Commissioner of Inland Revenue v Langkilde

[2025] NZHC 342

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2023-419-336

[2025] NZHC 342

IN THE MATTER

AND

of the Insolvency Act 2006

IN THE MATTER

of the Bankruptcy of DALLAS MAY LANGKILDE

BETWEEN

THE COMMISSIONER OF INLAND REVENUE

Judgment Creditor

AND

DALLAS MAY LANGKILDE

Judgment Debtor

Hearing:	5 November 2024
Counsel:	C Walmsley and C Hunt for the Judgment Creditor DM Langkilde, Judgment Debtor in Person
Judgment:	28 February 2025

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 28 February 2025 at 4 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:
Inland Revenue Legal Services, Hamilton

COMMISSIONER OF INLAND REVENUE v LANGKILDE [2025] NZHC 342 [28 February 2025]

Introduction

[1]    The judgment creditor, the Commissioner of Inland Revenue, applies for an order adjudicating the judgment debtor, Dallas May Langkilde, bankrupt. Ms Langkilde originally opposed the application on the grounds that she has not committed an act of bankruptcy as she has made payment by way of a purported bill of exchange and a further payment of $60,000 allegedly paid into Court.

[2]    In the submissions filed on behalf of the Commissioner in advance of the defended hearing, the Commissioner acknowledged technical defects with service of the bankruptcy notice and sought to rely on s 418 of the Insolvency Act 2006 to correct those defects. Ms Langkilde now also relies on those defects in process to oppose a bankruptcy order being made.

[3]    In addition, Ms Langkilde makes a number of submissions asserting that the Court does not have jurisdiction over her for a variety of reasons.

[4]    I consider this last submission first before setting out the relevant provisions applying to bankruptcy applications and determining whether an order ought to be made in the circumstances of this case.

Alleged lack of jurisdiction

[5]In the introductory paragraphs to her submissions Ms Langkilde submits:

I contest the classification and application of the term “person” in these proceedings as outlined under the Legislation Act. My standing in this case is based on my recognition as a “people” rather than a “person”, a distinction that underscores my approach through equity rather than statutory personhood. This interpretation is central to my arguments regarding the handling of this matter.

[6]    This follows on from one of her affidavits in opposition where Ms Langkilde includes the following paragraph:

20, Insolvency Act 2006, section 3 interpretation bankrupt means a person who has been adjudicated bankrupt

NOTE

Any adjudication is limited to persons as defined in the Legislation Act 2019 section 13.

People Dallas May Langkilde is not a person as defined in the Legislation Act 2019.

[7]    Ms Langkilde also seeks to rely on actions taken by the “Royal Crown Court”, recording on some of her documents that they are filed by the “Royal Crown Court Equity Liquidator”.

[8]    The reference to being a “people” rather than a “person” is relatively easily dealt with by reference to s 19 of the Legislation Act which provides that words in the singular include the plural (and vice versa).

[9]    In terms of the remaining submissions attempting to separate herself from her legal persona, such attempts to avoid the Court’s jurisdiction have been rejected consistently by the Courts as lacking any legal foundation.

[10]   In Niwa v Commissioner of Inland Revenue, Ellis J observed that attempts to employ such concepts to avoid or defeat any state, regulatory, contract, family or other obligations recognised by law “will inevitably be an abuse of process”.1

[11]   The Court of Appeal similarly held in Warahi v Chief Executive of the Department of Corrections (in the context of a habeas corpus application):2

[11]                 Acts of Parliament, including criminal enactments, are binding on all persons within the geographical territory of New Zealand. The Courts of New Zealand must uphold all Acts of Parliament as enacted. The Crimes Act 1961 is one such Act of Parliament. The courts have the power to deal with all actions that may amount to criminal offences in this country. No person within New Zealand is able to dissociate themselves from their “legal persona” so as to remove themselves from the jurisdiction of the courts. The arguments advanced by [the Appellant] are untenable and without legal foundation.

