Bax v Poros

[2021] NZHC 741

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-0839

[2021] NZHC 741

IN THE MATTER

AND

of the Insolvency Act 2006

IN THE MATTER

of the Bankruptcy of SPYRIDON POROS

BETWEEN

KYLIE BRIDGET BAX

Judgment Creditor/Applicant

AND

SPYRIDON POROS

Judgment Debtor/Respondent

Hearing:

9 December 2020

Counsel:

JD Noble for Judgment Debtor/Applicant

CFL Godinet for Judgment Creditor/Respondent

Judgment:

1 April 2021

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 1 April 2021 at 4pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Duggan & Murphy, Auckland Boyle Mathieson, Auckland

BAX v POROS [2021] NZHC 741 [1 April 2021]

Introduction

[1]        This is an application by Mr Spyridon Poros to set aside a bankruptcy notice on the basis that he has a cross claim against Ms Kylie Bax.

[2]        The cross claim relied upon is the relationship property claim filed by Mr Poros in the Family Court in December 2015. Those proceedings were not successful in the Family Court, or in the High Court on appeal. Mr Poros’ application to the High Court for leave to appeal to the Court of Appeal has been declined and he has now filed an application to the Court of Appeal for leave, as he is entitled to do.

[3]        The issue is whether the relationship property claim is still a “genuine triable claim”, as is required for it to be considered a cross claim in terms of s 17 of the Insolvency Act 2006 (“Insolvency Act”), or whether, until (and unless) leave is granted, there is no longer such a claim.

Background

[4]        The judgment debt that is the subject of the bankruptcy notice arises from a costs award made following an application for pre-commencement discovery by Mr Poros in 2015, prior to bringing proceedings under the Property (Relationships) Act 1976. He was unsuccessful in the discovery application and costs of $8,426.50 were awarded against him.1 Mr Poros sought a review of the Associate Judge’s decision and again was unsuccessful with a further costs award of $6,132.50 being made by Wylie J on 5 November 2015.2

[5]        Mr Poros commenced relationship property proceedings in the Family Court on 18 December 2015 with amended pleadings filed on 26 October 2016.

[6]        In May 2017, a bankruptcy notice was served on Mr Poros based on the two costs awards arising out of the pre-commencement discovery application, totalling

$14,559.

1      Poros v Bax [2015] NZHC 1579.

2      Poros v Bax [2015] NZHC 2772.

[7]        Mr Poros applied within the 10 working day time limit to set aside the bankruptcy notice on the grounds that he had a cross claim, the relationship property claim before the Family Court at that time.

[8]        When the application to set aside the notice was first heard on 12 September 2017, Associate Judge Christiansen adjourned the application, initially for two months, so that progress in the Family Court proceedings could be reviewed.3

[9]        The application to set aside has been adjourned since then, awaiting the outcome of the Family Court proceedings.

[10]      On 15 May 2019, the first instance decision in the relationship property proceedings was delivered. Judge Collin of the Hamilton Family Court made detailed orders over two pages of his judgment, determining which property was separate property of Mr Poros and Ms Bax and which was relationship property and how that should be divided.4

[11]       Mr Poros appealed to the High Court and Ms Bax cross-appealed. The appeal was determined on 7 July 2020, with Jagose J dismissing both the appeal and the cross appeal.5 As a result, the orders made in the Family Court remain.

[12]      Mr Poros applied for leave to appeal the High Court decision to the Court of Appeal. This application was dismissed by Jagose J on 22 October 2020.6

[13]      Mr Poros then applied for a recall of the leave decision on the grounds that the judgment failed to address “potentially the strongest of Mr Poros’ grounds for leave to be granted” that a disposition by the Goldeye Trust to Ms Bax as a loan could not have been to defeat Mr Poros’ claim or right. On 16 November 2020 Jagose J declined to recall the leave decision.7

3      Bax v Poros [2017] NZHC 2211.

4      Poros v Bax [2019] NZFC 874 at [283] to [286].

5      Poros v Bax [2020] NZHC 1602.

6      Poros v Bax [2020] NZHC 2769.

7      Poros v Bax [2020] NZHC 3024.

[14]      On 20 November 2020, Mr Poros filed an application in the Court of Appeal for leave to appeal to the Court of Appeal. No decision has yet been delivered.

