Premium Mobility Services Limited v Delta Shared Services Limited

[2022] NZHC 3021

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-002450

[2022] NZHC 3021

UNDER

the Companies Act 1993

IN THE MATTER

of liquidation proceedings

BETWEEN

PREMIUM MOBILITY SERVICES LIMITED

Plaintiff

AND

DELTA SHARED SERVICES LIMITED

Defendant

Hearing:

(On the papers)

Counsel:

James Hakaria for the Plaintiff

Defendant in Person (through Director of Shareholder Murray Osmond)

Date of Minute:

18 November 2022

JUDGMENT OF MOORE J

[On application to recall liquidation order]

This judgment was delivered by me on 18 November 2022 at 1:00 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar / Deputy Registrar Date:

PREMIUM MOBILITY SERVICES LIMITED v DELTA SHARED SERVICES LIMITED [2022] NZHC 3021

[18 November 2022]

Introduction

[1]                 On 27 May 2022, Associate Judge Andrew (as he then was) made an order that the defendant company, Delta Shared Services Ltd (“Delta”), be put into liquidation.

[2]                 Mr Osmond, who describes himself as the director of Delta Private Equity Ltd (Delta’s parent company), applies to recall Associate Judge Andrew’s order on the grounds that in making it, the Judge was materially misled by the plaintiff’s counsel.

[3]                 In the normal course of events, the application would be referred to the Judge who made the order. However, Associate Judge Andrew is unavailable, so the file has been referred to me in my capacity as Civil List Judge.

Procedural history

[4]                 The procedural history, although not overly complex, requires some detailed analysis in order to properly understand the competing accounts and determine the application.

Proceedings

[5]                 The plaintiff commenced its proceedings to place Delta in liquidation by way of statement of claim dated 20 December 2021. The essence of the claim is that various invoices payable by Delta to the plaintiff totalling more than $113,000 remained unpaid as at the time of filing and that further defaults were expected up to a sum of some $129,000. The matter was given a first call date of 1 April 2022.

First call

[6]                 Prior to the first call, Mr Hakaria, counsel for the plaintiff, filed a memorandum dated 30 March 2022. This recorded that although Delta had been served with a notice of proceeding, statement of claim and memorandum of counsel, the supporting affidavit was unsworn due to the disruptions of COVID-19. As a consequence, r 31.12 of the High Court Rules 2016 (“the Rules”), which requires relevant documentation to be served on the defendant not less than 15 working days before the date of the hearing, was unable to be complied with. Mr Hakaria thus asked for an adjournment

of one month to allow the affidavit to be served on Delta, noting that Delta had taken no steps of any kind in the proceeding and would not be prejudiced in the event an adjournment was granted.

[7]                 On 31 March 2022, Associate Judge Gardiner granted the plaintiff’s application on the papers. She minuted the Court file in the following way:

“The first call of this matter is adjourned to 29 April 2022 at 10am. The plaintiff is to inform the defendant of the adjournment and provide the Court with  evidence  that  the  defendant  has  been  informed,  at   the   call   on 29 April 2022.”

[8]                 On receipt of that Minute, and in compliance with the Judge’s direction, the plaintiff emailed Mr Osmond later that same day advising him that although the matter was scheduled to be called on 1 April 2022 it had been adjourned to 29 April 2022. The email attached the Court’s email containing Associate Judge Gardiner’s Minute.

Preliminaries to the next call on 29 April 2022

[9]                 On 29 April 2022, that is on the day of the next call, Mr Osmond filed a slew of documents. These included an application for leave to file a statement of defence out of time; a statement of defence; an affidavit sworn by a Mr Needham disputing service had  been  correctly  effected  (discussed  below);  and  an  affidavit  of  Remy Brooks attaching a “will say” statement of Mr Osmond which referred the alleged defects in service such that he claimed time had not started to run, the difficulties in replacing the director while the company was under threat of liquidation, giving notice to the plaintiff not to proceed to advertise and threatening injunctive relief in the event the plaintiff “should … issue proceedings”.

[10]              I interpolate here, for completeness, that companies are not permitted to be represented in this Court other than by a qualified lawyer.1 As such, Mr Osmond would, in the normal course of events, be required to first obtain leave of the Court to appear. No such application has been received. For the purposes of this aspect of the proceedings in this Court only, I shall proceed as if leave had been granted noting that the plaintiff has not taken the point.