1      Niwa v Commissioner of Inland Revenue [2019] NZHC 853, [2019] NZAR 1104 at [16].

2      Warahi v Chief Executive of the Department of Corrections [2022] NZCA 105 at [11].

[12]            I accept the issue in this case arises in the civil context but in my view the position remains the same. A person cannot by claiming an alternative persona or by reference to some alternative alleged power avoid the jurisdiction of the courts.

[13]            I therefore consider below whether a bankruptcy order ought to be made in respect of Ms Langkilde after setting out the principles applying to such applications.

Requirements of the Insolvency Act and principles applying to bankruptcy applications

[14]            Section 36 of the Insolvency Act provides that the Court may, at its discretion, adjudicate a debtor bankrupt if the creditor has established the requirements as set out in s 13 of the Act that:

(a)the debtor owes the creditor $1,000 or more or, if 2 or more creditors join in the application, the debtor owes a total of $1,000 or more to those creditors between them; and

(b)the debtor has committed an act of bankruptcy within the period of 3 months before the filing of the application; and

(c)the debt is a certain amount; and

(d)the debt is payable either immediately or at a date in the future that is certain.

[15]            Even where the requirements of s 13 are satisfied, adjudication does not follow automatically. Section 37 of the Act provides that the Court may exercise its discretion to decline to make an order adjudicating the judgment debtor bankrupt if:

(a)the applicant creditor has not established the requirements set out in section 13; or

(b)the debtor is able to pay his or her debts; or

(c)it is just and equitable that the court does not make an order of adjudication; or

(d)for any other reason an order of adjudication should not be made.

[16]            In Baker v Westpac Banking Corporation, the Court of Appeal held in relation to the exercise of the Court’s discretion:3

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

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

s 23 [the equivalent of s 13] 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.

[17]            In Rabobank Australia Ltd v Tootell,4 Associate Judge Osborne (as his Honour then was) referred with approval to the list of factors set out in Re Epirosa, ex parte Diners Club (NZ) Ltd.5 These factors include the circumstances in which the debt was incurred and whether those circumstances suggest that the creditor is acting unreasonably in pursuing adjudication.

Can the CIR establish the requirements of s 13 of the Insolvency Act?

Section 13(a) – Debtor owes the creditor $1,000 or more

[18]            On 13 September 2023 the Commissioner obtained judgment by default against Ms Langkilde in the District Court in the sum of $106,070.91.

[19]            The Commissioner has filed evidence confirming that as at 18 September 2024 Ms Langkilde had outstanding taxes in the increased sum of $160,144.03 with the last payment having been received on 9 December 2020.

[20]            In her submissions, Ms Langkilde appeared to seek to rely on a failure to properly serve the District Court proceedings on her. However her response to the email attaching the bankruptcy notice was to purport to pay the amount claimed by way of an alleged bill of exchange within the 10 working days required for compliance with the notice, rather than take any steps to set aside the District Court judgment.

[21]            I am therefore satisfied that the Commissioner has established that Ms Langkilde owes the Commissioner significantly more than $1000.

4      Rabobank Australia Ltd v Tootell [2013] NZHC 2975 at [7] and [8].

5      Re Epirosa, ex parte Diners Club (NZ) Ltd HC Wellington B498/91, 6 March 1992.

Section 13(b) – Debtor has committed act of bankruptcy

[22]            The act of bankruptcy relied upon by the Commissioner is Ms Langkilde’s failure to comply with the bankruptcy notice emailed to her on 8 February 2024.

[23]            The Commissioner has acknowledged that there are two technical defects in service of the bankruptcy notice and asks the Court to rely on s 418 of the Insolvency Act to correct those defects. If those defects cannot be corrected, there will have been no valid service of the bankruptcy notice and therefore no act of bankruptcy through failure to comply with it.

[24]The two defects are:

(a)service of the bankruptcy notice did not take place strictly in accordance with the substituted service order made by Anderson J on 5 February 2024; and

(b)a certified copy of the judgment on which the bankruptcy notice was based was not attached to the bankruptcy notice as required by r 24.8 of the High Court Rules 2016.

