Far North District Council v Pollock
[2014] NZHC 2473
•29 September 2014
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
CIV-2014-488-000028 [2014] NZHC 2473
UNDER the Insolvency Act 2006 IN THE MATTER OF
the bankruptcy of LESLIE GRAHAM POLLOCK
BETWEEN
FAR NORTH DISTRICT COUNCIL Judgment Creditor
AND
LESLIE GRAHAM POLLOCK Judgment Debtor
Hearing: 29 September 2014 Counsel:
Appearance:
G J A Day for the judgment creditor
LG Pollock, judgment debtor in person
Judgment:
29 September 2014
ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL
Solicitors: Far North Lawyers Ltd, Kerikeri
Copy to: L G Pollock, Awanui
Far North District Council v Pollock [2014] NZHC 2473 [29 September 2014]
Decision
[1] The Far North District Council has applied for an order adjudicating
Mr Pollock bankrupt. My decision is to adjourn this hearing until 24 November
2014 at 10.00 am. I adjourn it to give Mr Pollock the opportunity to pay the District
Council the debt, plus costs on this proceeding. If the debt has not been paid by 24
November 2014, I will consider adjudicating Mr Pollock bankrupt.
Reasons
[2] The Far North District Council has applied to bankrupt Mr Pollock because he did not comply with a bankruptcy notice. I will need to say something more about that bankruptcy notice.
[3] The bankruptcy notice was served on Mr Pollock on 18 March 2014. He had until 31 March 2014 to comply with the notice. He did not take any of the steps set out in the notice to comply with it. The Council has applied within three months of his committing this act of bankruptcy to have Mr Pollock adjudged bankrupt.
[4] Mr Pollock does not dispute his indebtedness to the Council. He does not dispute that he committed an act of bankruptcy, but he asks the Court in its discretion not to make an order of adjudication.
[5] Before I deal with Mr Pollock’s argument that I should not adjudicate him bankrupt, there are some technical issues to be addressed.
[6] The first relates to the bankruptcy notice that the Council served on Mr Pollock. The Council had obtained two orders for costs against Mr Pollock in the District Court at Kaitaia:
(a) for $8,477.37 in CIV-2009-029-39; (b) for $2,493.50 in CIV-2013-029-09. That is a total of $10,970.87.
[7] Judge de Ridder made the order for costs in the first proceeding when he struck out Mr Pollock’s claim against the Council seeking orders to prevent the Council selling by auction two pigs, which the Council had seized under the Impounding Act 1995. In the second proceeding, Mr Pollock sought the return of his pigs. Judge de Ridder dismissed that application, again making an order for costs in favour of the Council.
[8] The technical problem is that when the Council applied to the District Court for the issue of an evidential certificate, the District Court issued a single certificate for both orders for costs. That single certificate was made the basis for a single bankruptcy notice for separate final orders for costs.
[9] There is authority that there should be a separate bankruptcy notice for each judgment debt, a decision of the English Court of Appeal, Re Low ex parte Argentine Gold Fields Ltd.1 Lord Esher MR gave two reasons. First, he said that on the language of the statute, the Bankruptcy Act 1883(UK), a bankruptcy notice could only issue for a single judgment debt, not for more. Second, he said:2
Another reason for coming to the same conclusion is that otherwise there would be taken away from the debtor a right that he undoubtedly has to satisfy one of the notices, or to raise a counter-claim, set-off, or cross- demand to it, and so prevent its being used for the presentation of a bankruptcy petition.
[10] I follow that decision. As to the first reason given by Lord Esher, New Zealand’s Insolvency Act 2006 is in similar terms. Section 17(1)(a) refers to “a final judgment or a final order”, indicating a single final judgment or a single final order. Similarly, s 29(1)(b) refers to the bankruptcy notice requiring “the debtor, in relation to the judgment debt” singular, rather than “judgment debts” plural. Moreover, just as under the English Act, the scheme of the legislation anticipates that a debtor should be entitled to challenge judgment debts separately in separate bankruptcy notices. Accordingly, the bankruptcy notice in this case is irregular because of the
failure to follow the statute and the decision in Re Low.
1 Re Low ex parte Argentine Gold Fields Ltd (1891) 1 QB 147 (CA).
2 At 148.
[11] The question is how to deal with this irregularity. Section 418 of the
Insolvency Act applies:
418 Defects in proceedings
(1) A proceeding under this Act must not be invalidated or set aside for a defect (which includes misdescription, misnomer, or omission) in a step that must be taken as part of, or in connection with, the proceeding, unless a person is prejudiced by the defect.
(2) The Court may order the defect to be corrected, and may order the proceeding to continue, on the conditions that the Court thinks appropriate in the interests of everyone who has an interest in the proceeding.
