Apatu v Apatu

[2012] NZHC 1103

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2011-441-831 [2012] NZHC 1103

IN THE MATTER OF     the Insolvency Act 2006

AND

IN THE MATTER OF      the bankruptcy of ASHLEY KANARA APATU

Judgment Debtor

BETWEEN  KENNETH TAMA TE KAPUA APATU First Judgment Creditor

ANDNATHAN WIRIHANA APATU, RENATA ROBIN APATU AND KATHERINE LOUISE BATES

Second Judgment Creditors

Hearing:         4 May 2012

Counsel:         N. Gray - Counsel for Judgment Creditors

S. Govender - Counsel for Judgment Debtor

Judgment:      31 May 2012

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

This judgment of Associate Judge Gendall was delivered at 3.45 pm on 31 May 2012 under r 11.5 of the High Court Rules.

Solicitors:           Sainsbury, Logan & Williams, Solicitors, PO Box 41, Napier

KTTK APATU & ORS V AK APATU HC NAP CIV-2011-441-831 [31 May 2012]

Introduction

[1]      Before the Court are two applications:

(a)       an application which the judgment debtor has filed himself on 13

February 2012 which he describes as an “Interlocutory Application on Notice” seeking that “the Notice of Motion for Bankruptcy be stayed pending the hearing of an appeal to the Court of Appeal ....”.

(b)An application by the judgment creditor seeking an order adjudicating the judgment debtor bankrupt.

[2]      Both applications relate to a debt of some $85,000.00 being a costs award made against the judgment debtor and one other by Williams J in the High Court at Napier on 2 December 2011.  A Bankruptcy Notice claiming this amount together with additional costs was served on the judgment debtor on or about 12 January

2012.

[3]      It is appropriate first to consider the judgment debtor’s application noted at para [1](a) above.  That application, as I see it, clearly appears to seek to set-aside the earlier Bankruptcy Notice issued against him, and for present purposes, I will treat it as such.

Application to Set Aside Bankruptcy Notice

[4]      Section 17 Insolvency Act 2006 provides that a debtor commits an act of bankruptcy where s/he fails to comply with the requirements of a Bankruptcy Notice served on her/him within 10 working days after the date of service of that Notice. As a consequence, any application to set-aside a Bankruptcy Notice must be made within the 10 working day limit.  This requirement is also clearly stipulated in the Bankruptcy Notice itself noted as Form B2. Any such application must be made and served with supporting material within the 10 working day time limit.

[5]      As noted above, in the present case the Bankruptcy Notice was served upon the judgment debtor on 12 January 2012.  The 10 working day time limit therefore expired on 26 January 2012.

[6]      The present application which I take to be one to set-aside the Bankruptcy

Notice was not filed until 13 February 2012.  It is therefore out of time.

[7]      In Teio v Marac Finance Limited HC, Auckland, 1 December 2004, CIV-

2004-404-1091, Associate Judge Faire held that once the 10 working day period after service of a Bankruptcy Notice had passed, an act of bankruptcy had occurred. Accordingly, it is not possible to extend the time for complying with a Bankruptcy Notice.  Any provision endeavouring to do this could not effectively undo the event that has really occurred, namely the act of bankruptcy – Re:   Scott Ex Parte ANZ Banking Group (NZ) Limited HC, Rotorua, 15 September 1989, Fisher J B113/89.

[8]      The  authorities  are  clear  therefore  that  no  application  to  set-aside  a Bankruptcy Notice is valid unless it is filed and served within the mandatory 10 working day period of service of the Bankruptcy Notice on the debtor Re:  Memelink exp  Sanco  (NZ)  Ltd  10/3/09,  AJ  Gendall,  HC,  Wellington,  CIV-2008-485-269. Clearly that has not occurred here.

[9]      It must follow that the judgment creditor’s application in so far as it seeks to set-aside the Bankruptcy Notice fails.  And before me, Mr Govender, counsel for the judgment debtor acknowledged that this would necessarily follow.  That Application to Set-Aside the Bankruptcy Notice therefore is dismissed.  An order to this effect is now made.

Bankruptcy Application

[10]     I now turn to consider the judgment creditor’s Bankruptcy Application noted

at para [1](b) above.

[11]     That application seeks an order adjudicating the judgment debtor bankrupt on the basis of the 2 December 2011 costs judgment noted at para [2] above.   This ordered the judgment debtor to pay to the judgment creditor the sum of $85,000.00.

[12] Although as I have noted at [3] above, I have treated the judgment debtor’s “Application on Notice” as one to set-aside the Bankruptcy Notice itself, it is possible that this application also effectively seeks a stay of the bankruptcy proceeding. This is on the basis that the judgment creditor has brought an appeal against the 2 December 2011 judgment of Williams J in this Court, the costs order in which forms the foundation for this proceeding, and that appeal is presently before the Court of Appeal.

[13]     It is appropriate here as I see it to consider both the judgment creditor’s

adjudication application and this stay application together. I now do so.

