Thomsons Timber Supplies Limited t/a Thomsons ITM Building Centre v Elite Empire Limited

[2015] NZHC 196

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2014-419-422 [2015] NZHC 196

UNDER

The Companies Act 1993

IN THE MATTER OF

An application for liquidation of a company

BETWEEN

THOMSONS TIMBER SUPPLIES LIMITED T/A THOMSONS ITM Building Centre

Plaintiff

AND

ELITE EMPIRE LIMITED Defendant

Hearing:	16 February 2015
Appearances:	Mr P Morris for Plaintiff Mr F Deliu for Defendant
Judgment:	16 February 2015

ORALJUDGMENT OF ASSOCIATE JUDGE J P DOOGUE [on Costs]

THOMSONS TIMBER SUPPLIES LIMITED T/A THOMSONS ITM Building Centre v ELITE EMPIRE LIMITED [2015] NZHC 196 [16 February 2015]

[1]      The issue that has arisen between the parties concerns whether the plaintiff correctly served a statutory demand and also the subsequent liquidation proceedings which were linked to the earlier statutory demand.

[2]      The brief circumstances are that a woman by the name of Lijun Zhang is the sole director of the defendant company.   The plaintiff claimed that the defendant company owed it a debt and made arrangements to serve a statutory demand upon it. For reasons not relevant to this judgment the process server was instructed to serve the  statutory  demand  on  the  person  that  was  believed  to  be  a  director  of  the defendant company.   This he did on 25 September 2014.   In his affidavit proving service the process server referred to a “Mr Zhang”.  The person so named he served and that person told him he was a director of Elite Empire Limited and that he accepted service.  It later became clear that “Mr Zhang” could not be the director and therefore could not have accepted valid service of the statutory demand.

[3]      On 16 December 2014 the process server served the substantive proceedings and gave an affidavit that he affected service by handing them to “Lijun Zhang” at Hamilton on 16 December 2014.  Evidence has since emerged that Ms Zhang was not in New Zealand at the time and place indicated when service was stated to have occurred.

[4]      It would appear that the service has been beset by mistakes which were probably contributed to by the ethnicity of Lijun Zhang and difficulties with communication. There is no doubt that the bailiff was acting in good faith.

[5]      However in the wake of these mistakes Mr Morris and Mr Deliu have had a discussion today and the upshot of that is that Mr Morris for the plaintiff has stated that the liquidation proceedings will be withdrawn.  That leaves the question of costs upon which the parties were unable to agree.  Mr Morris took the position that the process server had good cause to serve the documents as he did.  He reminded me of the fact that the person who purportedly accepted service of the substantive proceedings identified himself as a director of the company when he was not.

[6]      On the other hand Mr Deliu said it did not matter about those matters.  The fact was that the proceedings have not been properly served and it was for that reason that Mr Deliu appeared pursuant to a protest to jurisdiction.  Mr Deliu said that the company had incurred costs in taking the various steps that it has as a result of the mis-service.  It should be reimbursed for at least part of those costs.

[7]      I consider that the plaintiff ought to pay costs.  Effectively it has discontinued its proceedings and I will follow the same reasoning that seemed applicable in a recent judgment that I delivered New Zealand Natural Therapy (in Liquidation) & Ors v Little1

I intend to follow the approach that Faire J (then Associate Judge) adopted in Scaffold Shore Load Ltd v Gill and Gundry Concrete Construction Ltd.2    In that case, his Honour determined that the rule governing the ordering of costs on a discontinuance, r 15.23, could be applied by analogy to interlocutory applications. The judgment contains the following passages:

[4]       The defendant, by counsel, has reviewed the history of the dispute.     For  reasons,  which  I  will  shortly  explain,  it  is  not appropriate that I make any determination of the merits of this case.

[5]       Because the plaintiff has effectively elected not to proceed, the position is analogous to that which applies where a plaintiff discontinues.   When that occurs r 476C of the High Court Rules applies.

[6]       The Rule raises a presumption that a discontinuing party will be liable for costs: North Shore City Council v Local Government Commission 9 PRNZ 182.  Generally, the Court will not inquire into the merits of the case unless the answer is clear and obvious.

[7]       Once the above considerations are taken into account, the matter is to be considered pursuant to the cost regime which was introduced on 1 January 2000 and is found in rr 46 to 53 of the High Court Rules

[8]      As to the amount of costs, I consider that there is no reason for departing from the presumptive position that 2B costs are applicable.   The parties were not able to agree on a fixed figure and accordingly I direct that the plaintiff is to pay

costs on a 2B basis.  I am sure that both counsel involved who are experienced and

1      New Zealand Natural Therapy (in Liquidation) & Ors v Little, 2015 NZHC 156.

2      Scaffold Shore Load Ltd v Gill and Gundry Concrete Construction Ltd HC Auckland CIV-2006-

404-1207, 30 June 2006.

pragmatic will be able to resolve the costs matters without further recourse to the

Court. The plaintiff will also pay disbursements to be fixed by the Registrar.

[9]      Finally I note that the liquidation proceedings are withdrawn by leave.

J P Doogue

Associate Judge