[12] The Court of Appeal’s decision in Best v Watson gives authoritative guidance on how s 418 is to be applied.3 That was a decision on s 11 of the Insolvency Act
1967 but that was to the same effect as s 418. Under s 418(2), the Court can allow the proceeding to continue. If it is to do so, the Court must be satisfied under s 418(1) that no person would be prejudiced by the defect.
[13] Mr Pollock has treated the costs orders in the bankruptcy notice as a single debt. He has not suggested that he has the right to challenge one debt and not the other. He has not attempted to make payment for one debt, rather than the other. In fact, he has made no payments at all. There was no prejudice to Mr Pollock in the two costs orders being combined in one bankruptcy notice. Accordingly, notwithstanding the defect, I allow the proceeding to continue.
[14] As indicated I am adjourning this matter. That will allow Mr Pollock time to clear the debt anyway, so that even if there had been any prejudice, he will not be under continuing disadvantage.
[15] It is of course well established that an order for costs can be a final order so as to provide a basis for a bankruptcy notice. Examples Mr Day cited were Tararua District Council v Reid, Wanganui District Council v Wilson and Wanganui District
Council v Page.4
3 Best v Watson [1979] 2 NZLR 492 (CA).
4 Tararua District Council v Reid HC Palmerston North CIV-2009-454-622, 15 October 2010; Wanganui District Council v Wilson HC Wanganui CIV-2010-483-133, 24 February 2011; Wanganui District Council v Page HC Wanganui CIV-2010-483-134, 21 July 2011.
[16] The next issue is that after the time for complying with the bankruptcy notice had expired, Mr Pollock filed documents in Court. The Court staff initially treated these as an application to set aside the bankruptcy notice. The matter was called before me on 9 June 2014. I held Mr Pollock’s documents not to be an application to set aside the bankruptcy notice. If they had been, they would have been out of time. They were really directed at opposing any order for adjudication being made. They were, if you like, a notice of opposition filed ahead of time because at that stage the Council had not filed its adjudication application. I directed that Mr Pollock could use those documents if the Council later did file an adjudication application. The Council has done so and I have considered the documents which Mr Pollock filed earlier this year.
[17] Another matter concerns the Council’s application. It was received in Court on 16 June 2014. That was within three months of Mr Pollock’s act of bankruptcy as required under s 13(b) of the Insolvency Act. The application did not, however, fully comply with the High Court Rules. While the application was signed on behalf of the District Council, the signature was not witnessed, as required under r 24.11(1) and Form B3 of the First Schedule of the High Court Rules.
[18] Associate Judge Christiansen directed that that defect could be rectified by the Council filing a fresh application properly witnessed. That has been done. I am satisfied that there has been no injustice to Mr Pollock by the application now proceeding with the signature duly witnessed.
[19] The Council’s application advises that it has a charging order lodged against Mr Pollock’s interest in land at State Highway 10, Awanui. A bankruptcy application requires a creditor to state whether it has security for a debt or whether it is an unsecured creditor. The charging order is apparently in support of one of the orders for costs which the Council relies on. A charging order does not survive the bankruptcy of a debtor. That is a result of s 108 of the Insolvency Act. While a charging order acts as a stop order which holds the property in the interim and prevents it being disposed of so as to defeat any judgment obtained, it does not grant an interest over the property in favour of the creditor. Under s 108, a creditor may retain the benefit of execution of a judgment if execution has been completed before
adjudication. The lodging of a charging order does not amount to the completion of execution. To complete execution the Council would need to file a writ of sale, have the property sold up and receive payment of the proceeds of sale. That stage has not been reached. As the charging order would lapse upon Mr Pollock being adjudged bankrupt, it does not stand in the way of the Council applying under s 13 of the Insolvency Act.
[20] I am advised that the Council is a creditor of Mr Pollock for other matters. Mr Day advises that the Council has obtained a third costs order against Mr Pollock. That matter has not been put in evidence. It is not the subject of the present application.
[21] Mr Pollock says that he is on a rates strike. Mr Day confirmed that the Council is also taking action in respect of rates not paid by Mr Pollock. Any debt for rates is not the subject of this proceeding. I note that the Council would apparently have security by way of charges under the Local Government (Rating) Act 2002 which may make it inappropriate for such a debt to be the basis for a bankruptcy application.
[22] The creditor is a local authority. It has come to the Court under the Insolvency Act because a debt owing to it has not been paid. Mr Day cited examples where other local authorities have brought bankruptcy proceedings, some of them for debts under orders for costs: the cases cited at [15] as well as Auckland City Council v Patel.5 These cases illustrate the unsurprising proposition that a local authority without any security is entitled to apply for remedies under the Insolvency Act. As a local authority, it has no special status - no priority over other creditors, but on the other hand no fewer rights than any other unsecured creditor.
[23] Those are the technical matters.
