Commissioner of Inland Revenue v Muir

[2018] NZHC 1834

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2017-404-002465

[2018] NZHC 1834

BETWEEN

COMMISSIONER OF INLAND REVENUE

Judgment Creditor

AND

GARY ALBERT MUIR

Judgment Debtor

Hearing:	On the papers
Appearances:	S J Leslie for the Judgment Creditor R B Hucker for the Judgment Debtor
Judgment:	24 July 2018

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by me on

24.07.18 at 10:30am, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

COMMISSIONER OF INLAND REVENUE v G A MUIR [2018] NZHC 1834 [24 July 2018]

Introduction

[1]    Dr Muir, the judgment debtor, has made an application for leave to appeal my decision of 15 June 2018 to the Court of Appeal pursuant to Section 56(3) of the Senior Courts Act 2016 (the Act). In that decision I dismissed Dr Muir’s application to set aside the bankruptcy notice issued against him by the Commissioner of Inland Revenue.

[2]    The Commissioner contends that my decision of 15 June was not an interlocutory one and that I therefore have no jurisdiction to grant leave to appeal.

[3]    The critical issue I must determine is whether I do have jurisdiction to grant leave or whether Dr Muir, as the Commissioner contends, must appeal directly to the Court of Appeal.

[4]    In his memorandum of 20 July 2018, Dr Muir contends that the Commissioner should file a notice of opposition to her application and that the court set the matter down for a defended hearing on the issue of whether leave to appeal is required. However, I see little utility in that approach. It would be contrary to the principles in Rule 1.2 of the High Court Rules and in the circumstances where the Commissioner accepts there is a right of appeal, I fail to see that there could be any real infringement of Section 27 of the New Zealand Bill of Rights Act 1990.

Analysis and decision

[5]    Section 56(1) of the Act provides that the Court of Appeal may hear and determine appeals from a judgment or order of the High Court. Section 56(1) is subject to subsection 3. That section reads:

Jurisdiction

(1)  The Court of Appeal may hear and determine appeals—

(a)from a judgment, decree, or order of the High Court;

(b)under the Criminal Procedure Act 2011;

(c)      from any court or tribunal under any other Act that confers on the Court of Appeal jurisdiction and power to hear and determine an appeal.

(2)  Subsection (1) is subject to subsections (3) and (5) and to rules made under section 148.

(3)   No appeal, except an appeal under subsection (4), lies from any order or decision of the High Court made on an interlocutory application in respect of any civil proceeding unless leave to appeal to the Court of Appeal is given by the High Court on application made within 20 working days after the date of that order or decision or within any further time that the High Court may allow.

(4)   Any party to any proceedings may appeal without leave to the Court of Appeal against any order or decision of the High Court—

(a)      striking out or dismissing the whole or part of a proceeding, claim, or defence; or

(b)granting summary judgment.

(5)   If the High Court refuses leave to appeal under subsection (3), the Court of Appeal may grant that leave on application made to the Court of Appeal within 20 working days after the date of the refusal of leave by the High Court.

(6)   If leave to appeal under subsection (3) or (5) is refused in respect of an order or a decision of the High Court made on an interlocutory application, nothing in this section prevents any point raised in the application for leave to appeal from being raised in an appeal against the substantive High Court decision.

[6]    Interlocutory application is defined in Section 4 of the Act:

interlocutory application—

(a)       means any application to the High Court in any civil proceedings or criminal proceedings, or intended civil proceedings or intended criminal proceedings, for—

(i)an order or a direction relating to a matter of procedure; or

(ii)      in the case of civil proceedings, for some relief ancillary to that claimed in a pleading; and

(b)      includes an application to review an order made, or a direction given, on any application to which paragraph (a) applies.

[7]    In Prescott v New Zealand Police1 Associate Judge Bell held that an application to set aside a bankruptcy notice is not an interlocutory application and thus does not fall within Section 51(3).

1      Prescott v New Zealand Police [2017] NZHC 2701 at [7].

[10] In my judgment, an application to set aside a bankruptcy notice is not an interlocutory application under this definition. An application to set aside a bankruptcy notice is a stand-alone proceeding. A bankruptcy notice can be used to establish an act of bankruptcy under the Insolvency Act 2006. Failure to comply with the bankruptcy notice is only one of a number of acts of bankruptcy which, on being proved, give grounds under ss 13 and 16 of the Insolvency Act to apply for a debtor’s adjudication in bankruptcy. While the bankruptcy notice is issued by the court, it is executive in nature. It does not by itself start a proceeding for the court’s determination in its civil jurisdiction. Instead, it requires a debtor to take steps, in the absence of which the debtor will be treated as having committed an act of bankruptcy. A decision that disposes of a bankruptcy notice goes to substance not to procedure, and does not deal with mere interlocutory relief. Because the application to set aside the notice is not interlocutory under the definition of s 4 of the Senior Courts Act, leave to appeal is not required.

[8]    I agree with the result and the reasoning of Associate Judge Bell. While a bankruptcy notice is issued by the Court, it is executive in nature. A decision that disposes of a bankruptcy notice goes to the substance or merits of the proceedings and not to procedure.

[9]    The application to set aside a bankruptcy notice is not an application for relief ancillary to that sought in an application for adjudication. It is clear from the scheme of the Insolvency Act 2006 that an adjudication proceeding is a separate and standalone proceeding albeit commonly based on a bankruptcy notice. If a bankruptcy notice is not challenged or the Court decides, on application, not to set it aside, then the judgment creditor must file separate and fresh proceedings for adjudication.

[10]   I accordingly conclude that I have no jurisdiction to grant the application sought by Dr Muir. If Dr Muir wishes to challenge my judgment of 15 June 2018 he must appeal directly to the Court of Appeal under Section 56(1).

Result

[11]   The application for leave to appeal is dismissed. This Court has no jurisdiction to determine that application.

[12]   In the ordinary course, the Commissioner, having succeeded, would be entitled to costs and on a 2B basis. However, and for the reasons given in earlier minutes, costs are reserved pending the determination of the appeal in Commissioner Inland Revenue Department v New Orleans Hotel 2011 Ltd2.

Associate Judge P J Andrew

2      Commissioner Inland Revenue Department v New Orleans Hotel 2011 Ltd [2018] NZHC 971.