1      Re G J Mannix Ltd [1984] 1 NZLR 309 (CA).

[11]              The application seeking leave to file a statement of defence out of time claimed two primary grounds in support:

(a)that Delta was not served with the statutory demand relied upon by the plaintiff; and

(b)Delta has a just and equitable defence to the allegations because it does not and never has had a contractual relationship with the plaintiff. All requests made by Delta for the plaintiff to produce documentary records to prove same have been ignored.

[12]              Mr Osmond also advised that a Hamilton lawyer, Mr Gloyne, who was apparently assisting Delta on an unrelated issue, would be able to accept instructions and appear.

[13]              Mr Osmond suggested that it would be in the interests of justice for the matter to be adjourned for two months to enable the parties to resolve the issues raised.

Hearing on 29 April 2022

[14]              The same day as Mr Osmond filed his application and associated papers, the proceedings came before Associate Judge Gardiner. Her Minute of 2 May 2022 is reproduced in full below:

“[1]     The defendant has filed documents indicating an intention to instruct counsel and to defend the proceedings.

[2]        The proceeding is adjourned to 27 May 2022 at 10.45 am to permit the defendant to instruct counsel and make an application for leave to file a statement of defence out of time.

[3]        Before the next call, the plaintiff is to file a memorandum of counsel and further affidavit addressing issues with service of the statutory demand and the proceeding. In addition to the issue raised by the defendant in the affidavit of Gareth Needham sworn 28 April 2022, it appears that the plaintiff served the statutory demand and proceedings on the defendant at the registered office and address for service of its parent company, rather than at the defendant’s registered office and address for service (73 Watkins Road, Cambridge). The Court requires clarification of these issues.”

(emphasis original)

Developments after hearing on 29 April 2022

[15]              On 24 May 2022, in compliance with Associate Judge Gardiner’s direction, Mr Hakaria filed a memorandum and other documents addressing the issues raised by the Judge. Amongst those documents was the further affidavit of Mr Quintal discussed above.

[16]              Mr Hakaria submitted that service of the statutory demand was properly effected on the evidence of Mr Quintal but, in any event, Mr Osmond was made well aware of it at or about the time of service.

[17]              He also submitted that as at the date of his memorandum Delta had had 81 days from the date the application within which to file a defence but had not done so. Despite indications counsel would be instructed to defend the proceedings that had not occurred. The debt remained owing and had increased to over $129,000. He submitted the company should be put in liquidation.

[18]              On 26 May 2022, Mr Osmond filed a further memorandum in anticipation of the hearing the following day. It has Associate Judge Andrew’s handwritten note on the front which appears to read “Director of parent company”, indicating that the Judge had read it before the hearing. Mr Osmond confirmed that Delta had previously received copies of the documents from Mr Hakaria.

[19]              He noted that Associate Judge Gardiner had directed the plaintiff to file a further memorandum and affidavit in relation to service, but noted that neither he nor Delta had been served with anything either at the registered office or via email (although I note that her Honour’s  minute did not require service on the Delta or   Mr Osmond).

[20]Mr Osmond advised that:

“Mr Gloyn a lawyer from Hamilton has continued his offer to assist if required, but this was contingent upon there being something filed and which might require an answer. So, to keep costs at a minimum he has not been formally instructed, as yet.”

[21]              Mr Osmond reiterated that both service of the statutory demand and privity of contract would be contested.

Hearing on 27 May 2022 – liquidation

[22]              The proceedings came before Associate Judge Andrew the following day, that is  27  May  2022.  Mr  Hakaria  appeared  for  the  plaintiff  as  counsel.  Despite  Mr Osmond’s memorandum of the previous day, there was no appearance for Delta, either by Mr Osmond or Mr Gloyn.

[23]              Mr Hakaria has since filed a memorandum dated 11 July 2022 in which he set out what occurred at the hearing before Associate Judge Andrew. That explanation is reproduced in full below.

“20Counsel explained that when the matter was first called before Associate Judge Gardiner it was adjourned:

(a)to allow the defendant company to instruct counsel and to apply for leave to file a defence out of time – but that hadn’t happened; and

(b)to allow the plaintiff to file a memorandum and affidavit about service – and that had happened.

