Independent Liquor (NZ) Ltd v Hanssen

[2012] NZHC 2441

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-4376 [2012] NZHC 2441

UNDER  section 290 of the Companies Act 1993

BETWEEN  INDEPENDENT LIQUOR (NZ) LTD Applicant

ANDBENJAMIN CHARLES HANSSEN First Respondent

ANDGLOBE HOTELS LIMITED Second Respondent

Hearing:         19 September 2012

Counsel:         MC Sumpter and J Marcetic for applicant

BM Stainton for respondents

Judgment:      20 September 2012

JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application to transfer proceeding]

Solicitors:           Canterbury Legal Services Ltd, PO Box 22 115 Christchurch

Chapman Tripp, PO Box 2206, Auckland 1140

INDEPENDENT LIQUOR (NZ) LTD V HANSSEN HC AK CIV-2012-404-4376 [20 September 2012]

[1]      The applicant applies for an order that a statutory demand served on it be set aside.

[2]      The respondents oppose the application.  The respondents have filed an application that the substantive application to set aside the statutory demand be transferred to the Dunedin Registry of this Court.  It is the transfer application that I now determine.

[3]      The  starting  point  for  consideration  of  the  respondents’  application  for

transfer is High Court Rules 5.1(4) which provides:

5.1       Identification of proper registry

…

(4)       If it appears to a Judge, on application made, that the statement of claim has been filed in the wrong registry of the court, he or she may direct that the statement of claim or all documents filed in the proceeding be transferred to the proper registry.

[4]      It is accepted by both parties that the ordinary position where an originating application is concerned is that the filing of the originating application is required to be at the registry nearest to the residence of the first defendant or respondent named in the originating application. That follows from the combined operation of r 19.7(1) which provides:

19.7     Commencement of proceeding

(1)       A proceeding that may be commenced by originating application is commenced when the originating application is filed in the proper registry of the court, as determined in accordance with rule 5.1, or when the court gives permission under rule 19.5(1).

And r 5.1(1)(a) which provides:

5.1       Identification of proper registry

(1)      The proper registry of the court, for the purposes of rules 5.25 and

19.7, is,—

(a)       when a sole defendant is resident or has a principal place of business in New Zealand, the registry of the court nearest to the residence or

principal place of business of the defendant, but when there are 2 or more defendants, the proper registry is determined by reference to the first-named  defendant who  is resident or has  a principal  place  of business in New Zealand:

[5]      The respondent’s registered office is in Dunedin.   Ordinarily therefore this

application should have been filed in the Dunedin Registry of the High Court.

[6]      The above conclusion is the conclusion reached by Master Venning (as he then was) in Seaview Road Ltd v Sarysyn Haining Ltd.[1]

[1] Seaview Road Ltd v Sarysyn Haining Ltd HC Christchurch M414/01, 20 December 2001.

[7]      Mr Sumpter submitted that the approach adopted in  Seaview Road Ltd v Sarysyn Haining Ltd was too narrow in its application.   He raised a number of submissions in support of the general proposition that the Court should exercise its discretion and leave the application to set aside the statutory demand for determination in the Auckland Registry of the High Court.

[8]      His first submission was that the statutory demand is not simply a technical or procedural step but is, in substance, a proceeding for the recovery of a alleged debt.  He referred to a passage from Volcanic Investments Ltd v Dempsey & Wood Civil Contractors Ltd.[2]

[2] Volcanic Investments Ltd v Dempsey & Wood Civil Contractors Ltd (2005) 18 PRNZ 97 (HC) at [20].

[9]      I do not accept his submission.  “Proceeding” is defined in r 1.3 of the High

Court Rules:

proceeding means any application to the court for the exercise of the civil jurisdiction of the court other than an interlocutory application

[10]     The application to the Court in Volcanic Investments Ltd v Dempsey & Wood Civil Contractors Ltd was not the statutory demand but rather the application to set it aside.[3]     The passage referred to has to be read within that context.   There is no question  of  the  service  of  a  statutory demand  being  the  commencement  of  the proceeding.  Its purpose is defined in the Companies Act 1993 as simply a means by

which an applicant for an order for the liquidation of a company and the appointment

of a liquidator can prove that the company the subject of the application has inability to  pay its  debts.    In  short,  it  assists  in  the  satisfaction  of  the  grounds  for  the appointment of a liquidator as prescribed in s 241(4)(a) of the Companies Act 1993.

