Moonlight Farms Trust Limited v Powell Land Holding Limited
[2019] NZHC 861
•17 April 2019
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2017-409-927
[2019] NZHC 861
UNDER the Companies Act 1993 IN THE MATTER OF
an application to set aside statutory demand
BETWEEN
MOONLIGHT FARMS TRUST LIMITED
Applicant
AND
POWELL LAND HOLDING LIMITED
Respondent
Hearing: 8 April 2019 Appearances:
C L Houghton and R A Woods for Applicant A S P Tobeck for Respondent
Judgment:
17 April 2019
JUDGMENT OF ASSOCIATE JUDGE LESTER
[1] The applicant has applied to set aside a statutory demand issued by the respondent on 10 November 2017. This application was filed on 21 November 2017. It was sent by email on 21 November 2017 to the respondent’s solicitors and on the same day the application was posted by the respondent’s solicitors. The copy sent by post was received by the respondent’s solicitors on 24 November 2017, that being the tenth working day after service. Ms Diack, a legal secretary within the respondent’s solicitor’s office, has sworn an affidavit confirming that on 24 November 2017 she collected the office mail from the Post Office as she usually does, and that the proceedings were in the post.
MOONLIGHT FARMS TRUST LIMITED v POWELL LAND HOLDING LIMITED [2019] NZHC 861
[17 April 2019]
[2] Ms Diack refers to affixing a date stamp to both the envelope and the covering letter and the date stamp showing 24 November 2017.
[3] Ms Diack does not go into any detail in respect of returning the post to the office, but when she says: “ON 24 November 2017 I collected the mail from Post Office Box 50 in Winton as I usually do”, the natural inference is that she collected the mail from the Post Office box and took it to the office.
Context
[4] The applicant was the lessee of rural land under a deed of lease from the respondent. The deed was executed 24 September 2013 recording a commencement date of 1 April 2014. The lease expired on 31 March 2019 (“the Lease”).
[5] It appears that there have been longstanding issues between the parties as to the interpretation of cl 1.7 of the Lease headed “Minimum Top Dressing Quantity”. That clause recorded that:
The Lessee agrees in each year of the term of this lease at the Tenant’s expense in the proper season of the year for so doing and in proper and husbandlike manner topdress the pastures of the Land with: …
There is then a description of the superphosphate and lime to be applied and to what paddocks.
[6]The final clause of cl 1.7 states:
The Tenant will annually make available to the Landlord receipts for fertiliser purchased and applied to the Land within two (2) months of application.
There has been an issue for some years over the quality of the information supplied by the applicant pursuant to this clause.
The statutory demand
[7] The statutory demand was issued by the respondent’s solicitors. The application has taken some time to come to hearing because of attempts by the parties
to resolve matters without the need to come to Court. Unfortunately, such efforts were not successful.
[8] The statutory demand alleged that the applicant was indebted to the respondent:
…pursuant to clause 12.1(b) of a Deed dated 24 September 2013 …. In the sum of $31,291.10 being costs incurred by POWELL LAND HOLDING LIMITED in enforcing or attempting to enforce MOONLIGHT FARMS TRUST LIMITED’S obligations pursuant to the deed. A copy of the taxation invoices are attached.
[9] There were some 16 invoices or other supporting documents attached to the statutory demand dating from 30 April 2015 to 3 May 2017.
[10] These documents were invoices issued by solicitors or farm consultants acting for the respondent, although some of the invoices are addressed to Mr DR & Mrs LM Powell being the directors of the respondent rather than to the respondent itself. Other invoices, for example, from a helicopter company for a fly over the farm, are addressed to a different company, Powell Farm Ltd. Some invoices are addressed directly to the respondent.
[11] The amount set out in the statutory demand and made up of the various invoices referred to was not invoiced by the respondent to the applicant prior to the issuing of the statutory demand. Mr McDonald in an affidavit on behalf of the applicant says:
Prior to being served with the statutory demand Moonlight never received copies of the invoices that are attached to the statutory demand. Powell’s Barrister, Mr Tobeck, had written to Kathy and I in August 2017 suggesting that his client was entitled to recover its costs, but the first I was aware of the actual invoices was when I went through the statutory demand.