21Counsel went on to explain that the defendant had not been served, because Associate Gardiner’s minute only directed the plaintiff to file a memorandum and affidavit, and the defendant had not filed a defence and had no standing in the proceeding and wasn’t entitled to be served.

22After reading counsel’s memorandum of 24 May 2022, Associate Judge Andrew ordered that the defendant be placed in liquidation – and orders were timed at 11:11am.”

Subsequent steps – Application to recall

[24]              By memorandum dated 27 May 2022, Mr Osmond filed an application to recall Associate Judge Andrew’s orders. Apart from seeking a recall, Mr Osmond seeks a direction that the plaintiff be required to file an affidavit “in response to the submission made to the Court on 27 May 2022” and “the matter be adjourned to a date specified by the Court to allow the plaintiff and the shareholder’s counsel to be heard”.

[25]              No formal application was made, nor is there an affidavit from Mr Osmond. Instead Mr Osmond has filed a second unsworn affidavit from Mr Brooks, who says he was asked by Mr Osmond to attend, observe and report back on both hearings, being 30 April 2022 before Associate Judge Gardiner and 27 May 2022 before Associate Judge Andrew. Mr Brooks claims he listened carefully on both occasions. The relevant portion of his affidavit is reproduced in full below:

“6. At [the hearing on 27 May 2022] Counsel for the Plaintiff (Ryan) said that at the last call (30 April 2022) an adjournment was granted for [Delta] to seek counsel and provide a defence. He noted that hadn’t been done.

7.He noted that there was a memorandum filed yesterday (26 May 2022) by Mr Osmond seeking a further adjournment of two months.

8.He noted that Mr Osmond wasn’t Counsel and not a Director of the defendant but was a director of the parent company.

9.His Honour then read the memorandum and noted what Counsel for the Plaintiff had said.

10.He asked Counsel if they wanted to proceed. They said yes.

11.The defendant was then placed in liquidation at 11:11am.

12.I believe Counsel for the Plaintiff (Ryan) misled the court when he said that the earlier adjournment had been granted to allow time for the Defendant to instruct Counsel.

13.I say this because:

a.I attended the earlier hearing on 30 April 2022 before her Honour Judge Gardiner.

b.Ryan was not representing the Plaintiff at that hearing; it was a female Counsel.

c.Her Honour Judge Gardiner said to that Counsel that she had read the memorandum Mr Osmond (dated 29 April 2022) and the affidavits filed.

d.Her Honour spoke to Counsel for the Plaintiff about the initial service.

e.She believed there were issues relating to improper service.

f.Her Honour said that she believed an adjournment was appropriate and that she expected the Plaintiff to file a further affidavit from its process server responding to the affidavit of Mr Needham together with a memorandum.

g.At no time do I recall her Honour saying that the adjournment was to give time for the Defendant to instruct Counsel and file a defence.

h.I reported to Mr Osmond that Her Honour had instructed the Plaintiff to file a memorandum dealing with the service matter and a further affidavit from the process server before the next hearing (on 27 May 2022)

[26]              Mr Osmond’s application is based on his claim that Associate Judge Andrew was misled by counsel for the plaintiff when he explained why Associate Judge Gardiner had adjourned the hearing to 27 May 2022. He claims that Mr Needham’s third affidavit, of 29 April 2022, is “false (and perjurious)”.

[27]              Mr Osmond also filed a supporting memorandum which contains extensive statements of evidence which should more properly have been in affidavit form. He repeated the background; referred to Delta’s funding issues, now resolved, arising out of a General Security Agreement; Mr Gloyn’s availability to accept instructions; and the two primary challenges being ineffective service and privity of contract. He also sought a two month “adjournment” to enable the parties to resolve the issues.

[28]              The plaintiff opposes recall. Mr Hakaria, by memorandum dated 11 July 2022, traversed the background pointing out that the plaintiff complied with Associate Judge Gardiner’s directions and that Mr Brooks’ recollection does not align with the express language of the Judge as reproduced in her Minute. He also submits that Mr Brooks’ affidavit  was  (and  remains)  unsworn,  it  refers  to  the  matter  being  called  on  30 April 2022 which was a Saturday, and incorrectly records counsel’s name as “Ryan”.

