Bank of New Zealand v Patrick

[2018] NZHC 2194

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE

CIV-2017-441-000066

[2018] NZHC 2194

BETWEEN

BANK OF NEW ZEALAND

Judgment Creditor

AND

JOHN STEPHEN PATRICK

Judgment Debtor

Hearing:

23 August 2018

Appearances:

M J Wenley for Judgment Creditor

J S Patrick (Judgment Debtor) in person

Judgment:

23 August 2018

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

(adjudication in bankruptcy)

The judgment debt

[1]                 The Bank of New Zealand (“the  Bank”)  became  a  judgment  creditor  of Mr Patrick in June 2017 for a sum of $1,112,115.87.

[2]                 The debt arose from the personal guarantee which Mr Patrick had given in relation to a company’s indebtedness. Mr Patrick informs me today that the debt, back in 2014, of approximately $1.2 million should be compared with what he and his bankers understood to be capital value of $2.4 million in his assets. The Bank made some recoveries through receivers, PriceWaterhouseCooper. But although there were very significant recoveries, the debt remains today as certified by counsel for the judgment creditor at no less than $1.12 million.

BANK OF NEW ZEALAND v PATRICK [2018] NZHC 2194 [23 August 2018]

[3]                 Mr Patrick is aggrieved at the conduct of both the bank and the receivers in the way they got in assets and the extent to which Mr Patrick has subsequently been pursued through civil litigation.

Mr Patrick’s petition

[4]                 After the ordering of the summary judgment, the Bank issued a bankruptcy notice in mid-2017. Mr Patrick took steps in response to the bankruptcy proceedings. Ultimately he sought a stay or halt of the Bank’s application for an adjudication order, while he pursued appeal rights. Those have been exhausted.

[5]                 Mr Patrick provided a detailed affidavit as to his position dated 7 July 2017. The affidavit explains in detail his personal circumstances and sets out in more detail than I have barely summarised the background to the commercial dealings, the Bank’s and the receivers’ recoveries, and the reasons Mr Patrick believed he had a large counterclaim against the Bank. Subsequently, this proceeding has been adjourned on occasions to enable Mr Patrick to pursue his appeal rights. Those have been pursued unsuccessfully to the Court of Appeal which delivered a judgment in April this year dismissing the appeal and in an application for leave to appeal to the Supreme Court which was dismissed earlier this month. Through that process, of course, costs and disbursements have continued to be  added  to  the  overall  indebtedness  between Mr Patrick and the Bank.

[6]                 Mr Patrick has addressed me with a request that I exercise the Court’s residual discretion to not adjudicate him bankrupt. He emphasises a number of points relating to his personal circumstances, but also speaks briefly to the circumstances of the debt. He acknowledges, as he must, that the judgment debt exists but he remains aggrieved at the reasoning which has led to the conclusion that he is still indebted in the sum of approximately $1.2 million.  As he put it to me, he cannot see how that is correct.  Mr Patrick will nevertheless appreciate that, from the Court’s perspective, it is correct.

Mr Patrick’s personal circumstances

[7]                 I will not in this judgment record the detail of Mr Patrick’s personal circumstances. At an older age, he is coming to the end of his current employment

and faces, against a background of recent unsuccessful job applications, a real difficulty in knowing what his future employment will be if he can gain it. He has a wife and children, the children not yet being adult. He emphasises, and I accept, that he is not a financial menace as is the concern in some adjudication proceedings. He emphasises that with all the work that has been done, particularly by the receivers, to investigate his circumstances this is not likely to be a situation where adjudication will result in recoveries by the Assignee for the benefit of creditors. He notes that the Bank is his sole creditor. He has some health issues which have affected him significantly.

The Bank’s position

[8]For the Bank, Mr Wenley referred to the principles identified in Re Epirosa,1

in support of the making of an order of adjudication:

(a)What are the issues of all the parties?