[14]     The main issue in considering these matters is whether in terms of s 42

Insolvency Act 2006, the present bankruptcy proceeding can properly continue and be disposed of when the judgment upon which the bankruptcy notice is based as noted above is subject to an appeal to the Court of Appeal.

[15]     Section 42 of the Insolvency Act 2006 addresses this issue and provides:

(1)      This section applies if the creditor's application for adjudication relies on 1 of the following acts of bankruptcy:

(a)     the debtor failed to comply with a bankruptcy notice (see section 17):

(b)      a judgment against the debtor for non-payment of trust money is not satisfied within 5 working days after the date of the judgment (see section 28).

(2)     If the debtor has appealed against the judgment or order underlying the bankruptcy notice or the judgment for nonpayment of trust money, as the case may be, and the appeal is still to be decided, then the Court may—

(a) halt the creditor's application for adjudication; or

(b) refuse the application.

[16]     Section 42 of the Insolvency Act 2006 thus grants a discretion to the Court to either halt a judgment creditor’s bankruptcy application or refuse the application, where the judgment underlying the bankruptcy notice is subject to an appeal and that appeal has yet to be decided. It does not state the circumstances where that discretion should be exercised however. As Lang J noted in Re Wright ex p Health Distributors

Limited, this discretion should be exercised in a manner that is just and equitable having regard to all the relevant factors.[1] The Court should consider the interests of the litigants, other creditors, and the public generally.[2]  Lang J then provided a non- exhaustive list of factors which would, depending on the circumstances, be relevant in exercising the discretion:

[1] Re Wright ex p Health Distributors Limited HC Hamilton CIV-2010-419-121, 4 November 2010 at

[10].

[2] At [10].

(a)       The prejudice to the judgment debtor if the application is refused; (b)        The likelihood that the judgment debtor’s appeal will succeed;

(c)       The judgment debtor’s ability to pay the debt if his appeal does not succeed in extinguishing the debt;

(d)      The prejudice to the judgment creditors if the application is halted or refused pending the appeal;

(e)       The delay in prosecuting the appeal.

(See also Brookers Insolvency Law and Practice at IN42.01).

[17]     In the present context, the judgment debtor is at risk of being adjudicated bankrupt before he has had a final opportunity to pursue his appeal. If that occurs, his appeal might well be rendered largely nugatory, as the Official Assignee may not permit him to pursue it. That is not a certainty however.  In addition, existence of an appeal is not an automatic bar to bankruptcy proceedings, and if it were Parliament would have said so in the Insolvency Act 2006, rather than leaving the matter up to

judicial discretion.[3]

[3] See Lang J decision at [17].

[18]     In terms of the prospects of success of any appeal, this Court must exercise caution when considering the merits of an appeal, as that is the domain of the Court of Appeal. However, where an appeal has very limited chances of success, the Court

is entitled to weigh that as a factor against halting a bankruptcy proceeding.   In

Pillay v ANZ National Bank Limited HC, Auckland, CIV-2009-404-4175, 3/12/09, Associate Judge Faire at [17] confirmed that the merits of a proposed appeal are not generally appropriate matters for a Court to consider when addressing a s 42 application unless it considers the appeal has no real prospect of success.   In the present case I need to say at the outset that I am satisfied the appeal does have very limited prospects of success at best. It is clear from the judgment of Williams J that the judgment debtor is indebted to the judgment creditors, and his claim that costs were wrongly awarded against him in my view is particularly weak.   On this, a minute dated 19 October 2011 from Arnold J in the Court of Appeal directed Mr Apatu to file an amended Notice of Appeal and strongly urged him to seek legal assistance in doing so, as his initial notice did not comply with the rules and was “incomprehensible”. In response, the judgment debtor filed a further notice which the judgment creditors say fails to identify the grounds on which the costs order is appealed.  And, on this, Arnold J in a further “judgment” he gave in the Court of Appeal on 2 December 2011 declining to review the Acting Registrar’s decision refusing to waive security for costs on the appeal, stated:

[7]       While there is no reason to doubt that Mr Apatu honestly intends to pursue the appeal, he has little prospect of success.  Mr Apaty’s original notice of appeal was incomprehensible and he was asked to file an amended notice clarifying the  grounds relied  upon.    He  has done that.    However, the amended notice still fails to identify with any clarity the errors that Joseph Williams J is alleged to have made in the judgment under appeal.  In those circumstances, the respondents are entitled to some protection, by way of provision of security, against what must be regarded as a likelihood that Mr Apatu’s appeal will fail and a costs order will be made against him.

[19]     Other factors of relevant here include r 30(3) of the Court of Appeal (Civil) Rules 2005 which states that failing to remedy defects in a Notice of Appeal filed by a Judge means the appeal is treated as having been abandoned.  The appeal might also be struck out on application to the Court of Appeal under r 37(1) in this case for failure on the part of the judgment debtor to pay security for costs as directed.  As I understand it, the security for costs ordered still remains unpaid.