[25]The substituted service orders made by Anderson J were as follows:

(a)  Dispensing with personal service of the Bankruptcy Notice dated 28 November 2023.

(b)     That service of the Bankruptcy Notice be effected on the respondent by sending the Bankruptcy Notice and a copy of the sealed Order of Substituted Service to the respondent by email to [email address redacted].

(c)  That service will be deemed to have occurred on the day on which the documents are sent to the email address of the respondent.

(d)  That service of any creditor’s application, summons to debtor and verifying affidavit filed in reliance on the Bankruptcy Notice may be served in like manner unless the respondent provides an address for service or the court orders otherwise.

(e)  Reserving the applicant’s costs of and incidental to this application and any order therein.

[26]            On 8 February 2024 the Commissioner sent an email to the judgment debtor at the email address directed in the substituted service order. The email referred the judgment debtor to attached documents which were being provided by way of service. These specifically referred to the bankruptcy notice dated 28 November 2023 and the substituted service order dated 5 February 2024. As expected, a copy of the bankruptcy notice was attached to the email. However the Commissioner attached a copy of the minute of Anderson J instead of the sealed substituted service order. In addition, the bankruptcy notice did not attach a certified copy of the judgment on which the bankruptcy notice was based, as required by r 24.8(3) of the High Court Rules.

[27]Section 418 of the Insolvency Act provides:

(1)        A proceeding under this Act must not be invalidated or set aside for a defect (which includes misdescription, misnomer, or omission) in a step that must be taken as part of, or in connection with, the proceeding, unless a person is prejudiced by the defect.

(2)        The court may order the defect to be corrected, and may order the proceeding to continue, on the conditions that the court thinks appropriate in the interests of everyone who has an interest in the proceeding.

[28]            Adopting a broad reading of s 11 of the Insolvency Act 1967 (the predecessor to s 418), the Court of Appeal in Best v Watson held:6

It will always be a question of degree whether or not it can be said that, notwithstanding failure to comply with an apparently mandatory requirement of the Act or of the Rules, there is before the Court what can fairly be described as proceedings under the Act; and that question should not be approached in a mechanical or technical way.

[29]            However, the Court confirmed that “if the document is so defective that it is a nullity there is nothing before the Court capable of rectification.”7

[30]            In Goodwin v Copland it was argued that a “direction for substituted service should have been set aside ex debito justitiae because it lacked the required evidentiary basis.”8 The Court of Appeal held however that even if the order should not have been

6      Best v Watson [1979] 2 NZLR 492 (CA) at 494.

7      At 494.

8      Goodwin v Copland [2014] NZCA 568 at [25].

made, there was no basis for setting it aside as “it can be reasonably assumed the bankruptcy notice was brought to Mr Goodwin’s attention, just as [if] it had been personally served on him.”9

[31]            The Court then considered, on an obiter basis, whether s 418 could cure a failure in meeting the requirements of service of the bankruptcy notice under s 17(1)(c) of the Insolvency Act. After agreeing with the Court in Best v Watson, the Court commented:10

[32]    Whatever the scope of s 418, we do not consider it could be used to establish an act of bankruptcy where none otherwise exists. Thus, if there was neither personal service nor substituted service in accordance with a direction, s 418 could not be used to save that situation. That would not be a defect in a step, but a failure to take a step at all. There would be nothing that s 418 could cure.

[33]     Again, the argument about the proper scope of s 418 has practical importance and is appropriately reserved for a proceeding in which it needs to be determined.

[32]   In Northland Regional Council v Philbrick, Associate Judge Bell, relying on the decision of Best v Watson, held that service of a bankruptcy notice was not a nullity in the circumstances where the notice had been served personally on another person but later came to the knowledge of the defendant.11 The court considered that if there was an irregularity it could be cured by s 418.12

[33]   The Commissioner submits that it was clear that the bankruptcy notice was brought to the attention of Ms Langkilde as Ms Langkilde responded to the bankruptcy notice by emailing the purported bill of exchange to the Commissioner on 22 February 2024. The Commissioner’s email attaching the bankruptcy notice was sent on 8 February 2024 so Ms Langkilde’s response was on the 10th working day following service, within the time period required for compliance with the bankruptcy notice.

