mr Jones, some five and a half working hours after receiving the proceedings by email. This certainly gives the appearance that Mr Jones had his solicitors prepare a statement of defence in anticipation of service, while at the same time not cooperating, if not evading service.

[10]   Mr Jones’ solicitors in their memorandum opposing costs, rather than really confronting why Mr Jones adopted the stance he did, submitted that personal service on the second defendant was not necessary as he was not a necessary party to the proceeding.

[11]   Mr Caradus, counsel for Mr Jones, notes that during the period described above, Mr Jones was not in fact a defendant as he was only added to the proceeding on 23 February 2023. There were no pre-existing direction that Mr Jones should be served. That is correct, but the proceedings plainly concerned Mr Jones.

[12]   Absent from Mr Caradus’ memorandum is any explanation as to why firstly, Duncan Cotterill did not respond to the initial requests to accept service. The initial requests predated the filing of the proceedings and so Duncan Cotterill would not have known whether Mr Jones was named as a party or not. This being an inter-shareholder dispute, Mr Jones was always going to need to be involved. The further request was

made on 1 February 2023, at that time the proceedings had been served on the company. If the reason for not accepting service was as now put, that Mr Jones was not a party, that would have been the obvious response to make to the 1 February 2023 request to accept service.

[13]   The fact that Mr Jones filed his statement of defence just five and a half working hours after service pursuant to the orders for substituted service, shows that he knew he would be involved in the proceedings.

[14]   Mr Jones has not put forward any good reason for not agreeing to accept service. If anything, his approach to service confirms the breakdown between the shareholders’ relationship, relied on by Mr Holmes.

[15]   I am satisfied that an award of costs is appropriate given Mr Jones’ actions. However, I do not consider this is a case for an uplift. The circumstances I have outlined justify a departure from the normal rule that costs on orders for substituted service are left until the conclusion of the proceeding. I also consider that there is some force in Mr Caradus’ submissions that the application for substituted service was straightforward.

[16]   The second defendant, Mr Jones, will pay to the plaintiff, Mr Holmes, costs on a 2A basis plus disbursements as fixed by the Registrar.

Associate Judge Lester

Solicitors:

Wynn Williams, Christchurch (for Plaintiff)

Duncan Cotterill, Christchurch (for First Defendant and Second Defendant)