[3] Ibid.

[11]     Mr Sumpter next raised the question of convenience.   In my view nothing turns on this.  Applications to set aside statutory demands are routinely determined on affidavit evidence and without cross-examination.  That arises from the nature of what must be proved by an applicant and which is referred to in s 290(4) of the Companies Act 1993.  Therefore, in my view, nothing really turns on the question of convenience.  What is essentially at stake is whether the applicant’s counsel has to travel to Dunedin for the hearing, or whether the respondents’ counsel has to travel to Auckland for the hearing.

[12]     Mr Sumpter  next  submitted  that  the  applicant  to  set  aside  the  statutory demand should be entitled to rely upon hcr 5.1(2).  High Court Rule 5.1(2) provides:

5.1      Identification of proper registry

…

(2)       Despite subclause (1)(a), if the place where the cause of action sued on, or some material part of it, arose is nearer to the place where the plaintiff or the plaintiff first-named in the statement of claim resides than to the place where the defendant resides, the proper registry of the court for the purposes of subclause (1) is, at the option of the plaintiff or the plaintiff first-named, as the case may be, the registry nearest to the residence of the plaintiff or the plaintiff first-named, as the case may be.

[13]     In determining this issue, Master Venning in Seaview Road Ltd v Sarysyn

Haining Ltd said:[4]

[4] Above n 1.

[12]      While I accept that the concept of a cause of action in relation to an application to set aside a statutory demand is a difficult one and not as clear as ordinary proceedings, I am unable to accept that the service of a statutory demand can of itself constitute a material part of the cause of action on such an application.   The service of the statutory demand is the step that triggers a number of provisions of the Companies Act in terms of the requirement to take steps in the court.   However, an application to set aside a statutory demand is concerned with whether there is a counterclaim, set-off or cross- demand,  or  whether  the  demand  ought  to  be  set  aside  on  other

general grounds.   Insofar as the cause of action is relevant, in my view the cause of action must be related to those particular matters.

[13]     Here the dispute involves joinery supplied by the Respondent to a building owned by the Applicant in Sea View Road, Lower Hutt. Counsel  accepted  that  if  the  cause  of  action  in  this  type  of proceeding is to be related to the substance of the dispute then that is in Wellington as opposed to Christchurch.

[14]      Again, while I accept Mr Norcross’ submission that the hearing of an application  to  set  aside  a  statutory  demand  may  only  be  a preliminary hearing in that liquidation proceedings may follow if the demand is not set aside or ordinary proceedings may follow if the demand is set aside, nevertheless the Court is directed by s290(4) to have  regard  to  the  matters  set  out  in  that  subsection  when considering the application.  It is those matters which are part of the causes of action in the substance of the dispute between the parties, rather than the technical or procedural step such as service of the statutory demand.

[15]      Although  I do  not consider the issue of service  of the statutory demand is part of the cause of action, I note that in any event no affidavit has been filed in support as is required by r107(3).  If the Applicant was to rely on that provision an affidavit should have been filed  initially,  or  at  least  before  this  hearing.    However,  for  the reasons noted  above,  even  if  such an  affidavit had  been  filed it would have made no difference in this case.

[14]     I agree with Master Venning that service of the statutory demand itself does not constitute a material part of the cause of action in relation to the application. Accordingly, I reject Mr Sumpter’s submission to the contrary.

[15]     What is apparent with this case is that the substantial dispute which is the central issue raised by the application relates to whether there is a debt due and owing pursuant to a particular contract.  There is no reply affidavit filed so that a final conclusion on this cannot be made until all affidavits are in and the Court hears argument on the substantive issues.  However, the issue that the case will raise is: was a contract entered into by the applicant and the respondents whereby the applicant was required to advance funds to the respondents?

[16]     The applicant’s case is that no such contract ever came into existence.

[17]     The respondents’ case is that a contract came into existence on the acceptance by the respondents of the applicant’s offer, in the form of contract documents which were sent to it and which were executed by the respondents in Dunedin.

