Stellaria NZ Limited v Waere Developments Limited [2018] NZHC 2110 (17 August 2018)

Last Updated: 26 September 2018

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-1061 [2018] NZHC 2110

BETWEEN	STELLARIA NZ LIMITED Plaintiff
AND	WAERE DEVELOPMENTS LIMITED Defendant

Hearing:	3 August 2018
Appearances:	T L Utuma for the Plaintiff BMK Pamatatau for Grant Reynolds, Liquidator
Judgment:	17 August 2018

JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on 17 August 2018 at 2:00pm

pursuant to Rule 11.5 of the High Court Rules.

.......................................

Deputy Registrar

Solicitors:

Holland Beckett Law (James McDougall), Tauranga, for the plaintiff Malcolm Whitlock, Auckland, for the liquidator of the defendant company

Copy for:

Bruce Pamatatau, Auckland, for the liquidator

STELLARIA NZ LIMITED v WAERE DEVELOPMENTS LIMITED [2018] NZHC 2110 [17 August 2018]

[1] Stellaria NZ Limited applies for Waere Developments Limited to be put into liquidation on the ground that it is unable to pay its debts. It is a creditor of Waere Developments for $25,810.12. Waere Developments Limited is presumed to be insolvent because it did not comply with a statutory demand served on its registered office on 18 April 2018. Mr Reynolds, however, says that the court cannot make a liquidation order because he was appointed liquidator by shareholders' resolution under s 241(2)(a) of the Companies Act 1993 at 11.45 am on 26 June 2018. Stellaria NZ Limited says that Mr Reynolds' appointment as liquidator is invalid because it was out of time under s 241AA of the Companies Act. That allows shareholders to appoint a liquidator when a liquidation application is pending under s 241(2)(c) of the Companies Act, so long as the appointment is made within 10 working days of service of the liquidation application. Stellaria NZ Limited says that the proceeding was served on 11 June 2018 and therefore Mr Reynolds' appointment is too late, because it was made on the eleventh working day. In response, Mr Reynolds says that service by Stellaria NZ Limited was invalid, because it did not comply with any of the requirements under s 387 of the Companies Act 1993. Accordingly, the issue is whether Stellaria NZ Limited served the liquidation application on Waere Developments Limited on 11 June 2018.

[2] Stellaria NZ Limited raises another issue. It says that even if Mr Reynolds was validly appointed, the court should review his appointment under s 283(4) of the Companies Act. I do not, however, need to consider that question, as I find that service on 11 June 2018 was valid and effective. Mr Reynolds' appointment as liquidator is void for having been made out of time.

[3] According to the companies register, when Waere Developments Ltd was incorporated on 15 June 2016, its registered office and address for service of Waere Developments Limited were the offices of RSM Accountants, 22 Amersham Way, Manukau, Auckland. On 9 March 2017, the registered office and the address for service were changed to the offices of RSM Accountants, 86 Highbrook Drive, East Tamaki, Auckland.
[4] A process server served the statutory demand on the office of RSM Accountants at 86 Highbrook Drive on 18 April 2018. The process server says that he gave the statutory demand to Tony Oliver who confirmed the address as the registered office of the defendant company. Another process server served the liquidation proceeding, but at 60 Highbrook Drive. She says that she found the office of RSM Accountants empty at 86 Highbrook Drive. There was no notice indicating that their offices had moved. She phoned them and was advised by the receptionist that RSM had moved to 60 Highbrook Drive. The receptionist advised her that RSM intended to put a notice on the door of 86 Highbrook Drive to advise of their relocation. The process server gave the documents to Mr Oliver at 60 Highbrook Drive. He confirmed that that address was the registered office and address for service of Waere Developments Limited. He accepted the documents on behalf of Waere Developments Limited. There is, however, no evidence that he is an employee or director of Waere Developments Limited.

[5] Section 241AA deals with appointments of liquidators by shareholders (under s 241(2)(a) or directors (s 241(2)(b)) when a liquidation application is pending:

241AA Restriction on appointment of liquidator by shareholders or board after application filed for court appointment

(1) This section applies if an application has been filed for the appointment of a liquidator of a company by the court under section 241(2)(c).

(2) A liquidator of the company may only be appointed under section 241(2)(a) or (b) if the liquidator is appointed within 10 working days after service on the company of the application.