[29]              Mr Hakaria points out the chronic and continuing failure to file a statement of defence, and the consequential lack of standing and entitlement to be served with all subsequent papers and documents.

Legal principles – recall

[30]              Rule 11.9 of the Rules provides that a Judge may recall a judgment given orally or in writing at any time before a formal record of it is drawn up and sealed. In

Horowhenua County v Nash (No 2), Wild CJ set out the three categories of cases in which a judgment may be recalled:2

“Generally speaking, a judgment once delivered must stand for better or worse subject, of course, to appeal. Were it otherwise there would be great inconvenience and uncertainty. There are, I think, three categories of cases in which a judgment not perfected may be recalled — first, where since the hearing there has been an amendment to a relevant statute or regulation or a new judicial decision of relevance and high authority; secondly, where counsel have failed to direct the Court’s attention to a legislative provision or authoritative decision of plain relevance; and thirdly, where for some other very special reason justice requires that the judgment be recalled.”

[31]              The Court being misled as to a material consideration qualifies as a “very special reason” for which a judgment may be recalled.3

Discussion

[32]              The central question is whether Associate Judge Andrew was materially misled such that his liquidation order should be recalled. However, because they are also relied upon by the defendant, I shall also discuss what I consider are the more peripheral questions of whether service of the statutory demand was properly effected on Delta and whether the claimed defence of privity of contract should be permitted to be pleaded.

Was the Judge misled?

[33]I am easily satisfied he was not. My reasons follow.

[34]              The claim is that counsel for the plaintiff wrongly advised Associate Judge Andrew that the adjournment granted by Associate Judge Gardiner “had been granted to allow time for the defendant to instruct counsel”.

[35]              In examining whether Associate Judge Andrew was misled, it is necessary to review the express wording of Associate Judge Gardiner’s Minute of 2 May 2022.

2      Horowhenua County v Nash (No 2) [1968] NZLR 632 (SC) at 633. This passage has been cited in Saxmere Co Ltd v Wool Board Disestablishment Co Ltd [2009] NZSC 122, [2010] 1 NZLR 76 at [2]; Uhrle v R [2020] NZSC 62 at [22] and [29]; Rainbow Corp v Ryde Holdings (1992) 5 PRNZ 493 (CA); Unison Networks Ltd v Commerce Commission [2007] NZCA 49; and Erwood v Glasgow Harley [2007] NZCA 88.

3      Murren v Schaeffer [2019] NZCA 34.

There she recorded that Delta had filed documents indicating an intention to instruct counsel and defend the proceedings. She thus adjourned the matter “to permit the defendant to instruct counsel and make an application for leave to file a statement of defence out of time”. That was the stated purpose of the adjournment. That is what counsel advised Associate Judge Andrew was the purpose of the adjournment. It follows that there was no misstatement. Counsel’s advice was correct.

[36]              It also necessarily follows that Mr Brooks’ recollection of what was told to the Judge is imperfect and, in particular, his statement that he did not recall at any time Associate Judge Gardiner saying that the adjournment was to give time for the defendant to instruct counsel and file a defence. Whether her Honour said that misses the point, although given the contents of her Minute it seems likely she must have. What was recorded in her Minute as to the reason for the adjournment is determinative. Put another way, when counsel for the plaintiff advised Associate Judge Andrew that was the purpose of the adjournment, he was simply reciting what Associate Judge Gardiner had said in her Minute.

[37]              Furthermore, there is nothing in Mr Brooks’ affidavit which assists in terms of any assessment of the reliability of his account. He does not depose how and in what circumstances he was asked by Mr Osmond to recall what took place and what was said at both hearings. Nor does he make reference to making any contemporaneous notes or other aides memoire to assist in documenting his version.

[38]              There are other indicia of unreliability. For example, Mr Brooks states that Associate Judge Gardiner believed an adjournment was appropriate for the purpose of obtaining further evidence as to service. That is not recorded in the Judge’s Minute. She simply directed the plaintiff to file a memorandum of counsel and further affidavit addressing issues relating to the service of the statutory demand and the proceedings. Another example is Mr Brooks reference to counsel’s name as “Ryan”. Plainly, that is incorrect. Finally, on this point, it is notable that Mr Brooks’ affidavit is unsworn and remains so despite being filed on 27 May 2022, more than two months ago. Only limited weight can be given to the contents of an unsworn statement because such a document carries no effective sanction against untruth, for example perjury, in the

event it is false and intended to mislead. It follows that I find Mr Brooks to be an unreliable evidential source.

