FM Custodians Limited v Serepisos HC Wellington CIV-2011-485-279
[2011] NZHC 1478
•23 May 2011
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2011-485-279
CIV-2011-485-280
IN THE MATTER OF the Insolvency Act 2006
AND IN THE MATTER OF the bankruptcy of ELEFTARIOUS SEREPISOS
BETWEEN FM CUSTODIANS LIMITED Judgment Creditor
Hearing: 23 May 2011
(Heard at Wellington)
Counsel: S. Caradus - Counsel for Judgment Creditor
J. Toebes - Counsel for Judgment Debtor (Granted leave to withdraw) Judgment: 23 May 2011
ORAL JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL
Solicitors: JT Law, Solicitors, PO Box 25443, Wellington
Rhodes & Co, Solicitors, PO Box 13444, Christchurch
Introduction
FM CUSTODIANS LIMITED v E SEREPISOS HC WN CIV-2011-485-279 23 May 2011
[1] Before the Court are two applications by the judgment debtor, Mr Serepisos:
(a) The first application on proceeding 279 is to set-aside a Bankruptcy Notice served upon the judgment debtor by the judgment creditor that Bankruptcy Notice being dated 16 February 2011. It claims
$2,914,923.45 which is the balance of the amount unpaid for which the judgment creditor on 15 December 2010 obtained a judgment in the High Court at Christchurch against the judgment debtor (as guarantor) and his company, New Millenium Design Limited as principal borrower.
(b) The second application on proceeding 280 is to set-aside a
Bankruptcy Notice issued against the judgment debtor on 16 February
2011. It claims the sum of $3,260,349.46 representing the balance due by both the judgment debtor (as guarantor) and his company Century City Developments Limited to the plaintiff represented by a judgment of the High Court at Christchurch also obtained on 15
December 2010.
[2] The two applications to set-aside the Bankruptcy Notices are opposed by the judgment creditor, FM Custodians Limited.
[3] Mr Toebes appeared as counsel for the judgment debtor, Mr Serepisos, in filing the present applications and in earlier calls of this matter before the Court up to the present time.
[4] Mr Toebes has, however, filed in this Court a Memorandum dated 20 May
2011. In that Memorandum he seeks leave to withdraw as counsel for the judgment debtor with respect to the two present applications. Before me today Mr Toebes indicated that he had no instructions to continue appearing for the judgment debtor in these matters. He has assured me, however, that he has had discussions with the judgment debtor and has advised the judgment debtor of his intention to seek leave to withdraw as counsel for Mr Serepisos today.
[5] Mr Toebes was at pains to indicate to me that he had made clear to Mr Serepisos that he would not be appearing on his behalf today and that the failure of any alternative counsel to appear on the present applications, both of which (significantly) have been brought by the judgment debtor, Mr Serepisos, would result in the likely consequence that each application would be dismissed.
[6] Mr Toebes advises that Mr Serepisos appears to have accepted that advice, and indicated that there would be no appearance on his behalf today.
[7] This is notwithstanding Mr Toebes’ indication to Mr Serepisos that in the absence of any appearance on his behalf the applications would clearly be dismissed with likely costs consequences following.
[8] Given all those matters, under the circumstances here I am satisfied that it is appropriate for leave to be given to Mr Toebes to withdraw as counsel.
[9] Leave is now granted to Mr Toebes to withdraw as counsel for the judgment debtor, Mr Serepisos, in these matters.
[10] That said, it is clear from Mr Toebes’ assurances to the Court that the judgment debtor, Mr Serepisos, does not intend or wish for the present applications to set aside the Bankruptcy Notices issued against him to proceed.
[11] Although there is no formal application before me to withdraw or discontinue these applications, that is effectively the position in which the Court finds itself today.
[12] Notwithstanding that, I turn briefly to address the broad arguments advanced for the judgment debtor in his present applications, which I note at the outset, on the basis of the material before the Court, have little chance of succeeding.
[13] In doing so, I note that the two separate judgments of the High Court at Christchurch against the judgment debtor upon which the Bankruptcy Notices are founded total something in excess of $6.8 million.
[14] Of this, I am told by counsel for the judgment creditor, that something over
$5 million remains outstanding at present and that interest on the guaranteed loans continues to accrue, I am told at a rate of 17.25% per annum.
