Carters Building Supplies t/a Carters v Angurala
[2025] NZHC 1380
•29 May 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-3024
[2025] NZHC 1380
BETWEEN CARTERS BUILDING SUPPLIES
LIMITED trading as CARTERS Judgment Creditor
AND
KEEMATI LAL ANGURALA
Judgment Debtor
Hearing: 19 May 2025 Appearances:
P J Morris and C R Russell for Judgment Creditor I M Hutcheson for Judgment Debtor
Judgment:
29 May 2025
JUDGMENT OF ASSOCIATE JUDGE LESTER
(Application to set aside bankruptcy notice)
This judgment was delivered by me on 29 May 2025 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
………………………………………………..
CARTERS BUILDING SUPPLIES LIMITED trading as CARTERS v KEEMATI LAL ANGURALA [2025] NZHC 1380 [29 May 2025]
[1] Carters Building Supplies Limited trading as Carters (Carters), provided materials to Mr Angurala’s company, Keemati Limited, pursuant to Carters’ Standard Terms and Conditions (the Conditions). Under the Conditions, Mr Angurala provided a guarantee of Keemati Ltd’s liability to Carters.
[2] Keemati Ltd’s trade account was opened pursuant to the Conditions in September 2018 and was closed, as far as I can tell, at the end of June 2023 because of the account being in arrears. From the start of July 2023, Keemati Ltd was supplied on a cash basis.
[3] At the time Keemati Ltd’s account was closed, Keemati Ltd was building a number of properties. Carters continued to supply products, in particular, roof trusses, for those properties on a cash basis. Mr Angurala raises issues about the trusses supplied by Carter or, at least a complaint that the required trusses were not supplied.
[4] A meeting was held on 15 November 2023 between Mr Angurala and Mr Dhanapaul of Carters to reconcile invoices and bank statements. Following that meeting, various credit notes were passed in favour of Keemati Ltd on 24 November 2023.
[5] By mid-2024, Keemati Ltd had not cleared its trade account with Carters, with the indebtedness standing at approximately $70,000. A statutory demand was issued against Keemati Ltd by Carters on 13 July 2024 and ultimately Keemati Ltd was placed into liquidation by this Court on 31 October 2024.
[6] On 30 September 2024, Keemati Ltd’s solicitor requested a copy of the proceedings issued against Keemati Ltd and they were provided by Carters’ solicitors. The liquidation application was not opposed.
[7] In the meantime, District Court proceedings were issued against Mr Angurala which were served on 30 July 2024. Judgment by default was entered against Mr Angurala on 18 October 2024.
[8] Mr Angurala was served with a bankruptcy notice by Carters on 3 December 2024. Mr Angurala applies to set aside the bankruptcy notice relying in part on losses he says Keemati Ltd suffered as a result of the roof truss issue, and in part on what he says are inaccuracies in Carters’ record keeping in respect of Keemati Ltd’s trade account.
Principles applying to the setting aside of a bankruptcy notice
[9] The principles to be applied are well established. Section 17 of the Insolvency Act 2006 (the Act), relatively provides as follows:
17 Failure to comply with bankruptcy notice
(1)A debtor commits an act of bankruptcy if—
(a)a creditor has obtained a final judgment or a final order against the debtor for any amount; and
(b)execution of the judgment or order has not been halted by a court; and
(c)the debtor has been served with a bankruptcy notice; and
(d)the debtor has not, within the time limit specified in subsection (4),—
complied with the requirements of the notice; or
(ii)satisfied the court that he or she has a cross claim against the creditor.
…
(7)In subsection (1)(d)(ii), 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 the order, as the case may be, was obtained.
[10] In summary, ss 17(1)(d) and 17(7), require the debtor to demonstrate the existence of a cross-claim of true substance that he or she genuinely proposed to pursue.1
1 Sharma v ANZ Banking Group (1992) 6 PRNZ 386 (CA) at 389.
[11] In Westpac New Zealand Ltd v Chen citing Clarke v UDC Finance Ltd, the Court said of the cross-claim that:2
This must be equal to, or greater than, the judgment debt. The applicant must also establish that the cross claim could not have been established as a defence in the proceeding in which the judgment underpinning the bankruptcy notice was entered. (emphasis added)
[12]Applying the principles as set out in Robertson v ASB Bank:3
(a)the onus is on Mr Angurala to show that he has a genuine triable cross-claim;
(b)Mr Angurala must show a genuine triable claim in terms of both liability and quantum;
(c)not only must the existence of a cross-claim be established, but also it must be equal to or greater than the judgment debt, and could not have been used as a defence in the proceeding in which that judgment was entered;
(d)the summary nature of the present procedure is wholly unsuitable for the determination of disputed questions of fact; and
(e)the court need not accept uncritically evidence that is inherently lacking in credibility.
