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Judge strikes out Team Kiwi Racing liquidation move over process serving, finds breach of publication rule

Published 22 December 2007

A High Court judge has struck out an application to wind up Team Kiwi Racing Ltd (David John) because a process server hadn’t proved he’d stuck a statutory demand notice on the right door at TKR’s vacated registered office.

 

Associate Judge Hannah Sargisson issued her decision 15 minutes before the Auckland High Court closed for Christmas. She also found the plaintiff, Apparel By Design Ltd, had breached the High Court rule forbidding advertising or the publication of other information about a liquidation application in the 7 days after it was lodged. The rule is designed to allow a defendant time to seek a restraint of advertising & publication.

 

V8 Supercar company Team Kiwi Racing hadn’t objected to newspaper & Gazette advertising, which was done at the appropriate time, but to comments on radio by an Apparel By Design director before notice of the liquidation application had been served.

 

Apparel By Design applied on 17 September (and earlier) to have Team Kiwi Racing wound up on the basis of a $90,000 statutory demand.

 

At a hearing before Associate Judge Sargisson on 16 October, Team Kiwi Racing sought orders restraining advertising & staying the liquidation proceeding, and a second order striking the proceeding out. Towards the end of that hearing, the judge suppressed advertising or publication of further information on the case until further order of the court.

 

In her decision, Associate Judge Sargisson said the first part of Team Kiwi Racing’s application became redundant because the application to wind the company up had already been well publicised, so the decision on striking out the application should also be publicised.

 

On the strike-out application, Team Kiwi Racing’s lawyer, Edwin Telle, contended there was no effective service of the statutory demand because service was defective, and the plaintiff had published information or advertised the proceeding in breach of rule 700J of the High Court rules.

 

Rule 700J, on the restriction of advertising of a proceeding, states: “Except where a statement of claim filed pursuant to rule 700C is filed by the defendant company, no person shall, unless the court otherwise directs, publish any advertisement required by rule 700I or any other information relating to that statement of claim until at least 7 days after the date on which the statement of claim in the proceeding is served on the defendant company.”

 

The statutory demand relied upon was served on Team Kiwi Racing’s vacant registered office at 59 Montgomerie Rd, Airport Oaks, on 16 August (Apparel By Design’s registered office has been at the same address since June 2006). The processor server taped the demand to the front door and said in an affidavit: “The premises showed signage for the defendant company so it appeared to me that I was serving the defendant’s current or previous business premises, albeit that the premises now appeared to be vacant.”

 

Team Kiwi Racing said it had moved to Te Rapa, Hamilton, by then but suspected a statutory demand notice had been delivered to the Oaks premises. None was found, and by the time Team Kiwi Racing did establish a statutory demand had been filed it was too late for the company to exercise its rights to seek an order setting the demand aside.

 

Team Kiwi Racing said the plaintiff knew the defendant had vacated those premises in July and could have obtained an order allowing service at the new registered office.

 

Associate Judge Sargisson said it was enough for the process server to attach the demand to the door of the registered office, but not just to any door: “However, it is also clear that the affidavit as to service should detail the means by which the process server identified the place of service as the correct registered office…. It is not sufficient for the process server to tape the document to any door at premises which are subdivided into separate offices for separate tenants. In such cases, process servers should satisfy themselves they have the correct door and their deposition should be clear about that.”

 

The judge found merit in the defence that evidence on where the demand was taped was inadequate: “The process server describes the presence of logos & signage at the premises, but he does not say with certainty that he knew he had the right part of the premises….. In the circumstances, I am not able to find there has been service on the registered office in accordance with the act. There is no indication in the evidence that the particular door bore any signage or identification that showed that service was effected on the defendant company’s office.”

 

The plaintiff didn’t deliver the statutory demand to Team Kiwi Racing’s new premises until 27 August.

 

The judge said service on a vacant registered office was valid, but the court could intervene “if the circumstances are such that a miscarriage of justice might result…. In this case, I am satisfied there was an obligation to go further…..  I am not satisfied in these circumstances that there was effective service. Therefore the plaintiff’s application must be set aside to avoid a miscarriage of justice…..

 

“Clearly, the liquidation proceeding cannot stand if there has not been adequate or effective service of the statutory demand. The liquidation proceeding must be struck out. However, for completeness, some comment about the issues raised about publication in this case is appropriate.

 

“The plaintiff had already advertised the proceeding in the media before the hearing of the defendant’s application. Advertising was placed in the NZ Herald on 6 October and the NZ Gazette on 11 October (outside the period in which advertising is prohibited).”

 

However, the defendant’s complaint related not to the advertisements, published shortly after the defendant filed & served its application for orders restraining advertising, but to an allegation that the plaintiff “published other information relating to the statement of claim to the news media before the statement of claim was served on it (the defendant). It (the defendant) says it filed its application hoping to prevent further advertising, that it put the plaintiff on notice that it would be making its application, and that it expected the plaintiff would desist until the application could be heard. It also says … that publication was a breach of rule 700J. Hence its contention that there should be an order striking out the proceeding as an abuse of process.”

 

Associate Judge Sargisson then turned to rule 700K of the High Court rules, which empowers the court to restrain “publication of any advertisement required by rule 700I or any other information relating to that statement of claim and staying any further proceedings in relation to the liquidation…..

 

“What is self-evident from a reading of rule 700K is that the actual filing of the application does not cause a stay & restraint to apply. An order of the court is required or, alternatively, as often happens, the agreement of the parties not to advertise.

 

“It is also self-evident that there must be no publication of any advertisement or other information before the expiry of the 7-day period.

 

“In this case it is not disputed that the plaintiff published information about the statement of claim, before it was served on the defendant, to a member of the news media. However, the circumstances leading to the publication are disputed. The plaintiff says it did not initiate the communication that resulted in information being broadcast on radio about the statement of claim. The plaintiffs say that it was approached by the news media, and its advice merely confirmed what the journalist already knew. The advice was given as a result of naivety and not because of any malice on its part.

 

“The defendant says the publication was an act of malice designed to harm its reputation…. Suffice it to say that I am satisfied that there was a clear breach of rule 700J. It was not inadvertent, and it should not have occurred.

 

The plaintiff’s application to strike out the liquidation proceeding is successful. The proceeding is struck out accordingly.”

 

Team Kiwi Racing announced on 19 December that it had finished its new workshop & race headquarters at Te Rapa.

 

Team Kiwi Racing director Mr John is also a director of David John Motorsport Trust Ltd (originally called Team Kiwi Racing Ltd, struck off the register on 20 November), Numero Uno Investments Ltd, TKNZ Ltd, TKR Automotive Ltd and TKR Events & Promotions Ltd.

 

Website: Team Kiwi Racing

 

Earlier stories:

17 October 2007: Strikeout decision reserved, evidence & submissions suppressed in Team Kiwi Racing case

12 October 2007: U: The names behind the action, the week to 14 October 2007, part 2, Team Kiwi Racing gets urgent strike-out hearing

 

Want to comment? Click on The new BD Central Forum or email [email protected].

 

Attribution: Court hearing, judgment, story written by Bob Dey for this website.

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