Body Corporate 207650 v Singh

[2019] NZHC 1547

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-000116

[2019] NZHC 1547

BETWEEN

BODY CORPORATE 207650

Judgment Creditor

AND

CHERYL SITARA SINGH

Judgment Debtor

Hearing:	17 May 2019
Appearances:	T J G Allan and T P Kelly for the Judgment Creditor S Bryers for the Judgment Debtor
Judgment:	3 July 2019
Reissued:	4 July 2019

JUDGMENT OF HINTON J

This judgment was delivered by me on 3 July 2019 at 10.00 am pursuant to Rule 11.5 of the High Court Rules

…………………………………………………………………… Registrar/Deputy Registrar

Counsel/Solicitors:

Stephen Bryers, Barrister, Auckland Grove Darlow & Partners, Auckland

BODY CORPORATE 207650 v CHERYL SITARA SINGH [2019] NZHC 1547 [3 July 2019]

[1]    This is an application to halt a bankruptcy adjudication under s 37 of the Insolvency Act 2006. The section refers to refusing an adjudication, but both parties have referred in their submissions to this being an application to halt adjudication.

Background

[2]    There has been a lengthy and expensive history to this litigation, which is over non-payment of special levies. The levies relate to construction work undertaken to repair and maintain a building known as “Richmond Terraces”.

[3]    On 20 December 2017, Judge G M Harrison entered judgment in  the  District Court at Auckland against Ms Singh for the sum of $181,561, plus costs.

[4]    Prior to that there had been proceedings in the High Court over whether the levies were lawful.1

[5]    After Judge Harrison’s decision, Ms Singh unsuccessfully appealed to this Court and unsuccessfully sought leave to appeal to the Court of Appeal. Both the appeal and the leave to appeal were heard before me.

[6]    A number of the judgments have made comment on Ms Singh’s re-litigation of issues. Many of her arguments were technical.  Even on the application for leave to the Court of Appeal, Ms Singh raised new and technical points which I allowed to be argued, erring materially in her favour in doing so. This resulted most unusually in a judgment longer than that she sought to appeal.

[7]As at 19 March 2018, Ms Singh owed the Body Corporate approximately

$207,000 on the basis of which the Body Corporate served a bankruptcy notice, having first obtained an order for substituted service.

[8]    Ms Singh failed to comply with the bankruptcy notice and as a result committed an act of bankruptcy.

1      Body Corporate 207650 v Speck [2017] NZHC 966 per Lang J. The proceeding involved more parties than just Ms Singh.

[9]    The Body Corporate applied for adjudication. That application and summons were served on Ms Singh on 26 November 2018.

[10]   Ms Singh applied to halt the adjudication proceeding and it is that application that is addressed in this judgment.

Key arguments

[11]   Ms Singh relies on two matters in submitting that the Court should exercise its discretion to decline adjudication and/or halt the bankruptcy for a defined period:

(a)She says she will be able to pay the amount of the judgment obtained by the Body Corporate as soon as she has sold the unit she owns in the complex administered by the Body Corporate.

(b)She says she has a good claim against third parties that she is pursuing in this Court and in the circumstances of that claim, there is good reason to halt the bankruptcy to allow her to do so.

[12]   In oral submissions, Mr Bryers, for Ms Singh, stressed the first of the above points, no doubt appreciating that was the stronger potential argument.

Legal principles

[13]   Both parties are agreed that the Court has a discretion to determine whether to halt an adjudication even where a creditor has an established right to that order if it is just and equitable or for any other reason.2

[14]The onus is on Ms Singh.

[15]In Baker v Westpac Banking Corporation, the Court held:3

The principles governing the exercise of the discretion under s 26 to grant or refuse an order of adjudication in bankruptcy are well settled and have been discussed by this court in recent years in Ellis v NZI Finance Limited

2      Insolvency Act 2006, s 37.

3      Baker v Westpac Banking Corporation CA212/92, 13 July 1993 at 4.

(CA253/89 judgment 24 July 1989) and McHardy v Wilkins & Davies Marinas Limited (in receivership).4 It is proper for the court to consider not only the interests of those directly concerned – the petitioner, other creditors, the debtor

– but also the wider public interest. A creditor who establishes the jurisdictional facts set out in s 23 is not automatically entitled to an order. On the other hand, it is for an opposing debtor to show why an order should not be made. The court will give proper weight to the commercial judgment of the petitioner but the oppressive use of the bankruptcy process may be a ground for refusing an order. Another ground may be the undoubted absence of assets but that will not necessarily preclude an order given the range of interests involved including the public interest in the continuing oversight of a bankrupt’s affairs and the disqualifications that go with bankruptcy. In the end the court must balance the various considerations relevant to the case and determine whether the debtor has succeeded in showing that an order ought not to be made.

