Casata Limited v Farr

[2020] NZHC 1952

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2019-485-572

[2020] NZHC 1952

UNDER

the Insolvency Act 2006

IN THE MATTER

of the bankruptcy of Graeme Lester Farr

BETWEEN

CASATA LIMITED

Judgment Creditor

AND

GRAEME LESTER FARR

Judgment Debtor

Hearing:	4 August 2020
Counsel:	C Chapman for judgment creditor Judgment debtor in person
Judgment:	6 August 2020

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]                 The judgment creditor, Casata Ltd, seeks an order under s 11 of the Insolvency Act 2006, adjudicating the judgment debtor, Mr Graeme Farr, bankrupt.

[2]                 The application is founded on Mr Farr’s failure to comply with a bankruptcy notice dated 9 October 2019 served on him by Casata. The bankruptcy notice was in turn based on a default judgment of this Court dated 3 March 2014.

[3]                 When Casata commenced this proceeding Mr Farr applied pursuant to r 12.14 of the High Court Rules 2016 for an order setting aside the original judgment. I heard that application on 24 June 2020. In  my judgment  dated 10 July 2020  I declined  Mr Farr’s application.

CASATA LIMITED v FARR [2020] NZHC 1952 [6 August 2020]

[4]Following the issue of that judgment this application was set down for hearing.

[5]                 Prima facie Casata is entitled to the order it seeks, and Mr Farr did not contend that Casata was unable to establish any of the requirements of s 13 of the Insolvency Act. However, he invited the Court to exercise the discretion arising out of that section and ss 36–44.

[6]                 It is well settled that the Court has a broad discretion. Like all such discretions it must be exercised on a principled basis. Although Mr Farr did not identify with any precision the foundation for his application, the case falls most obviously into that category of cases in which the question is whether in all the circumstances it is just and equitable to make an order. As discussed in Heath and Whale’s Insolvency Law in New Zealand,1 the circumstances in which the Court has exercised its discretion to refuse to make an order are many and varied. The leading case is the Court of Appeal’s judgment in Baker v Westpac Banking Corporation2 where the Court said that a judgment creditor has no automatic right to an order even if the statutory prerequisites are made out, and that before making an order the Court must consider the interests of all parties including the public interest.

[7]                 In advancing his argument Mr Farr relied on a synopsis of submissions filed and served by counsel formerly acting for him in the matter, some notes he himself prepared and oral submissions.  I reserved my judgment because the synopsis and  Mr Farr’s notes were only handed up at the conclusion of the hearing and I thought it important to review these alongside what Mr Farr had told me during the course of the hearing before reaching any conclusion.

[8]                 What follows is my attempt to identify and address the points in the written material and Mr Farr’s oral submissions.

[9]                 Mr Farr invited the Court to have regard to the manner in which Casata secured judgment and the background to the same. That is an entirely appropriate invitation.  I have done so.

1       Heath and Whale’s Insolvency Law in New Zealand (2nd  ed) at 3.10.6.

2      Baker v Westpac Banking Corporation CA, 13 July 1993 (CA 212/92).

[10]             He contends that the original judgment was incorrect because the guarantee on which it was based was given by Mr Farr and another guarantor for a total of $500,000 and the other guarantor has already paid an amount of $200,000, but the judgment Casata obtained against Mr Farr was for $500,000. Mr Farr did not appeal from the original judgment. In any event, that is a point I dealt with in my judgment in the setting aside proceeding. I concluded that Mr Farr had given a guarantee for the amount of $500,000.

[11]             Mr Farr emphasises the lapse of time from the date on which the judgment was obtained (March 2014) until the time that Casata commenced this enforcement proceeding (October 2019). As he says, the judgment and the service of the bankruptcy notice were separated by close to six years. That, however, is not the full story. Between those dates the parties negotiated and ultimately entered into a settlement agreement which Mr Farr did not honour. In any event, as Mr Chapman submits, Casata is entitled as of right to commence execution proceedings within six years and does not have to explain any delay.