…
… Moonlight had no knowledge of the invoices or amounts claimed in the statutory demand. We only found out about the claim when we were served.
[12] Mr Tobeck who appeared for the respondent did not suggest that there had been any prior demand or invoicing of the costs said to be payable by the applicant pursuant to the costs recovery clause in the Lease. The relevant part of that costs recovery clause provides:
12.1 Lessee to Pay Lessor’s Costs
In addition to the rental and other moneys reserved by this Lease the Lessee shall pay:
…
(b) all costs, charges and expenses for which the Lessor shall become liable in consequence of or in connection with any breach or default by the Lessee in the performance of any of the covenants in this Lease or by enforcing or attempting to enforce any of the Lessee’s covenants or any of the Lessor’s rights under or arising from this Lease.
The application to set aside
The application to set aside was made on grounds including that:
(i)the sum specified in the statutory demand was not a debt that was due and owing and therefore could not be the subject of a statutory demand;
the sum specified in the statutory demand is disputed; and
(iii)that the applicant has a counterclaim that exceeds the amount in the demand.
The notice of opposition
[14] The opposition took issue with the process by which the application was served and asserted that the debt in the demand was due and owing and disputed the existence of the counterclaim.
Service
[15] Rule 6.12(1) of the High Court Rules enables personal service of a document on a company incorporated under the Companies Act 1993 (“the Act”) to be effected by service in accordance with s 387 of the Act.
[16]Section 387 of the Companies Act 1993 provides:
387 Service of documents on companies in legal proceedings
(1)A document, including a writ, summons, notice, or order, in any legal proceedings may be served on a company as follows:
(a)by delivery to a person named as a director of the company on the New Zealand register; or
(b)by delivery to an employee of the company at the company’s head office or principal place of business; or
(c)by leaving it at the company’s registered office or address for service; or
(d)by serving it in accordance with any directions as to service given by the court having jurisdiction in the proceedings; or
(e)in accordance with an agreement made with the company; or
(f)by serving it at an address for service given in accordance with the rules of the court having jurisdiction in the proceedings or by such means as a solicitor has, in accordance with those rules, stated that the solicitor will accept service.
(2)The methods of service specified in subsection (1) are the only methods by which a document in legal proceedings may be served on a company in New Zealand.
[17] As Associate Judge Gendall (as he then was) set out in Ingleburn Developments Ltd v BRC Ltd:1
… service on companies is governed exclusively by the provisions of the Companies Act 1993 and s 387 specifically sets out mandatory requirements.
[18] Section 387 is prescriptive, making clear that any document in legal proceedings must be served by one of the methods listed in subsection (1) of that.2
[19] His Honour noted that any defect in service of an application to set aside a statutory demand cannot be corrected under what is now r 1.9 of the High Court Rules. The issue is not one of compliance with the High Court Rules but relates to compliance with the requirements of the Act.3
1 Ingleburn Developments Ltd v BRC Ltd (2008) 10 NZCLC 264,325 (HC) at [10].
2 See Timberworld Ltd v Tanner Sawmills Ltd (2002) 9 NZCLC 262,983.
3 Livi Investments Ltd v Butler Gilpat Ltd (1998) 11 PRNZ 680 (HC).
[20] An application to set aside a statutory demand which is not served within the required 10 working day period from the date of service of the demand is a nullity.4
[21] His Honour concluded that where a statutory demand provides as an address for service the address of a solicitor and gives the physical address, personal service is required. In Ingleburn, the Court was concerned with service by facsimile. His Honour concluded that as service by facsimile was neither mentioned nor authorised by the statutory demand, service by facsimile was ineffective.5
[22] In Livi Investments it was not disputed that the facsimile had been received, with Master Kennedy-Grant saying at [35]:
The service requirements in the Companies Act 1993 are strict and are prescriptive. As I see the position, it does not help the applicant to contend that actual receipt of the facsimile by Gibson Sheat on 10 March constitutes proper service. This is particularly the case given the clear statement as to the proper address for service of the respondent specified in the statutory demand.
