THE COMMISSIONER OF INLAND REVENUE V AUCKLAND TRADE TRAINING ACADEMY LTD AND ORS HC AK CIV 2005-404-7039

THE COMMISSIONER OF INLAND REVENUE V AUCKLAND TRADE TRAINING ACADEMY LTD AND ORS HC AK CIV 2005-404-7039 16 December 2008IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2005-404-7039 CIV 2006-404-7409 CIV 2007-404-6954UNDER the Companies Act 1993 BETWEEN THE COMMISSIONER OF INLAND REVENUE Plaintiff AND AUCKLAND TRADE TRAINING ACADEMY LIMITED DefendantAND BETWEEN CIV 2006-404-7409THE COMMISSIONER OF INLAND REVENUE Plaintiff AND MORRIS LIGHTING (NZ) LIMITED (IN LIQUIDATION) DefendantAND BETWEEN CIV 2007-404-6954THE COMMISSIONER OF INLAND REVENUE Plaintiff AND ALLBANX MORTGAGES LIMITED Defendant Hearing: (on papers) Judgment: 16 December 2008 at 4 p.m.JUDGMENT OF ASSOCIATE JUDGE DOOGUEThis judgment was delivered by me on16.12.08 at 4 pm, pursuant to Rule 540(4) of the High Court Rules. Registrar/Deputy Registrar DateCounsel:PricewaterhouseCoopers, Private Bag 92-162, Auckland[1] The liquidators have applied ex parte for approval of their remuneration. I have raised with the liquidators whether their application is in the correct form. In brief, the application does not contain the certificate by counsel which rule 240(2) requires. [2] Rule 240 states:240 Ex parte application (1) If the applicant wishes the application to be heard without any other party being served (in these rules referred to as an ex parte application), the applicant must use form 20. (2) An ex parte application must contain a certificate that— (a) is personally signed by the applicant's solicitor or counsel in his or her own name; and (b) uses the words "Certified pursuant to the rules of Court to be correct". (3) The solicitor or counsel who signs the certificate— (a) must, before signing it, be personally satisfied— (i) that the notice of application and every affidavit filed in support of it complies with these rules; and (ii) that the order sought is one that ought to be made; and (iii) that there is a proper basis for seeking the order in an ex parte application; and (b) is responsible to the Court for the matters specified in paragraph (a).[3] It would appear that liquidators have developed a practice of filing ex parte applications which do not contain certificates of counsel in reliance on the decision of Master Gambrill, Re Medforce Healthcare Services Ltd (In Liquidation) (No 2)[2001] 3 NZLR 158. The Master said at 164 et seq:The applications by the liquidators to secure their fees must be a matter of procedure and therefore are an interlocutory application in the total context of the liquidation. The form of the application to be made by either solicitors or liquidators was not considered in the original Medforce hearing. As there are prima facie no other parties to be served the Court can receive an application from "a party" and then exercise its powers under R 239(1)(d) and (e). The Court has already held that a memorandum may be filed by a liquidator and this informal procedure accords with the intent of the judgment. The decision in Re Amon (decd) [1956] NZLR 30 makes it clear that any applicant in person who is not legally represented and is a party and technically appears before the Court can make the application. The existence of the certificates and the rule relating thereto is the justification for dispensing with personal attendance of the counsel to obviate unnecessary trouble and expense.[4] In that judgment, the Master stated that the justification for a liquidator making an application in person in ex parte form which did not contain a counsels' certificate was sanctioned by the authority of In Re Amon (Deceased) [1956] NZLR 30. [5] In Re Amon (Deceased) was a motion for probate of the will of A W Amon, deceased. The testator had appointed his solicitor and son to be executors and trustees. The notice of motion was not subscribed with the certificate referred to in the then relevant rule governing ex parte applications, Rule 403 of the Code of Civil Procedure. That Rule provided:Every notice of motion, including every notice of motion for the grant in common form of probate or letters of administration, that is intended to be moved ex parte and is not intended to be moved by the applicant in person shall be subscribed with a certificate signed personally in his own name by the solicitor engaged in the proceedings, or by counsel, in the following form: "Certified pursuant to the rules of Court to be correct".[6] Barrowclough C. J. said in his judgment:I assume that the certificate was omitted because the solicitor who filed the papers thought it was unnecessary, in view of the fact that the notice of motion was intended to be moved by the "applicants in person".[7] The first thing that should be noted is that Rule 403 is different from the Rule in its present form, which is Rule 240 of the High Court Rules. The effect of the former Rule was to expressly permit the filing of ex parte notices of application that did not contain the required certificate in cases where the applicant intended to move the application in person.[8] At the date when Master Gambrill gave her judgment, the relevant Rule, Rule 237, was substantially the same as it was when Barrowclough C.J. gave his judgment in Re Amon. A certificate by counsel was required under Rule 237 where the application:is not intended to be made by the party applying in person[9] In Re Amon (Deceased) Barrowclough C. J. noted that in the absence of a certificate, the Court would not have the reassurance that came from counsel's certificate, which was the justification for dispensing with personal attendance. In the case of applicants moving 'in person' Barrowclough C. J. said:When the Rule speaks of an "applicant in person", it contemplates a situation in which, for some reason or other, the applicant does not wish to employ a solicitor. In such a case he may move in person; but, in my opinion, he cannot so move unless he appears in person before the Court or Judge having cognizance of the matter. On such an appearance, the Court or the Judge can make of the applicant such inquiries as may be thought necessary to ensure that the "papers are regular and in order and that the order applied for is one that ought to be made": cf. R. 405. Those inquiries cannot readily be made unless the applicant is in personal attendance.