[12]             He also says that he has no other non-current indebtedness so that if he were not made bankrupt, no third parties would be affected. Although there is no evidence as to this, I accept what Mr Farr says. It is a relevant point.

[13]             Mr Farr says that his financial position is parlous which he submits means that no public good will be achieved by his bankruptcy. Again, there is no evidence as to the details of his financial position. In any event, I do not accept this submission. A judgment creditor is entitled to apply for a bankruptcy order and it seems to me that some public good is achieved by the Official Assignee reviewing the bankrupt’s financial position, and how it came about.

[14]             He says that he is now sixty-three, does not enjoy good health and has lived “a blameless life”. Mr Farr is an architect by profession (though no longer registered or holding a practising certificate) and says that he earns “a humble income” as a draftsman and project manager “in charge of financial projections and costings”. He says, no doubt quite rightly, that bankruptcy will make it more difficult for him to

continue to work. A bankrupt’s personal position is relevant when it comes to the exercise of the discretion, but never a decisive consideration.

[15]             Mr Farr describes Casata as “a multi-million dollar company” and says that it will not be affected materially by the non-recovery of this debt. That is irrelevant.

[16]             He says that Casata’s application is an “act of vengeance”. There is no evidence before the Court that I am aware of that Casata is acting vengefully. I do not accept this.

[17]             Mr Farr emphasises that the debt which was the subject of the original judgment was rental unpaid by a business originally promoted by him and Mr Alex Knowles, but which only became due after he — Mr Farr — had been removed from the business, and was run up without his knowledge or consent. The evidence in the setting aside proceeding tended  to  support  that  view of things.  However unfair  Mr Farr may perceive that to be, as Mr Chapman submits, it was not the responsibility of Casata to manage Mr Farr’s obligations under the guarantee he gave. Those were matters within Mr Farr’s control both in terms of his original agreement to provide a guarantee and the steps he took or failed to take while the company was in operation and in particular at the point he was removed.

[18]             He then returns to a theme of his argument in the application to set aside the original judgment, that is to say that Casata’s Managing Director promised that “he wouldn’t chase me if I made it easy for him to get judgment”. That is a matter which I dealt with at some length in my judgment, and I do not propose to revisit it here. The short point is that even if something along those lines was said — and I expressed real doubt about that in my earlier judgment for the reasons there explained — judgment was obtained against him. In making his submissions Mr Farr went so far as to say that he always knew that Casata had obtained and could enforce this judgment and whilst he did not perceive it to be an immediate threat he knew that he would have to deal with it at some stage. Regrettably — and I use that term deliberately because it is impossible to not feel some sympathy for Mr Farr’s predicament — this is what he is now having to do.

[19]             Mr Farr placed some emphasis on the evidence called by and submissions made on behalf of Casata in the setting aside proceeding to the effect that he was advised by a solicitor at various stages.  He explained  that  his  solicitor,  the late  Mr Justin Toebes, was “just a friend” and that he didn’t recall Mr Toebes “ever having charged me”. In my view this doesn’t assist Mr Farr. The evidence was that he had access to and took advice from an experienced solicitor.

[20]             In the end, I am not persuaded that this is a situation in which it is open to the Court to exercise its discretion not to make the order sought by Casata. Casata has a judgment which Mr Farr consciously decided not to oppose at the time and did not appeal. It is entitled to exercise its remedies. Bankruptcy proceedings is one option. That is the route that it has gone down. Doing the best I can to balance the interests of the parties and the public, my assessment is that the proper course is to make the order sought by Casata.

[21]             On the application of the judgment creditor, Casata Ltd, I make an order pursuant to s 11 of the Insolvency Act bankrupting the judgment debtor, Mr Graeme Farr. That order will come into force at 4.00 pm on Friday 14 August 2020 unless the full outstanding amount of the judgment debt together with any interest thereon are paid by that time and date.

[22]             Casata is entitled to its costs on a 2B basis in relation to this application together with such disbursements as may be allowed by the Registrar.

Associate Judge Johnston

Solicitors:

Rickit Law, Wellington for judgment creditor Langford Law, Wellington for judgment debtor