Maple Land International Ltd v Ping
[2022] NZHC 248
•22 February 2022
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE
CIV-2021-454-000065
[2022] NZHC 248
UNDER the Companies Act 1993 IN THE MATTER
of an application to set aside a statutory demand issued under s 290 of the Act
BETWEEN
MAPLE LAND INTERNATIONAL LIMITED
Applicant
AND
ZHANG PING
Respondent
Hearing: 3 February 2022 (by AVL) Appearances:
S E Russell and A South for Applicant S J Parsons for Respondent
Judgment:
22 February 2022
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 22 February 2022 pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
MAPLE LAND INTERNATIONAL LTD v PING [2022] NZHC 248 [22 February 2022]
[1] Maple Land International Ltd (Maple) applies under s 290(4) of the Companies Act 1993 for an order setting aside a statutory demand issued by the respondent Zhang Ping (Ms Ping) dated 30 September 2021. The statutory demand requires payment of the sum of $75,000 said to be the amount owing by Maple to Ms Ping under Deeds of Nomination and Acknowledgement of Debt dated 14 June 2021 and a Deed of Settlement dated 12 August 2021.
[2]Maple’s amended application is made on the grounds that:
(a)the statutory demand was not served in accordance with the requirements of service under the Companies Act 1993 and is a nullity; and
(b)there is a genuine and substantial dispute as to whether Maple is indebted to Ms Ping for the sum demanded.
[3]For her part, Ms Ping asserts:
(a)the statutory demand was validly served (although there has been a post-hearing change of position as to how and when service is said to have been effected);
(b)there is no genuine or substantial dispute as to Maple’s indebtedness to Ms Ping in the sum of $75,000; and
(c)the application to set aside the statutory demand is a nullity having not been filed and served within 10 working days of service of the statutory demand as required by s 290(2) of the Companies Act.
[4] As will be apparent, and counsel identified, the issues arising (and the logical order to deal with them) are:
(a)whether the statutory demand was validly served and, if so, when;
(b)whether the application to set aside the statutory demand was filed and served within 10 working days of service of the statutory demand as required by s 290(2) of the Companies Act; and
(c)whether a genuine and substantial dispute exists as to the alleged debt which is the subject of the statutory demand.
[5] Counsel also recognise that if the statutory demand was not validly served, that will determine the matter and the other two issues fall away.
Factual background
[6] On 19 November 2018, Ms Ping entered into an agreement with Thatilldo Ltd (Thatilldo) to purchase 15 North Street, Palmerston North (the property) for $538,000. The agreement was conditional upon the parties entering into a building contract for the construction of a new house on the property. Ms Ping paid a deposit of $75,000 following signing of the agreement.
[7] It was not until 11 October 2019 that Ms Ping entered into a building contract with Baillie Construction Ltd (Baillie) to build the new house on the property. I understand that Baillie and Thatilldo are related companies, but nothing turns on that.
[8] Apparently, Ms Ping experienced difficulties with Baillie and the building contract was varied so that Baillie would instead renovate the existing house on the property up to an as new standard and Ms Ping would pay a reduced purchase price of
$510,000. When this occurred is not exactly clear.
[9] On 14 June 2021, Ms Ping and Maple executed documents identified as a Deed of Acknowledgement of Debt and a Deed of Nomination and Assignment pursuant to which Ms Ping assigned to Maple her rights and obligations under both the agreement for sale and purchase with Thatilldo and building contract with Baillie. Maple agreed to repay Ms Ping the $75,000 deposit. Maple’s obligation in this regard was expressed slightly differently in the two documents. The relevant clauses in the Deed of Acknowledgement of Debt and Deed of Nomination and Assignment respectively read:
Deed of Acknowledgement of Debt
2.The debt will be repaid to Ping in full by Maple within five (5) working days of the full performance of the agreements by the vendor as to the reasonable satisfaction of Maple.
Deed of Nomination and Assignment
5.The Nominee will within five (5) working days of the completion date of the renovation of the existing property and performance of the agreements to the satisfaction of the Nominor repay the Nominor
$75,000 that she paid the vendor.
[10] Maple says it also experienced difficulties with Baillie. On around 12 August 2021, Baillie, Thatilldo, Maple and Ms Ping entered into a Deed of Settlement pursuant to which Maple agreed to accept the property in its incomplete state for a reduced purchase price of $425,000 with settlement to occur within five working days. Maple argues that the Deed of Settlement superseded all other agreements extinguishing its indebtedness to Ms Ping.