[20]     The judgment debtor has also indicated that he has no financial means to pay the debt if the appeal is unsuccessful.  On this there is also no evidence before me of any assets which the judgment debtor holds which could be used to satisfy the debt. It is difficult to escape the conclusion that the judgment creditors are likely to be

prejudiced  if  adjudication  is  delayed  further  and  particularly  until  the  Court  of Appeal determines even whether it is going to hear the appeal.   Any assets the judgment debtor does indeed have may well be likely to dissipate even further if matters are delayed longer because of his attempts to appeal.

[21] Another factor which weighs against the judgment debtor here is his continuing delays in prosecuting this appeal. The judgment debtor filed his appeal against the decision of Williams J on the last day of the 20 working days allowed to do so. The 19 October 2011 Court of Appeal minute of Arnold J directed the judgment debtor to file an amended notice of appeal by 18 November 2011 which complied with the rules. He filed that further Notice of Appeal but both the judgment creditors and Arnold J (in his 2 December 2011 judgment noted at [18] above) say that it fails to identify the grounds on which the Williams J decision and his costs order are appealed. Next, it is clear that the judgment debtor has not paid security for costs for the appeal within the time ordered by Arnold J. He has also failed to file the case on appeal within the required 6 months. He applied for an extension of time for filing this, on the last day of the 3 months in which he was entitled to do so. In addition, the judgment debtor was supposed to file submissions in support of the Application for Extension within 20 working days but he has failed to do so. He has filed documents since which purport to be submissions but these do not address the reasons warranting an extension of time. The judgment creditors oppose the Application for Extension of time and say that if it is granted, they intend to apply to have the appeal struck out in reliance on r 30(3) or r 37(1) Court of Appeal (Civil) Rules 2005. This protracted sequence of events in pursuing the appeal in my view must weigh against granting a halt in proceedings in the present situation. As I see it that would only contribute further to the delay here, and this could further prejudice the judgment debtor’s creditors by way of possible dissipation of what (if any) assets the judgment debtor may presently have.

[22]     Overall, the only factor here that favours the judgment debtor’s invoking of s

42  Insolvency  Act  2006  is  the  likely  prejudicial  effect  that  dismissal  of  his application  will  have  on  the  prosecution  of  his  appeal  to  the  Court  of Appeal. Clearly, in appropriate circumstances the Court should not curtail a legitimate right to  appeal  by  making  it  realistically  impossible  for  that  appeal  to  be  pursued.

However, if I weigh that against a combination of the many countervailing factors already identified, the combined weight of those other factors lead me to conclude that the application for an order halting the proceedings should be dismissed.

[23]     There has been substantial and effectively unexplained delay on the part of the judgment debtor in prosecuting his appeal.  He has not in any sense prosecuted the appeal diligently.  In addition, the Court here, in my view, can safely conclude on the basis outlined above in particular at [18] that this appeal has very little chance of succeeding.  As a result the judgment debtor’s bona fides in prosecuting the appeal on  what  is  effectively  a  long-standing  family  dispute  must  be  questioned.    In addition, as this is essentially a family dispute matter, no public interest issues arise in this case.

[24]     As I have noted above, the only factor here that might favour the judgment debtor’s s 42 application is the possible effect that dismissal of his application will have for prosecution of his appeal.  I confirm my earlier comment that this factor, as I see it, is outweighed here by the combined weight of the other countervailing factors referred to above.  I am satisfied in this case that it is in the overall interests of justice for the judgment debtor’s s 42 application to be dismissed, and I now do so.

[25]     Turning lastly to the judgment creditor’s bankruptcy application itself, it is undisputed here that the judgment debtor has committed an act of bankruptcy in terms of s 13(b) in that he has failed to comply with the Bankruptcy Notice served upon him within the specified period as set out in s 17(1) Insolvency Act 2006.  The debt in question exceeds $1,000.00 and remains overdue.  The grounds for an order for adjudication set out in s 13 Insolvency Act 2006 are clearly established.

[26]     And, I am satisfied too that there is no basis in this case upon which the Court can  exercise  its  discretion  to  refuse an  order  for adjudication  in  terms  of s  37

Insolvency Act 2006.  Certainly, the judgment debtor before me did not attempt to argue that any of the grounds outlined in s 37 would apply here, other than in so far as they might be linked to his arguments relating to s 42 Insolvency Act 2006.  In

fact, the judgment debtor effectively acknowledged before me that he is unable to pay his debts and has little by way of assets.

[27]     For all the reasons outlined above I am satisfied that the judgment creditor’s

application for an order of adjudication must succeed.

Conclusion

[28]     Orders are now made therefore as follows:

(a)       An order is made adjudicating the judgment debtor Ashley Kanara

Apatu bankrupt.

(b)       Costs are awarded to the judgment creditors on this application on a

2B basis together with disbursements as fixed by the Registrar. (c)    These orders are timed at 3.45 pm today, 31 May 2012.

‘Associate Judge D.I. Gendall’