[34]   Counsel for the Commissioner further relies on the fact that rather than contesting service, Ms Langkilde’s original opposition was on the basis that she had

9      Goodwin v Copland, above n 8, at [22] and [27].

10     At [32] to [33].

11     Northland Regional Council v Philbrick [2018] NZHC 433.

12 At [10].

complied with the bankruptcy notice through the purported bill of exchange being valid payment.

[35]   In these circumstances, the Commissioner submits that s 418 can be relied on to correct the defect as her response by email confirms that she knew of the bankruptcy notice and therefore there has been no prejudice to Ms Langkilde.

[36]   In terms of the failure to attach a copy of the certificate of judgment to the bankruptcy notice, it has previously been held that where the omission causes no prejudice to the judgment debtor, this defect can also be cured.13 This will be the case, for example, where it is clear what judgment the bankruptcy notice refers to.14

[37]   Ms Langkilde submits in response that the procedural defects caused unfairness and prejudice to her because they materially affected her ability to participate fairly in the process. Ms Langkilde says the Commissioner cannot rely on Best v Watson or Goodwin v Copland here because the facts of those cases differed significantly from this case as the omissions have prevented her engagement in the proceedings altogether. Ms Langkilde did not, however, provide any further explanation or evidence as to how she was prevented from engaging.

[38]   I am satisfied after considering how the Commissioner’s application proceeded that Ms Langkilde was not prevented by these defects from engaging in the proceedings.

[39]   Working through the steps taken, as set out above, Ms Langkilde responded to the email attaching the bankruptcy notice by tendering an alleged bill of exchange for the full amount claimed. The Commissioner did not accept it was a valid bill of exchange and so filed an application for an adjudication order dated 13 March 2024. The amount claimed in the bankruptcy application as owing was the amount of the judgment debt of $106,070.91 plus $46,273.90 in additional taxes assessed and

13 Re Denize, ex parte Stockco Ltd HC Auckland CIV-2011-4-4-3557, 31 October 2011 at [29], [30], [33], and [34] (referring to Best v Watson). There are a number of cases that have adopted the same stance: See Sharma v Wati [2012] NZCA 195, (2012) 21 PRNZ 161 at [8]; Re Body Corporate 324525, ex parte Butcher [2016] NZHC 887 at [14]; Ministry of Justice v McGuire [2018] NZHC 2475 at [5], [6], and [9] and Prescott v Auckland Council [2017] NZHC 2698 at [15].

14 Re Denize, above n 13, at [33].

penalties and interest incurred not included in the judgment sum for a total of

$152,344.81.

[40]   At the first call in the bankruptcy list on 15 May 2024, the application was adjourned to allow Ms Langkilde to put a proposal to the Commissioner.

[41]   When the matter was next called on 17 June 2024, Ms Langkilde advised the Court that she had been trying to contact the Inland Revenue Department (IRD) as directed. She said that because she did not receive a response, she eventually sent an email on Friday, 14 June 2024. Ms Langkilde advised the Court that she was able to pay the whole of the debt but wanted to be clear that it was properly owing.

[42]   In her email to the Commissioner, Ms Langkilde referred to the amount due on the final judgment as being $100,670.91 but queried the $46,273.90 added as additional taxes assessed and penalties and interests. Ms Langkilde asked for a breakdown of these amounts. Counsel for the Commissioner, Ms Hunt, explained at the list call that a breakdown of these amounts had previously been provided but she nevertheless provided a further copy to Ms Langkilde in Court. I made directions that Ms Langkilde was to set her questions out in an email by 1 July 2024 and to make payment of $60,000 into Court as proof of her ability to pay by the same date.