[39]              Relatedly, Associate Judge Andrew was plainly correct to make the orders he did given the circumstances.

Failure to instruct counsel and/or file a defence

[40]              First, despite Associate Judge Gardiner adjourning the proceedings “to permit the defendant to instruct counsel”, counsel was not instructed at any time. Mr Osmond filed his memorandum which, for the reasons explained above, the Judge must have considered. Instead of instructing counsel or appearing himself, Mr Osmond instructed Mr Brooks to attend and take notes.

[41]              Neither was there compliance with the other reason Judge Gardiner gave for adjourning the proceedings; to give time to make an application for leave to file a statement of defence out of time. No steps were taken by Delta to advance any application for leave. The plaintiff’s application was served on Delta in January 2022. Delta had 10 working days from service to file and serve a statement of defence. It has still not filed or served a defence nor made any attempt to advance the signalled application for leave to file out of time. Mr Osmond has not been granted leave to represent Delta and his attempt to file such an application is without standing.

[42]              Furthermore, there is no supporting evidence to explain why leave to file a statement of defence out of time should be granted. It would appear that the primary evidence relied on is a “will say” statement made by Mr Osmond attached to an affidavit sworn by Mr Brooks. There is no supporting affidavit by Mr Osmond on this point; only memoranda. The Court is left wondering why Mr Osmond has not been prepared to commit his statements to oath.

[43]              In these circumstances the Judge was entitled to proceed in the absence of the defendant to make the orders sought.

Was service of the statutory demand properly effected?

[44]              In order to deal with this issue it is necessary to set out the chronology and the competing positions on the question of the effectiveness and lawfulness of service on Delta.

[45]              In an affidavit of service dated 23 November 2021 the plaintiff’s process server, Mr Quintal, deposed that on 27 October 2021 he served a covering letter and the statutory demand on Delta at its registered address of Level 17, 125 Queen Street, Auckland. He said:

“Gareth Needham met me and confirmed the address to be the registered office of Delta Shared Services Limited and accepted service of the Statutory Demand on behalf of Delta Shared Services Limited in a contactless manner”.

[46]              In another affidavit of service dated 28 January 2022 relating to service of the proceedings, Mr Quintal deposed he served the notice of proceeding to put Delta into liquidation, the statement of claim, and related documents (including the unsworn supporting affidavit) on Delta on 21 January  2022.  The  address  was  Level  17, 125 Queen Street, Auckland. He said:

“4Steve Hine met me and confirmed the address to be the registered   office of Delta Shared Services Limited, and accepted service of the Documents on behalf of Delta Shared Services Limited in a contactless manner.

5I took six photographs of service of the Documents at Level 17, 125 Queen Street, Auckland. Attached and marked “A” is a copy of these photographs”

[47]              Attached are six photographs which appear to show Level 17 as viewed from the lift and an illuminated sign outside a set of glass office doors stating “Delta Private Equity”.

[48]              Mr Osmond disputes that service of the statutory demand was properly effected and challenges Mr Quintal’s account. He has filed an affidavit sworn by Mr Needham dated 28 April 2022.

[49]              Mr Needham deposes that he is employed by Burgered Restaurants  Auckland Ltd and from time to time works from the offices of Delta Private Equity at

Level 17, 125 Queen Street, but is not a director of Delta. He said Mr Quintal did not serve Delta and his claim he did so is untrue. He says he has viewed relevant video footage of Level 17 and is adamant that the time at which Mr Quintal claims he attended the address Mr Quintal does not appear in any of the footage. He said he was approached by Mr Quintal in the lobby having been pointed out by the concierge as being from Level 17. Mr Quintal asked his name, Mr Needham gave it. Mr Quintal handed him an A4-sized envelope. Mr Needham rejects Mr Quintal’s account that he said or confirmed it was the registered office of Delta and that he never accepted service on behalf of Delta. His affidavit is silent on what he did with the A4-sized envelope after he received it.

