Bank of New Zealand v Evans
[2015] NZHC 1345
•11 June 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-470-173 [2015] NZHC 1345
UNDER the Insolvency Act 2006, section 209 IN THE MATTER OF
the bankruptcy of HAYDEN CARL EVANS
BETWEEN
BANK OF NEW ZEALAND Judgment Creditor
AND
HAYDEN CARL EVANS Judgment Debtor
Hearing: 11 June 2015 at 2:15pm Appearances:
D T Broadmore for Judgment Creditor
Hayden Carl Evans, Judgment Debtor(by telephone link from Western Australia)
Judgment:
11 June 2015
ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL
Solicitors:
Buddle Findlay (L O’Gorman/D T Broadmore) Auckland, for Judgment Creditor
BANK OF NEW ZEALAND v EVANS [2015] NZHC 1345 [11 June 2015]
[1] Mr Evans has applied to set aside the bank’s bankruptcy notice.
[2] These matters arise on his application:
(a) Does the court have jurisdiction to issue a bankruptcy notice against
Mr Evans in Australia?
(b)Can the court’s decision to order service outside New Zealand be challenged?
(c) Is the amount stated in the bankruptcy notice over-stated?
(d)Has Mr Evans entered into an agreement with the bank in settlement of the debt?
(e) Should the court approve a proposal by Mr Evans to pay the debt off over time?
[3] The bankruptcy notice is issued under s 17 of the Insolvency Act 2006. Failure to comply with a bankruptcy notice is an act of bankruptcy. If a debtor commits an act of bankruptcy, that gives ground for the creditor later to apply to have the debtor made bankrupt. The bankruptcy notice by itself does not make the debtor bankrupt. It is a preliminary step to be proved as one of the grounds for applying for the debtor’s bankruptcy. Any bankruptcy decision will be subject to a separate proceeding. The question to be decided here is whether the bankruptcy notice should be allowed to stand so that if Mr Evans does not comply with it that will give rise to an act of bankruptcy.
[4] Because Mr Evans has applied to set aside the bankruptcy notice, the time for complying with the notice has been extended under r 24.10 of the High Court Rules. That extension of time runs until the court decides the outcome of the setting aside application.
Background
[5] The bank obtained judgment against Mr Evans in the District Court at Tauranga on 22 December 2008 for $21,914.98. That was for a debt based on a credit card account. In March 2009 the bank applied for Mr Evans to be examined as to his assets and liabilities. Mr Evans attended and an attachment order was made against his earnings, requiring his employer to pay $250 a fortnight in reduction of the debt. Between May 2009 and September 2010 the bank received $8,750 in reduction of the judgment debt by payments made under the attachment order. The last payment the bank received was made on 15 September 2010.
[6] Some four years passed before the bank applied for a bankruptcy notice to issue. In that time, Mr Evans had left New Zealand to live in Australia. He has in the meantime returned frequently to New Zealand but he says that he now has permanent residence in Western Australia. I infer that he went to Australia for employment. There is no evidence to satisfy me that his motive in leaving New Zealand to go to Australia was to escape his creditors.
[7] The bankruptcy notice issued in October 2014 requires Mr Evans to pay the sum of $17,498.60 plus interest running at five per cent per annum, the current rate fixed under the District Courts Act 1947. The sum of $17,498.60 was arrived at by taking the amount set out in the evidential certificate issued by the District Court,
$13,560.98, and adding on interest at five per cent from 23 December 2008 to
9 October 2014 amounting to $3,937.62.
[8] The bank made contact with Mr Evans by email. He agreed to accept service of the bankruptcy notice by email. After he was served, Mr Evans filed an application to have the bankruptcy notice set aside. That application showed that Mr Evans was in Australia. As it was originally issued, the bankruptcy notice contemplated that Mr Evans was in New Zealand and that the place of service would be in New Zealand. The notice gave Mr Evans only 10 working days in which to comply.
