Richard Zhao Lawyers Ltd v Chen
[2015] NZHC 3230
•16 December 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-2086 [2015] NZHC 3230
UNDER Part 2 of the Insolvency Act 2006 and
r 24.8 of the High Court Rules
IN THE MATTER
of the bankruptcy of Jie Ping Chen
BETWEEN
RICHARD ZHAO LAWYERS LIMITED Judgment Creditor
AND
JIE PING CHEN Judgment Debtor
Hearing: 15 December 2015 Appearances:
Mr P F Chambers for the Applicant
Mr F C Deliu for the RespondentJudgment:
16 December 2015
JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE
This judgment was delivered by me on
16.12.15 at 4.30 pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
RICHARD ZHAO LAWYERS LIMITED v CHEN [2015] NZHC 3230 [16 December 2015]
[1] The issues that fall to be considered in this case were stated by Mr Paul
Chambers, Counsel for the judgment debtor as follows:
2. It is submitted that there are four simple matters to determine:
2.1 Service on the Judgment Debtor the Bankruptcy Notice.
2.2 Service on the Judgment Creditor, the Judgment Debtor’s
application to set aside the Bankruptcy Notice.
2.3 Whether the Judgment Debtor is unable to pay the Judgment
Creditor’s debts and is, therefore, insolvent.
2.4Whether or not, in all the circumstances, it is appropriate to set aside, or stay, the Bankruptcy Notice.
[2] As it happens, I consider that the application can be resolved by consideration only of point 2.2 above.
[3] The background to the application can be stated briefly.
[4] On 26 March 2014 the judgment debtor engaged the legal services of the judgment creditor a Mr Zhao who is the principal of Richard Zhao Lawyers Limited and who assisted her with relationship property proceedings in the Family Court that were commenced in 2013.
[5] The judgment debtor was subsequently invoiced $13,402.25 for these services. However, as was her right, instead of paying the invoice she made a complaint to the Lawyers Complaints Service of the New Zealand Law Society. That matter has yet to be concluded.
[6] Pursuant to Clause 8 of the retainer agreement that she entered into with the judgment creditor, the property of the judgment debtor has been caveated. By 8 May
2015 she unsuccessfully opposed a judicial review application the judgment creditor brought against her and this led to a costs award on 5 August 2015 being made against her in the amount of $4,000.
[7] The judgment debtor has not paid the costs ordered which led to the judgment creditor bringing the instant bankruptcy proceedings.
[8] As Mr Deliu for the judgment creditor submitted:
11. This was served on her:
a.On the Judgment Creditor’s best version of events, her lawyer due to his express acceptance that he is acting on 16
September 2015;
b.On the Judgment Creditor’s alternative version of events, her lawyer due to the Judgment Debtor’s express acceptance that he may be served on 25 September 2015, ibid; or
c. On the Judgment Debtor’s version of events, on 28
September 2015, ibid.
[9] Following service on one of those dates, the judgment debtor, in turn, purported to serve an application to set aside the notice on 9 October 2015.
[10] The judgment creditor says that application was never properly served. Validity of service of the application to set aside is one of the issues raised by the application.
[11] There is no doubt that the statutory demand was served upon the judgment debtor. The question of the date when this occurred was raised as an issue. The judgment debtor through her counsel, Mr Chambers, was not prepared to concede that service of the bankruptcy notice occurred before 28 September 2015. It was not until that date that counsel had instructions to accept service on behalf of his client. I accept that the position that the judgment debtor takes is correct. I do not accept that a judgment creditor can unilaterally obtain the authority of the client to serve counsel by way of an agreement or discussions to which the legal representative who is to be served is not a party.
[12] However, I do not propose to determine the issues of what date the bankruptcy notice was served as that relates to the question of whether the application to set aside the bankruptcy notice was served within 10 working days as required by the HCR 24.10 and the form of bankruptcy notice set out in Schedule B2
to the Rules. The reason for taking this approach is that the validity of the application to set aside the bankruptcy notice can be decided on different grounds that are discussed below.
Service of the application to set aside
[13] I deal next with the issue whether the application to serve the application to set aside was carried out within the time limits specified for that to occur.
[14] The evidence is that a process server went to a property at 12 Ryan Place Manakau to serve the application to set aside the bankruptcy notice. The registered office of the judgment creditor is at that address. However there was a complicating feature present in that the judgment creditor no longer carries on business at that address. The premises are occupied by a different business known as Yong Xiang which is a supplier of tubes, fittings and valves.
[15] The process server acting on behalf of the judgment debtor deposed that she went to this property and spoke to someone she encountered there. That turned out to be a person by the name of Ying En Yan (“the Manager”) who is the warehouse manager employed by the tube and fittings company.
[16] The manager gave an affidavit. In it he said that the process server asked him
if “this is Richard Zhao Lawyers Limited” and that his response was:
2. … I told him no
3. Notwithstanding my answer, he nonetheless then handed me an envelope with some documents inside and asked me to hand them to Richard Zhao Lawyers Limited (he did not provide me with the name of any individual) and then left.
[17] The manager further stated that he never agreed to accept the documents on the judgment creditor’s behalf.
[18] The process server, Ms Blake, gave a slightly different account of matters. She apparently accepted that it was the manager of the pipe and tubing’s company that she served. She said that:
4.I did not ask him if this was Richard Zhao Lawyers Limited. The man I handed the documents to accepted them with a nod, after I told them [sic] they were for the judgment creditor, Richard Zhao Lawyers Limited.