[24] I am giving this decision on the basis that the Council is an unpaid judgment creditor which has no security for its debt. The requirements of s 13 of the
5 Tararua District Council v Reid, above n 4; Wanganui District Council v Wilson, above n 4;
Wanganui District Council v Page, above n 4; Auckland City Council v Patel HC Auckland CIV-
2010-404-1392, 31 August 2010.
Insolvency Act are satisfied. The matter then becomes a question of decision under ss 36 and 37 of the Insolvency Act. Both sections provide that the Court has a discretion. Mr Day correctly submitted that once a creditor has shown that the requirements of s 13 of the Insolvency Act are satisfied, the debtor has the onus of persuading the Court not to make an order of adjudication.
[25] There are two broad matters that Mr Pollock has raised. The one which I have found important appears in evidence filed on his behalf. That is that he has some equity in his property in Awanui and he would be able to use that property to raise finance to discharge his liability to the Council. Although he signalled that in the papers filed in April, he has not taken any steps to carry out that intention in the meantime. I want Mr Pollock to understand that he needs to take this matter seriously, failing which he will be adjudicated bankrupt. He has seemingly played for time, relying on the second matter, which I will need to address.
[26] Mr Pollock’s stated ability to raise finance to clear the debt goes to s 37(b) of the Insolvency Act. If Mr Pollock is able to clear the debt, including costs on this application, by 24 November 2014, he will have shown his ability to pay his debts. At the same time, he will have removed the Council’s standing as a creditor and this proceeding will come to an end.
[27] In the hearing, Mr Pollock put greater weight on other matters. He wanted me to consider the possibility that he had a significant cross-claim against the Council and that by reason of that cross-claim, no useful purpose would be served by adjudicating him bankrupt. The purpose in raising a cross-claim at this stage is it may give rise to a set-off under the mutual set-off and credit provisions of s 254 of the Insolvency Act. The way the argument could be put for Mr Pollock is that if he could show a good case for having a claim that exceeded any debts he owed the Council, then no useful purpose would be served by him being made bankrupt because the net effect would be that he was a creditor of the Council, rather than the Council being his creditor.
[28] Mr Pollock has the onus of establishing that he has a cross-claim of substance which would require the Court to take it seriously enough to dismiss the application
for adjudication in its discretion. That is where Mr Pollock ran into difficulties. He has old grievances relating to this property at Awanui. He said that he bought it in
1979. He complains about parts of that property being appropriated for public purposes, part for a drainage scheme, and part for State Highway purposes. The area taken was about six hectares. He says that he was absent from the property for some of the 1980s, although he came back to live on the property in 1991. He also complains about decisions of the Mangonui County Council in 1986 under which a neighbour’s subdivision was approved. His papers describe the subdivision as being by way of a boundary adjustment. He criticises the competence of a planning officer of the Mangonui County Council. He alleges wrongdoing by the Council in relation to his right of way arising out of that decision in 1986.
[29] To put the matter into context, the Mangonui County Council has now gone out of existence. It went out of existence in 1989. Its place has been taken by the Far North District Council. The Far North District Council succeeded to the assets and liabilities of the Mangonui County Council, but it is fanciful to think that anyone in the Far North District Council would today be able to deal with ancient complaints going back to the 1980s. The short point is that whatever grievances Mr Pollock has are now statute barred under the Limitation Act 1950. However Mr Pollock wishes to couch his claim, whether in tort or for adverse possession of land, he is now well and truly out of time.
[30] In submissions, but without any evidential support, Mr Pollock alleged that there was forgery on the part of the District Council and that he had only just become aware of this. I attach no weight at all to those submissions. Allegations of forgery are serious. They need to be backed up by proper evidence. Mr Pollock gave no evidence at all in support of his allegations. The allegations go back to matters that happened a long time ago. Given his occupation of the land at least since 1991, he has had the ability since then to ascertain the correct boundaries of his property and then to take any steps in relation to it. I cannot give any credence at all to his allegations that he has any kind of viable cross-claim against the Council relating to these ancient matters. Such proceedings are not arguable.
[31] In his submissions, he expressed the wish to mediate with the Council. He alleged some fault on the part of the Council in refusing to mediate with him. It is not for the Court to rule whether the Council should or should not enter into mediation with its ratepayers. That is a decision for the Council. There is nothing in the conduct of the Council in this case that I can see that gives me reason to pause under s 37 of the Insolvency Act. There is nothing that I have seen in this proceeding that would suggest that the Council has acted oppressively in seeking a remedy under the Insolvency Act. Mr Pollock has not persuaded me that there is any basis under s 37 for not adjudicating him bankrupt, apart from the matter under s 37(b), his ability to pay the debt. He can demonstrate that by paying the Council before 24 November 2014.
Decision repeated
[32] This matter is adjourned to 24 November 2014 to give Mr Pollock the opportunity to pay the debt, plus costs as advised by Mr Day. The case will be called in the bankruptcy list on that day. I also record that this hearing has taken half
a day.
Associate Judge RM Bell
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