Fleming v Rokos HC Auckland CIV 2010-404-006590
[2011] NZHC 484
•16 May 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2010-404-006590
IN THE MATTER OF the Insolvency Act 2006 and in the matter of the bankruptcy of Patrik Rokos
BETWEEN PIPPA JANE FLEMING AND DAVID NEIL MURRAY
Judgment Creditors
ANDPATRIK ROKOS Judgment Debtor
Hearing: 16 May 2011
Counsel: J F Armstrong for judgment creditors
No appearance for judgment debtor
Judgment: 16 May 2011
ORAL JUDGMENT OF ASSOCIATE JUDGE ABBOTT
Solicitors:
Armstrong Murray, PO Box 33-1028, North Shore City 0740
FLEMING AND MURRAY V ROKOS HC AK CIV 2010-404-006590 16 May 2011
[1] This matter is before the court today to deal with two applications. The first is the judgment creditors’ substantive application to adjudicate the judgment debtor, Patrik Rokos, bankrupt. The second is an application by Mr Rokos for leave to file notice of opposition out of time.
Background
[2] The matter has its genesis in a dispute over the development of three blocks of land in Dakota Avenue, Beachhaven, Auckland. The judgment creditors, as trustees of the Emsa Trust, were the owners of a property at 8 Dakota Avenue. Susan Voerman (a sister of the trustee P J Fleming) is a beneficiary of that trust, and by arrangement with the trustees resided in the 8 Dakota Avenue property. In 2005
Ms Voerman and Mr Rokos, together with owners of the properties at 6 and 10
Dakota Avenue, had a discussion about subdividing the three properties. Mr Rokos and Ms Voerman signed an agreement in October 2005 under which Ms Voerman (purporting to act on behalf of the trustees) agreed to sell the rear portion of 8
Dakota Avenue to BRNO Developments or nominee. It appears that the adjoining owners entered into similar agreements.
[3] Mr Rokos incorporated a company BRNO Developments Limited, which, post incorporation, proceeded to take over the agreements and commenced development of the rear part of each of the properties. BRNO Developments Limited was later placed into liquidation, before the development was complete.
[4] BRNO Developments Limited lodged a caveat against the trustees’ title in mid 2008, before it went into liquidation. After it went into liquidation the liquidators entered into discussions with Mr Rokos over an arrangement to try to allow Mr Rokos to complete the subdivision. That deed was never completed. Mr Rokos contends that before he signed it he found out that the caveat had been lodged in the name of BRNO Developments Limited. He contended that it should have been in his name. He lodged a second caveat, in his own name, in December
2009. It was only at that time that the trustees became aware both of the agreement
that Ms Voerman had purported to sign on their behalf, and of the caveat previously lodged by BRNO Developments Limited. (Although it is not clear what happened with notice of the earlier caveat, it appears possible that it was sent to a solicitor then acting both for Ms Voerman and for the owners of the other two properties).
[5] The trustees took the view that the agreement was not binding on them, and took steps to have the caveats lapse. Mr Rokos applied for orders that his caveat over 8 Dakota Avenue and similar caveats over the adjoining properties not lapse. Those applications came before this court on 4 August 2010, and were dismissed in a reserved decision given on 6 August 2010. Costs were awarded to the trustees, against Mr Rokos, on a scale 2B basis.
[6] The trustees sealed their order for costs on 24 September 2010 in the sum of
$5,452. They issued a bankruptcy notice seeking payment in mid October 2010. That notice was served on Mr Rokos on 20 October 2010. He took no steps to have it set aside.
[7] Following expiry of the bankruptcy notice, the trustees issued the present application on 22 November 2010. It was given a first hearing date of 3 February
2011. Mr Rokos did not take any steps ahead of that hearing, but appeared in person at the hearing. By that time he had lodged a complaint with the New Zealand Law Society against the trustee Mr Murray (who is a solicitor and was acting as a professional trustee) in which he made similar allegations of fabricated evidence.
