Croad v Rabson

[2013] NZHC 226

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2011-485-2437 [2013] NZHC 226

IN THE MATTER OF     the Insolvency Act 2006

AND

INTHE MATTER OF     the Bankruptcy of MALCOLM EDWARD RABSON

Judgment Debtor

BETWEEN  ANDREW CROAD AND CHRISTINE MARGARET DUNPHY (AS LIQUIDATORS OF DOUBLE ZERO HOLDINGS LIMITED AND AS LIQUIDATORS OF VISION LIMITED) Judgment Creditors

Hearing:         13 February 2013

Appearances: H L Thompson for the Judgment Creditors

Judgment Debtor in Person

Judgment:      18 February 2013

RESERVED JUDGMENT OF GODDARD J

Solicitors:      McMahon Butterworth Thompson, PO Box 106073, Auckland

Copy To:       M E Rabson, C/- 173 Wellington Street, Paekakariki, Wellington

CROAD AND DUNPHY (AS LIQUIDATORS OF DOUBLE ZERO HOLDINGS LIMITED AND AS LIQUIDATORS OF VISION LIMITED)V RABSON HC WN CIV-2011-485-2437 [18 February 2013]

[1]      On 12 June 2012, Ronald Young J made an order under s 42(2)(a) of the Insolvency Act 2006 halting the judgment creditors’ application to have Mr Rabson adjudicated bankrupt.

[2]      The brief chronology of relevant events up to that point was set out by Ronald Young J in his decision.  Briefly, it is as follows.  On 11 April 2011 French J ordered Mr Rabson to pay the judgment creditors as liquidators, $58,084.31 plus costs and disbursements of $29,194.  Of that sum an amount of $68,669 remained outstanding and unpaid.

[3]      On 11 May 2011 Mr Rabson filed an appeal in the Court of Appeal.

[4]      Mr Rabson allowed his appeal to lapse and sought an extension of time from the Court of Appeal which was granted on 27 April 2012.

[5]      Meanwhile, in November 2011, after Mr Rabson’s appeal had lapsed but before he had obtained his time extension, the judgment creditors had served the bankruptcy notice on him.

[6]      As noted above, on 12 June 2012, Ronald Young J made an order halting the

proceeding, pending determination of Mr Rabson’s appeal to the Court of Appeal.

[7]      Mr Rabson sought recusal of two judges of the Court of Appeal from sitting on his appeal, which was set down for hearing on 17 October 2012.  The Court of Appeal proceeded to hear the appeal, with the Judges concerned sitting.  Judgment dismissing the appeal was delivered on 31 October 2012.

[8]      Mr Rabson is now seeking leave from the Supreme Court to appeal against both decisions of the Court of Appeal: refusing his application for recusal of two of the Judges who heard his appeal; and from the judgment of the Court of Appeal. However, as leave to appeal  to the Supreme  Court is required, there is in fact currently no appeal pending.

[9]      In  opposition  to  the  present  application  to  lift  the  order  halting  the adjudication proceedings made on 12 June 2012, Mr Rabson submitted that the

status quo should prevail, as the appeal process is on-going and therefore the basis of the  original  stay  of  adjudication  has  not  changed.    He  further  submitted  that, although he continues to accept that the jurisdictional requirements of s 36 and s 13 of the Insolvency Act 2006 are “technically met”, there are issues as to amount owing and, in his view, there is no amount owing.

[10]     Mr Rabson is seeking the exercise of the Court’s discretion under either s 37 and/or  s  42  of  the  Insolvency  Act  2006  to  decline  the  Judgment  Creditors’ application, on the basis either that he is able to pay his debts or it is just and equitable to decline the application.   He submitted that all necessary matters to expedite his application for leave to appeal to the Supreme Court have been attended to  promptly,  and  there is  precedent  for  refusing  adjudication  where a  judgment debtor is able to pay but is refusing to do so, citing Re Lynch ex parte Main.[1]   In my view  that  decision  does  not  support  the  proposition  that  a  court  may  refuse

adjudication where a judgment debtor is able to pay but is refusing to do so.  In that case adjudication was refused because the judgment creditors held a charging order over property owned by the judgment debtor.  The value of the charge exceeded the amount of the debt outstanding. As a result, s 14 of the Insolvency Act prevented the Court from  making  an  order  of adjudication.[2]     Mr  Rabson  also  referred  to  the judgment of Ronald Young J on 12 June 2012.  Nothing in this judgment supports Mr Rabson’s proposition.

[1] Re Lynch ex parte Main HC Palmerston North CIV-2008-454-285 8 May 2009.

[2] Section 14 Insolvency Act 2006 states that the court must not make an order of adjudication on the application of a secured creditor unless the creditor has established that the amount of the

debt exceeds the value of the charge by at least $1,000.

[11]     Mr Rabson further submitted that he does have an appeal extant against the judgment underlying the bankruptcy notice, referring to his application for leave to appeal to the Supreme  Court having been filed and  under consideration by  the Supreme Court.  He referred also to the principles relating to the Court’s discretion under s 42, and to a judgment of Woolford  J in the High Court at Hamilton.[3]

[3] Featherstone Park Developments Limited (in rec and in liq) v Bradley HC Hamilton CIV-2011-

419-00956, 1 March 2012.

However, I note that the facts in Mr Rabson’s case are distinguishable from those in

Featherstone Park.  Here the judgment creditors do not have charging orders against

Mr Rabson’s property and while Mr Rabson’s application for leave to appeal is being

considered by the Supreme Court, the Supreme Court has yet to fix a hearing date.

[12]     This is a long outstanding matter and the matters put forward by Mr Rabson in opposition were well anticipated by Mr Thompson for the Judgment Creditors.

[13]     It is clearly appropriate for an order to be made lifting the previous order halting  the  adjudication  proceeding  and  for  an  order  adjudicating  Mr  Rabson bankrupt to be made at the same time.  However, the applicants have put forward the reasonable proposal of Mr Rabson being granted a short adjournment of the adjudication proceeding to provide him an opportunity to make payment into Court of the amount owing: viz. $91,309.21, to be held by the Registrar as security pending the outcome of Mr Rabson’s application for leave to appeal to the Supreme Court. In support, Mr Thompson referred to the comparable decision in Halifax Finance Ltd

v McFarlane.[4]   I am satisfied that the circumstances here merit the same approach.

[4] Halifax Finance Limited v McFarlane HC Wellington CIV-2007-485-1377, 20 May 2008.

[14]     Having carefully considered the competing arguments, I am satisfied that it is appropriate for the Court to make the orders sought by the Judgment Creditors.  The orders will allow Mr Rabson to seriously and expeditiously pursue his application for leave to appeal to the Supreme Court and will secure the Judgment Creditors’ interests in the interim while that process occurs.

[15]     The Judgment Creditors’ application is granted and the following orders are

made:

(a)The  Court’s  previous  order  of  12  June,  halting  the  applicants’ adjudication proceeding against Mr Rabson, pending his appeal to the Court of Appeal is lifted;

(b)The adjudication proceeding is adjourned to Monday 4 March 2013, subject to the condition that Mr Rabson pay the sum of $91,309.21 into Court no later than 3 pm on Thursday 28 February 2013.  Such sum  is  to  be  held  by  the  Registrar  as  security  for  Mr  Rabson’s

indebtedness   to   the   applicants   pending   determination   of   his application to the Supreme Court for leave to appeal against the judgment of the Court of Appeal; and

(c)      The respondent is to pay the applicants’ costs of this application.

Goddard J