[11] On 13 September 2021, the solicitor who then acted for Ms Ping, Jeremy McGuire, had a telephone conversation with Maple’s director, Nitin Karan, concerning payment of the $75,000 to Ms Ping. On 17 September 2021, Mr McGuire sent a letter to Maple demanding payment of the $75,000 by 24 September 2021, failing which a statutory demand would be issued. That day he lodged a caveat against the property in favour of Ms Ping.
[12] Correspondence then passed between Mr McGuire and a firm of solicitors acting for Maple, CR Law. On 30 September 2021, Mr McGuire emailed the statutory demand that is now in issue to CR Law. It was also delivered to their offices by courier. The statutory demand provided that Ms Ping’s address for service and the place for payment was Mr McGuire’s offices in Main Street, Palmerston North.
[13] There is conflicting evidence as to when CR Law advised Maple the statutory demand had been received and provided a copy to it. The argument was advanced before me that Maple was advised of the statutory demand on 5 October 2021, and a copy of it was sent to Mr Karan by email on 11 October 2021.
[14] Maple instructed a new firm of solicitors to act for it. On 14 October 2021, those solicitors, Russell Legal, filed on Maple’s behalf the application under s 290(4) to set aside the statutory demand. The application was made on the ground there was a substantial dispute as to whether Maple was indebted to Ms Ping for the sum demanded. The application was sent by email to Mr McGuire on 18 October 2021. An endorsed copy of Maple’s application was provided by the Court on 20 October 2021. This was also forwarded to Mr McGuire.
[15] On 27 October 2021, Maple filed an amended application to set aside the statutory demand, adding as a ground that Ms Ping’s statutory demand had not been validly served in accordance with the Companies Act requirements. The amended application was accepted by Mr McGuire by way of service on 27 October 2021.
Section 290
[16]Section 290 of the Companies Act relevantly provides: 1
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
1 The principles upon which the Court will act when considering an application to set aside a statutory demand on the ground there is a substantial dispute are set out in Confident Trustee Ltd v Garden & Trees Ltd [2017] NZCA 578 but for the reasons that follow I need not set them out here.
(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.
Issue 1 – was the statutory demand validly served
[17] I take the view a statutory demand is not a notice in legal proceedings for the purposes of s 387 of the Companies Act and must be served in accordance with s 388 of the Companies Act.2
Section 388(1) of the Companies Act provides:
Service of other documents on companies
(1)A document, other than a document in any legal proceedings, may be served on a company as follows:
(a)by any of the methods set out in paragraph (a) or paragraph (b) or paragraph (c) or paragraph (e) of subsection (1) of section 387; or
(b)by posting it to the company’s registered office or address for service or delivering it to a box at a document exchange which the company is using at the time; or
(c)by sending it by facsimile machine to a telephone number used for the transmission of documents by facsimile at the company’s registered office or address for service or its head office or principal place of business; or
(d)by emailing it to the company at an email address that is used by the company.
[19]Also relevant is s 392(1)(a) of the Companies Act which provides:
392 Additional provisions relating to service
(1)Subject to subsection (2), for the purposes of sections 387 to 391,
---
(a)if a document is to be served by delivery to a natural person, service must be made
---
2 Arzan Investments Ltd v Beresford Apartments Ltd (2003) 16 PRNZ 825 (HC); Phonographic Performances NZ Ltd v Music Systems (Music) Ltd HC Wellington CIV-2006-485-1270, 2 August 2006; North Harbour Equine Hospital Ltd v DK Lyttle Corporate Trustee Ltd HC Auckland CIV- 2006-404-7585, 19 February 2007; Energy Efficient Health Homes Ltd v Greenwood Natural Woods [2013] NZHC 1179 and Upright Scaffolding Ltd v Pinnies Painters & Plasterers Ltd [2019] NZHC 1495.
(i) by handing the document to the person; or
(ii) if the person refuses to accept the document, by bringing it to the attention of, and leaving it in a place accessible to, the person:
[20] Maple submits there is nothing in ss 387 or 388 which allows for service of a statutory demand at the offices of a company’s solicitor, so that the act of delivering the statutory demand to the offices of CR Law was of no effect and the statutory demand is a nullity.
[21] Mr Parsons’ written submissions on behalf of Ms Ping did not identify how service of the statutory demand had been effected other than that the statutory demand was “received” by CR Law on 30 September 2021.
[22] At the hearing, Mr Parsons submitted the statutory demand had been validly served pursuant to s 387(1)(f) of the Companies Act. I do not accept Mr Parsons’ submission. As noted above, I do not consider a statutory demand is a document issued in a legal proceeding and therefore service must be effected in accordance with s 388 (not s 387).