[15] Part of the defence advanced by Mr Serepisos in his application to set-aside the Bankruptcy Notices is that the judgment creditor holds adequate security for the loans which he has guaranteed. Addressing that aspect, in uncontested submissions advanced before me by counsel for the judgment creditor, it seems evident that after the sale of the secured properties by the judgment creditor, there is likely to be an estimated shortfall owing by the judgment debtor of something in excess of $2.3 million.
[16] Notwithstanding this, the judgment debtor has clearly guaranteed the debts of his companies in question, companies of which I understand he is the sole director and effectively the sole beneficial shareholder.
[17] It is significant also that the judgment debtor has not appealed against any of the earlier High Court judgments upon which the Bankruptcy Notices are founded, nor in his application to set-aside the Bankruptcy Notices has he put forward any counter-claim, set-off or cross-demand.
[18] His essential argument, as I understand it, is that the Court should exercise its inherent jurisdiction to set-aside the Bankruptcy Notices as an abuse of the Court’s process.
[19] In my view, there is little of substance in this contention. Generally the Court requires “very special circumstances” before it would take such a step and here the Bankruptcy Notices are clearly justified on the basis of uncontested judgments of the High Court at Christchurch obtained last year.
[20] The two Bankruptcy Notices in question were dated in February 2011 and were served upon the judgment debtor on 22 February 2011. His application to set- aside the Bankruptcy Notices was filed on 8 March 2011.
[21] Those applications were consolidated and on 21 March 2011 were set down for hearing today, 23 May 2011.
[22] There are clearly no procedural defects which have been raised against the judgment creditor’s position here. In addition, I am satisfied there are no arguable grounds of defence open to the judgment debtor here. Similarly, I can see nothing of substance raised before the Court to suggest that an injustice might occur in this case in the event that the Bankruptcy Notices are allowed to remain.
[23] Before me, counsel for the judgment creditor noted a number of cases in which this Court has shown reluctance to intervene in setting-aside Bankruptcy Notices unless there were reasonable grounds for an attack on a judgment obtained against a judgment debtor or some separate claim had been filed. I simply note these decisions in passing - Re Wise, Wise & Anor v Benecke HC, Auckland, B227-228/95,
21 June 1995;, Re: Stansfield v Gould HC, Auckland, AKB 1378/01, 3 December
2002; Re: Holloway v Darby, HC, Hamilton, CIV-2005-419-1085, 8 December
2005; Re: Sadler ExP Insite Design HC, Auckland, CIV-2006-404-4528, 27 April
2007; Re: Saker ExP Blackler HC Wellington, CIV-2008-485-124, 26 May 2008;
Re: Halifax Finance Ltd v McFarlane HC, Wellington, CIV2007-485-1377, 12
November 2007, Re: Bennett ExP Preston HC, Palmerston North, CIV-2007-454-
856, 28 October 2008 and Re: Krukziener ExP Hanover Finance HC, Auckland, CIV-2007-404-2896, 12 August 2008.
[24] Finally, there appeared to be some suggestion in the Application to Set-Aside the Bankruptcy Notices that the judgment creditor had somehow breached its duties in terms of s 176 Property Law Act in relation to mortgagee sale processes with respect to the various secured properties.
[25] No evidence of any kind, however, was placed before me regarding this aspect. To the contrary, it does appear on the evidence which has been advanced by the judgment creditor, that there is a little in this contention.
[26] Certainly, it was not advanced further by the judgment debtor other than in his formal application to set-aside the Bankruptcy Notices.
[27] These matters in any event could be the subject of a damages claim at a later point if indeed they turn out to have some substance through subsequent events.
[28] In conclusion, I am satisfied that, as the judgment creditor has two undisputed judgments against the judgment debtor upon which outstanding debt totals something in excess of $5 million, the Bankruptcy Notices issued with respect to these debts, in my view, were properly issued and must remain.
[29] For all these reasons the application by the judgment debtor to set-aside the two Bankruptcy Notices is dismissed.
[30] As to costs, counsel for the judgment debtor has signalled that under the circumstances here, an application for increased costs is likely. On this he suggests that Memoranda might be filed for consideration.
[31] I agree this is a sensible course and therefore direct as follows:
(a) Counsel for the judgment creditor is to have 10 working days from today to file and serve any Memorandum he may wish on the issue of costs.
(b)The judgment debtor and or any instructed counsel on his behalf is to have a further 10 working days from that date to file and serve any Memorandum on costs in reply.
(c) Those Memoranda are then to be referred to me and, in the absence of either party indicating they wish to be heard on the matter, I will decide the question of costs based upon the material before the Court.
‘Associate Judge D.I. Gendall’
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