[23] A similar statement that the requirements of s 387 are mandatory can be found in Richard Zhao Lawyers Limited v Chen, a decision of Associate Judge Doogue.6 In that case, a process server went to the registered office of the judgment creditor to serve an application to set aside the bankruptcy notice. However, the judgment creditor no longer carried on business at that address, the premises being occupied by a different business. The process server went to the property and spoke to someone she encountered there who happened to be the manager of the new company operating from the registered office. The documents were left with that person with the request that they be handed on to the judgment creditor. The submission that the documents had been validly served through being left with an employee of a different company from the judgment creditor was met with the response that such did not meet s 387. His Honour said:7
It is not just a matter of technicalities. The rules for service have as their objective reliable means by which documents for service on companies can be brought to the attention of the company. It is to be presumed that if the documents are given to an employee of the company that requires to be served,
4 Hartner Trustee Ltd v Colin MacKenzie Plastering Ltd (2001) 15 PRNZ 318 (HC).
5 Ingleburn Developments Ltd, above n 1, at [35].
6 Richard Zhao Lawyers Limited v Chen [2015] NZHC 3230.
7 Richard Zhao Lawyers Limited v Chen, above n 6, at [27].
that he/she will take steps to bring them to the attention of the person in the company who is responsible for dealing with such matters. Giving the documents to a person who was unconnected with the company does not achieve that objective.
[24] A further relevant decision is Arzan Investments Ltd v Beresford Apartments.8 That is a case very similar to the present one. The application to set aside a statutory demand in that case was sent to the creditor’s solicitors by facsimile and on the same date a further copy was sent to the firm through the document exchange. Master Lang (as he then was) dismissed the possibility that service by facsimile could be valid and then turned to the service by the document exchange. His Honour said:
[38] The only other basis upon which the application may have been validly served on Beresford is if it can be viewed as having been served in accordance with the second limb of s 387(1)(c) of the Act. This permits the service of legal proceedings to be effected by “leaving” the proceedings at the recipient company’s address for service. In my view the use of the word “leaving” implies that personal service on the actual address for service is required. It is difficult to see how the transmission of documents by facsimile (or sending them through the document exchange) could amount to leaving documents at a company’s address for service. For this reason I am not satisfied that the application was validly served in terms of s 387(1)(c) either.
[25] Pratt Quarries Ltd v Keegan Contractors Ltd (in Rec and Liq), another decision of Associate Judge Gendall (as he then was) was a case in which one of the issues was whether an application to set aside a statutory demand had been validly served by post.9 His Honour said:10
The address for service provided in the statutory demand was the address of the receivers and the address of its solicitors, DLA Phillips Fox. However, sending a document by post or facsimile does not amount to service within the terms of s 387.
Applicant’s argument on service
[26] The applicant, to meet these arguments, argued that service was completed by Ms Diack when she brought the letter from the law firm’s Post Office box to the office, thereby serving it. Thus, Mrs Houghton for the applicant said that the application to
8 Arzan Investments Ltd v Beresford Apartments Ltd (2003) 16 PRNZ 825 (HC).
9 Pratt Quarries Ltd v Keegan Contractors Ltd (in Rec and Liq) HC Wellington CIV-2010-485-2461, 10 February 2011.
10 At [20].
set aside the statutory demand was personally served by Ms Diack and that such service satisfied s 387(1)(f) of the Act.
[27] I put to Mrs Houghton that this meant that Ms Diack became an inadvertent process server. Mrs Houghton’s response was that in a practical sense it did not matter. The office worker picking up the mail intended to uplift the mail from the Post Office box and deliver it to the office and in doing so served the document.
Discussion
[28] While a well thought out means of addressing the service issue, I cannot accept Mrs Houghton’s submission. To do so would in a practical sense make service by post an acceptable means of service under s 387 of the Act. Comparing s 387 with s 388 of the Act confirms that service by post is not an acceptable means of service under s 387. I say that as s 388(1)(b) provides that:
(1)A document, other than a document in any legal proceedings, may be served on a company as follows:
…
(a)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
…
[29] While s 387 contains no equivalent to s 388(1)(b), inherent in the act of posting a document or sending it by document exchange is that it will be physically delivered to the address of the recipient either by the postal service or document exchange service or will be picked up from a Post Office box number and taken to the physical address of the recipient. What the applicant seeks to characterise as personal service
– that is the last step in the postal process, the physical delivery of a letter to the addressee, is only a part of the postal process. The sender intended service to be by post. I do not accept that by dividing up the stages of delivery by post, or document exchange, that service by post can become personal service.
