Back when I became a lawyer, the service of documents was a fairly simple affair. If the person to be served did not have solicitors who were authorised to accept service, then you found out where the person was, and either your or an agent met them and handed them the documents. If you needed to do something different, such as serving through email or Facebook, or by attaching the documents to their front door because no one ever seemed to be at home, then you made an application to the Court for substituted service. The benefit of this process was that service was largely uncontroversial.
At some point, the “personal touch” seems to have become lost, and there are more and more cases coming before the Courts challenging service. Of note is that the Courts are actually taking a very hard line, and, when it comes to service, close enough is not good enough.
The case of Forensic Recovery Associates Limited v Farmers First Livestock Limited [2024] NZHC 3135 is an example of service of a statutory demand going awry.
Usually, when serving a statutory demand, the processes under s 388 of the Companies Act 1993 should be followed. Section 388 requires service to be effected in one the following ways, namely by:
1. delivery to a director;
2. delivery to an employee at the company’s head office or principal place of business
3. leaving it at the company’s registered office or address for service;
4. serving it in accordance with an agreement made by the company;
5. posting it to the company’s registered office;
6. emailing it to the company at an email address that is used by the company; or
7. (if anyone still uses fax machines) by fax.
In the Forensic Recovery Associates case, the counterparty purported to email a statutory demand to the personal email address of a director, and to the receivers of the company. It was not in issue that both the director and the receivers actually received the statutory demand.
Neither the director nor the receivers responded to the statutory demand, and a liquidation application was commenced. There were a number of matters in contention, including service. The application to put the company into liquidation was declined, among other things, because the statutory demand was not served properly.
The Court found that in order to serve a document on a company by email, it has to be to an email address used by the company. Evidence that the email address was so used has to be before the Court. As the email was sent to the director’s personal email address, and there was nothing to suggest that the director used his personal email address for the company, service was not carried out properly. The Court also observed that “delivery” to a director meant personal delivery, not electronic, so service was not carried out by delivery to the director.
The service of the statutory demand on the receivers was not service on the company, because service on receivers is not service on the company.
The Court also referred to recent other cases where service was not carried out correctly. These included cases where the statutory demand had been emailed to the debtor’s solicitor and couriered to the debtor’s solicitor. Absent an agreement for service in that way, documents could not be served on a company by way of its solicitors. It made no difference if the debtor company was later sent the statutory demand by their solicitor, after it had been ineffectively served.
In other words, having actual knowledge of and possessing the documents does not overcome irregular service.
The rules of service of documents can be technical and can vary according to the documents to be served and the nature of the recipient. As the above case shows, it is vital to carry out service correctly, as any irregularity can derail the process.
Thanks to Kerry Puddle for writing this article. Please get in touch with Kerry or another team member if you would like to discuss it.
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