Ellis v Rochis Limited HC Napier CIV 2007-441-914
[2008] NZHC 2529
•27 August 2008
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
CIV 2007-441-914
IN THE MATTER OF the Insolvency Act 2007
AND
IN THE MATTER OF the bankruptcy of THOMAS WILLIAM CORBET ELLIS
ANDROCHIS LIMITED Judgment Creditor
Hearing: 21 August 2008
Appearance: G.W. Calver - Counsel for Judgment Creditor
G.G. McKay - Counsel for Judgment Debtor
Reasons for Decision: 27 August 2008
REASONS FOR DECISION
OF ASSOCIATE JUDGE D.I. GENDALL
Solicitors: McKay Hill Gale, PO Box 248, Taupö
McKay Hill, PO Box 1143, Napier
ELLIS V ROCHIS LIMITED HC NAP CIV 2007-441-914 27 August 2008
[1] On 21 August 2008 the judgment creditor’s petition to have the judgment debtor adjudicated bankrupt came before the Court for hearing.
[2] At the conclusion of that hearing the following orders were made:
(a) An order for adjudication of Thomas William Corbet Ellis also known as Thomas Corbet Ellis was made.
(b)Costs were awarded to the judgment creditor on a Category 2B basis together with disbursements as fixed by the Registrar.
(c) The order was timed at 12.44 pm.
[3] In that decision I indicated that my detailed reasons would follow. I now set out those reasons.
[4] On 19 July 2007 this Court granted judgment by consent against the judgment debtor for the sum of $1,399,769.74. At the hearing on 19 July 2007 Mr McKay present counsel for the judgment debtor appeared as counsel for the defendant.
[5] Subsequently a bankruptcy notice was issued against the judgment debtor for this judgment sum and service by way of substituted service was finally effected on
18 January 2008.
[6] On 1 April 2008 the present proceeding was filed and service of the judgment creditor’s documents was effected on the judgment debtor on 7 May 2008.
[7] A Notice of Opposition to the present application was filed on behalf of the judgment debtor on 26 June 2008.
[8] The grounds advanced by the judgment debtor in that Notice of Opposition were:
(a) The petition is not addressed or directed to the right person.
(b)It would not be just and equitable in the circumstances of the case for the Judgment Debtor to be adjudicated as a bankrupt.
(c) The Judgment Debtor is able to pay the Judgment Creditor the agreed settlement sum.
(d) The amount payable is not certain.
(e) That both the Judgment Creditor and Judgment Debtor have agreed between them on a number of occasions that bankruptcy proceedings would not be pursued and that a formula for settlement would be reached between the parties upon manageable and reasonable terms.
(f) This application arises in uncertain economic times where moratoriums, creditors arrangements and negotiation are more likely to produce worthwhile and practical results in debtor/creditor cases than adjudication and bankruptcy which is unlikely of itself to produce any worthwhile remedy for the Judgment Creditor.
(g) Upon the grounds more particularly set forth in the Affidavit of Thomas Corbet Ellis sworn and filed in support of this Notice of Opposition.
[9] An affidavit of the judgment debtor in support of this Notice of Opposition was also filed on 26 June 2008.
[10] This matter has been the subject of calls in this Court on 23 April 2008, 29
May 2008, 30 June 2008 and 24 July 2008.
[11] At the hearing before me on 21 August 2008 Mr Ross Harold Fitches, the Managing Director of the judgment creditor gave evidence to confirm that the judgment debt had not been paid and remained due and outstanding.
[12] In addition before me Mr Calver for the judgment creditor advised that a judgment had just been obtained against the judgment debtor on 20 or 21 August
2008 in the District Court by Rod Kay Limited for the sum of $41,479.63.
[13] The starting point in this matter must be that on its face the judgment debtor has committed an act of bankruptcy. This is on the basis that he has failed to comply with a bankruptcy notice properly served upon him by the judgment creditor with regard to the $1.4 million (approx) judgment debt obtained against him in this Court over one year ago on 17 July 2007.
[14] As I have noted the judgment debtor was represented by Counsel at that hearing and the judgment was entered by consent. No application to set aside the bankruptcy notice has since been made by the judgment debtor.
[15] Instead the judgment debtor now opposes the making of any order for adjudication upon the grounds set out in his Notice of Opposition, grounds which I have outlined at paragraph [8] above. I now consider each of those grounds in turn.
Petition is Not Addressed or Directed to the Right Person
[16] This ground of defence alleges that the judgment creditor is seeking to bankrupt the wrong person. The judgment debtor named in the bankruptcy notice and in this proceeding is Thomas William Corbet Ellis of 204 Brackenridge Road, RD3, Napier, Company Director.