[30] Nor do I consider that what occurred falls within s 387(1)(f) relied on by the applicant. That section provides that:
(1) A document, including a writ, summons, notice, or order, in any legal proceedings may be served on a company as follows:
…
(f)by serving it at an address for service given in accordance with the rules of the court having jurisdiction in the proceedings or by such means as a solicitor has, in accordance with those rules, stated that the solicitor will accept service.
[31] Mrs Houghton’s argument depended on the actions of Ms Diack in picking up the mail and taking the mail to the office as being personal service.
[32]Rule 19.12A(2) provides:
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.
[33] This rule was inserted in the Rules from 1 December 2009. Rule 6.5 provides that “A document may be served at an address for service by leaving the document at that address at any time between 9 am and 5 pm”. As noted in [24] above, “leaving” does not include posting.
[34]In Westpac New Zealand Ltd v Lau, Edwards J held that:11
… r 6.5 should be liberally interpreted so as to give effect to r 19.12A, and to allow service to be effected by posting documents to a post office box address if that is the address provided in the caveat. That conclusion flows from the definition of “address for service” in r 1.3 which includes the address of a place in New Zealand “at which a document…may be sent by post to that party, under these rules…”.
[35] The authors of McGechan on Procedure queried Her Honour’s interpretation of r 6.5 as that rule deals specifically with service at an address for service, not service by means of Post Office box, which is governed by r 6.6.12
11 Westpac NZ Ltd, above n [12] at [7].
12 McGechan on Procedure (online loose-leaf ed, Thomson Reuters) at [HR6.5.03].
[36] The telling point about the Westpac v Lau decision is that the documents were served by posting them to the Post Office box address provided in the caveat lodged by the respondent. Providing a Post Office box number as an address for service in my opinion means that the person to be served is confirming that service by post is acceptable – in a practical sense post is the only means of service at a Post Office box number.
[37] That is not the case here. Neither r 19.12A or Westpac v Lau assists the applicant in this case as the statutory demand referred to a physical address as the place for service.
[38] Where the address for service in the statutory demand is the physical address of a law firm personal service is required.
[39] Accordingly, I am compelled to conclude that the application to set aside the statutory demand was not validly served. That is not altered by the fact that the application was in fact received. In Ingleburn Developments Ltd, there was no dispute by the solicitors who were the address for service that they received the application by facsimile on time. That did not alter the fact that personal service at the physical offices of the solicitors was required. “Service by facsimile was neither mentioned nor authorised”.13 Nor did the fact of receipt establish service in Livi Investments as noted at [22] above.
[40] Mrs Houghton was unable to refer me to any authority in support of the proposition she advanced, or as authority for the proposition that if it could be established that the proceedings were in fact received, albeit by unauthorised means, that such was good service.
[41] Accordingly, having concluded that the application was not served within the 10 working day period which is compulsory under s 290 of the Act, the application is a nullity.
13 Ingleburn Developments Ltd, above n 1, at [34].
Merits
[42] Given the conclusion reached, I need say little on the merits save that I would have held that the demand should be set aside on the ground that the costs claimed to be payable under the Lease were not due and presently payable as at the date of the statutory demand. The statutory demand of itself cannot create a debt. The statutory demand here was not preceded by an invoice from the lessor to the lessee based on the costs claimed to be payable, nor any letter of demand.14
[43] The point of requiring there to be an invoice and a demand for the costs is to ensure that they are properly particularised and explained, which would give the applicant an opportunity to examine the claim and decide whether to invoke the dispute resolution provisions under the Lease.
[44] Accordingly, the application to set aside the demand is dismissed. Costs are reserved. If the respondent seeks costs, then a memorandum not exceeding three pages is to be filed within five working days of the date of this Judgment (that is by Monday 29 April 2019) and the applicant may respond within a further five working days (that is by Monday 6 May 2019).
Associate Judge Lester
Solicitors:
Anderson Lloyd, Christchurch Menzies Marshall La, Winton
Copy to counsel: A S P Tobeck, Barrister, Otautau
14 See discussion in Insolvency Law & Practice (online loose-leaf ed, Thomson Reuters) at [CA 289.02].
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