[9] Once the bank saw that Mr Evans was in Australia, it realised that notice was invalid under s 17 of the Insolvency Act. The bank had to obtain permission from the court under s 17(3) to serve Mr Evans outside New Zealand. The court had to make an order under s 17(4) fixing the time for complying with the notice. Those steps had to be carried out. The bankruptcy notice was accordingly invalid.
[10] Mr Evans’ application to withdraw the bankruptcy petition was successful. The notice served on him in December was withdrawn. The question of costs remains outstanding. Mr Evans did use a lawyer on that application although he has represented himself in the current application.
[11] In February 2015 the bank applied for orders allowing service out of New Zealand and fixing a time for compliance. Associate Judge Doogue gave permission under s 17(3) to allow service on Mr Evans in Australia, and fixed the time for complying with the notice at 25 working days after service. By agreement, the bank served Mr Evans by email on 17 February 2015. Mr Evans filed and served his setting aside application on 25 March 2015. In a conference on 23 April 2015, I held that Mr Evans was within time with his application. Because he has validly applied to set aside the bankruptcy notice within time, he has not yet committed any act of bankruptcy.
[12] No issue arises with the time taken to serve the bankruptcy notice on Mr Evans. While the bankruptcy notice was issued on 15 October 2014, there is no time limit for serving a bankruptcy notice out of New Zealand, whereas there is a time limit of six months for serving a bankruptcy notice within New Zealand.1
Jurisdiction
[13] Mr Evans argues that the bankruptcy notice should not have been issued out of New Zealand because he is now a permanent residence of Australia. The question of his bankruptcy ought to be determined in Australia, not in New Zealand. He says
that while a New Zealand judge has jurisdiction over matters in New Zealand, a
1 High Court Rules, r 24.9.
New Zealand judge does not have jurisdiction over residents of Australia, just as
Australian judges do not have jurisdiction over residents of New Zealand.
[14] That, with respect, is rather simplistic. The starting point is that s 17(3) of the Insolvency Act expressly gives the court the power to allow a bankruptcy notice to be served outside New Zealand. That is the short answer on the jurisdiction point. But, taking the matter more widely, there is the Trans-Tasman Proceedings Act 2010. Under that act, New Zealand judges can take jurisdiction over Australian residents just as, under corresponding legislation in Australia, Australian judges can take jurisdiction over New Zealand residents. Mr Evans objection to a New Zealand court hearing the case against him simply on the basis that his residence in Australia is not well-founded.
Should the court exercise its discretion to take jurisdiction in this case?
[15] There is a further question whether the court should allow a bankruptcy notice to be issued against Mr Evans in Australia. This is not a question of jurisdiction, but of discretion. The bank says that, as Associate Judge Doogue has already decided to allow the service of the bankruptcy notice out of New Zealand, the matter is already concluded and cannot be reviewed. With respect, Associate Judge Doogue made that decision on an application without notice by the bank. Mr Evans was not heard on that application.
[16] In other cases where the court grants leave to a plaintiff in New Zealand to serve a New Zealand proceeding on a person outside New Zealand, that person is entitled to apply to have the court decide whether it is appropriate for the proceeding to continue in New Zealand or whether it should be dealt with somewhere else. In a parallel way, it should be open to a debtor served with a bankruptcy notice outside New Zealand to apply to the court in New Zealand to contend that questions as to a bankruptcy notice, or, more widely, questions as to the debtor’s insolvency can be more suitably determined outside New Zealand in the territory of the debtor’s residence rather than in New Zealand.
[17] Given the short period within which a debtor must respond to a bankruptcy notice, a setting aside application is an appropriate vehicle by which a debtor can ask the court to review the decision to allow service of the bankruptcy notice outside New Zealand. Accordingly, I regard it as competent for Mr Evans to ask the court to consider afresh whether this bankruptcy notice should issue against him in Australia.