[8] The court’s minute of the February 2011 hearing records that at that point the parties were considering an interim arrangement under which the amount of the judgment for costs, and costs in respect of this application, would be paid to a stakeholder pending resolution of Mr Rokos’ complaint. It was anticipated, at that stage, that the application would probably be withdrawn under that arrangement. The application was adjourned to 10 March 2011.
[9] Mr Rokos did not lodge funds as was contemplated on 3 February 2011. Instead on 9 March 2011 he filed notice of his intention to oppose the making of the adjudication order. He states in his notice that he wished to dispute the act of
bankruptcy relied on by the trustees, on the grounds that the trustees had included false and fabricated documents in the affidavits earlier sworn in this court, ―to influence the High court [sic] to their favour to get financial gain‖. The trustees took issue with this late change of position in the proceeding. The court gave directions for both matters to be listed for defended hearing today.
[10] Mr Rokos has not appeared at the hearing today. The court started late, anticipating that Mr Rokos would appear but was running late. The application, once called, was then stood down whilst attempts were made to contact Mr Rokos. He could not be contacted.
Legal principles
[11] The Court’s powers in relation to an application for adjudication are to be
found in ss 13, 36 and 37 of the Insolvency Act 2006:
13 When creditor may apply for debtor's adjudication
A creditor may apply for a debtor to be adjudicated bankrupt if—
(a) the debtor owes the creditor $1,000 or more or, if 2 or more creditors join in the application, the debtor owes a total of $1,000 or more to those creditors between them; and
(b) the debtor has committed an act of bankruptcy within the period of 3 months before the filing of the application; and
(c) the debt is a certain amount; and
(d) the debt is payable either immediately or at a date in the future that is certain.
36 Court may adjudicate debtor bankrupt
The Court may, at its discretion, adjudicate the debtor bankrupt if the creditor has established the requirements set out in section 13.
37 Court may refuse adjudication
The Court may, at its discretion, refuse to adjudicate the debtor bankrupt if—
(a) the applicant creditor has not established the requirements set out in section 13; or
(b) the debtor is able to pay his or her debts; or
(c) it is just and equitable that the Court does not make an order of adjudication; or
(d) for any other reason an order of adjudication should not be made.
[12] The principles on which the Court approaches the exercise of its discretion on an application for adjudication are settled. They have been summarised succinctly in the following passage from the decision of the Court of Appeal in Baker v Westpac Banking Corporation (CA212/92, 13 July 1993) at 4 which refers to the comparable sections in the Insolvency Act 1967:
… The principles governing the exercise of the discretion under s26 to grant or refuse an order of adjudication in bankruptcy are well settled and have been discussed by this court in recent years in Ellis v NZI Finance Limited (CA253/89 judgment 24 July 1989) and McHardy v Wilkins & Davies Marinas Limited (in receivership) (CA54/93 judgment 7 April 1993). It is proper for the court to consider not only the interests of those directly concerned – the petitioner, other creditors, the debtor – but also the wider public interest. A creditor who established the jurisdictional facts set out in s23 is not automatically entitled to an order. On the other hand, it is for an opposing debtor to show why an order should not be made. The court will give proper weight to the commercial judgment of the petitioner but the oppressive use of the bankruptcy process may be a ground for refusing an order. Another ground may be the undoubted absence of assets but that will not necessarily preclude an order given the range of interests involved including the public interest in the continuing oversight of a bankrupt’s affairs and the disqualifications that go with bankruptcy. In the end the court must balance the various considerations relevant to the case and determine whether the debtor has succeeded in showing that an order ought not to be made. …
Consideration of application and grounds for opposition
[13] There is no disputing the fact that the trustees have established grounds for an order for adjudication today. They hold a judgment which has been the basis of a bankruptcy notice validly served on Mr Rokos, which Mr Rokos has not satisfied.
[14] The issues therefore before the court are:
(a) Whether to grant Mr Rokos leave to file his opposition out of time;
(b)If leave is given, how to exercise its discretion on the substantive application.