No application to set aside District Court judgment
[13] The notable feature in this case is that Mr Angurala has not applied to set aside the judgment entered against him by default in the District Court on 18 October 2024.
[14] The reality is, there was no barrier to Mr Angurala raising any of the issues he now seeks to raise as giving rise to a cross-claim in the District Court.
2 Westpac New Zealand Ltd v Chen [2022] NZHC 1834 at [9], citing Clarke v UDC Finance Ltd
[1985] 2 NZLR 636 (CA) at 639.
3 Robertson v ASB Bank Ltd [2014] NZCA 597 at [22] and [32].
Mr Angurala’s evidence
[15] Mr Angurala has filed two affidavits. Essentially, they cover the same ground. The first affidavit was filed on 17 December 2024 under urgency and hence, was supplemented by a subsequent more structured affidavit setting out further material.
[16]Mr Angurala in his first affidavit says:
The reason that I could not have answered these issues earlier was due to financial constraints and the inability to properly and fully instruct counsel. I appreciate I will need to properly document this for the Court but I simply do not have time to do so at the present time to enable this affidavit to be filed within the required timeframe. (emphasis added)
[17] Mr Angurala, in his second affidavit, did not expand on his reasons for not defending the District Court proceeding. Mr Angurala does not explain why he has not applied to set aside the District Court judgment.
[18] As noted above at [6], Mr Angurala did instruct a solicitor to review the proceedings against Keemati Ltd. On 30 September 2024, Carters’ solicitor sent a copy of those proceedings to the solicitor instructed on behalf of Keemati Ltd. The issues Mr Angurala raises in this proceeding could all have been raised by Keemati Ltd in response to the liquidation proceeding. Keemati Ltd did not respond to the statutory demand or to the winding up proceedings.
Could not have been used as a defence in the District Court — s 17(7)(b)
[19] In order for Mr Angurala to be able to rely on the cross-claims which he asserts as the basis for setting aside the bankruptcy notice, he must have been unable to raise those claims as a defence in the District Court.
[20]The learned authors of Insolvency Law and Practice state:4
The phrase “could not” has generated substantial case law, however, the leading decision of the Court of Appeal in Clarke v UDC Finance Ltd [1985] 2 NZLR (HC) 636 and the High Court decision in Hardie v Booth [1992] 1 NZLR 356 (HC) has made it clear that while the emphasis is on legal impediments, practical or factual impediments may also be considered
4 Robyn Merrett and Stephen Revill (eds) Insolvency Law and Practice (online looseleaf ed, Thomson Reuters) at [IN17.10(3)].
provided there are cogent circumstances. Thus, the mere failure to take advantage of an opportunity because of inconvenience or difficulty will not be enough.
[21] While Mr Angurala took no steps to defend the proceeding against him, in substance he has to demonstrate he did not have the opportunity to do so, — that is that it was “… factually impossible for the debtor to do anything about the claim at the time”.5
[22]In Re Williams, Fisher J said:6
It seems to me … that when the Act refers to a situation in which the debtor “could not set up” his counter-claim, set-off or cross-demand, that is an objective test which refers to legal opportunity rather than the subjective abilities, understandings and knowledge of the individual debtor.
[23] It is clear from Mr Angurala’s own emails in September 2024 to Carters’ solicitor, that he was aware of the issues he now seeks to rely on.
[24] Significantly, no issue is taken with the safety of the underlying judgment in this case. Mr Angurala accepts he was served but only offers the above general reasons for not defending the proceedings. Notably, while as highlighted at [16] above Mr Angurala accepted he would have to “properly document” why he was unable to instruct counsel to defend the District Court proceeding, his second affidavit is silent on this key consideration. I also note that the written submissions filed in support of the application do not refer to this issue at all.
