Dugh v Dugh HC Napier CIV-2010-441-651

[2011] NZHC 132

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2010-441-651

BETWEEN  SATNAM SINGH DUGH Judgment Creditor

ANDJOGINDER RAM DUGH, PARDEEP KUMAR DUGH AND NARESH KUMAR DUGH

Judgment Debtors

CIV-2010-441-652

AND BETWEEN            SATNAM SINGH DUGH Judgment Creditor

ANDJOGINDER RAM DUGH Judgment Debtor

CIV-2010-441-653

AND BETWEEN            SATNAM SINGH DUGH Judgment Creditor

ANDPARDEEP KUMAR DUGH Judgment Debtor

Hearing:         18 February 2011 (Heard at Napier)

Counsel:         E.M. Forster - Counsel for Judgment Creditor

M.J. Wenley - Counsel for Judgment Debtors

Judgment:      23 February 2011 15:30:00

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

This judgment was delivered by Associate Judge D.I. Gendall dated 23 February

2011 at 3.30 pm under r 11.5 of the High Court Rules.

SS DUGH V JR DUGH, PK DUGH AND NK DUGH HC NAP CIV-2010-441-651 23 February 2011

Solicitors:         Souness Stone Law Partnership, Solicitors, PO Box 975, Hastings

Willis Toomey Robinson, Lawyers, Private Bag 6018, Napier 4142

[1]      Before the Court is an application by the judgment debtors to set-aside bankruptcy notices dated 14 October 2010 issued against them by the judgment creditor.  The judgment creditor is the brother of the judgment debtors in CIV-2010-

441-651 and 653 and the son of the judgment debtor in CIV-2010-441-652..

[2]      The bankruptcy notices in question were issued claiming from the judgment debtors as trustees of the Joginder & Sons Trust the sum of $174,027.42.   This amount represented the sum ordered to be paid under a judgment obtained by the judgment creditor against the judgment debtors in the High Court at Napier on 14

September 2010.

[3]      The stated grounds set out in the Application to Set-Aside the Bankruptcy

Notices are essentially as follows:

2.        (c)        The Bankruptcy Notices have been issued against the Applicants personally whereas their liability (is) as Trustees of the Joginder & Sons Trust in respect of a liability from that Trust to the plaintiff.

(d)       The Plaintiff by his actions in not executing Land Transfer documents consequent upon his removal as a Trustee of the Joginder & Sons Trust has prevented the Applicants from raising bank finance or selling Trust properties to satisfy the judgment debt.

(e)       The Trust  and  the  Plaintiff are  co-guarantors to  Westpac  Bank of  the obligations of the Plaintiff ’s company, C Sun Limited.  The Plaintiff and his interests are the sole shareholders of C Sun Limited and in equity the just apportionment between the co-guarantors is that the Plaintiff contribute

100% of any liability met by the Applicants as Trustees of the Trust to

Westpac Bank in respect of C Sun Limited.

(f)         The Plaintiff is insolvent.

[4]      In  addition  a  further  ground  in  support  of  the  present  application  was advanced before me at the hearing of this matter.  This related to a supervening event which has occurred since the present application was filed on 1 November 2010.

[5] It relates to another matter before this Court under CIV-2010-441-667. In this proceeding Wine Country Credit Union recently obtained judgment against the judgment creditor for the sum of $957,295.85. In addition on 16 December 2010 an interim charging order was issued in that proceeding in favour of Wine Country Credit Union charging the judgment creditor’s $174,027.42 judgment noted at [2] above with respect to this amount of $957,295.85.

[6]      The specific terms of that interim charging order issued in favour of Wine

Country Credit Union were as follows:

Interim Charging Order to Satnam Singh Dugh

This Court orders that until it discharges or finalises this order, your estate, right, title or interest in the proceeds of the judgment dated 14 September 2010 for the sum  of  $174,027.24  together  with  interest  in  proceeding  CIV-2007-441-562 awarded to you against JR Dugh, PR Dugh and NK Dugh as trustees of the Joginder

& Sons Trust, is charged with payment of the amount for which the entitled party, Wine  Country  Credit  Union,  has  obtained  judgment.  The  amount  charged  is

$957,295.85.

[7]      This interim charging order has the effect outlined at r 17.55 High Court

Rules.

17.55     Effect of interim charging order

A person served with an interim charging order may not, except under rules
17.56 to 17.61 or with the leave of the court,—

(a)       pay over any debt, income, interest, dividends, bonus, profits, or other money due or accruing due to the liable party named in the interim charging order; or

(b)      make, concur in making, or permit any conveyance, transfer, assignment, or disposition of any estate, right, or interest, or of any share in a partnership or company, of the liable party named in the interim charging order.

