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They say you shouldn’t break up with your boyfriend or girlfriend via text…but why not? In the case of Templeton UQ Limited v Watts & Hughes Limited, Templeton's application was served via email, a method not permitted under the Companies Act 1993. As a result, the application was struck out, demonstrating the critical importance of following prescribed service methods. These are both examples of when you fail to communicate appropriately, things don’t go well!
To avoid such outcomes, it's essential to serve legal documents correctly and within the specified deadlines.
On 3 May 2024, Associate Judge Lester in the High Court delivered his Honour's judgment in the case of Templeton UQ Limited v Watts & Hughes Limited [2024] NZHC 1072. An important preliminary issue that needed to be resolved was whether an application to set aside a statutory demand was properly served by Templeton UQ Limited (Templeton). His Honour clarified the relevant legal principles regarding service of an application to set aside a statutory demand. A summary of the key facts of the case and its significance are discussed below.
On 31 January 2024, Templeton was served with a statutory demand by Watts & Hughes Limited (Watts) (Statutory Demand). The Statutory Demand specified three methods of service for documents: postal, document exchange (DX mail), or facsimile.
The deadline for Templeton to apply to set aside the Statutory Demand was 15 February 2024. It applied to set aside the Statutory Demand on 15 February 2024 and purported to serve its application at the offices of Templeton's lawyer by email on the same day.
Unfortunately for Templeton, the Court found that the application to set aside was not properly served in time. An email address was not specified as a permitted means of service in the demand so it was not open for Templeton to serve the proceedings by email. Therefore, the application was a nullity and had to be struck out.
Associate Judge Lester held that the only methods of service on a company in New Zealand of a document in legal proceedings are those set out in section 387(1) of the Companies Act 1993 (the Act). The Act is the exclusive regime for service of proceedings on a company. The Court has no ability to cure any defects in service through the application of the High Court Rules 2016 (the Rules).
His Honour stated that rule 19.12A of the Rules – which provides that an application to set aside a statutory demand may be served, in accordance with rule 6.5 of the Rules, at the address shown in the statutory demand as the creditor’s address or the address for payment – does not expand the methods of service available. All it does is make it clear that service at the address given in the statutory demand is good service. It is only where the permitted method of service in a statutory demand is wider than those in section 387 of the Act are the permitted means of service expanded.
So what are the permitted means of service under section 387 of the Act? They are as follows:
In reaching the above conclusion, his Honour considered the conflicting authority in Golden Land Civil Ltd v Baseline Survey Ltd, where Associate Judge Bell considered that rule 19.12A(2) provides an alternative mode of service outside rule 6.12 of the Rules and section 387 of the Act. After a careful analysis of the reasoning in Golden Land Civil Ltd, and engaging in an exercise of statutory interpretation, Associate Judge Lester considered that the learned Judge' reasoning was incorrect. In our opinion, Associate Judge Lester's reasoning is sound and likely to be followed in future cases.
As an aside, the judgment also touched on an important provision in the Act which is often overlooked. Under section 392(2) of the Act, a document that is sent by email is deemed to have been received on the working day following the day on which it was sent. So, it is important to keep in mind that if a statutory demand was served by email, the 10 working day period to apply to set aside the statutory demand and the 15 working day period to comply with the demand, commence on the second working day following the date of service.
Legal practitioners and businesses should pay close attention to procedural requirements in legal proceedings, as strict compliance is essential. If a company wishes to apply to set aside a statutory demand, it is vital to get it right the first time round, otherwise the company faces the risk of an application for liquidation by a creditor in reliance on the statutory demand. Additionally, the judgment sheds light on a commonly overlooked provision in the Act concerning email service timelines, offering valuable insights for future legal engagements.
The decision underscores the wisdom of engaging suitably experienced legal advisors, and professional document service agents, to ensure correct preparation and valid service of, not only legal proceedings filed in the court, but crucial notices that precede such proceedings, such as statutory demands or other formal notices, including default/demand notices prescribed under the Property Law Act 2007 or similar legislation.
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© McVeagh Fleming 2024
This article is published for general information purposes only. Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice. If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.