Setting aside a bankruptcy notice – the principles

[15]      A debtor must not be adjudicated bankrupt on a creditor’s application unless the debtor has committed an act of bankruptcy in the three month period prior to the filing of the creditor’s application.8

[16]      Section 17(1) of the Insolvency Act provides that a debtor commits an act of bankruptcy if:

(a)a creditor has obtained a final judgment or final order against the debtor; and

(b)execution of the judgment or order has not been halted by a Court; and

(c)the debtor has been served with the bankruptcy notice; and

(d)the debtor has not within the time limit specified in subs 4 (10 working days):

(i)complied with the requirements of the notice; or

(ii)satisfied the Court that he or she has a cross claim against the creditor.

[17]      The form of the bankruptcy notice and the manner of service are not in issue. Mr Poros has not complied with the notice. So, in the absence of a cross claim, Mr Poros will have committed an act of bankruptcy.

8      Insolvency Act 2006, s 16.

[18]      Section 17(7) of the Insolvency Act defines what may constitute a cross claim for the purposes of s 17(1). It provides:

(7)… cross claim means a counterclaim, set-off, or cross-demand that—

(a)is equal to, or greater than, the judgment debt or the amount that the debtor has been ordered to pay; and

(b)the debtor could not use as a defence in the action or proceedings in which the judgment or order, as the case may was obtained.

[19]       The principles that apply in determining whether a debtor has a cross claim against the creditor are settled. The Court of Appeal in Robertson v ASB Bank Ltd9 referred to Sharma v ANZ Banking Group10 as the relevant authority, recording that it was decided under the predecessor to s 17, but holding that there is no material difference between the current statutory provision and its predecessor.

[20]      In Sharma, Cooke P, delivering the judgment of the Court of Appeal, held that the cross claim relied on in an application to set aside is required to be a genuine triable claim, concluding:11

We accept that this is the proper criterion and the words “genuine” and “triable” require the debtor to demonstrate that he has a claim of true substance which he genuinely proposes to pursue.

[21]      Section 17(7)(b) makes it clear that the cross claim cannot have been available as a defence in the action or proceeding in which the order was obtained.

[22]      If there is a genuine triable cross claim that could not have been raised, the bankruptcy notice must be set aside, there being no discretion to decide otherwise.12

[23]      The test of a genuine triable claim is referable to both liability and quantum,13 and requires a debtor to establish a cross claim of equal or greater value to the judgment debt.

9      Robertson v ASB Bank Ltd [2014] NZCA 597.

10     Sharma v ANZ Banking Group (1992) 6 PRNZ 386.

11     At 389.

12     At 389.

13     At 389.

[24]The Court in Robertson approved of the Australian High Court’s approach in

Vogwell v Vogwell:14

The words of the section are that the debtor must satisfy the court that he has “a counter-claim, set-off or cross demand which equals or exceeds the amount of the judgment debt.” In the first place it is accordingly clear that the counter- claim, set-off or cross demand must be something sounding in money. What the section contemplates is a claim to the enforcement of a right sounding in money. It must be a real claim; it is insufficient that the debtor believes that he has a claim, and the authorities show that the matter to which the Court looks is this – whether it is just that the claim should be determined before the bankruptcy proceedings are allowed to continue; in other words, whether it is a claim which is proper and reasonable to litigate.

[25]      In reviewing the evidence of the cross claim, all that is needed is a genuine triable claim, so analysis as to the likely success of the claim is not necessary:15 the debtor does not have to prove he has a watertight case.16

[26]      In Robertson, the Court held that the court’s approach on an application to set aside should be similar to the approach taken for summary judgment or to sustain a caveat.17 The Court held that the summary nature of the procedure for applications to set aside is, as with summary judgment and caveat applications, wholly unsuitable for the determination of disputed questions of fact. The Court went on, however, to say that in assessing the strength of the claim, the courts need not accept uncritically evidence that is inherently lacking in credibility. For example, where it is inconsistent with contemporary documents or inherently improbable.