Compare: 1908 No 89 Schedule 2 r 581.

[8]      McGechan on Procedure at para HR17.55.01 confirms that a charging order operates as a ―stop order‖ which preserves or holds the property in question and prevents it from being disposed of so as to defeat any judgment obtained or that may be obtained – Re Gate (1996) 9 PRNZ 568.

[9]      In addition, McGechan on Procedure at para HR17.55.02 in dealing with r

17.55 states:

HR17.55.02      Surplus monies

An order attaching ―all debts due or accruing‖ from the garnishee to the liable party prevents the garnishee paying anything to the liable party, even if the amount is in excess of that required to satisfy the judgment: Murphy v New Zealand Newspapers Ltd [1983] NZLR 225, at p 227; Rogers v Whiteley [1892] AC 118; [1891-4] All ER Rep 682 (HL).

Leave of the Court may be obtained permitting payment of the ―excess‖ to the liable party:  Murphy  v  NZ  Newspapers  Ltd  (above)  (solicitor  seeking,  by  way  of originating application, Court’s directions as to disposal of surplus monies arising from mortgagee sale); Rogers v Whiteley (above).

[10]     The evidence before the Court in this case confirms that the 16 December

2010 interim charging order has been served upon the judgment debtors.

[11]     That said, it seems clear that the judgment debtors are prohibited here from paying the judgment creditor the amount of the subject judgment being $174,027.24 which is itself subject to the charge in favour of Wine Country Credit Union.  No leave of the Court has been sought for any such payment to be made.  If a payment of this judgment sum were to be made to the judgment creditor then that would be in breach of the ―stop order‖ and would defeat the rights of Wine Country Credit Union here under the interim charging order.

[12]     Indeed, r 17.56 notes that if the judgment debtors here, as persons served with the interim charging order were to pay the $174,027.24 judgment over to the judgment creditor ―the Court may order that person to pay the entitled person (Wine Country Credit Union) .... the amount of the money paid in breach of r 17.55‖.

[13]     Under r 17.57 the judgment debtors may pay the $174,027.24 into Court and this serves to discharge them from liability under the charging order.  But that is not what the judgment creditor seeks here.  His bankruptcy notice specifically requires payment of this sum to him which would clearly affect the rights of Wine Country Credit Union as chargeholders and is therefore inappropriate in all the circumstances here.  The appropriate course for the parties here might be to consider an application for relief as persons prejudicially affected by the charging order pursuant to r 17.44,

which application would necessarily involve Wine Country Credit Union as charge holder.

[14]     But, Wine Country Credit Union is not a party to the present proceeding.  It is not joining in to play any part in these bankruptcy proceedings brought by the judgment creditor against his family members as judgment debtors.

[15]     In my view, the application before me is therefore quickly disposed of.

[16]     In light of the interim charging order in favour of Wine Country Credit Union over the judgment debt in question, the judgment debtors here are prohibited from making  the  payment  to  the  judgment  creditor  of  the  amount  claimed  in  the bankruptcy notice.   To do otherwise would clearly breach the ―stop  order‖ and r

17.55 High Court Rules.

[17]     Effectively therefore, this $174,027.42 as the subject of the interim charging order in favour of Wine Country Credit Union, for the purposes of enforcement on the part of the judgment creditor by the issue of bankruptcy notices, in my view is the subject of a form of ―stay‖.   I find, therefore, that for that reason alone, the bankruptcy notices issued against each of the judgment debtors have been issued prematurely and must be set-aside. An order to this effect will follow.

[18]     Given my conclusion on that aspect, I need say nothing further about the other grounds advanced by the judgment debtors in support of their present application.

[19]     For the reasons outlined above, the judgment debtors’ application to set-aside the bankruptcy notice succeeds.

[20]     Orders are now made setting aside the bankruptcy notices in each case dated

14 October 2010 issued against the judgment debtors by the judgment creditor.

[21]     As to costs, as the judgment debtors have succeeded in their application, I see no reason why they should not be entitled to an award of costs in the usual way.

[22]     Costs are therefore awarded to the judgment debtors against the judgment creditor  on  a  Category  2B  basis  together  with  disbursements  as  fixed  by  the Registrar.

[23]     I certify for one counsel only with respect to that costs award.

‘Associate Judge D.I. Gendall’