[43]   At the next call on 15 July 2024, Ms Langkilde assured the Court that $60,000 had been paid into Court but could not provide evidence of having done so. Ms Langkilde continued to seek to rely on the alleged bill of exchange provided to the Commissioner. I confirmed the bill of exchange was not valid payment but adjourned the matter to allow Ms Langkilde one final opportunity to provide evidence of payment of the $60,000 and to agree a proposal with IRD.

[44]   A further memorandum was filed by Ms Langkilde prior to the next call on 12 August 2024, referred to as a “Memorandum of the Royal Crown Court”. The matter was then set down for a defended hearing on 5 November 2024.

[45]   At the defended hearing Ms Langkilde required the IRD case officer, Ms Thompson, to be available for cross-examination. Ms Langkilde’s questions included

asking Ms Thompson why she had not attached the sealed substituted service order or the certified copy of the judgment to the service email with the bankruptcy notice. Ms Thompson’s answers confirmed that it was inadvertent. Ms Thompson further confirmed, as had been stated in her earlier affidavit, that the minute of Anderson J was attached to the email together with the bankruptcy notice. The minute set out the reasons for the substituted service orders and the orders themselves and referred to the judgment of the Hamilton District Court on which the bankruptcy notice was based by date.

[46]   Having taken all of the above into account, I consider that while the Commissioner failed to attach a sealed copy of the substituted service orders or the certified copy of judgment, Ms Langkilde was not prevented from engaging or otherwise prejudiced because she was served with the bankruptcy notice and the required information was provided in the minute of Anderson J. In these circumstances I am satisfied that it is appropriate to cure these two defects by reliance on s 418 of the Insolvency Act.

[47]   The next question in terms of determining whether the debtor has committed an act of bankruptcy for the purposes of s 13(b) is whether Ms Langkilde has complied with the bankruptcy notice as she asserts. Ms Langkilde submits that firstly the alleged bill of exchange is valid and secondly $60,000 has been paid into Court.

[48]In my minute of 16 July 2024, I recorded:

Even if the intended Bill of Exchange had the necessary consents recorded on it as s 17 of the Bill of Exchange Act requires, the document would not be able to be relied on because the “drawer” and “drawee” are not clear because both parties have multiple names listed beside them. The reason for directing Ms Hunt to confirm by memorandum the sections the Commissioner relies on is simply to assist Ms Langkilde’s understanding. The Bill of Exchange would not be valid in any event because of the uncertainty in relation to the drawer and drawee.

[49]   Counsel for the Commissioner, Ms Hunt filed a memorandum as directed, referring to a number of other issues with the alleged bill of exchange.

[50]   The document is clearly not a valid bill of exchange because neither the drawer nor drawee are clear because they have multiple names listed beside them. This is a fundamental difficulty in addition to there not being the necessary consents.

[51]   Ms Langkilde further submits that the failure by IRD to return the alleged bill of exchange means the bill of exchange has been accepted. But the document presented is not a valid bill of exchange so any failure to return cannot be acceptance (even if failure to return meant acceptance as Ms Langkilde submits). Ms Langkilde’s attempt to rely on the alleged bill of exchange to comply with the bankruptcy notice is therefore unsuccessful.

[52]   In addition, Ms Langkilde submits that a further payment of $60,000 was made to the Court and remains untraceable. Ms Langkilde says that counsel for the Commissioner has asserted that this payment has not been received but has failed to provide any bank documentation to support this claim.

[53]   The $60,000 payment was directed to be paid into Court rather than to the Commissioner following Ms Langkilde’s submission that she was able to pay (as set out above). The Court has not received the payment and Ms Langkilde has not provided copies of any bank accounts or other evidence that confirms any such payment. This is despite express direction in minutes dated 18 June 2024 and 16 July 2024 that Ms Langkilde was to provide evidence from the bank account from which the $60,000 was paid to the Court’s bank account with other entries in the bank account redacted if necessary.

