Pratt Quarries Ltd v Keegan Contractors Ltd Hc Wn

• Jurisdiction: New Zealand
• Judge: D.I. Gendall
• Judgment Date: 10 February 2011
• Court: High Court
• Date: 10 February 2011
• Docket Number: CIV-2010-485-2461

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2010-485-2461

BETWEEN

Pratt Quarries Limited

Applicant

and

Keegan Contractors Limited (in Receivership And Liquidation)

Respondent

Counsel:

G. Paine —Counsel for Applicant

K. Sullivan —Counsel for Respondent

JUDGMENT OF ASSOCIATE JUDGE D.I. Gendall

Introduction

1 The applicant, Pratt Quarries Limited (Pratt), applies to set aside a statutory demand issued by the respondent, Keegan Contractors Limited (Keegan), which is currently in receivership and in liquidation. The application is brought on the basis that there is a substantial dispute or a right of set-off in relation to the debt, and that Keegan's actions in issuing the demand amount to an abuse of process.

2 The application is opposed. The principal grounds of opposition are that the application has not been commenced, filed and served in accordance with the Companies Act 1993 and the High Court Rules; and that in any event Pratt is attempting to set off a debt resulting from a post-receivership contract against a pre- receivership debt.

Facts

3 Keegan operated a concrete construction business, undertaking civil earthworks contracts and drainage work. Pratt has a quarrying business. On 29 July 2010, subsequent to the appointment of liquidators of Keegan, the secured creditor of the company appointed Mr Ian Shephard and Ms Christine Dunphy as receivers. A decision was made to continue trading Keegan as there were several projects still to be completed at the time. The statutory demand in question was served on Pratt on 22 November 2010. It relates to a debt of $22,162.50 that Pratt is alleged to owe for the purchase of concrete panels and the hire of an excavator from Keegan.

4 There is conflicting evidence before the Court as to the timing and the genesis of these particular transactions. According to Mr Shephard, the agreement for the purchase of the panels was only concluded after the receivers had been appointed. His evidence is that the receivers became aware of (pre-receivership) negotiations to sell the panels to Pratt. The panels were pre-cast concrete panels which were partially damaged. The initial negotiations with Pratt had been conducted by Mr Phil Corcoran, who was the operations manager of Keegan at the time. Mr Shephard says that Mr Corcoran showed him the panels, and that the receivers then determined that the panels could be sold.

5 Importantly, Mr Shephard's affidavit also states that Mr Malcolm Pratt, who is one of the directors of Pratt, contacted the receivers directly in early August 2010 to discuss the purchase of the panels, attempting to negotiate a lower price. Mr Shephard claims that Mr Pratt knew that Keegan was in receivership at the time of his call, and that he seemed to fully understand the position. He says that he suggested that Mr Pratt continue to deal with Mr Corcoran, and that the agreement was then finalised between Mr Pratt and Mr Corcoran, who informed the receivers of the agreed price. Delivery of the panels was also arranged with Mr Corcoran. Mr Shephard states that Mr Pratt did not raise any issues concerning outstanding invoices or the possibility of a set-off at that time.

6 Mr Pratt has filed two affidavits in support of the application to set aside the demand. In his first affidavit filed 9 December 2010, he alleges that Keegan is indebted to Pratt for the sum of $34,194.58, resulting from a number of pre- receivership transactions. He contends that he had no notice of Keegan's receivership or liquidation when he purchased the panels, and claims that there was an arrangement that the cost of the panels would be deducted from the debt owing by Keegan. He says that “it was assumed and I believed agreed that the concrete panels would be deducted from the amounts owing”.

7 In his second affidavit sworn 31 January 2011, Mr Pratt claims that he entered into an agreement to purchase the panels when he met with Mr Malcolm Keegan in April 2010. He says that “Malcolm Keegan agreed to sell them to me, we shook hands and the deal was complete”. He explains, however, that he could not pick up the panels at that time because there were other materials stored in front of them. He concedes that he later asked Mr Corcoran whether he could reduce the price, but says that he never talked to anyone but Mr Keegan and Mr Corcoran about the panels. He asserts that “the arrangement [in April 2010] was there would be a deduction from my account i.e. a credit for the panels given to Pratt Quarries Ltd”. He also claims that he never received formal or informal notification of Keegan's liquidation or receivership, and that he did not at any stage call Mr Shephard.