(3) If a liquidator is appointed under sections 241(2)(a) or (b), the creditor who filed the application referred to in subsection (1) may apply to the court under section 283(4) for the review of his or her appointment as if the words “successor to a liquidator” in section 283(4) read “liquidator”.

(4) Subsection (2) does not apply once the application has been finally disposed of.

[6] Under subsection (2) there is a 10 working day window after service of a liquidation application in which shareholders or directors may appoint a liquidator. Any appointment more than 10 working days after service is invalid. The court may declare a late appointment invalid under s 284(1)(g) of the Companies Act. Even if a
liquidator has been validly appointed within the 10-working day window, the court may review the appointment under s 283(4).

[7] Section 387 of the Companies Act governs service of documents on companies in legal proceedings:

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.

That is reinforced by r 6.12 of the High Court Rules:

6.12 Personal service on New Zealand corporations

(1) A document may be served on a company incorporated under the Companies Act 1993 in accordance with section 387 of that Act.

...

Stellaria NZ Limited relies on s 387(1)(c) of the Companies Act as the basis for service on Waere Developments Limited.
[8] Section 186 of the Companies Act requires a company to have a registered office in New Zealand:¹

186 Registered office

(1) A company must always have a registered office in New Zealand.

(2) Subject to section 187, the registered office of a company at a particular time is the place that is described as its registered office in the New Zealand register at that time.

(3) The description of the registered office must—

(a) state the address of the registered office; and

(b) if the registered office is at the offices of any firm of accountants, barristers and solicitors, or any other person, state—

(i) that the registered office of the company is at the offices of that firm or person; and

(ii) particulars of the location in any building of those offices; or

(c) if the registered office is not at the offices of any such firm or person but is located in a building occupied by persons other than the company, state particulars of its location in the building.

[9] Section 187 deals with change of the registered office:

187 Change of registered office

(1) Subject to the company’s constitution and to subsection (3), the board of a company may change the registered office of the company at any time.

(2) Notice in the prescribed form of the change must be given to the Registrar for registration.

(3) The change in the registered office takes effect on a date stated in the notice not being a date that is earlier than 5 working days after the notice is registered.

¹ A company is also required to have an address for service. Sections 192 and 193, which deal with the address for service, are in similar terms to ss 186 and 187.

[10] Section 387(1)(c) of the Companies Act allows service by leaving documents for legal proceedings at a company's registered office or address for service without requiring that the documents be delivered to any person or brought to the knowledge of any person associated with the company to be served. If no one is present at the registered office, the documents may be left there. That will be valid service. The courts have, however, recognised that that practice carries the risk of miscarriage of justice because those in control of the company may not be aware of the proceeding.² The courts have met this difficulty by recognising that while service might be valid under s 387, where it has not been effective to bring the proceeding to the knowledge of those in control of the company, the court has a discretion to prevent an injustice.³

[11] This case, however, is different. When the process server found that RSM Accountants no longer occupied the premises at 86 Highbrook Drive, she did not leave the documents there but made enquiries and left the documents at the offices of RSM Accountants, but not at 86 Highbrook Drive. Clearly the process server intended to avoid the risk of injustice from leaving the documents at 86 Highbrook Drive without their coming to the knowledge of the directors of Waere Developments Limited.

[12] While the courts have exercised a discretion to relieve against injustice when there has been valid service under s 387, there is a different question, if the attempted service does not meet the requirements of s 387, but the court is asked to deal with the proceeding as if service were valid. On this there are authorities going both ways. In Timbalok NZ Limited v Sky-Hi Roofing Limited, an application to set aside a statutory demand was not served on the respondent's registered office, but was sent to the respondent's solicitor's office in time.⁴ The case was decided under s 264 of the Companies Act 1955, but that does not differ materially from s 290 of the Companies Act 1993. Master Venning held that he could give relief under r 11 of the High Court Rules, now r 1.9 of the High Court Rules 2016. That gives the court the power to amend any defects and errors in procedure.

2. For examples see Kirton v Prospecdev Holdings Limited [1990] NZHC 532; (1990) 2 PRNZ 412; Argyle Estates Limited v Bowen Group Limited (2003) 17 PRNZ 57.