[23] Further, while s 388 provides service of documents (other than in legal proceedings) may be served in accordance with s 387(1)(a), (b), (c) and (e), it does not allow for service by the method set out in s 387(1)(f).
[24] Also, s 387(1)(f) is concerned with the circumstance where a solicitor has stated it will accept service “in accordance with the rules of the court”. Mr Parsons was unable to refer me to any applicable rule of the Court and there is no suggestion that CR Law gave any indication that it would accept service of documents on behalf of Maple in any event.
[25] Following the hearing, Mr Parsons filed a memorandum in which he advances the new argument the statutory demand was served on 11 October 2021 pursuant to s 387(1)(a) of the Companies Act when Maple’s director, Nitin Karan, is said to have
received a copy of it by email from CR Law.3 Section 387(1)(a) provides a document may be served upon a company “by delivery to a person named as a director on the New Zealand register”.
[26] In his memorandum, Mr Parsons referred to Upright Scaffolding Ltd v Pinnies Painters & Plasterers Ltd, although he made no specific submissions on its application to this case.4 It concerned an undefended application to liquidate a company following its failure to satisfy a statutory demand. The issue for the Court was whether the statutory demand was validly served. The facts were the creditor’s solicitors had corresponded by email with the director of the debtor company seeking payment on their client’s behalf. When this did not result in payment, the solicitors forwarded the statutory demand to the director of the debtor company by email. While acknowledging that he was taking a different view from that adopted in many previous judgments of the Court,5 Associate Judge Lester held that in the circumstances the statutory demand had been validly served pursuant to s 388(1)(d) of the Companies Act. Relevantly, he noted the email made it clear that what was being sent was a statutory demand and that it was being sent by way of service on the debtor company and the debtor company had taken no steps to defend the liquidation application.6
[27] This case is very different from Upright Scaffolding. Here, Mr Parsons submits service of the statutory demand was effected under s 387(1)(a) not s 388(1)(d). Upright Scaffolding did not concern s 387(1)(a). Second, Maple does assert that service was not validly effected. Third, and most importantly, in Upright Scaffolding the statutory demand was sent by the creditor’s solicitor and duly authorised agent directly to the director of the debtor company and it was made clear that it was sent by way of service. That is not the case here.
[28] The position Mr Parsons advances is incongruous. The contention that CR Law effected service on Maple by the action of forwarding the statutory demand to it cannot be correct for several reasons.
3 In a memorandum of 8 February 2022, counsel for Maple objected to me considering Mr Parsons’ memorandum. Had I considered there was merit in the argument Mr Parsons advanced, I would have called for further submissions, but in the event that was not necessary.
4 Upright Scaffolding Ltd v Pinnies Painters & Plasterers Ltd, above n 2.
5 At [41].
6 At [37] and [39].
[29] First, as noted, s 387(1)(a) allows for service upon a company by “delivery” to a person named as a director. I do not accept that sending the statutory demand to Mr Karan by email is delivery of it to him for the purpose of the section. That is because the section contemplates personal delivery, not transmission by electronic means. This is made clear in s 392(1)(a) which provides if a document is to be served by delivery to a natural person, that person must be handed the document, or it must be brought to their attention and left in a place accessible to them should they refuse to accept it.
[30] Second, the essential objective of service is to bring a document to the personal attention of the person whose concern it is to receive it so they may respond in the appropriate manner.7 This is particularly important in a case where there are strict time limits within which the person served must respond to the document. Such is the case with a statutory demand. Knowledge of the document and its contents, as well as its receipt by way of service, are equally important in this regard. It cannot be the case that service of documents can be effected accidentally or unintentionally which is, in effect, what is being contended for here.8
[31] Third, there is authority that where there has been irregular service it is not sufficient that the document in question has subsequently come to the attention of the person to be served.9 I agree with that approach. The fact that Mr Karan accepts the statutory demand was sent by email to him (albeit some days after it was received by his solicitors) does not change the fact that it was never validly served.
[32] Fourth, at a practical level, compliance with the strict requirements in the Companies Act serves the interests of the party serving the document who may need to prove its delivery.10 A party in the position of Ms Ping, who chooses to send a
7 In re a Debtor [1939] 1 Ch 251, 256 referred to in Bond Cargo Ltd v Chilcott (1999) 13 PRNZ 629 at 633.
8 In the context of court proceedings see Adrian Zuckerman “Zukerman on Civil Procedure” (4th ed, Sweet & Maxwell, London, 2021) at 227.
9 Kristensen v Global Flags Ltd (in liq) (2001) 15 PRNZ 581 (HC) at [20] and Towers v Morley
[1992] 2 All ER 762; [1992] 1 WLR 511 (CA).