[54]   I am satisfied that Ms Langkilde has committed an act of bankruptcy by failing to comply with the bankruptcy notice served on her on 8 February 2024.

Section 13(c) - Debt is a certain amount

[55]   As set out above, the Commissioner’s application for an adjudication order relies on the judgment obtained by default in the District Court for $106,070.91 plus

$46,273.90 in additional taxes assessed and penalties and interest incurred which are not included in the judgment sum amounting to $152,344.81. An affidavit was filed

by Ms Thompson together with the application dated 13 March 2024 confirming that the statements in the application were true.

[56]There is no question therefore that the debt is for a certain amount.

[57]   Following the filing of the application, the Commissioner has filed further evidence updating the amount owing. Section 13(c) of the Insolvency Act requires the debt to be for a certain amount at the time of the application. I therefore confine the amount required to be paid to avoid bankruptcy to the amount claimed in the creditor’s application dated 13 March 2024.

Section 13(d) – Debt is payable immediately

[58]   Again, there is no question that the judgment debt is payable immediately. The default judgment was entered on 14 November 2023. The remaining amount claimed by the IRD has been established by the evidence filed to be due for payment. IRD set out the due dates for payment of each tax assessment and the due date for each of the unpaid tax assessments has now passed.

Conclusion on requirements of s 13

[59]   The Commissioner has established that the requirements of s 13 have been satisfied.

Should the Court exercise its discretion to decline to make a bankruptcy order under s 37 of the Insolvency Act?

[60]   The grounds for the court exercising its discretion to decline to make an order include that the creditor has not established the requirements set out in s 13.15 As set out above, these have been established.

[61]   The second ground is where the debtor is able to pay his or pay her debts.16 Ms Langkilde originally sought to rely on this ground so was given the opportunity to pay part of the amount outstanding into Court, being the $60,000 payment discussed

15     Insolvency Act 2006, s 37(a).

16     Section 37(b).

above. However no evidence of payment has been provided as discussed above. Nor has Ms Langkilde provided other evidence of her financial position. The debtor has not therefore established that she is able to pay her debts.

[62]   The next ground for declining an order is where it is just and equitable that the court does not make an order.17 Ms Langkilde relied on this ground to submit that because of the technical defects in service of the bankruptcy notice and alleged defects in the proceedings in the District Court, a bankruptcy order ought not to be made. I have discussed the service defects above and do not consider they are sufficient to avoid a bankruptcy order in the circumstances of this case. Furthermore no application to set aside the District Court judgment has been made despite more than a year passing since that judgment was issued.

[63]   As will be clear from the timeline above every effort has been made to allow Ms Langkilde an opportunity to discuss matters with the IRD, to seek further details and to agree a payment plan but no progress has been made. I do not therefore consider that it is just and equitable to decline to make an order.

[64]   The final ground for declining to make an order is that there is any other reason why an order of adjudication should not be made.18 Ms Langkilde has not provided further evidence of her personal circumstances or any especially negative consequence that may arise from bankruptcy or any other matter that would justify the order not being made in the circumstances.

[65]   The making of a bankruptcy order does however have considerable consequences. In the circumstances, I therefore allow a further period for Ms Langkilde to pay the debt claimed in the application as it will now be clear from this judgment that the defences on which she relies have not been accepted by the Court.

[66]   The matter will be called in the next bankruptcy list following that date when the order will be directed to take effect if payment has not been received by the Commissioner.

17     Insolvency Act 2006, s 37(c).

18     Section 37(d).

Result

[67]   The Commissioner's application for an adjudication order is granted with the order to lie in court until the bankruptcy list on Monday, 7 April at 10 am to allow payment by Ms Langkilde by Tuesday, 1 April 2025 of $152,344.81.

[68]   If payment is not made by that date, the bankruptcy order will be confirmed as taking effect from the time recorded in the bankruptcy list on Monday, 7 April 2025.

Costs

[69]   Costs are reserved for determination at the call in the bankruptcy list on 7 April 2025.

Associate Judge Sussock