[10] The first significant feature of Rule 240 is that it is mandatory that an application contain a certificate. The mandatory nature of the procedure contained in Rule 240 is reinforced by the fact that use of the form that is provided in the Rules, Form 20, is obligatory and that form, of course, contains the prescribed certificate., no exception is permitted by the Rule for cases where an applicant intends to apply in person, which was the case under Rule 403. Indeed, the rule in its current form does not contain a similar mechanism to the former Rule 403, which contains a dispensation where the party moving is before the Court. [11] For these reasons I consider that the practice of applicants signing ex parte applications without a certificate from counsel does not comply with Rule 240. No doubt there would be practical advantages to liquidators and others if a contrary conclusion were possible. In my view, though, it does not seem possible for the terms of the Rules to be avoided and I consider that ex parte applications of the kind which have been signed by the liquidators in this case do not comply.[12] The next issue that I will consider is whether the position can be salvaged by invoking Rule 5. [13] Rule 5 states:5 Non-compliance with Rules (1) Where, in beginning or purporting to begin any proceeding or at any stage in the course of or in connection with any proceeding there has, by reason of any thing done or left undone, been a failure to comply with the requirements of these rules, whether in respect of time, place, manner, form, or content or in any other respect, the failure – (a) Shall be treated as an irregularity; and (b) Shall not nullify – (i) The proceeding; or (ii) Any step taken in the proceeding; or (iii) Any document, judgment, or order in the proceeding. (2) Subject to subclauses (3) and (4), the Court may, on the ground that there has been such a failure as is mentioned in subclause (1), and on such terms as to costs or otherwise as it thinks just, – (a) Set aside, either wholly or in part, – (i) The proceeding in which the failure occurred; or (ii) Any step taken in the proceeding in which the failure occurred; or (iii) Any document, judgment, or order in the proceeding in which the failure occurred; or (b) Exercise its powers under these rules to allow such amendments (if any) to be made and to make such order (if any) dealing with the proceeding generally as it thinks fit. (3) The Court shall not wholly set aside any proceeding or the originating process by which the proceeding was begun on the ground that the proceeding was required by these rules to be begun by an originating process other than the one employed.(4) The Court shall not set aside any proceeding or any step taken in a proceeding or any document, judgment, or order in the proceeding on the ground of a failure to which subclause (1) applies on the application of any party unless the application is made within a reasonable time and before the party applying has taken any fresh step after becoming aware of the irregularity.[14] I consider that Rule 5 entitles the Court to entertain the application notwithstanding that Rule 240 has not been complied with. [15] The following matters seem relevant to the exercise of the discretion. First, applications to fix liquidators' remuneration are a matter of routine and the Court is familiar with them. Therefore, the Court has an understanding of what the issues are and consequently whether or not the orders sought should be made. The applications do not raise novel issues or issues of any great complexity which make it desirable for the Court to have the reassurance of counsel's certificate pursuant to Rule 240. Second, the failure to subscribe the necessary certificate is understandable in light of the fact that the earlier decisions of this Court apparently sanctioned that process. For the reasons I have given, I respectfully disagree with that approach in view of the terms of Rule 240 and I am also of the view that the authority on which the earlier decisions rely is distinguishable. Third, in some circumstances the Court will decline to cure a defect by invoking Rule 5. An example is to be found in Leal v Dunlop Bio-Processes International Limited [1984] 2 All ER 207, where a defendant served a writ out of the jurisdiction without first obtaining the leave of the Court. The Court concluded that it would be wrong for the equivalent of Rule 5 to be resorted to in effect to retrospectively approve the service of the writ out of the jurisdiction without consent, because to do so would have the effect of depriving the defendant of a defence based on a statutory limitation. A purported exercise of the discretion to allow such a result would be wrong. I interpolate that the present case is far removed from the example to which I have referred. [16] For all of these reasons, it is my view that the applications filed, while not complying with Rule 240, are saved by the provisions of Rule 5. [17] In each case I make the orders sought.[18] By way of two footnotes I mention the following. First, I suggest that it should not be assumed that future applications would necessarily be saved by application of like reasoning. That is, the Court will not necessarily look sympathetically on the making of applications that are knowingly made in a manner that does not comply with the express requirements of the Rules. Second, the High Court Rules will be amended from 1 February 2009 and in those Rules, the absence of a certificate may be excused under a new Rule 7.23(5). By virtue of s 9 of the Judicature (High Court Rules) Amendment Act 2008 the new Rules will apply to proceedings commenced before the Rules come into force so that any extant applications pending in the Court as at 1 February 2009 should not encounter the same difficulties that have lead me to issue this judgment. _____________ J.P. Doogue Associate Judge