[16]Factors that have been considered to be relevant include:5

(a)What are the wishes of all affected parties, including the applying creditor, other creditors, and the debtors?

(b)Does the debtor have the ability to meet his or her debts over time and, if so, does that meet the requirements of achieving finality within a reasonable period?

(c)What were the circumstances in which the debt was incurred, and do those circumstances suggest that the creditor is acting unreasonably in pursuing adjudication?

(d)Will adjudication be pointless?

(e)Will the debtor, if adjudicated, be rendered unable to support himself or herself?

(f)Does the debtor have such a standing in the community that significant issues of stigma or embarrassment will result?

4      McHardy v Wilkins & Davies Marinas Ltd (in rec) CA54/93,7 April 1993.

5      Re Rabobank Australia Limited, ex parte Tootell  [2013] NZHC 2975 at [8]; and Re Epirosa,ex parte Diners Club (NZ) Ltd HC Wellington B498-91, 6 March 1992.

Payment on sale of unit

[17]   Ms Singh’s primary submission is the bankruptcy should be halted until she sells her unit. In effect this is an argument that she can pay the debt within a reasonable time, being one of the factors noted above.

[18]   Ms Singh filed an “updating affidavit” the day before this hearing saying that her unit at Richmond Terraces was subject to a sale agreement, dated 16 April 2019. The agreement was not attached. The affidavit said that the agreement was conditional on a LIM report and on “arranging sufficient finance to settle the contract”. An extension of time to arrange finance had been agreed until 16 May 2019, the day of the affidavit. In the meantime, no deposit had been paid.

[19]   At the outset of the hearing, I was advised by Mr Bryers that the agreement had not gone unconditional and that it had come to an end. The purchaser had cancelled it. Mr Bryers suggested this may have been the fault of the Body Corporate because there were disagreements as to the amount Ms Singh owed.

[20]   Although the Body Corporate was aware of a sale agreement, they had not been provided with a copy. Mr Bryers handed up a copy in Court. It showed a sale price of $660,000. I was advised that estimated costs and commission were $30,000, so on the face of it, had the sale gone unconditional, the net sale proceeds would have been about $630,000. I was advised by Mr Bryers that the outstanding mortgage debt is

$338,000. That leaves $290,000. The judgment debt is $232,000 at the date of the application for adjudication, plus interest. In addition, the Body Corporate seeks more than $40,000 costs on this hearing. The costs are sought on an indemnity basis and have been awarded on that basis previously in this litigation.

[21]   If I make the costs award as sought, or even close to it, Ms Singh’s real interest in the property, even based on the sale agreement that has fallen through, appears to be minimal, or arguably nil. I note that I have no proof of the mortgage debt.

[22]   As a consequence of the agreement being cancelled, Mr Bryers advised that he sought six months’ further delay so that Ms Singh could sell. He said she had been trying to do so for about the last five months. He said that meanwhile they could see

what progress would be made on the proceedings against the Body Corporate, but assured me that whatever happened in that regard, Ms Singh would pay the judgment debt once her unit sold. I queried that position and he re-stated it, but then said there may be some question mark around whether she pays some extra amount of money, which would be a “subject for discussion”. I had the impression that related to a point on which I had earlier ruled against Ms Singh in my 31 July 2018 judgment, but in any event, nothing turns on that.

[23]   I suggested that, given the amounts at issue, Ms Singh should sign the unit over to the Body Corporate to sell, or to an independent party who would be responsible for obtaining the best price reasonably obtainable within say three months, paying off the debt to the Body Corporate and paying any net balance to her. No such arrangement has been reached and nor do I consider it would be likely because I consider the reality is that Ms Singh will not be able to “agree” as to the amount to be paid to the Body Corporate, despite the judgment debt and Mr Bryers’ assurances to the contrary.

[24]   Had there been an outstanding viable unconditional agreement for sale of the unit and a very clear and enforceable undertaking as to the full judgment sum being repaid from the net proceeds, then I may have allowed further time.

[25]However, there is neither.

