Avon Parnell Limited v Chevin
[2021] NZHC 2301
•2 September 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-001778
[2021] NZHC 2301
UNDER The Insolvency Act 2006 IN THE MATTER OF
The bankruptcy of PETER LOUIS CHEVIN
BETWEEN
AVON PARNELL LIMITED
First Judgment Creditor
WAIMAURI LIMITED
Second Judgment CreditorAND
PETER LOUIS CHEVIN
Judgment Debtor
Hearing: 13 August 2021 Appearances:
M J W Lenihan for Judgment Creditors R B Hucker for Judgment Debtor
Judgment:
2 September 2021
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by Associate Judge Andrew on 2 September 2021 at 4.00 pm
pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar
Date……………………………
AVON PARNELL LTD v CHEVIN [2021] NZHC 2301 [2 September 2021]
Introduction
[1] These are bankruptcy proceedings. In April 2021, the two judgment creditors were substituted for the original judgment creditor, pursuant to s 44 of the Insolvency Act 2006.
[2] Mr Chevin, the judgment debtor, contends that the Court had no jurisdiction to substitute two creditors; the jurisdiction under s 44 is confined to the substitution of one creditor only for the original creditor. Mr Chevin also contends the second judgment creditor, Waimauri Limited,1 is not a creditor for the purposes of s 44.
[3] Those are the two issues I must address, namely jurisdiction and the status of Waimauri.
[4] The parties are agreed as to the disposal of the proceedings following my determination of these issues. I address that matter below.
Factual background
[5] The bankruptcy notice issued by the original judgment creditor, Rainey Law, was based on a judgment of the District Court in the sum of $128,780.49.
[6] Timothy Edney is the sole director and majority shareholder of Waimauri. His son-in-law, Ryan Leggatt, is the sole shareholder and director of Avon Parnell Limited.2
[7] Avon Parnell is a creditor of Mr Chevin under the judgment of van Bohemen J dated 29 March 2021 in related proceedings.3 Mr Chevin was ordered to pay Avon Parnell and Mr Leggatt, jointly, damages of $256,432.32 plus interest and costs and disbursements of $83,971.30.4
1 Waimauri.
2 Avon Parnell.
3 Avon Parnell Ltd v Chevin [2021] NZHC 650.
4 Avon Parnell Ltd v Chevin, above n 3, at [138](c) and (d).
[8] The second creditor, Waimauri, contends it is a creditor of Mr Chevin under nine separate loan agreements entered into between 13 February 2017 and 27 September 2018. Waimauri says all of the loans are overdue and the total amount owing (including interest) as at 31 January 2021 is $196,142.17.5
[9] On 28 January 2021, Waimauri and Mr Edney filed notices of appearance advising that in the event the judgment creditor, Rainey Law, were to withdraw, they would seek orders under s 44 of the Insolvency Act to be substituted as creditors.6
[10] On 16 April 2021, Avon Parnell filed a notice of appearance seeking an order that in the event that Rainey Law, the judgment creditor, was to withdraw its application for adjudication, Avon Parnell would be substituted under s 44 of the Insolvency Act.
[11]In the Bankruptcy List on 22 April 2021, Bell AJ made orders for substitution.7
[12] A further creditor of Mr Chevin, namely LDE 2004 Limited, which had originally filed a notice of appearance in support of an application for adjudication in 2020, reached a settlement with Mr Chevin in 2021.
Relevant legal principles
[13]Section 44 of the Insolvency Act reads:
Substitution of creditor
(1)The court may substitute another creditor (Creditor 2) for the creditor making the application for adjudication (Creditor 1), if –
(a)Creditor 1 has not proceeded with due diligence or at the hearing of the application offers no evidence; and
(b)the debtor owes Creditor 2 $1,000 or more.
5 That does not include what Waimauri says are its entitlements to costs against Mr Chevin for the enforcement of the loans.
6 Mr Edney is a creditor of Mr Chevin under a costs award in a judgment dated 18 December 2020 in the proceeding Chevin v Valmont [2020] NZHC 3438.
7 The Court file notes that the “Edney interests” were substituted.
(2)In that case, Creditor 2 must file another application for adjudication, but can rely on the act of bankruptcy to which Creditor 1’s application related.
[14]Section 13 of the Insolvency Act reads:
When creditor may apply for debtor’s adjudication
A creditor may apply for a debtor to be adjudicated bankrupt if –
(a)the debtor owes the creditor $1,000 or more or, if 2 or more creditors join in the application, the debtor owes a total of $1,000 or more to those creditors between them; and
(b)the debtor has committed an act of bankruptcy within the period of 3 months before the filing of the application; and
(c)the debt is a certain amount; and
(d)the debt is payable either immediately or at a date in the future that is certain.
[15] There is no requirement in s 13 that the debt must be a judgment debt.8 All that s 13 requires is that the debt be for a liquidated sum payable immediately or at some certain future time.9
[16] While s 13 does not require that the debt be a judgment debt, it must be a legally enforceable debt.10
Analysis and decision
Issue (a): Does the Court have jurisdiction to substitute more than one creditor?
[17] Mr Hucker, for Mr Chevin, contends that these proceedings are a nullity. He argues that the wording of s 44 of the Insolvency Act expressly prohibits the substitution of more than one creditor. He further contends that there are good policy reasons for this approach, namely the concern not to allow oppression against the debtor by the addition of a multiplicity of creditors in one adjudication application.
8 Ronaldson v Dominion Freeholds Ltd [1981] 2 NZLR 132 (CA) at 138. That case concerned what was then s 23 of the Insolvency Act 1967, however the same approach applies to the current Act.
