BROOKFIELDS LAWYERS (SUING AS A FIRM) V KEA INVESTMENTS LIMITED HC WN CIV-2006-485-61

BROOKFIELDS LAWYERS (SUING AS A FIRM) V KEA INVESTMENTS LIMITED HC WN CIV-2006- 485-61 2 May 2006IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV-2006-485-61UNDER The Companies Act 1993 BETWEEN BROOKFIELDS LAWYERS (SUING AS A FIRM) Plaintiff AND KEA INVESTMENTS LIMITED Defendant Hearing: 2 May 2006 Appearances: A.J. Knowsley for Plaintiff E. Horner for Defendant Judgment: 2 May 2006ORAL JUDGMENT OF ASSOCIATE JUDGMENT D.I. GENDALL Introduction[1] The plaintiff seeks an order placing the defendant company into liquidation.Background Facts[2] On 28 November 2005 the plaintiff served upon the defendant company a statutory demand with respect to a debt of $47,747.24. This related to a guarantee provided to the plaintiff by the defendant company in consideration of the plaintiff providing legal services to a Mr Vorwerk, a director and beneficial shareholder of the defendant company.[3] The defendant company did not respond in any real way to the statutory demand, and on 12 January 2006 the plaintiff filed its Statement of Claim seeking an order placing the defendant company into liquidation. [4] This matter was then listed for call in this Court on 27 February 2006. [5] In the meantime, on 17 February 2006 counsel for the plaintiff Ms Bruton and counsel for the defendant filed a consent memorandum requesting an adjournment of this proceeding to mid March 2006 "to enable settlement discussions to continue". [6] As a result, this matter was adjourned on 27 February 2006 to a call yesterday, 1 May 2006. [7] The matter was further adjourned yesterday, 1 May 2006, until today, 2 May 2006. In the meantime, an affidavit of Mr J. Schubach, the solicitor for the defendant company dated 1 May 2006 was provided. [8] The plaintiff before me seeks an order for liquidation of the defendant company. In response, Ms Horner for the defendant company seeks an adjournment of this matter for a period of at least 7 days, to enable further consideration of the position by the defendant, and as I understand it, possible settlement discussions. [9] Also before me today, 2 May 2006, counsel for the plaintiff provided a copy of a document mentioned at the call of this matter yesterday. This document filed in the District Court at Christchurch and dated 14 January 2006, is headed an "admission by second defendant (Kea Investments Limited) of claim". By this document, Kea Investments Limited, the defendant company in this proceeding, admitted the claim by the plaintiff Brookfields Lawyers in the sum of $48,747.24, together with interest and costs and disbursements of $1,304.60. [10] This admission of claim was signed on behalf of Kea Investments Limited and filed in the District Court at Christchurch. [11] The importance of this admission will become apparent shortly.[12] The essence of the defendant company's opposition to the liquidation application before me is, as I understand it, twofold. First, when the plaintiff's Statement of Claim in this proceeding was served upon the defendant company, it was not accompanied by a verifying affidavit, as Rule 700E High Court Rules requires. [13] According to the defendant, this invalidates the liquidation procedure which the plaintiff is endeavouring to activate today. This is so, particularly bearing in mind the provisions of Rule 700K High Court Rules, which Ms Horner noted provide the defendant with the power to make an application to stay liquidation proceedings within 7 days after service of this documentation on a defendant. [14] What is apparent now is that the verifying affidavit under Rule 700E was served upon the defendant Kea Investments Limited (through its solicitor who accepted service) yesterday, 1 May 2006. [15] As I see the position, however, Ms Horner for the defendant may well have overlooked the precise wording of Rule 700K High Court Rules giving the defendant 7 days to apply for a restraining order once service has been effected. [16] What is clear from Rule 700K is that the defendant company may "within 7 days after the date of the service of the Statement of Claim on the defendant company, apply to the Court for an order restraining publication of any advertisement required by Rule 700Iand staying any further proceedings in relation to the liquidation". [17] Here there is no question that the defendant company was served with the Statement of Claim on 24 January 2006. [18] In my view, this activated the 7 day period specified in Rule 700K for any application from the defendant to stay the proceeding and to stay advertising. [19] The defendant company was clearly aware as from 24 January 2006 when it received the Statement of Claim that these liquidation proceedings were underway.