5.I knew that Richard Zhao Lawyers Limited did not conduct its business at that address, having served papers for the judgment creditor at that address earlier in the year for Ms Chen’s legal team,
…
6. Richard Zhao Lawyers Ltd actually conducts its business from 9
City Road Auckland Central … .
[19] Neither the manager nor Ms Blake were subject to notices requiring them to be available for cross-examination. To the extent that there are conflicts between the evidence of the two, they cannot be resolved. There is no contextual assistance available in the form of contemporaneous documents or the evidence of independent parties who might assist the Court to resolve any dispute.
[20] Therefore the approach that I will take is in accordance with the burden of proof which lies on the judgment debtor, any unresolvable conflicts of fact should be resolved by adopting the most favourable view of them from the point of view of the judgment creditor (and against the judgment debtor who has the burden of proof on the issue).
[21] Mr Deliu submitted that based upon the evidence which the process server had provided, there had not been proof of service of the application to set aside the bankruptcy notice in conformity with the statutory requirements of s 387 of the Companies Act 1993 which provides as follows:
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) of this section are the only methods by which a document in legal proceedings may be served on a company in New Zealand.
[22] As Associate Judge Gendall noted in his decision in Ingleburn Developments
Ltd V Brc Ltd:1
[10] The present application is a legal proceeding in terms of s 387
Companies Act 1993. And, as McGechan on Procedure at HR198.02 notes, service on companies is governed exclusively by the provisions of the Companies Act 1993 and s 387 specifically sets out mandatory requirements.
[11] Section 387 Companies Act 1993 similarly is prescriptive. It makes clear that any document in legal proceedings must be served by one of the methods listed in subsection (1) of that section – noted in paragraph [9] above – Timberworld Ltd v Tanner Sawmills Ltd (2002) 9 NZCLC 262, 983.”
[23] I agree that the methods of service specified in s 387 are mandatory and that it is clear that any document in legal proceedings must be served by one of the methods listed in subsection (1).
[24] The issue is whether Ms Blake actually carried out service in accordance with those requirements. If the judgment debtor does not prove that service was properly carried out, then the application which the judgment debtor brings must fail.
[25] Mr Chambers told me that the judgment debtor relied upon subsection 1(c) of s 387. The documents he said were left at the companies registered office.
1 Ingleburn Developments Ltd V Brc Ltd (Unreported) HC WN CIV-2007-485-454 30 July 2007.
[26] Mr Deliu on the other hand said that the various types of service contemplated by the section were mutually exclusive. The parties serving could either deliver the documents to an employee of the company at the companies head office or principal place of business2 or could leave it at the company’s registered office.3 He submitted that the process server in this case had not elected one of the means described in s387. She had left the document with the employee of a different
company from the judgment creditor. In so doing, she did not comply with subsection (1)(b). Nor was there compliance with subsection (1)(c) which contemplates the document being physically left at the premises.
[27] I accept that submission. 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, 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. He/she may have no interest in passing the documents on to the relevant person and may not even know who that person is. He may even take the documents away from the premises.
[28] On the other hand, it is to be assumed that officers of a company who make reasonable arrangements for its procedures in this area will ensure that the company’s employees will know what to do with documents when they are served.
[29] That aside, there will still be cases where the company continues to have a place as its registered office even though it no longer has a physical connection with those premises. In such a circumstance, plainly there is a risk that service copies of documents in Court proceedings will not come to the attention of the company. To be balanced against safeguarding the interests of the company that finds itself in such a situation parties to proceedings who are required to serve documents must be
entitled to some certainty that they have done all they need to do when serving
2 Subsection (b).
3 Subsection (c).
documents. If for example, service is carried out by leaving the documents at the place which the company has continued to represent as its registered office and the documents do not reach the responsible person in the organisation, that will not be the concern of the serving party. Any problems that will arise are of the company’s own making. After all, it can be assumed that companies generally will appreciate that legal processes will from time to time be served on them and that it is up to them to not only acquaint themselves with the rules but to adopt reasonable arrangements and procedures to ensure that if documents are left at their registered office, they will come to the notice of responsible officers of the company.
[30] There is a need for certainty in these matters if commerce is to be carried on effectively and efficiently. It is for that reason that the legislature has enacted what is essentially a code. If a party attempting to serve documents complies with the code, it can be confident that it has done all that the law requires and that service will be regarded as complete even though, it must be accepted, there may be circumstances in which the company never appreciates that documents have been served.
[31] It is not unreasonable to expect that those who are required to serve documents will be properly trained and will understand the rules such as those contained in s 387.
[32] My conclusion is that the method of service which the process server adopted in this case does not comply with s 387. The process server attempted to adopt a hybrid type of service incorporating elements of subsections (1)(b) and (1)(c) which did not satisfy the requirements of this section.
[33] For all of those reasons, the application to set aside the bankruptcy notice is dismissed.
[34] Mr Deliu submitted that costs on the application should follow the event and should be on a 2B basis. While Mr Chambers did not expressly make submissions on the matter of costs, he did not dissent from that approach. I agree that the approach that Mr Deliu submitted is the correct one. The judgment creditor will
have an order for costs on a 2B basis together with disbursements as fixed by the
Registrar.
J.P. Doogue
Associate Judge
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