9 Brookers Insolvency Law & Practice (looseleaf ed, Thomson Reuters) at [IN131.01(i)].
10 Official Assignee v Fuller [1982] 1 NZLR 671 (CA).
[18]I reject those submissions; they are highly technical and without merit.
[19] The question of whether more than one creditor can be substituted was addressed by Anderson J in Re Bruns, ex parte Trust Bank Central Ltd.11 Although his decision is based on the equivalent provision in the Insolvency Act 1967, his reasoning remains applicable to s 44 of the 2006 Act. Anderson J held there was nothing in the 1967 Act preventing the substitution of more than one creditor. However, he noted:12
... the power of substitution is discretionary, and the discretion to substitute more than one creditor ought to be exercised with due regard to fairness to both creditors and debtors. Because of the risk of oppression to a debtor, the power ought to be exercised only where there is a clear justification for the plural substitution.
[20] In support of his finding the operative Act allowed plural substitution, Anderson J referred to s 4 of the Acts Interpretation Act 1924 which provided “words importing the singular number include the plural”.13 The effect of that provision has been carried over in s 33 of the Interpretation Act 1999, which provides (by reference to 4 of the 1924 Act):
33 Numbers
Words in the singular include the plural and words in the plural include the singular.
[21] The statutory scheme of the 2006 Act also supports the approach of Re Bruns. Section 13(a) expressly contemplates that there may be more than one creditor in an adjudication application:
A creditor may apply for a debtor to be adjudicated bankrupt if –
(a)the debtor owes the creditor $1,000 or more or, if 2 or more creditors join in the application, the debtor owes a total of $1,000 or more to those creditors between them; ...
11 Re Bruns, exp Trust Bank Central Ltd (1992) 6 PRNZ 382 (HC). Anderson J’s decision is cited favourably in Brookers, above n 9, at [IN44.04].
12 Re Bruns, exp Trust Bank Central Ltd, above n 11, at 384.
13 Re Bruns, exp Trust Bank Central Ltd, above n 11, at 384.
[22] The case of Re Havenleigh Global Services Ltd, ex part Henderson,14 which Mr Hucker relies on, does not assist his argument. That case is confined to the narrow point of whether the Court has power to add a creditor, as opposed to substituting a creditor.
[23] Even if s 44 allows for only one creditor to be substituted, which I do not accept, it would not necessarily follow Bell AJ’s decision substituting two creditors is a nullity. Rather, it could be rectified under s 418 of the Insolvency Act 2006, which provides a proceeding must not be invalidated or set aside for a defect unless a person is prejudiced by that defect. There is no evidence before me to suggest that Mr Chevin has in any real way been prejudiced by the substitution of two creditors in this case.
[24] I conclude that the Court has jurisdiction to substitute more than one creditor and that the proceedings are not a nullity.
Issue (b): Is Waimauri a creditor?
[25] The parties agree Waimauri is not a judgment creditor. They also agree that is not a requirement under s 44.
[26] Waimauri contends that it is a creditor under loan agreements between it and Mr Chevin. Mr Chevin, on the other hand, contends that the loans were made to Glenvale Holdings Ltd/Jason Harvey and not to him.
[27] I agree with the submission of Mr Lenihan that the sole document Mr Chevin relies upon to support his position does nothing of the sort. The “summary” exhibited to Mr Chevin’s affidavit of 26 May 2021 merely sets out a number of different loans. These are named in the left-hand column.
[28] Mr Edney, of Waimauri, put the individual loan agreements into evidence in his affidavit sworn 28 January 2021. The loans are all stated to be between Waimauri and Mr Chevin. In that affidavit Mr Edney also included a summary of the loans in spreadsheet form. Each summary states that Waimauri is the creditor and Mr Chevin
14 Re Havenleigh Global Services Ltd, ex parte Henderson [2010] NZAR 714.
is the debtor. Mr Chevin did not dispute this in his affidavit sworn 26 May 2021 and filed in support of the current application.
[29] Mr Edney also addressed the allegations as to the loans in his reply affidavit sworn 15 July 2021. Mr Edney put in evidence documents from the proceedings referred to at [7] above. In Mr Edney’s brief of evidence in that proceeding he referred to the Waimauri loans to Mr Chevin. In his “brief of evidence” that he filed and served in those proceedings in response to Mr Edney’s brief of evidence, Mr Chevin said “loans (a) through (i) I accept”.
[30] Mr Chevin has clearly accepted his liability in respect of the loans that Waimauri claims against him in these proceedings.
[31] The debts arising from the loans are for an ascertainable amount and otherwise meet the requirement to constitute Waimauri as a creditor under the Insolvency Act. I find Waimauri can be, and was, properly substituted, together with Avon Parnell under s 44 of the Insolvency Act.
Result
[32] The Court has jurisdiction to substitute two creditors for the original creditor under s 44 and Waimauri, the second judgment creditor, is a creditor for the purposes of s 44.
[33] By consent memorandum dated 13 August 2021, the parties have agreed as to the disposal of the proceedings following the determinations I have now made.
[34] This means that having resolved both the jurisdiction and creditor issue in favour of Waimauri, the monies referred to in paragraph 2(b) of the consent memorandum, namely $196,142.17, are to be paid to Waimauri’s solicitors, Brown Partners, within two working days of this judgment.
[35] In accordance with that consent memorandum, I also order that upon payment being made, counsel are to file a joint memorandum confirming that payment has been made.
[36] I wish to hear further from the parties in relation to the direction sought at paragraph 4(e) of the consent memorandum. I wish to hear submissions on whether I can now dismiss the proceedings on the papers or whether they should be adjourned for a call of the matter in the Bankruptcy List.
[37]The Registrar is to arrange for a telephone conference to address that issue.
Associate Judge P J Andrew
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