[20] Further, it is apparent to me around the time of the first call of this matter on 27 February 2006, that the defendant company by its participation in the consent memorandum filed in this Court on 17 February 2006 sought an adjournment of the proceeding to mid March 2006 purely "to enable settlement discussions to continue". [21] There was no suggestion at that time of any failure on the part of the plaintiff to comply with the strict service requirements under the High Court Rules. Not was there any intimation then that an application for stay of this proceeding was likely. [22] I find, therefore, that the delay in filing and serving the verifying affidavit upon the defendant company here is not fatal to the consideration of this liquidation application today. [23] The second point of opposition to the liquidation application raised by Ms Horner today relates to the admission of claim signed by the defendant company for the purposes of the Christchurch District Court proceedings dated 14 January 2006. [24] It was her contention before me, as discussed in the recent affidavit of Mr Schubach dated 1 May 2006, that this admission of claim was signed under duress by Mr Vorwerk for the defendant company. He says it was signed at a time when "he continued to act under duress since Brookfields demanded the signature of him in return for not initiating and adjourning the proceedings respectively" – paragraph 10 Schubach affidavit of 1 May 2006. [25] These claims, in my view, are rather puzzling. They were not made in this Court until the affidavit of Mr Schubach dated 1 May 2006 was completed yesterday. They were not referred to in any way when this matter was first called on 27 February 2006, nor were they even hinted at in the joint memorandum of counsel filed 17 February 2006. [26] Further, it is clear that the defendant company has made no attempt to apply to set aside the statutory demand served upon it on 28 November 2005, a demand which related precisely to the $48,747.24 dealt with later in the defendant's admission of claim.[27] In my view, the defendant's approach here smacks of a last minute attempt upon its part to raise unsubstantiated defences to the plaintiff's claim against it dating back to a guarantee provided in August 2005. [28] So far as Rule 700K is concerned, it is instructive to note in McGechan at para HR700K.05 that the learned authors state:Where the debtor has full knowledge of the situation, and has not been deprived of an opportunity to respond, there does not seem to be justification to stay an application for liquidation on technical non-compliance with service provisions.[29] In my view, this seems to be precisely the situation in the present case. [30] Finally, the defendant company has placed before the Court no evidence whatsoever as to its current solvency. Indeed, there is no reference in any of the material filed in this Court to the financial position of the defendant company. [31] In summary, the following matters seem to me to be firmly established: (1) The defendant company through its admission of claim made as recently as 14 January 2006 acknowledges its indebtedness to the plaintiff amounting to $48,747.24, plus interest, plus $1,304.60 costs. (2) The defendant company in making an error as to form rather than substance with its failure to file and serve the verifying affidavit with its Statement of Claim, did not meet the strict requirements of Rule 700E. This omission was rectified when the verifying affidavit was served on 1 May 2006. (3) In my view, the debtor company here clearly had full knowledge of the situation concerning the liquidation application when the Statement of Claim and other documents were served upon it on 24 January 2006. As I see the position, it cannot say it has been deprived of an opportunity to respond by way of a R700K application to stay the liquidation and advertising or otherwise.(4) As recently as 17 February 2006 when the consent memorandum of counsel for the plaintiff and the defendant was filed in this Court, the parties were seeking an agreed adjournment of this matter purely "to enable settlement discussions to continue". No suggestion at that time was made of any defence or opposition to these proceedings based upon technical or other grounds. [32] Given these matters, in my view, there is no reasonable basis put forward by the defendant upon which the plaintiff's application to place the defendant into liquidation can be opposed here. [33] That said, it is appropriate, in my view, for an order for liquidation to be made. [34] The following orders are therefore made: a) An order is now made placing the defendant company Kea Investments Limited into liquidation. b) The Official Assignee is appointed liquidator. c) Costs are awarded to the plaintiff on a category 2B basis, together with disbursements as fixed by the Registrar. d) This order is timed at 11.14am. __________________________Associate Judge D.I. GendallSolicitors:Rainey Collins, Wellington for Plaintiff Morrison Kent, Wellington for Defendant