Aotearoa Tourism Management Limited v Mahoney [2014] NZHC 2274 (17 September 2014)

Last Updated: 22 September 2014

IN THE HIGH COURT OF NEW ZEALAND WANGANUI REGISTRY

CIV-2014-483-026 [2014] NZHC 2274

BETWEEN	AOTEAROA TOURISM MANAGEMENT LIMITED Applicant
AND	MARK GERARD MAHONEY Respondent

Hearing:	17 September 2014
Appearances:	J Gilbert for applicant J Waugh for respondent
Judgment:	17 September 2014

_{ORAL JUDGMENT OF ASSOCIATE JUDGE SMITH}

[1] The plaintiff seeks to set aside a statutory demand said to have been served on it on 10 June 2014. The application was duly filed on 23 June 2014, within the period of ten working days allowed under s 290(2)(a) of The Companies Act 1993 (the Act).

[2] However the application was not properly served on Mr Mahoney within that ten working day period. Instead, a copy of the application and the supporting affidavit of Mr Terence Steven was emailed to Mr Mahoney, at an email address he had been using in earlier correspondence with the applicant’s solicitors. This email was sent at 1.47pm on 24 June 2014, being the last day for service of the application in accordance with s 290(2)(b) of the Act.

[3] In the covering email, the applicant’s solicitor asked Mr Mahoney to acknowledge service. He did not do so. Instead, on 25 June 2014, Mr Mahoney sent an email to Mr Garth Steven, the applicant’s director (with a copy to the applicant’s

_{solicitor) stating that the applicant had failed to respond to two statutory demands}

AOTEAROA TOURISM MANAGEMENT LIMITED v MARK GERARD MAHONEY [2014] NZHC 2274 [17

September 2014]

served on it within the ten working day period allowed under the Act. Mr Mahoney stated that “no documents have been served correctly on the creditor in terms of s 290(2)(b) of [the Act]. Any application to set aside the statutory demands are invalid. You have until the 30^th of June 2014 to pay the full amount of the debts and money owed”.

[4] Section 290(3) of the Act makes it clear that the court has no jurisdiction to extend the time for a creditor to serve an application to set aside a statutory demand.

[5] Mr Mahoney has filed a notice of opposition to the application, in which he has taken the service point. He has also filed an affidavit in opposition, although he failed to appear when the application was first called on 20 August 2014. Mr Gilbert raised that failure to appear with me today, and I indicated that, in my view, the application must still be dealt with having regard to all of the documents filed (including notice of opposition and affidavits).

[6] An application to set aside the statutory demand is an originating application under part 19 of the High Court Rules. Service of the application is required to be effected in accordance with the High Court Rules. Absent any agreement to accept service by email, a party is not permitted to effect service by email.

[7] Mr Gilbert relies on the decision of Master Venning, as he then was, in Timbalok New Zealand Ltd v Ski-Hi Roofing ¹, where the court addressed the situation where an application to set aside a statutory demand was filed in time and sent by fax to the creditor’s solicitors some two days before the last day allowed for service. The creditor’s solicitors responded saying they had no authority to accept service, and the court accepted that service had not been properly effected in accordance with the rules. However the court considered that r 11 of the High Court Rules as they then stood could be applied to cure the defect. The equivalent of that

rule in the current High Court Rules is r 1.9:

1.9 Amendment of defects and errors

(1) The court may, before, at, or after the trial of any proceeding, amend any defects and errors in the pleadings or procedure in the proceeding, whether

¹ Timbalok New Zealand Ltd v Ski-Hi Roofing [1996] 10 PRNZ 271.

or not there is anything in writing to amend, and whether or not the defect or error is that of the party (if any) applying to amend.

(2) The court may, at any stage of a proceeding, make, either on its own initiative or on the application of a party to the proceedings, any amendments to any pleading or the procedure in the proceeding that are necessary for determining the real controversy between the parties.

(3) All amendments under subclause (1) or (2) may be made with or without costs and on any terms the court thinks just.

(4) This rule is subject to rule 7.7 (which prohibits steps after the close of pleadings date without leave).

[8] In Timbalok, the court held that there would be no prejudice to the creditor if r 11 was applied to cure the defect in service: the statutory demand had been prepared by the same solicitors to whom the application to set aside was faxed. However the Master cautioned:

This decision should not be taken as an excuse for parties not to comply with clear statutory provisions as to service, nor should it be.

[9] The Master saw the use of r 11 as being in the interests of justice in the particular circumstances of the case.

[10] I am not satisfied that the interests of justice require me to apply r 1.9 to cure the defective service in this case. Mr Mahoney has not actually acknowledged receiving the application to set aside and the supporting affidavit which was emailed to him in time. It was emailed to him only at 1.47pm on the last day for service. By contrast, the solicitor who received the faxed copy of the setting aside application in Timbalok received the document two days before the expiry of the time limit.

