Commissioner of Inland Revenue v Spicer

[2016] NZHC 1344

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2015-485-001037 [2016] NZHC 1344

UNDER

the Insolvency Act 2006

IN THE MATTER

of the bankruptcy of DIANNA RITA SPICER

BETWEEN

COMMISSIONER OF INLAND REVENUE

Judgment Creditor

AND

D R SPICER Judgment Debtor

Appearances:	T D Lancaster for Judgment Creditor
Judgment:	21 June 2016
(Determined on the papers)

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

as to extension of time for service of bankruptcy notice

Introduction

[1]      The Commissioner of Inland Revenue, on 15 December 2015, obtained leave to serve a bankruptcy notice upon the debtor outside New Zealand.  She has since obtained an order for substituted service.  It is now more than six months since the bankruptcy notice was issued.  By memorandum, counsel for the Commissioner has sought an extension of the time for service to nine months from the date of issue.

Counsel relies on r 24.9(2) and (3) High Court Rules.

COMMISSIONER OF INLAND REVENUE v SPICER [2016] NZHC 1344 [21 June 2016]

The issue

[2]      Rule 24.9(1) to (3) deals with the service of bankruptcy notices when they are to be served in New Zealand.  The prescribed period for service under r 24.9(1) is service within six months from the date of issue, which may be extended under r 24.9(2) and (3) for a further three months.  Rule 24.9(1) to (3) has no application in relation to the present bankruptcy notice because the notice is to be served outside New Zealand.

[3]      This raises an issue as to whether there is a prescribed period for service applicable to this bankruptcy notice.  If not, is the period for service at large?

Service of the bankruptcy notice outside New Zealand

[4]      The starting point for analysis is that, pursuant to r 24.9(4) High Court Rules, a bankruptcy notice must be served in accordance with pt 6 High Court Rules.   I recognise that r 24.9(4) appears within a rule which has as its heading “Service of bankruptcy notice in New Zealand”.   But it is clear from the plain wording of r 24.9(4) and from the legislative history by which r 24.9(4) was added in 2013,1 that the application of pt 6 to service of bankruptcy notices was intended to be in relation to bankruptcy notices generally.2

[5]      The statutory obligation to serve a bankruptcy notice arises under s 17(1)(c) Insolvency Act 2006.   In Goodwin v Copland, the Court of Appeal regarded the insertion of the new r 24.9(4) as:3

…  intended  to  make  express  what  was  always  the  position:  that  the s 17(1)(c) requirement for service is service in accordance with the High Court Rules.

[6]      In short, r 24.9(4) deals with service of bankruptcy notices wherever service is to occur.

1      By r 25(3) High Court Amendment Rules (No 3) 2013 (SR 2013/425).

2      See Minutes of the Rules Committee 03/13 (Item 6) and 04/2013 (Item 9).

3      Goodwin v Copland [2014] NZCA 568 at [20].

Operation of service rules under Pt 6 High Court Rules

[7]      A bankruptcy document is not an originating document to which rr 6.27 to

6.29 apply.4    The service rule which applies to a bankruptcy notice served outside

New Zealand is r 6.30 High Court Rules which provides:

6.30     Service of other documents outside New Zealand

Any document other than an originating document required by any rule to be served personally may be served abroad with the leave of the court, which may be given with any directions that the court thinks just.

The procedural law as it stands

[8]      Whereas (through r 24.9) there is a time limit for service of a bankruptcy notice in New Zealand, there is no equivalent provision in the High Court Rules in relation to service of a bankruptcy notice outside New Zealand.

[9]      The omission is understandable in that the policy need for a bankruptcy notice to remain fresh would have been in the drafter’s mind when dealing with the “within New Zealand” service rule which is specifically designed for bankruptcy notices.  Given that the “outside New Zealand” service rule is contained not within the specific insolvency provisions of pt 24 High Court Rules but within a service rule of application to all documents (other than originating documents), the omission of a time limit relevant to the insolvency situation is understandable.

[10]     Accordingly, the procedural law as it stands is that, unlike a bankruptcy notice to be served within New Zealand, a bankruptcy notice to be served outside New Zealand is not the subject of a time limit.   Under r 6.30, the Court, when granting leave for service abroad, might impose by analogy with r 24.9 a time limit (perhaps by express adoption of rr 24.9(2) and (3).   But in the absence of such direction, there is not a prescribed time limit. Time is at large unless the Court, when granting leave to serve abroad, makes a time direction under r 6.30.   In the circumstances of the leave granted in this case, the Commissioner does not require

an extension of time.

4      Westpac New Zealand Ltd v Boulton [2014] NZHC 693, (2014) 22 PRNZ 183 at [12].

[11]     Now that the peculiar position in relation to service of bankruptcy notices outside New Zealand has come to the attention of the Court, it is my intention to in future adopt a practice whereby a time limit for service is imposed when granting leave under r 6.30.  That is an expedient that the Court may appropriately adopt in the absence of a parallel provision to that in r 24.9.

[12]     Ideally, the time limit ought not to be dependent on particular counsel or a Judge  being  alert  to  the  omission  in  the  rules.    I  recommend  that  the  Rules Committee  consider  the  introduction  of  a  parallel  time  limit  for  service  of bankruptcy notices outside New Zealand. The Committee might, at the same time, reconsider the appropriateness of the placement of r 24.9(4) within a rule which appears to deal only with service within New Zealand.

Outcome

[13]     The Commissioner does not require the extension she has sought.  First, it is not available under r 24.9.  Secondly, in relation to this bankruptcy notice, the time for service remains at large.   It is nevertheless appropriate that the Commissioner, having now obtained directions for substituted service, ensure that service is effected promptly.

Ruling

[14]     I refuse the request for extension of time for the reasons stated.

Associate Judge Osborne

Solicitors:

Inland Revenue Legal and Technical Services, Wellington