[17] The judgment debtor, Mr Ellis, in his affidavit sworn 26 June 2008 claims that his correct name is “Thomas Corbet Ellis”. He says it is his 18 year old son who is “Thomas William Corbet Ellis” and that his son “has had no association or dealings with the judgment creditor”. Mr Ellis goes on to depose that he wants to ensure “that my son is not involved in this matter”.
[18] In response, Mr Calver for the judgment debtor, notes that from a range of documentation provided to the Court by Mr Ellis himself, it is plain that he uses the
two names, “Thomas William Corbet Ellis” and “Thomas Corbet Ellis”
interchangeably.
[19] On this issue it is significant as I see it that the consent judgment obtained against the judgment debtor in this Court on 19 July 2007 was against the named defendant in that proceeding, “Thomas William Corbet Ellis”. As I have noted above, Mr McKay who is counsel for the judgment debtor in the present proceeding was counsel for the defendant in the earlier proceeding and consented to the order made on 19 July 2007. There is no question, as I understand the position, that the “Thomas William Corbet Ellis” against whom that judgment was given was the father and not the son.
[20] Further, in my view, it is quite plain here that the judgment debtor accepts, answers to and uses both names “Thomas Corbet Ellis” and “Thomas William Corbet Ellis” interchangeably as a number of documents annexed to his own affidavit sworn 26 June 2008 confirm. These documents are:
(a)Exhibit “A” which is a proposed agreement drawn up by the judgment debtor’s solicitors, McKay Hill, which refers to him as “Thomas Corbet Ellis”.
(b)Also, as part of this Exhibit “A”, is a Heads of Agreement document again prepared by the judgment debtor’s solicitors, McKay Hill which refers to him as “Thomas William Corbet Ellis”. On page 4 of this Heads of Agreement the judgment debtor appears to have signed his name alongside an attestation clause which describes him as “Thomas William Corbet Ellis”.
(c) In addition, as part of that Exhibit “A” is a Deed of Variation of Loan Agreement which describes the judgment debtor as “Thomas William Corbet Ellis”. Again on page 3 of this document the attestation clause describes him as “Thomas William Corbet Ellis as guarantor” and he has signed the document alongside this clause in the presence of Mr McKay, his solicitor and counsel.
(d)Exhibit “B” is a handwritten document which refers to the judgment debtor as “Tom Ellis”.
(e) Also attached as part of Exhibit “B” is a letter dated 21 May 2008 from a Mr Brian Nichols which refers to the judgment debtor as “Thomas Corbet Ellis”.
(f) Annexed as Exhibit “C” appears to be another copy of the document I have described at paragraph [20](a) above noting in the attestation clause the judgment debtor’s name as “Thomas Corbet Ellis”. This document appears to be signed by Mr Ellis alongside this attestation clause.
(g) Exhibit “D” is a statement of position which describes the judgment debtor as “Thomas Corbet Ellis”.
(h) Also annexed it seems as part of Exhibit “D” is a letter dated 18 June
2008 to Mr McKay from a Mr Foote who I understand is the judgment debtor’s accountant. This refers to the judgment debtor in various ways as “Tom Ellis”, “Tom E.” and “Tom”.
[21] In summary, the judgment debtor consented to judgment being entered against him in this Court in the name of Thomas William Corbet Ellis after advice from his current solicitor, Mr McKay. In addition documents prepared by the judgment debtor’s own solicitor or witnessed by him describe Mr Ellis as “Thomas William Corbet Ellis”.
[22] The suggestion which seems to be advanced that the judgment creditor is attempting to bankrupt the wrong person, in my view, is wide of the mark. I am satisfied that the judgment creditor uses and answers to both of the names in question on an interchangeable basis.
[23] I reject this first ground of opposition put forward by the judgment debtor.
[24] The essence of the next defence advanced by the judgment debtor is that the judgment creditor compromised its debt on the basis that some time ago a formula for settlement had been reached between the parties. As I understand it this argument is based upon a document which was said by the judgment debtor to have been signed on or about 19 May 2008. A copy of this document is annexed as Exhibit “B” to the 26 June 2008 affidavit of the judgment debtor.
[25] Although there is some difficulty in reading parts of this photocopied handwritten document it appears to be an agreement between Brian S Nichols and Ross Fitches said to be acting on behalf of the Rochis Trust and Tom Ellis. At the outset the document states:
“This agreement is without prejudice to all rights and remedies.”
[26] Although the document purports to be with Rochis Trust rather than Rochis Limited (and I leave aside the argument that it does not therefore bind the judgment creditor in any event), it does go on to state that Tom Ellis will pay to Rochis Trust “in respect of settlement of debt” the following payments:
(a) $20,000.00 on 28 May 2008. (b) $10,000.00 on 6 June 2008.
(c) $250,000.00 (NZ equivalent in US dollars) to be paid in two instalments as follows:
(i) $100,000.00 (NZ) paid no later than 3 months from Settlement
Agreement.