Discussion

[27]      The cross claim relied on by Mr Poros is the relationship property claim that he first filed in the Family Court in December 2015 and that has now been determined by both the Family Court and the High Court on appeal. Mr Poros sought leave from the High Court to appeal to the Court of Appeal but was declined. He has now sought leave from the Court of Appeal. The Court of Appeal has not yet delivered its decision on the leave application.

14     Robertson v ASB Bank Ltd, above n 9, at [23], referring to Vogwell v Vogwell (1939) 11 ABC 83 (HCA).

15     Robertson v ASB Bank Ltd, above n 9, at [31].

16     Re Jacomb, ex parte Wikeley [2013] NZHC 3034 at [26].

17     Robertson v ASB Bank Ltd, above n 9, at [32].

[28]      At this point in time two Courts have determined that Mr Poros does not have a relationship property claim against the judgment creditor, Ms Bax, that is equal to or greater than the amount of the judgment debt on which the bankruptcy notice is based.

[29]The High Court has already declined Mr Poros’ application for leave to appeal.

[30]      To obtain leave from the Court of Appeal, Mr Poros will have to persuade the Court of Appeal that the proposed appeal would raise:18

…some question of law or fact capable of bona fide and serious argument in a case involving some interest, public or private, of sufficient importance to outweigh the cost, both to the Court’s system and to the parties, and the delay involved and further appeal. Upon a second appeal this Court is not engaged in the general correction of error. Its primary function is then to clarify the law and to determine whether it has been properly construed and applied by the Court below. It is not every alleged error of law that is of such importance, either generally or to the parties, as to justify further pursuit of litigation which has already been twice considered and ruled upon by a Court.

[31]      The threshold before leave will be granted is, therefore, relatively high. On appeal to the High Court, Jagose J dismissed Mr Poros’ appeal and did not disturb any of the many orders made by the Family Court judge.

[32]      At this point in time, no genuine triable claim remains as the Family Court and the High Court have not found that Mr Poros has a claim equal to or of greater value than the judgment debt.

[33]      In the words used by Cooke P in Sharma, now that the relationship property proceedings have been determined, Mr Poros cannot say that he has “a claim of true substance”19 that is equal to or greater than the judgment debt as the Family Court and the High Court have found that he does not.

[34]      There is no question that although Mr Poros is genuinely pursuing his claim by seeking leave to appeal from the Court of Appeal, without leave there is no triable claim and so the application to set aside must be dismissed.

18     Property Relationships Act 1976, s 39B; Senior Courts Act 2016, s 60 and Snee v Snee (1999) 13 PRNZ 609 (CA) at [22].

19     Above n 10 at 389.

[35]      If Ms Bax relies on the bankruptcy notice to file an application to adjudicate Mr Poros bankrupt, an application could be made by Mr Poros to stay or halt the adjudication application under ss 37 or 38 of the Insolvency Act, as counsel accepted during the hearing. The court has a discretion under s 37(c) to refuse the adjudication where it is just and equitable not to make the order, or to halt the proceeding under s 38 on the terms it considers appropriate, providing the court with broader powers than under s 17 of the Act.

Result

[36]      For the reasons set out above the application to set aside the bankruptcy notice is dismissed.

Substituted Service

[37]      During the hearing, the judgment creditor made an oral application for substituted service of the bankruptcy proceedings if the application to set aside did not succeed on the basis that Mr Poros currently resides in Greece. I am not prepared to make such an order in circumstances where there was no evidence before me of difficulties with service in the past. Such an application can be made in the usual way if it proves necessary.

Costs

[38]      Counsel did not address me on costs. If they are unable to be agreed, memoranda of no more than 5 pages are to be filed, within 20 working days of this judgment by the judgment debtor and within 30 working days by the judgment creditor.

Associate Judge Sussock