[18]     Although it is not completely clear on the material before me, it seems that the communications between the parties were made electronically.   If the Court concluded that the parties entered into a contract that would have been in Dunedin.[5]

[5] Entores Ltd v Miles Far East Corp [1955] 2 All ER 493, [1955] 2 QB 327.

[19]     This leads me to the preliminary view that, without having all the material before  me,  the  respondents’ allegation  requires  proof  that  a  contract  came  into existence in Dunedin and not in Auckland.  That suggests to me that the dispute will be answered by whether or not the contract in fact came into existence at all and, if so, if it came into existence in Dunedin.   For that reason, and this being an interlocutory application only, my preliminary view is that Dunedin is likely to be the place where the cause of action arose.

[20]     The difficulty in analysing what the cause of action is arises because of the nature of the issue that is placed before the Court on an application to set aside a statutory demand.  The matter in issue is the respondents’ claim that they are a party to a contract with the applicant made in Dunedin.  The applicant’s first and principal response is that no such contract was entered into because there was  no actual acceptance.  This application seeks an order that the demand, which is based on the respondents’ claim that a contract exists, is the very matter in dispute.  In short, the applicant has the onus of proving that there is a dispute about a negative, ie that no such contract existed.  If this was a summary judgment application the respondents would be the plaintiffs and the applicant would be the defendant. The respondents as plaintiffs  would  have  to  establish  that  there  was  no  defence  available  that  the contract was not made.  If it was a summary judgment application it would have had to be filed in the Auckland Registry because that is the court nearest to the registry of the registered office the party who would be the defendant in the summary judgment application who is in fact the applicant on this application.

[21]     The   above   analysis   simply  illustrates   the   difficulty   in   analysing   an application to set aside a statutory demand by attempting to say where the cause of action arises.   Indeed, to apply the normal exception to the place of filing of an

originating application in these cases is always going to be difficult.

[22]     Before I leave this matter I record the Court’s concern that the High Court Rules effectively drive the parties to a position where part of a matter that relates to steps to be taken pursuant to Part 16 of the Companies Act 1993 and Part 31 of the High Court Rules, be filed in one registry, being the place of residence or registered office of the claiming creditor, whilst the liquidation proceeding itself must be filed in the Court nearest to the registered office of the alleged debtor company.   The matter might well be resolved by way of an amendment to r 19.7(2) of the High Court Rules and by the addition of a subrule (c) which provides that r 19.7 does not apply to an originating application to set aside a statutory demand which must be filed in the registry of the court nearest to the registered office of the company to whom the statutory demand is addressed.

[23]     Although I have made the above observation, I must apply the rules as they currently stand and that is why I conclude that this an appropriate case to order that the originating application seeking the setting aside of the statutory demand and all documents filed so far in relation to the application, be transferred to the Dunedin Registry of this Court.

[24]     The only matter that requires direction to ensure that this application is ready for hearing, is the fixing of a time for the filing of a reply affidavit and directions for the exchange of submissions and a casebook for the hearing of the case.  I took the opportunity  of  discussing  appropriate  arrangements  with  counsel  and  what  is recorded in the orders made in this judgment are the directions and orders which were to apply irrespective of whether the case was to be heard on its merits in the Dunedin Registry of this Court or the Auckland Registry of this Court.

Orders

[25]     I order as follows:

(a)      The application to set aside the statutory demand and all papers that have been filed in relation to this application shall be transferred to the Dunedin Registry of this Court for hearing and determination;

(b)      Any reply affidavit  shall  be filed and  served  by the  applicant  by

5 October 2012;

(c)      The applicant shall file and serve, by 19 October 2012, submissions in support of the application, plus copies of all authorities referred to, together with a casebook of the application, notice of opposition and all affidavits which is indexed and paginated;

(d)The respondents shall file and serve, by 26 October 2012, submissions in opposition plus copies of all authorities referred to;

(e)      The Registrar of the Dunedin Court shall allocate a two-hour fixture for the substantive proceeding and notify counsel of that date which

must be after 26 October 2012.

Costs

[26]     The hearing of this application before me occupied approximately 1¼ hours. I reserve costs and direct that they be determined based on the outcome of the

substantive application.

JA Faire

Associate Judge