[11] I accept that Mr Mahoney probably did have the application within time, but I do not believe that I can safely draw that inference with sufficient certainty for me to find that service has been proved adequately under the rules. We have all experienced the situation where, for no reason which a lay person could readily explain, an email arrives in our inbox much later than the time at which it was sent.

[12] Other factors suggest that this is not a case where justice requires me to apply r 1.9 to cure the defective service. The first is that Mr Mahoney has not filed any application for a liquidation order within 30 working days after the last day for

compliance with the statutory demand. Under s 288(1) of the Act, that means that Mr Mahoney will not be able to use failure to comply with the demand as a basis for any liquidation application he may wish to file, unless I make an order under s 291(1) of the Act directing the applicant to pay the amount in the demand within a specified period of time, and that in default of payment within that period, Mr Mahoney may apply to liquidate the applicant. Mr Mahoney has not applied for any such order, and I would not have been inclined to make one if he had.

[13] The second matter going to the justice of the situation is that the applicant’s evidence is in my view clearly inadequate. First, no copy of the statutory demand has been produced, and while various disputes are asserted in the supporting affidavit of Mr Terence Steven, it is not clear from that affidavit that those matters are the same ones that were the subject of the statutory demand. A second serious deficiency is that it appears that much of the evidence of Mr Terence Steven may be hearsay. The director of the applicant is his brother, Mr Garth Steven, and the affidavit as originally drawn was clearly drawn with a view to Mr Garth Steven signing the document. Mr Terence Steven has completed the document, with the name “Garth Campbell Steven” crossed out and Mr Terence Steven’s name substituted. Mr Terence Steven says in the affidavit that he has been advising his brother Garth Stevens in regard to this matter and all other matters relating to his dispute with Mr Mahoney, and that “as such I can confirm the following.”

[14] It is difficult to tell from that how much of the affidavit is mere repetition of what Mr Terence Steven was told by his brother. In his opposing affidavit, Mr Mahoney has said that Mr Terence Steven has never had any association with the applicant in the six years that Mr Mahoney was a director of the applicant.

[15] On the other side of the coin, Mr Mahoney’s evidence is equally unimpressive. He did not produce a copy of the statutory demand either, and it appears as if part if not all of what was demanded had been the subject of a District Court claim against the applicant which Mr Mahoney commenced in 2013 but has not pursued. I accept too Mr Gilbert’s submission in respect of an apparent claim by Mr Mahoney for a sum of $29,000 allegedly removed by the applicant by Mr Mahoney’s bank account, that a letter dated 16 September 2013 from an

unnamed bank to Mr Mahoney suggests that there may then have been some dispute between Mr Mahoney and Mr Garth Steven over the entitlement to the money as between the applicant and Mr Mahoney.

[16] Having regard to the inadequate quality of the evidence, on both sides, this is not a case where I would have been prepared to make any order under s 291 of the Act that the applicant pay to Mr Mahoney the amounts in the statutory demand (whatever they may have been).

[17] The result is that the application is refused, but Mr Mahoney will be unable to use the applicant’s failure to comply with the statutory demand as a basis for any liquidation proceeding.² If Mr Mahoney now wants to pursue the claim he will need to either issue an appropriate court proceeding, or if he is satisfied that the applicant has no genuine and substantial defence, issue another statutory demand. In the latter event, if there were a second application to set aside any such demand, the whole

matter could be dealt with properly, on the basis of better evidence than has been produced in this proceeding.

[18] The application is accordingly refused.

[19] Mr Waugh asks for costs. He has only been involved in today’s hearing – prior to that, Mr Mahoney had been handling the matter himself. Mr Gilbert submits that the applicant had no option but to commence the originating application to set aside the demand. He points to Mr Mahoney’s discourtesy to the court in failing to appear at the hearing on 20 August 2014.

[20] As this decision brings the present originating application proceeding to an end, it is necessary to make some order as to costs. The normal principle is that costs should follow the event, but I am satisfied that costs should be at the lowest end of the scale in this case. Accordingly, I make an order for costs on a scale 1A

_{basis in favour of the respondent, those costs being limited to Mr Waugh’s}

2. Mr Waugh has confirmed today that no liquidation proceeding was commenced within 30 working days following the expiry of the time allowed for complying with the statutory demand.

preparation for, and attendance at, today’s hearing. I also make an order in the

respondent’s favour for disbursements, to be fixed by the registrar.

Associate Judge Smith

Solicitors:

Horsley Christie, Wanganui for applicant

Jamie Waugh, Wanganui for respondent