Commissioner of Inland Revenue v Sharma

[2015] NZHC 1124

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2014-419-246 [2015] NZHC 1124

BETWEEN

THE COMMISSIONER OF INLAND

REVENUE Plaintiff

AND

IRENE REENITA SHARMA Defendant

Hearing:	21 May 2015
Appearances:	Ms M Brown for plaintiff Mr A Nolan for defendant
Judgment:	28 May 2015

JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

This judgment was delivered by me on

28.05.15 at 4 pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

THE COMMISSIONER OF INLAND REVENUE v SHARMA [2015] NZHC 1124 [28 May 2015]

[1]       In this proceeding, Ms Sharma seeks an order setting aside the bankruptcy notice which the Commissioner served upon her.

[2]      The background which follows is taken from the submissions that counsel for the Commissioner, Ms Brown, filed for the hearing.  The outline of the events is not disputed by Ms Sharma.

Background

[3]      The  Commissioner  obtained  sealed  judgment  against  Ms  Sharma  on  20

February 2013 following a hearing in the District Court at Hamilton on 31 January

2013 before Marshall DCJ.

[4]      Ms Sharma subsequently appealed the decision of Marshall DCJ on 1 March

2013.  She discontinued the appeal on 8 July 2013.

[5]      On  9  June  2014  the  Commissioner  filed  a  request  for  the  issue  of  a

Bankruptcy Notice.

[6]      On 30 September 2014 Ms Sharma was served with the Commissioner’s Bankruptcy Notice by way of substituted service, by affixing the Order for Substituted Service and  the Bankruptcy Notice  to  the front  door of her private residence located at 166B Bankwood Road, Chartwell, Hamilton.

[7]      On 14 October 2014 Ms Sharma filed an interlocutory application to set aside the Bankruptcy Notice and supporting affidavit (“the Application”).    The Commissioner was not served with the Application.

[8]      The Commissioner submits that the failure on the part of Ms Sharma to serve the application for order setting aside bankruptcy notice and supporting affidavit is a fatal flaw in her proceeding, which must result in the proceeding being dismissed.

[9]      For her part, Ms Sharma submits that the important matter was that she had filed the proceeding in time.   She did so on 4 November 2014, and there is no dispute between the parties about the date of filing.  Ms Sharma has not produced any evidence establishing that the application and supporting affidavit was actually served on the Commissioner.

[10]     Ms Brown, for the respondent, referred me to s 17(1) of the Insolvency Act

2006, which provides:

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),—

(i) complied with the requirements of the notice; or

(ii) satisfied the court that he or she has a cross claim against the creditor.

[11]     The time limit specified in subsection (4) is 10 working days after service, if the debtor is served with the bankruptcy notice in New Zealand.

[12]     Ms  Brown  further  referred  to  the  fact  that  the  Bankruptcy  Notice,  as prescribed in Form B2 of the High Court Rules 2008, sets out the procedure for counter claim, set-off or cross-demand.  That procedure requires that an application and supporting affidavit must be filed in the High Court and served on the judgment creditor.   She also made reference to the case of ANZ Bank New Zealand Ltd v

Edwards,1  in which the judgment debtor had filed the application to set aside the

bankruptcy notice in time but had failed to serve the judgment creditor within the 10 working day timeframe.   Sargisson AJ  struck the application out and  made the following comments:2

[8]       The Court’s decision in Re Memelink ex parte Sanco (NZ) Ltd is apposite.  In that judgment, Associate Judge Gendall (as he then was), states that it is clear from a number of judgments that once the tenth day after service of a bankruptcy notice has passed, an act of bankruptcy occurs.  As he  pointed  out,  any  provisions,  be  they  in  the Act  or  elsewhere  which provide for some extension of time for bringing in serving applications, will not assist.   Simply put, they cannot undo an event which has occurred, namely the act of bankruptcy.

[9]       As the debtor was required by the bankruptcy notice to both file and serve any application to set the notice aside within the ten day statutory time period allowed, she  has failed to comply with the bankruptcy notice as required  by  s  17.   As  it  is  clear  from the  wording  of  the Act  and  the provisions in Form B2, that a Judgment Debtor has only ten working days from the date the bankruptcy notice is served on him or her to apply to this Court to set aside the notice, the application is a nullity and must be struck out.

[10]      The Court has no power to extend the time within which such an

application must be made…

[13]     I agree with the above judgment.   The applicant has failed to make her application in time.  There can be one result only which is that the application has to be dismissed and I order accordingly.

[14]     Ms Brown submitted that the combined effect of s 17 of the Act, Form B2 and ANZ Bank New Zealand Limited v Edwards is that Ms Sharma’s application is a

1    ANZ Bank New Zealand Ltd v Edwards [2013] NZCH 2756.

2      ANZ Bank New Zealand Ltd v Edwards, above n 1 (footnote omitted).

nullity and should be struck out on the basis that she did not serve the Commissioner within the 10 working day timeframe as required by s 17(4) of the Act.

[15]     I would expect the parties to agree the matter of costs.  If they cannot, they should advise the Registrar and I will allocate hearing time to resolve that issue.

J.P. Doogue

Associate Judge