[15] In the ordinary course, the court will give favourable consideration to extending time for filing opposition where there is a reasonable explanation for delay and it is apparent that there is some basis for opposition.
[16] In this case there does not appear to be any reason for delay other than the fact that Mr Rokos had made his complaint to the Law Society against the trustee Mr Murray, and was hoping that that would determine the matter in his favour. More significantly, however, it appears from the minute of the hearing on 3 February 2011 that he was in a position to meet the debt (by placing money into a stakeholder’s account) yet failed to do so. There does appear to have been a change of position on Mr Rokos’ part. Nevertheless had he attended court today I would have been prepared to have granted leave as the trustees were present and were in a position to argue the matter. As he has failed to do so (that is, attend today) I see no reason to grant him the benefit of an order for leave.
[17] I also accept the submission of counsel for the trustees (which is supported by a further affidavit of Mr Murray) that Mr Rokos may well have elected to abandon this matter because the Lawyers Complaint Service of the New Zealand Law Society on 6 May 2011 issued its decision dismissing Mr Rokos’ complaint.
[18] This brings me to the second issue for the court, which I technically do not now need to deal with, namely whether this was an appropriate case to exercise the court’s discretion not to adjudicate Mr Rokos bankrupt. The grounds that Mr Rokos has advanced in his affidavit are that the judgment which the trustees obtained in the caveat application was obtained on the basis of ―false and fabricated documents‖. There is also a suggestion that Mr Rokos has a counterclaim for substantial financial losses.
[19] Turning first to the issue of fabricated documents, there is nothing in the evidence before the court, or referred to in the judgment, to suggest firstly that this issue (falsity of documents) was raised before Cooper J or, secondly, has any substance to cause the court to reject the sworn evidence of the trustees that they had no knowledge of the agreement entered into by Ms Voerman before the end of 2009.
[20] Mr Rokos has made much of the fact that the trustee Ms Fleming is a sister of Ms Voerman, and could have been expected to have seen work in progress on the back half of the section, sufficient to have put her on notice. That contention is not answered directly by Ms Fleming, but there could be any number of reasons for that (there is no evidence to show that it was obvious that the work that had been done was necessarily on the back of the trustees’ property, or the nature of the work at any relevant time, let alone that Ms Fleming in fact went round to the property).
[21] More significantly, however, it is apparent that Mr Rokos was aware of the documents some considerable time ago, and he was legally represented on the caveat application. If there was any merit to those points, one would have expected that to have been raised with his counsel, and raised as an issue in the caveat proceeding. I see nothing before the court to form the view that it would be inequitable to allow the trustees to pursue their present application, or to suggest that there is any possibility that the costs order was obtained on a faulty and false basis.
[22] I also take into account that Mr Rokos took no steps to apply to set aside the bankruptcy notice even if he felt that he had some grievance in respect of the underlying cost judgment (which I also note was not appealed).
[23] Turning then to the potential for a counterclaim. Mr Rokos contends that he has incurred substantial financial losses.
[24] I find no merit in the alleged counterclaim. In the caveat application, Cooper J held that all rights in relation to the trustees’ property lay with BRNO Development Limited (in liquidation) rather than with the judgment debtor personally. It is also significant that since the caveat applications were determined, the trustees have entered into an agreement with BRNO Developments Limited (in liquidation) and the purchase price for that agreement takes into account all payments made to Ms Voerman, as part of the earlier intended purchase ahead of the earlier development. In the circumstances I cannot see that there is any merit at all to the counterclaim.
[25] Taking all of these matters into account, I dismiss the application for leave.
[26] I also accept that the trustees are entitled to an order for adjudication, and that
it is appropriate to exercise court’s discretion.
[27] I make an order adjudicating the judgment debtor Patrik Rokos bankrupt. This order is made at 11:37am.
[28] I also order that the judgment debtor pay costs to the judgment creditors on a scale 2B basis, being the sum of $3,384, together with disbursements for filing and
service fees of $207 and $408.89 respectively.
Associate Judge Abbott
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