[18] The bank relies on a number of factors to justify New Zealand dealing with Mr Evans’ insolvency. It points out that Mr Evans incurred the debt in New Zealand under a credit card contract. He lived in New Zealand at the time. He remained in New Zealand up to the time the judgment was obtained against him and afterwards until about 2011 when he moved to Australia. The bank says that is sufficient grounds to justify New Zealand dealing with Mr Evans’ insolvency.
[19] I said before that there is nothing to suggest that Mr Evans had gone to Australia to escape his creditors. Even if Mr Evans went to Australia purely for employment, and he has now taken up permanent residence in Australia (although returning to New Zealand occasionally) there is still good reason for New Zealand to deal with Mr Evans’ insolvency. A debtor who leaves New Zealand without settling with his creditors cannot complain that the country where he has left his creditors unpaid asserts a continuing interest in questions of his solvency. New Zealand continues to have a justifiable interest in dealing with that debtor. That, in my view, provides sufficient grounds for the court to assert jurisdiction in this case. I concur with the decision of Associate Judge Doogue that the bankruptcy notice could properly be served on Mr Evans in Australia.
Overstatement of amount due in the bankruptcy notice
[20] In written submissions, the bank conceded that the amount stated in the bankruptcy notice may have been overstated. While it had received $8,750 in reduction of the debt, it had given credit for a smaller sum of $8,404. It seemed to accept that the bankruptcy notice overstated the debt by $346.
[21] In the hearing, however, Mr Broadmore persuaded me that there is not in fact any overstatement. He referred to the documents beginning with Mr Evans’
examination in the District Court, and satisfied me that the $346 can be accounted for by way of costs on the examination in the District Court. I accept that submission. I find that the amount stated in the bankruptcy notice has not been overstated.
[22] If I had found that the amount in the bankruptcy notice had been overstated, I would have adjusted the amount required to be paid by reducing it to the extent of the overstatement. I would make that order under s 418 of the Insolvency Act. That is consistent with the court’s powers under s 418 of the Insolvency Act as established by leading decisions such as Best v Watson.2 As it is, I see no need to adjust the amount in the bankruptcy notice.
Did Mr Evans settle with the bank?
[23] Mr Evans says that he entered into a binding agreement with the bank that it would accept payment of $11,000 as a full and final settlement of the debt.
[24] In his affidavit, Mr Evans says:
9.In December I was wanting to clear this debt and BNZ offered to settle for $11,000 which I excepted [sic] but before the matter could be concluded the lawyers in Buddle Findlay locked its conclusion.
[25] With his submissions, Mr Evans has also attached an email he received from the bank about that time in which the bank indicated that Mr Evans should deal with these matters directly with the bank’s lawyers rather than with the bank. Even though he alleges that he entered into an agreement to settle the matter for the
$11,000, Mr Evans has not paid that sum to the bank.
[26] For the bank, a manager, Ms Northcott, has deposed that she has examined the bank’s records and has not found any written record of any agreement along the lines asserted by Mr Evans. The reference to the absence of any written record is relevant by reason of s 92 of the Judicature Act 1908. Mr Broadmore argued that an agreement to accept payment of a lesser sum in full and final settlement of a debt for
a greater sum is not without more supported by consideration and is therefore not
2 Best v Watson [1979] 2 NZLR 492 (CA).
enforceable. For that, he relies on the well established authority of Foakes v Beer.3
To show that this authority had been followed in the context of applications to set aside bankruptcy notices, he referred to the decision of Associate Judge Faire in Thwaites v Commissioner of Inland Revenue.4
[27] Mr Broadmore also referred me to s 92 of the Judicature Act:
An acknowledgement in writing by a creditor, or by any person authorised by him in writing in that behalf, of the receipt of a part of his debt in satisfaction of the whole debt shall operate as a discharge of the debt, any rule of law notwithstanding.
[28] The section modifies the rule in Foakes v Beer by an exception for a written acknowledgement by the creditor.
[29] Mr Evans does not contend that the agreement he alleges was recorded in writing. Therefore s 92 does not help him. The rule in Foakes v Beer is against him because he cannot point to any consideration given by him in support of his compromise agreement. In the circumstances therefore, Mr Evans is not entitled to assert that he has entered into a settlement with the bank as a ground for setting aside the bankruptcy notice.