8 In relation to the hire of the excavator, Mr Shephard states that Pratt had been hiring the excavator for some months prior to the receivership, and that it continued to use the excavator under its hire contract after the receivership and liquidation of Keegan. The excavator was transported to Pratt's yard on 26 July 2010, the date of the liquidation. Mr Pratt, however, claims that Mr Keegan gave Pratt the use of the excavator “to offset his long outstanding account” and that he had no knowledge of Keegan's financial affairs at the time he uplifted the excavator. He maintains that there was no contract for hire.

9 At the end of August 2010, the receivers sent two invoices to Pratt: one for $15,750.00 for the panels, and one for $6,412.50 for the excavator hire. The words “in receivership and in liquidation” were handwritten on the invoices. When the receivers contacted Pratt to follow up the payment demand in October 2010, they were told that the invoices would not be paid because of a “set off”. The receivers responded to this by explaining that there was no basis for a set-off because the transactions were entered into after their appointment. Following several letters of demand, the receivers issued the statutory demand in question, which as I have noted was served on Pratt on 22 November 2010.

10 On 2 December 2010, Mr Paine, counsel for Pratt, sent by post a letter to the receivers' address and to their counsel, Mr Sullivan, attaching an “Interlocutory Application on Notice to Set Aside a Statutory Demand” and an affidavit in support by Mr Malcolm Pratt. The letter claimed that the application had been filed in the High Court at Palmerston North. There was no hearing date or file number allocated to the proceeding. The court file discloses that the Wellington High Court Registry received the application, along with a cheque for $613.33, as a filing fee on 9 December 2010, and then exercised its discretion to accept the application as an originating application. The difference in the actual filing fee due was subsequently refunded. The application had been sent by Mr Paine under a covering letter dated 7 December 2010.

11 Counsel for Keegan then filed a memorandum disputing that there was jurisdiction to hear the application. On 9 December 2010, Mr Paine sent a fax to the Wellington Registry stating that “the document was filed in the Palmerston North High Court within time”. The matter was first called on 13 December 2010, but was adjourned to allow the jurisdictional issues to be dealt with. Pratt formally served the application at Keegan's address for service on 21 January 2011, once service copies were made available. It seems to be accepted that the final date for filing and serving any application to set aside the demand here was 6 December 2010. This was ten days after the statutory demand was served on Pratt on 22 November 2010.

Jurisdiction Issues

12 Keegan submits that the present application must fail because it has not been filed or served in accordance with the strict provisions of the Companies Act 1993 and the High Court Rules. Section 290(2) of the Companies Act 1993 provides that an application to set aside a statutory demand must be filed and served within 10 working days of the date of service of the demand. Subsection (3) expressly states that no extension of time may be given for making or serving the application:

290 Court may set aside statutory demand

• (1) The Court may, on the application of the company, set aside a statutory demand.

• (2) The application must be—

  • (a) Made within 10 working days of the date of service of the demand; and

  • (b) Served on the creditor within 10 working days of the date of service of the demand.

• (3) No extension of time may be given for making or serving an application to have a statutory demand set aside, but, at the hearing of the application, the Court may extend the time for compliance with the statutory demand.

• …

13 Keegan appears to accept here that an application was filed on 2 December 2010 at the High Court in Palmerston North, albeit not in the proper form. Rule 19.2(c) of the High Court Rules provides that an application to set aside a statutory demand must be filed by way of originating application under Part 19. Pratt, however, sought to commence proceedings by way of interlocutory application. Copies of that application were provided to counsel and the receivers on the same day. Another copy of the interlocutory application was then filed in Wellington on 9 December 2010, out of time, but the Registry agreed to accept this as an originating application.

14 Keegan maintains that the application was apparently rejected by the Palmerston North Court on the basis that Pratt had chosen both the wrong Court and the wrong procedure. Keegan accordingly submits that the application is a nullity because no originating application was filed and served before 6 December 2010, and there is no power to extend the time for filing and serving the demand.

15 Reference is made here to Hartner Trustee Ltd v Colin...