Brown, ex parte Commissioner of Inland Revenue HC Auckland CIV-2010-404-03740

[2011] NZHC 2082

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-03740

UNDER  the Insolvency Act 2006

IN THE MATTER OF     the bankruptcy of THOMAS JOSEPH BROWN

BETWEEN  COMMISSIONER OF INLAND REVENUE

Judgment Creditor

ANDTHOMAS JOSEPH PETER BROWN Applicant

Hearing:         6 December 2011

Appearances: Mr Kleinbaum for Inland Revenue Department

Applicant in person

Judgment:      19 December 2011 at 3:00 PM

JUDGMENT OF ASSOCIATE JUDGE DOOGUE

This judgment was delivered by me on

19.12.11 at  3 pm, pursuant to

Rule 11.5  of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:

Inland Revenue Department, P O Box 33150, Takapuna –  [email protected]

Mr T J Brown c/ Office 710/369 Queen Street, Auckland – [email protected]

COMMISSIONER OF INLAND REVENUE V BROWN HC AK CIV-2010-404-03740 19 December 2011

Issues

[1]      This is a proceeding for annulment of adjudication in bankruptcy which took place 17 February 2011.

[2]      The issues that fall to be decided on this matter are the following.

[3]      First, Thomas Joseph Peter Brown who has provided an affirmation to the court dated 3 November 2011 claims that he has been wrongly adjudicated bankrupt. He says that it has not been established that he is the same person as the “Thomas Joseph Brown as trustee in the sleeping Fox trust” against whom the debt upon which the bankruptcy ultimately depends was entered in the District Court for March

2010.  Secondly, he asserts alternatively that, in effect, there is a difference between entering judgment against Peter Joseph Brown in his own right and Peter Joseph Brown as trustee of a trust.  It is claimed that a person with the status of trustee is a separate legal entity from the person in his own right.   Thirdly he claims that by reason of the fact that there is a reference to the sleeping Fox Trust in the intituling of the bankruptcy proceedings, an abuse of process occurred and that should be redressed by the court making an order for annulment of the adjudication.  Fourthly, he claims that the debtor has now been satisfied by means of the Commissioner accepting a bill of exchange in satisfaction of the debt upon which the bankruptcy was based.

Identity

[4]      As I have noted, on 7 October 2010, Thomas Joseph Peter Brown filed an affirmation dated the same day in the High Court at Auckland.

[5]      He gave evidence that he had posted a letter to the Inland Revenue which contained what the letter described as “a coin of a denomination of ten dollars or more, being a legal tender for the payment of any amount in accordance with the provisions of section 27(2)(a) of the Reserve Bank of New Zealand Act 1989”.  He said in the letter:

Please apply this tender of payment of money to the amount of $819,330.03 you are presently demanding from TRUSTEES IN THE SLEEPING FOX

TRUST account 92-960-323, together with any further amounts of penalties, interest, fees or court costs.

[6]     It seems that the coin which was attached was a memorial minting to commemorate the life of Sir Edmund Hillary.

[7]     In the first place, the suggested significance of this material is that it demonstrates that Thomas Joseph Peter Brown was attempting to settle a liability owed by Thomas Joseph Brown as trustee in the Sleeping Fox Trust.  In the passage from the letter attached to the declaration which I have quoted from above, it is clear that the liability that was sought to be extinguished was the liability of the Mr Brown who was a trustee of  the Sleeping Fox Trust.

[8]      There would seem to be two possible explanations for this state of affairs. The first is that Thomas Joseph Brown and Thomas Joseph Peter Brown are names which are used to describe the same person who is a trustee of the Sleeping Fox Trust.

[9]      The second is that there are two separate individuals by the name of Thomas Brown who have an interest in extinguishing the liability incurred by a person of that name while a trustee of the Sleeping Fox Trust.

[10]     In the absence of any express evidence that there are two separate persons, common sense would suggest that the trustee of the Sleeping Fox Trust is a person who describes himself variously as Thomas Joseph Brown and Thomas Joseph Peter Brown.  I therefore conclude that this is not a case where a judgment entered against person A has wrongly been used as the foundation for insolvency proceedings for the adjudication of person B.  That therefore is not a ground upon which the Court could annul the adjudication.

Trustee a separate entity

[11]     The second point that Mr Brown relies upon is that even if he was a trustee, he was not liable for debts of the trust which he claims was a separate entity.  That is not correct, see for example my decision in Sovereign Homes Ltd v Meurant.[1]

[1] Sovereign Homes Ltd v Meurant HC Auckland CIV-2006-404-7394, 15 May 2007.

[12]     The effect of the creation of a trust is that property settled on existing persons is usually in accordance with the terms of the trust deed which explains the reason why the property is held, identifies the persons for whose benefit it is held and gives powers to the trustees to enter into dealings affecting the property.  A trustee who incurs a liability in executing the terms of that trust will generally have a right of indemnity out of the trust property.  But the existence of the right of indemnity is only necessary in the first place because a trustee can be liable for contracts and other obligations that he or she entered into in furtherance of the trust objects.

[13]     Mr Brown also submitted that even if he was liable, he resigned as a trustee on the day of his adjudication.  If that occurrence had happened, and there was no evidence dealing with the point, that would not absolve him from pre-existing liabilities incurred as a trustee.

Abuse of process

[14]     Another point that Mr Brown advanced at the hearing before me was that there was an error in the intituling of the proceedings in that it made reference to the “Lazy Fox Trust”.  He claimed that as a result, there had been an abuse of process. If it was an error to include reference to the trust that is a matter of detail and that could not possibly invalidate the proceedings against him as Mr Brown claimed.

Bills of Exchange Act

[15]     Mr Brown then submitted that an Associate Judge had no jurisdiction to deal with matters arising under the Bills of Exchange Act 1908.

[16]     He told me that I had to deal with this point then and there in the course of the hearing.  I declined to do so.  On considering the point further I believe there is

nothing in it.  The jurisdiction to deal with insolvency matters arises under s 26I of the Judicature Act 1908.  The fact that in the course of such a hearing, an argument is raised that relates to another statute such as the Bills of Exchange Act, does not mean that an Associate Judge does not have jurisdiction to deal with the case.

[17]     The final point concerns the other aspect of the Bills of Exchange Act 1908 ground.  This ground has been advanced to courts on other occasions generally in the same broad iteration as is advanced in this case.

[18]   As best as I can understand the argument, it is to the effect that the Commissioner agreed to compromise the amount owing from the applicant by accepting a bill of exchange to the value of the memorial coin which I have referred to above.  This argument is unsupportable; there is no basis in evidence for it.   It does not therefore provide a ground to the applicant upon which an annulment of the bankruptcy may be sought.

[19]     There are no grounds that I can perceive upon which the court would be justified in granting an annulment of the adjudication in bankruptcy.  The application is dismissed.   There does not seem to be any point in making an order for costs against  Mr  Brown  given  that  he  is  bankrupt.    I  do  not  consider  that  there  is

jurisdiction to make an order for costs against his McKenzie friend.

J.P. Doogue

Associate Judge