10 Andrew Beck “Jarndyce Lives on” [2000] NZLJ 381 at 382 referred to in “Voidable Transaction Notices” [2006] NZLJ 257 referred to Upright Scaffolding Ltd v Pinnies Painters & Plasterers Ltd, above n 2, at [14].
document to the other party’s solicitors, would generally have no knowledge of when that document makes its way into the hands of the client and could not prove service.
[33] Finally, the position advanced would put solicitors in an invidious position whereby, in complying with their professional obligation to keep their client informed, they may be acting contrary to the client’s interests.
[34] For these reasons, I find the statutory demand was not validly served on Maple and was effectively a nullity. That is enough to determine the outcome of this proceeding.
Issue 2 - was the application to set aside the statutory demand validly served
[35] As the statutory demand was not validly served there is no basis for making any order setting it aside. However, by way of comment, I should address two arguments advanced by Ms Ping which I do not accept.
[36] The first was that Maple was unable to amend its application to set aside the statutory demand after the expiry of the time limit for making an application under s 290(2) of the Companies Act.
[37] It is not uncommon for originating applications to be amended. It is noted in McGechan on Procedure that in appropriate cases the Court may be prepared to allow an amendment.11 While no rule allowing amendment of such applications was drawn to my attention, I consider amendment should be allowed in appropriate cases consistent with the objectives of the High Court Rules.12
[38] The second matter concerns Ms Ping’s argument that Maple’s application to set aside the statutory demand could not be served at Mr McGuire’s offices. There is some irony in this stance given the position Ms Ping took on the first issue. However, the submission overlooks r 19.12(A)(2) of the High Court Rules which provides:
11 Andrew Beck and others McGechan on Procedure (looseleaf ed, Brookers) at [HR19.10.08] citing
Godfrey v McCormick [2017] NZHC 420.
12 High Court Rules, rr 1.2 and 1.6(2).
(2)An originating application under section 290 of the Companies Act 1993 to set aside a statutory demand may be served, in accordance with rule 6.5, at the address shown in the statutory demand as the creditor’s address or the address for payment.
[39] In this instance, the statutory demand provided that Ms Ping’s address for service and the place for payment was Mr McGuire’s offices. In those circumstances, delivery of Maple’s application to Mr McGuire’s offices would be an effective method of service.
Issue 3 - is there a substantial dispute as to the sum owing
[40] Given my earlier finding, it is not appropriate to resolve this issue. However, there is another reason I do not do so.
[41] Ms Ping filed two curt affidavits in opposition to Maple’s application. In the main, she relies upon affidavits of Mr McGuire. Mr McGuire’s first and principal affidavit was filed while Mr McGuire was on the record as Ms Ping’s solicitor.13 His affidavit is contentious and he should not have made such an affidavit while he was solicitor on the record.
[42] Both of Mr McGuire’s affidavits demonstrate a lack of objectivity. They contain hearsay, speculation, submission and in some respects scandalous allegations. Maple objected to the affidavits and was right to do so.
[43] Had I been required to determine this issue, I would not have had regard to much of the material Ms Ping relies upon. That would not reflect fairly upon the arguments I understand she would wish to be advanced on her behalf.
Result
[44] I have found that the statutory demand was never validly served. It follows there is no basis to make an order setting aside the statutory demand. For that reason Maple’s application is dismissed.
13 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, r 13.5. I should note in this regard that Mr Parsons was instructed at a relatively late stage of this proceeding.
[45] On the issue of costs, the general rule is that the successful party is entitled to its costs.14 While Maple has not obtained an order setting aside the statutory demand, it has been successful in establishing the statutory demand was not validly served.
[46] I consider Maple was correct to file the proceeding to protect its position.15 Had it not done so, Ms Ping is likely to have applied to liquidate Maple and the defence of that application would have put both parties to potentially greater expense than they have incurred.
[47] Had Ms Ping accepted Maple’s position concerning service of the statutory demand at an earlier stage, I may have taken a different view as to whether she should bear a costs liability. As it is, she forced a hearing on the issue. I therefore consider Ms Ping must pay Maple costs.
[48] Maple sought increased costs, but I consider scale 2B costs and reasonable disbursements are appropriate. Maple is to claim costs and disbursements in respect of one application only.
[49] I expect counsel shall agree on the quantum of costs but, if not, they may file memoranda within 14 days.
O G Paulsen Associate Judge
Solicitors:
Russell Legal, Auckland
Cooper Cross Limited, Palmerston North
14 High Court Rules 2016, r 14.2(1).
15 Golden Land Civil Ltd v Baseline Survey Ltd [2021] NZHC 1373.
4
0
0