(ii) $150,000.00 (NZ) paid no later than 4 months from Settlement
Agreement.
“In exchange Rochis Trust will withdraw proceedings but will have the option to proceed upon default”.
and
An agreement will be drafted and signed on Monday, 19 May. If Tom Ellis fails to agree to the above proposal then Rochis Trust will continue with the proceedings.”
[28] In evidence before the Court Mr Fitches the director of the judgment creditor states that no Settlement Agreement was ever concluded. He notes that the document only says that Mr Nichols and Mr Fitches (and not the judgment creditor and judgment debtor) both “agree in principle to the proposal as outlined below”.
[29] Counsel for the judgment creditor contends that this “agreement”, in any event, would be void for uncertainty. And it is clear that the document uses the words “Without Prejudice to all Rights and Remedies” and the further words “In exchange Rochis Trust will withdraw proceedings but will have the opportunity to proceed upon default”. In my view there is some vagueness to the words used, and in any event, the document clearly contemplated a formal agreement to follow which was to be drafted and signed on 19 May 2008 which I understand did not occur.
[30] And finally, as I understand the position, there has been default in making payment of certain stipulated amounts in this document upon their respective due dates. That said, then it is clear that “Rochis Trust” (or indeed “Rochis Limited” if it is bound by this agreement at all) is entitled to “continue with the proceedings”.
[31] For all these reasons I reject this second ground of opposition advanced by the judgment debtor.
[32] As to this suggestion, counsel for the judgment creditor has confirmed that since the High Court judgment was obtained in July 2007 two payments, one of
$30,000.00 and one of $10,000.00 have been made. He goes on to note that at the rate of interest provided for in the original agreement, interest accrues at an amount approximating $323,000.00 p.a.
[33] Even if that were not the case, the judgment creditor’s position is that it would be entitled to interest on the judgment sum at the statutory rate of 7.5% p.a. and interest at this rate would still be in excess of $100,000.00 p.a.
[34] If the payments that have been made were not credited to interest, but rather to the principal amount of the judgment obtained against the judgment debtor, then this would simply reduce the amount of principal owing under the judgment to
$1,359,769.74.
[35] In my view there is nothing in this defence advanced by the judgment debtor and I reject it.
Bankruptcy Would Produce No Worthwhile Remedy for the Judgment Creditor and It is Not Just and Equitable for the Judgment Debtor to be Adjudicated Bankrupt
[36] This next ground of defence appears to be based upon the suggestion that there is no point in bankrupting the judgment debtor.
[37] In his affidavit sworn 26 June 2008 the judgment debtor has attached as Exhibit “D” a statement of his assets and liabilities which he declares is “true and correct”.
[38] The financial information provided however is quite unsatisfactory. It gives no details whatever of income and outgoings. It shows four liabilities being a Visa credit card account of $43,000.00, an Amex account of $600.00, an amount due to
Rod Kay of $40,000.00 and a debt described as a “Contingent Liability Rochis
Limited” of $270,000.00.
[39] His list of assets show “debtors”, George Waikari of $10,000.00, Alan Duff of $20,000.00 and “Expected Metal Forming Income approx $300,000.00”. In addition he says he has $20,000.00 cash, $2,000.00 “other cash” and $25,000.00 personal items and effects.
[40] There is no indication of the recoverability of the debtors he lists nor details of what the “Expected Metal Forming Income approx $300,000.00” represents, when it may be due and to what it relates.
[41] In any event, given the outstanding judgment debt to the judgment creditor of nearly $1.4 million dollars, the judgment debtor is clearly insolvent.
[42] As an aside, a further matter of concern needs mention. This arises from paragraph 5 of the judgment debtor’s 26 June 2008 affidavit. This states:
“5.A further background matter I feel I should explain to the Court is the distinction between my personal status and my status as a trustee of the Ellis Family Trust. Some years ago my wife and I agreed that the bulk of our business assets would be vested in a Family Trust for her protection and the protection in estate planning for my son and my daughter. The Ellis Family Trust was established with the usual professional assistance in such matters. Our home, our personal assets and shares in various enterprises which we conducted were all vested in the Trust, the trustees of which were myself and my wife …”.
(emphasis added)
[43] The concern that arises relates to a letter dated 18 June 2008 from his accountant Mr Foote which the judgment debtor has exhibited as part of Exhibit “D” to this affidavit. That letter from Mr Foote confirms in paragraph 3:
“3. Breckenridge (the judgment debtor’s home) is not owned by a Trust
…”.
[44] Clearly this is an issue that requires some clarification.
[45] In all the circumstances here I am satisfied that the judgment debtor is clearly insolvent and that it is just and equitable for the order for adjudication to be made.
[46] That said, the orders noted at paragraph [2] of this decision are confirmed.
‘Associate Judge D.I. Gendall’
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