[50]              Following the filing of Mr Needham’s affidavit, Mr Quintal has made a more detailed affidavit addressing  the  claims  contained  in  Mr  Needham’s  evidence. Mr Quintal noted that although he understood Delta’s address for service had since changed to an address in Cambridge, as at the time he served the statutory demand Delta’s address for service was Level 17, 125 Queen Street, Auckland.

[51]              He pointed out that service of the statutory demand by Mr Quintal was effected on 27 October 2021, when the address for service was 125 Queen Street. In reply to Mr Needham’s affidavit disputing service of the statutory demand, Mr Quintal said that he visited 125 Queen Street on 27 October 2021. Level 17 was locked and inaccessible without a swipe card. In the lobby he told a security officer or concierge that he needed to go to Level 17 to serve documents on Delta. That person “connected” Mr Quintal to Mr Needham,  who  was  walking  through  the  lobby. Mr Needham said he was from Level 17 and from Delta. He gave his name and told Mr Quintal he could accept service for Delta. Mr Quintal handed Mr Needham the statutory demand. Mr Quintal said that he is aware of the requirements for service and has received training. He said he would not have handed the statutory  demand to  Mr Needham, had Mr Needham not said that he was from Delta and could accept service on behalf of Delta.

[52]              Although the making of credibility and/or reliability findings on the papers is often impossible, there are aspects of the affidavit evidence described above which lead me to the view that Mr Quintal’s account is to be preferred over that of

Mr Needham. The first is that Mr Quintal is a professional process server who has received some vocational training. Secondly, his affidavit of 23 November 2021 records  Mr  Needham’s  name  and  the  circumstances  around  the   claim   that   Mr Needham accepted service on behalf of Delta. Mr Needham does not dispute that he met Mr Quintal at 125 Queen Street and that Mr Quintal handed him an envelope. Had Mr Needham not been prepared to accept service in these circumstances, it begs the question as to why he received and apparently retained the document Mr Quintal gave him. Had he attempted to return it to Mr Quintal or refused to accept it he would, most certainly, have said so. Also left unexplained is what Mr Needham did with the envelope.

[53]              However, in any event, I do not regard the resolution of the conflicting accounts as dispositive of the issue of effective service. A statutory demand may be served on a company by emailing to the company at an email address that is used by the company.4

[54]              It is uncontroversial that the following day, on 28 October 2021, Mr Hakaria sent an email to Mr Osmond’s email addressing ending in “@deltaanz.com”. This is the email address that he provided on documents filed with the Court during this litigation, which he  says  are  on  behalf  of  Delta.  Mr  Hakaria’s  email  advised Mr Osmond that the plaintiff had served a statutory demand on Delta the previous day. It attached a copy of the statutory demand. That evidence is uncontradicted. I am accordingly satisfied that Mr Osmond’s email address is one which is used by the company and that the email was properly addressed and sent.5 Service was effected.

[55]              In any event, that Mr Osmond purports to act and speak for the company and is plainly aware of the statutory demand and has actively engaged in aspects of the proceedings (and has since at least 29 April 2022) is telling evidence that Delta is well

4      Companies Act 1993, s 388(1)(d); Arzan Investments Ltd v Beresford Apartments Ltd (2003) 16 PRNZ 825 at [21]; Energy Efficient Healthy Homes Ltd v Greenwood Natural Ltd [2013] NZHC 1179 at [12]–[13]; and Maple Land International Ltd v Ping [2022] NZHC 248 at [17]. There appear to be conflicting approaches turning upon whether a statutory demand is “a document in any legal proceedings”. I prefer this approach, on the basis that a statutory demand is not, by itself, a document in a legal proceeding. It is able to be served through the electronic means set out in s 388. For the contrary view, see for example Delta Installations Ltd v Hamilton Joinery Ltd (2003) 16 PRNZ 814 (HC) at [21].

5      Section 392(1)(f).

aware of the proceedings and that the present challenge as to the correctness and adequacy of service is not only unduly technical but is plainly an exercise in form over substance. This reinforces the conclusion that there is no very special reason for which justice would require the liquidation order to be recalled.

Result

[56]The application to recall is dismissed.

Moore J

Barristers/Solicitors:
Sharp Tudhope, Auckland

Copy to:

Delta Private Equity Limited, Cambridge