The Court is only concerned with the wishes of one creditor – the Bank. Against that is to be balanced the wishes of the debtor, Mr Patrick.

(b)Does the debtor have the ability to meet the debt over time?

This is occasionally a factor which effectively allows the Court to defer the time at which adjudication is finally considered to see if the debt can be cleared. Mr Patrick’s debt cannot be cleared either now or over time.

(c)What are the circumstances in which the debt was incurred?

I regard this as a relatively neutral factor. This is a situation in which a person intimately involved with a company personally guaranteed the company’s debt and has borne the consequences of the failure of the company. I accept, as Mr Patrick has indicated, that there is no evidence to suggest he acted in an irresponsible way.

1      Re Epirosa HC Wellington B498/91, 6 March 1992.

(d)Will adjudication be pointless?

There is force in Mr Patrick’s proposition that in this particular case, where receivers have investigated his circumstances, it is unlikely that there will be additional recovery given the resources that the Assignee would have compared to those which a receiver might have been prepared to bring to bear. That said, the recovery of money is not the only purpose of adjudication. The adjudication does serve a purpose of holding a debtor accountable for the consequences, particularly of significant losses. I do not put that factor too highly in this case.

(e)If adjudication occurs, will the debtor be able to support himself?

I accept Mr Wenley’s submission that in this case the answer to that question is neutral. In the way that Mr Patrick has put matters, he is affected generally by his circumstances but particularly by his age and the difficulties that he is at present facing in finding employment. There may be some additional consideration brought to bear by some prospective employers in the way they regard a job application from Mr Patrick as a bankrupt. But, whether Mr Patrick is bankrupt or not, the difficulties which he identifies seem largely attributable to his age.

(f)Is there a particular community standing held by the debtor which would create an unusual degree of stigma?

I accept that for Mr Patrick there will be a degree of stigma attaching to his bankruptcy, if adjudicated. But it does not appear to be different to that which faces any person who has worked in the commercial sector and is bankrupted. In Re Fidow,2 as noted by  Mr Wenley, Fisher J emphasised that, in all matters of bankruptcy and insolvency, there is a public interest which transcends the interests of the parties themselves.

2      Re Fidow [1989] 2 NZLR 1346.

[9]                 Finally, Mr Wenley emphasised that the onus is on the debtor to satisfy the Court that it should exercise the residual discretion not to adjudicate a particular debtor bankrupt.

[10]             I am not satisfied in the circumstances of this case that Mr Patrick’s particular position is such that it takes him outside the usual consequences for a debtor unable to meet his or her debts. There are factors which Mr Patrick has very responsibly summarised. The Court understands the sense of grievance he has about the litigation and, in particular, the extent to which the recoveries in the receivership left a very large debt. Those are matters which inform his sense of grievance but cannot overly influence the Court’s judgment on whether adjudication is the appropriate outcome. He owes a judgment debt which has been established as existing at the highest levels of the legal system.

[11]             In deciding that the correct course is to adjudicate Mr Patrick bankrupt, I also take into account the fact that this is a huge debt and that Mr Patrick, one hopes, is not at the end of his working life. If he is adjudicated bankrupt, as much as he wants to be able to uphold his financial standing in the community without the stigma of bankruptcy, there is a clear benefit to him and his family in having this overwhelming debt brought to an end through the process of bankruptcy. That may sound paternalistic but it is a reality.

[12]             In the circumstances, I decline Mr Patrick’s application for the exercise of the Court’s residual discretion.

Orders

[13]I order:

(a)John Stephen Patrick is adjudicated bankrupt.

(b)I award costs to the creditor on a 2B3 basis together with disbursements to be fixed by the Registrar.

3      High Court Rules, Category 2 under r 14.3(1) and band B under r 14.5(2).

(c)I time the order at 11.07 am.

Associate Judge Osborne

Solicitors:

MinterEllisonRuddWatts, Wellington Copy to: J S Patrick, in person