[25] In Clarke v UDC Finance Ltd regarding whether the matters relied on in the challenge to the bankruptcy notice could not have been used as a defence in the underlying judgment, Casey J said:
… the primary emphasis on the legal nature of the impediment suggests that such other reasons must be carefully scrutinised, and certainly simple neglect to take even the elementary step of seeking further information or advice cannot avail the debtor.
5 Clarke v UDC Finance Ltd, above n 2, at 640.
6 Re Williams HC Auckland B120/94, 20 June 1994 at 4.
[26] Again, I come back to the fact that Mr Angurala had Keemati Ltd instruct counsel to obtain a copy of the proceeding against the company. All of the matters Mr Angurala now seeks to raise by way of counterclaim or set off were known to Mr Angurala when the proceedings were issued against Keemati Ltd, but not pursued despite a solicitor being instructed for Keemati Ltd. Again, the defences for the company as principal debtor and Mr Angurala as guarantor are the same.
[27] I find that Mr Angurala cannot meet the threshold in s 17(7)(b) of the Act, as all of the matters he wishes to raise in this proceeding were known to him prior to him being served with the District Court proceedings and certainly prior to the timeframe for him to defend that proceeding. Mr Angurala does not explain why it was “factually impossible” for him to defend the District Court proceeding, that being the practical standard to be met when an application to set aside a bankruptcy notice relies on a factual rather than a legal impediment as the reason a cross-claim could not have been raised in the proceeding, resulting in the judgment founding the bankruptcy notice.
[28] Mr Hutcheson, counsel for Mr Angurala, in his oral submissions accepted that establishing criteria for a cross-claim, s 17(7)(b) was “not straightforward from his client’s point of view”.
[29] Mr Hutcheson described the evidence I set out at [16] as being the “high point” of the factual reasons advanced by his client.
[30]It follows that Mr Angurala’s application is dismissed.
[31] I comment only briefly on the merits. In respect of the truss issue, the architectural drawings for one of the properties being developed, show false gables in one roof. The architect’s drawings were provided to Carters on 15 May 2023. On 17 May 2023, Carters provided Mr Angurala and his builder with copies of “as built the final layout drawings” dated 16 May 2023 for the trusses for that particular lot. Those truss drawings do not show the provision of false gables. The evidence from
Carters is that Mr Angurala was sent the final layout drawing of the truss details on 17 May 2023 for his approval, and that this is standard practice. The evidence is that on the same day, the account manager for Keemati Ltd at Carters spoke with Mr Angurala by telephone and confirmed Mr Angurala’s approval of those final layouts, which were then used to fabricate the trusses. The trusses were then fabricated and delivered to site. This evidence is not contradicted by Mr Angurala.
[32] Mr Hutcheson submitted that Carters’ fault could be analysed not so much in terms of not delivering trusses showing false gables, but in incorrectly preparing the drawing sent to Mr Angurala and his builder in the first place on 17 May 2023. That change in focus does not assist, given the uncontradicted evidence that Mr Angurala approved the 17 May 2023 drawings.
[33] As to the other main part of Mr Angurala’s claims, that is errors in the invoicing and/or failure to recognise credits, Carters produces a running account of the amount owed by Keemati Ltd. The total due under that account up until Keemati Ltd was put on cash only, is the amount that was claimed in the statement of claim. The major credits claimed by Mr Angurala are accounted for in that statement.
[34]Clause 2.4 of the Conditions provides:
2.4 Any disputes or credit requests by the Customer relating to an invoice issued by CARTERS for Goods supplied must be received in writing within 30 days from the date of invoice.
[35] While I have not attempted to relate every dispute raised by Mr Angurala to the date of the invoice to determine whether it falls within the 30 days in the above provision, it appears that the issues Mr Angurala raises are outside that provision and so are simply raised too late, but that is no more than an impression.
Costs
[36] Costs follow the event on a 2B basis plus disbursements as fixed by the Registrar.
Associate Judge Lester
Solicitors:
Bae Legal Limited, Auckland (for Judgment Debtor)
Stace Hammond Lawyers, Hamilton (for Judgment Creditor)
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