³ Argyle Estates Limited v Bowen Group Limited above; Reynolds v Ascot Aluminium Limited

[2012] NZHC 1787; ASB Bank v Info-Touch Technologies Limited (2000) 14 PRNZ 331.

⁴ Timbalok NZ Limited v Sky-Hi Roofing Limited (1996) 10 PRNZ 271.

[13] Livi Investments Limited v Butler Gilpat Limited is another case where an application to set aside a statutory demand was sent to the office of the creditor's solicitors, instead of being served on the creditor’s registered office.⁵ Master Kennedy Grant declined to follow Timbalok NZ Limited v Sky-Hi Roofing Limited and held that service on the creditor's lawyers did not meet the requirements of s 387. In his judgment, the Companies Act governed service of documents for a legal proceeding and powers in the High Court Rules could not be used to relieve against non- compliance with s 387.

[14] In this case I do not need to decide generally whether the relieving approach in Timbalok NZ Ltd v Sky-Hi Roofing Ltd or the contrary approach in Livi Investments Ltd v Butler Gilpat is to be preferred. There are obvious attractions in allowing the courts to exercise a discretion in favour of one party when it is clear that documents for a proceeding have come to the notice of those in charge of a company, even if service does not come under s 387. But when the court exercises such a discretion, it does so prospectively as part of its procedural role in ensuring that justice is done. While an order recognising that what has been done is to be treated as tantamount to service (for example under r 1.9 or r 6.8 of the High Court Rules), that is for the ongoing conduct of the proceeding. That does not apply here. The question whether Waere Developments Ltd was properly served affects substantive elements, the validity of the shareholders’ resolution of 26 June 2018 and the appointment of Mr Reynolds as liquidator. In those circumstances, it would not be right to make backdated orders which to retrospectively alter substantive rights.⁶ The validity of the shareholders’ resolution of 26 June 2018 must be decided according to the legal position then, not on the court’s exercise of some relieving power later. Accordingly, the question turns on whether service of the documents at the offices of RSM Accountants was service on the registered office of Waere Developments Ltd under s 387(1)(c).

⁵ Livi Investments Limited v Butler Gilpat Limited (1998) 11 PRNZ 680.

6. Trim Perfect Australia v Albrook Constructions [2006] NSWSC 153 at [33]- [35] and Hartley Poynton Limited v Ali [2005] VSCA 53.

[15] Tickled Pink Design Limited v Concept to Completion Limited gives useful guidance.⁷ There a company contended that a statutory demand had not been served on its registered office. The companies register showed the registered office as:

KPMG

Level 10,

9 Princes Street Auckland

The process server served the statutory demand on the offices of KPMG at level 11, 9 Princes Street, not level 10. The statutory demand was accepted by a receptionist who confirmed that the document was served at the registered office of Tickled Pink Design Limited. Master Lang held that service was valid. After referring to s 186(3) he said:

In the present case, the particulars of the applicant's registered office which are held by the Registrar of Companies make it clear that the registered office is at the offices of the accounting firm KPMG. It is true that the particulars go on to provide the address of those offices as being Level 10, 9 Princes Street. Those particulars were no doubt inserted to enable the company to comply with the provisions of s 186(3)(b)(2), which requires particulars of the location of a registered office in any building to be specified. In my view, this does not affect the fact that the actual registered office in the present case was at the offices of KPMG. The particulars required by s 186(3)(b)(2) are no doubt there because they serve the useful function of enabling interested persons to ascertain the precise location of the building where the registered office might be found. They do not, however, alter the actual location of the registered office, which was at the offices of KPMG.

And:

In the present case, however, the offices of KPMG have been nominated as the registered office and the evidence is plain that the statutory demand was in fact served at those offices. In my view, it makes no different whether or not service was effected at Level 10 or Level 11 of KPMG's offices.

Clearly Master Lang considered that it was essential for the description of a registered office of a company that it state whether it was at the offices of any firm of accountants, barrister and solicitor or any other person but that any inaccuracy as to the location of those offices did not change the fact that the registered office was at the offices of a firm.

7. Tickled Pink Design Limited v Concept to Completion Limited HC Auckland CIV-2003-404-831, 23 May 2003.

[16] That case and this one are not on all fours. In Tickled Pink Design Limited, there was a misdescription as to the floor in a building where documents could be served; whereas here the misdescription went to the street address where the accountants had their offices. But the principle is still applicable.