Should the court approve a proposal by Mr Evans to pay the debt off over time?
[30] Mr Evans indicates a willingness to pay off the debt at some $250.00 a fortnight. In that, he was simply offering to continue payments that had already been ordered in the 2009 attachment order. In an application to set aside a bankruptcy notice, the court has an independent power to consider proposals by a debtor to pay
off the debt.5 Specifically, the bankruptcy notice as one form of compliance that
Mr Evans must secure or enter into a new formal agreement for the amount in the notice to the creditor’s satisfaction, or to the satisfaction of the High Court. The provision for the court to be satisfied as an alternative to the creditor shows that the
court does have an independent power.
3 Foakes v Beer (1884) 9 App Cas 605 (HL).
4 Thwaites v Commissioner of Inland Revenue (2006) NZTC 20,052 (HC).
5 Insolvency Act, s 29(1)(b)(iii).
[31] I am not, however, satisfied that Mr Evans’ proposal is an appropriate one in
the circumstances of this case. The debt is long overdue. The arrangements made in
2009 to pay off the debt at $250 a fortnight were reasonable in the circumstances at that time. But Mr Evans did not adhere to them. Once he left his employment - so that the attachment order could no longer operate – he did not continue making payments to the bank. He let the debt remain unpaid with interest on the debt mounting. Now that he has left New Zealand, the bank will be placed at a real disadvantage if there were a new arrangement along the lines proposed by Mr Evans. There is not enough in Mr Evans’ proposal to give the bank, or the court, any reasonable assurance that Mr Evans would adhere to the arrangements. The bank would be left at a disadvantage were Mr Evans to default in that it would have to run up more costs in trying to enforce payment. There is a looseness and lack of specificity about the arrangements. That means that I cannot be satisfied that it would be appropriate to approve Mr Evans’ proposal. Accordingly, I do not approve his proposal.
Further matters
[32] The court can also set aside a bankruptcy notice if it is satisfied that the debtor has a counterclaim, set-off or cross-demand which equals or exceeds the amount of the judgment and which the debtor could not have set up in the original proceeding. Mr Evans has not provided anything that would satisfy me that he has any such counterclaim here. There is no evidence to that effect.
[33] In submissions, Mr Evans also raised the question whether he had been validly served with the District Court proceeding. He has left it far too late to raise such challenges. He accepts that he was indebted to the bank for the credit card debt. He attended an examination in the District Court at Tauranga. An attachment order was made. There was plenty of opportunity then to complain about the enforcement of the court’s judgment in those days, but he did not. He must have accepted at that stage that the judgment was valid. It is now far too late for him to start raising questions as to the validity of the judgment. In effect, any application to have the judgment set aside would be pointless, given that he does not contest the validity of the debt.
Result
[34] In all these circumstances, Mr Evans has not made out any grounds for setting aside the bankruptcy notice, and accordingly I dismiss his application.
[35] I reserve costs but give a preliminary view. When initially served, Mr Evans employed a lawyer to apply to set aside the first bankruptcy notice. Mr Evans had valid grounds for applying to set aside the notice because he was out of New Zealand and the bankruptcy notice did not comply with ss 17(3) and (4) of the Insolvency Act. Costs each side has incurred may be set off. I regard the bank as entitled to recover its costs on the present application subject to a deduction for whatever costs may be due to Mr Evans on his earlier setting-aside application. I give that as a general indication. I invite the parties to confer to see if costs can be agreed. If they cannot agree, memorandum should be filed.
[36] The effect of this decision is that the bankruptcy notice has not been set aside. Time has stopped running for compliance with the notice.
[37] This application has been heard in chambers. The time to apply to review this decision is extended under r 2.3(2) to 15 working days after the written version of the decision is delivered. That is to allow Mr Evans time to obtain legal advice.
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Associate Judge Bell
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