[26]   I understand from Mr Bryers that Ms  Singh  has  been  trying  to  sell  for five months, but I was told she intended to sell  when  her case was before me in  July 2018, or earlier, and she should have been able to do so. I appreciate that the circumstances surrounding the Richmond Terrace units are difficult, but I doubt, given the attitude that Ms Singh has displayed in the course of the proceedings, whether she has taken a realistic view of her need to sell and of the terms of sale. Further, she may have been disincentivised from doing so by the fact that, as I am advised, she is receiving more rent for her unit than she is paying to live elsewhere.

[27]   In addition, I am not satisfied that if she was left in control of the sale, the full judgment debt would be repaid. I consider there would be ongoing difficulties and

time spent and costs incurred by the Body Corporate. That is unacceptable. The time has come where an independent party needs to step in.

[28]   Given the length of time that Ms Singh has had already to arrange a sale, the fact that she has little real equity in the property, the longstanding judgment debt and the other factors discussed above, I would not be prepared to allow further time for her to arrange a sale of her unit.

Should I allow further time to pursue the claim against third parties?

[29]   On 6 March 2018, Ms Singh, having failed comprehensively against the Body Corporate, issued proceedings against third parties, namely the members of the Body Corporate Committee (of whom she was once one) and the Body Corporate manager.

[30]   A unit-holder can sue such parties only on the grounds of wilful misconduct or gross negligence. Both Lang J and I averted to the law in that regard in the earlier judgments to which I have referred.6 The third-party proceedings will otherwise be traversing similar ground to before.

[31]   As will be apparent from my previous remarks, in my view, the short answer to whether I should allow time to pursue this claim is “no”. I consider Mr Bryers effectively recognises the inevitability of that answer when he says that Ms Singh commits to repaying the “full judgment sum” on sale of the unit. This would theoretically then apply regardless of how the claim against the third parties is progressing.

[32] First, staying a bankruptcy because of claims against third parties is technically possible, but if it has happened in practice, it is rare. It will be noted it is not one of the factors listed at [16] above.

[33]   Second, while Ms Singh can bring a claim against third parties, given the standard she has to meet and the background to this matter, suffice to say her claim

6      Body Corporate 207650 v Speck [2017] NZHC 966 at [29]; and Singh v Body Corporate 207650

[2018] NZHC 1932 at [31].

cannot  be considered strong.    If it continues, that proceeding will no doubt take considerable time.

[34]Third, the claim against the third parties could have been brought much earlier.

[35]   Fourth, the third-party proceedings can continue with the consent of the Official Assignee, if they consider there is merit. It would need to be funded out of Ms Singh’s income, which presumably is the only source of funding now, regardless of a bankruptcy.

Other relevant factors

[36]   This matter, as is the nature of these things, has been running for a long time. Ms Singh has had plenty of latitude, even with regard to her application for leave to appeal to the Court of Appeal, as noted above. Ms Singh has taken many steps that have protracted the process, including seeking many adjournments.

[37]   I do not consider it makes any difference that Ms Singh’s only creditors may be her mortgagee, Westpac, and the Body Corporate. Further, the Body Corporate represents a large number of other unit-holders, many of whom are in no better position than Ms Singh and some of whom are in a materially worse position. They have also had to pay out their share of the much larger levies than were anticipated, where she has not.

[38]   The Body Corporate have had to meet very significant legal costs and carry a significant burden in this case. I do not consider they should be put in a position where that is stretched out any further. It has to be remembered that at the end of the day the Body Corporate really is no more than a number of individuals who are in no different position to Ms Singh herself.

Further application by Ms Singh

[39]   Subsequent to this hearing, Ms Singh filed yet further affidavit evidence (effectively a further application to halt the bankruptcy) regarding her ongoing efforts to negotiate matters with the Body Corporate. I am not prepared to take account of

that affidavit or the accompanying memorandum. In any event, they make no difference. If the dispute is over matters to do with the judgment debt, there is no dispute. If the dispute is over matters external to the judgment debt, it can be resolved between the Official Assignee and the Body Corporate.

Conclusion

[40]   For all of the above reasons, I do not consider it would be just and equitable to exercise my discretion to halt the adjudication, to the contrary.

[41]The application is dismissed.

[42]   There was no dispute but that the grounds for adjudication were satisfied and I accordingly also make an order adjudicating Ms Singh bankrupt. The time of the adjudication is the time of release of this judgment.

[43]   The Body Corporate is entitled to costs. If the Body Corporate wishes to file submissions beyond those filed, a memorandum should be filed within seven days. In either event, Ms Singh is to file submissions as to costs within a further 14 days.

Hinton J