[17] At 11 June 2018, the companies register was ambiguous as to the registered office and the address for service for Waere Developments Ltd. It could potentially refer to two places: the offices of RSM Accountants (at 60 Highbrook Drive) or the premises at 86 Highbrook Drive (no longer the offices of RSM Accountants). The ambiguity needs to be resolved. Generally the law does not tolerate ambiguities in documents. Whichever interpretation is chosen, the companies register will involve a partial misdescription. If the registered office is at the offices of RSM Accountants, the register is incorrect as locating them at 86 Highbrook Drive. On the other hand, if 86 Highbrook Drive is correct, the register is wrong in stating that the offices of RSM Accountants are there.

[18] In interpreting public documents, the court does not have regard to information known to the maker of the document, but it is permissible to have regard to extrinsic evidence to identify a place referred to.⁸ It is, however, proper to have regard to the statutory purpose of specifying a place as the registered office and as an address for service. One purpose is to identify a place where documents can be left so that they may come to the knowledge of those with control of the company.⁹ Accordingly, where the information as to a registered office or an address for service is ambiguous, it is preferable to take as the appropriate location the place where there are people who will be able to refer the documents served to those with control of the company. That is reinforced by considering the consequences of taking 86 Highbrook Drive as the registered office and address for service. If that address were taken as the registered office, service on the premises which no longer have any connection with Waere Developments Ltd would be valid, but it would not be effective. It may then trigger

⁸ Slough Estates Ltd v Slough Borough Council (No.2) [1971] AC 958 (HL(E)), 962.

9. For example Re Samoana Press Company Ltd (1988) 4 NZCLC 64,119. There are of course other purposes. See the requirement for documents to be kept at a registered office under s 198 of the Companies Act.

the court’s exercise of its discretion in cases such as Argyle Estates Ltd v Bowen Group Ltd¹⁰ to give relief because of ineffective service.

[19] In my judgment, the better interpretation is that the registered office and address for service of Waere Developments Ltd were at the offices of RSM Accountants, not at 86 Highbrook Drive. The process server correctly interpreted the information she was given as to the company’s registered office and served the documents for the proceeding on the registered office of Waere Developments Ltd on 11 June 2018.

[20] Because there was valid service under s 387(1)(c) on 11 June 2018, Mr Reynolds was appointed out of time under s 241AA(2). I declare that Mr Reynolds was not validly appointed liquidator on 26 June 2018. I make that finding as part of the determination of Stellaria’s liquidation application. It does not need a separate application under s 284 of the Companies Act.

[21] That means that it is not necessary for me to review his appointment under s 283(4) of the Companies Act. That is just as well. The parties offered little evidence or submissions whether I should choose Mr Reynolds or the creditor's preferred liquidator, Mr Thomas. Both are recognised insolvency practitioners known for acting with independence and integrity.

[22] Because the shareholders' resolution of 26 June 2018 was ineffective to put Waere Developments Limited into liquidation, this proceeding remains alive. Stellaria NZ Limited has established the grounds for a liquidation order. Given the shareholders' resolution that the company should be put into liquidation, those in charge of the company clearly have no grounds for resisting a liquidation order. I accordingly make an order that Waere Developments Limited be put into liquidation.

[23] I appoint David Thomas liquidator. He proposes that his remuneration be at the rates prescribed by reg 28 of the Companies Act 1993, Liquidation Regulations

¹⁰ Argyle Estates Ltd v Bowen Group Ltd (2003) 17 PRNZ 57 and Reynolds v Ascot Aluminium Ltd

[2012] NZHC 1787.

1994. He is entitled to charge those rates as of right under s 276(2) of the Companies Act.

[24] The time of the order is 2:00pm on Friday 17 August 2018.

[25] Stellaria NZ Limited is entitled to costs on the liquidation application. Counsel should file a memorandum setting out costs sought, plus disbursements.

[26] There is also the question of Mr Reynolds' remuneration. Counsel did not address that. Leave is reserved to apply for further directions for his remuneration while he was acting as liquidator.¹¹

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Associate Judge R M Bell

¹¹ See Companies Act 1993, Liquidation Regulations 1994, regs 35 and 36.