Foundation Securities (NZ) Limited v Case HC Auckland CIV 2007-404-006964

[2008] NZHC 2554

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2007-404-006964

IN THE MATTER OF     the Insolvency Act 1967

BETWEEN  FOUNDATION SECURITIES (NZ) LIMITED

Plaintiff

ANDROBYN MARIE CASE Defendant

Hearing:         1 September 2008

Appearances: S McAnally for Petitioner

Debtor in Person
K Wendt for the Commissioner of Inland Revenue

Judgment:      1 September 2008

ORAL JUDGMENT OF ASSOCIATE JUDGE ROBINSON

Solicitors:           Keegan Alexander, PO Box 999, Auckland

FOUNDATION SECURITIES (NZ) LIMITED V ROBYN MARIE CASE HC AK CIV 2007-404-006964  1

September 2008

[1]      Mr Tane Räkau claims to be entitled to represent Robyn Marie Case the above named debtor. He does so on the basis that he claims Miss Case has assigned all her assets and also her identity to the Ngai Tupanga Hapu Incorporated. Mr Räkau claims to be authorised by the Ngai Tupanga Hapu Incorporated to act on its behalf.

[2]      There is clear and binding authority on me to the effect that only litigants in person or barristers and solicitors of the High Court have what is commonly known as a right of audience in this Court. On occasions, the Court does allow a person to have the assistance of what has become known as a McKenzie friend. However, when providing that assistance, it is made clear to the McKenzie friend that the McKenzie friend has no right of audience and in particular cannot address the Court. The person who addresses the Court in those circumstances is the person who is acting on his or her own behalf. No such request for a McKenzie friend has been made by Miss Case.

[3]      Consequently, I required Mr Räkau to supply some authority to establish his right to address the Court. He has referred me to s 64 of the Law Practitioner’s Act

1982. However, that section cannot apply. Firstly the Law Practitioner’s Act 1982 has  been  repealed.  Secondly the  provision  he  refers  to  is  that  provision  which provides that it is not an offence under the section concerned for a person to carry on business as a Mäori agent. Section 64 created an offence for a person to hold himself or herself out as a solicitor or as being qualified to act as a solicitor. Quite clearly, that section even if it was in force could not empower Mr Räkau to represent the interests of Miss Case in these proceedings.

[4]      In the course of submissions to me, Mr Räkau has referred to the jurisdiction of this Court. In particular, he has referred to a claim that the Court lacks jurisdiction arising out of the Treaty of Waitangi and Mr Räkau and Miss Case claim that this Court lacks jurisdiction and that the proceedings should be dealt with in an authority created by the local tribes. However, there is clear authority binding on this Court establishing the Court’s jurisdiction to entertain these proceedings. In particular, it

has been held that this Court cannot go behind what has been enacted by Parliament and that all citizens of this country both Mäori and Päkehä are bound by Acts of Parliament as is indeed this Court. In McQueen v Mitchell CA 68-04, 23 August

2004, the Court rejected a defendant’s argument that he had a right to be tried under

Te Kainga law. In coming to that conclusion, the Court of Appeal stated:

This Court has made it plain on a number of occasions now that arguments that are based upon an assertion that the Parliament of New Zealand was not authorised to make law effecting some or all of the persons living in New Zealand  cannot  succeed  before  it.  Our  Courts  are  bound  to  accept  the validity of Acts of Parliament. Although this issue does involve a point of law,  Mr  Mitchell’s  proposition  has  been  squarely  rejected  on  many occasions in the High Court and Court of Appeal.

[5]      Based on that authority, I am satisfied that this Court does have jurisdiction. I am also satisfied that Mr Räkau has no right to appear and represent the interests of Miss Case. Consequently, I reject his application to represent her interests in these proceedings. In rejecting the application, I do note that he has submitted to the petitioner a proposal to settle payment of the outstanding account by some sort of bond. The fact that I have said that he has no right to represent the debtor Miss Case in these proceedings of course doesn’t stop him from being able to assist her if necessary with regard to her representing herself and in particular with the new proposal that she has with regard to payment.

[6]     He indicated that the debtor would be seeking an adjournment. These proceedings have been pending since the beginning of this year. There has been ample time for the debtor to enter into a satisfactory arrangement to clear the debt. I consider it would be improper for the Court to exercise its discretion and yet again adjourn these proceedings having regard to the delays that have been encountered. It is important that this matter proceeds with due diligence. There has been far too much delay. From the debtor’s point of view it is not fair to her to allow the matter to be adjourned further. Either the debtor is adjudicated bankrupt or else the petition is dismissed. These proceedings for obvious reasons should not be allowed to continue and must be resolved today.

[7]      The petitioner Foundation Securities (NZ) Limited brings these proceedings for the adjudication of the debtor as a bankrupt. The petitioner claims that the debtor

owes the petitioner $26,768.39 with interest at 7.5% per annum from 18 October

2007 being the amount payable under a final order obtained by the petitioner against the debtor in this Court on 18 October 2007 and in addition seeks costs of $535 in respect of the service of a bankruptcy notice.

[8]      The petition is based on an available act of bankruptcy in that the debtor failed to comply within fourteen days of the requirements of a bankruptcy notice issued by this Court and served on her on 15 December 2007. The debtor applied to set aside the bankruptcy notice. She claimed that bankruptcy notice to be a nullity because there had been inappropriate service. Her application with regard to the bankruptcy notice was dealt with by Associate Judge Doogue on 5 March 2008. He concluded that the bankruptcy notice had been properly served. He also concluded that the application by the debtor to set aside the bankruptcy notice was out of time.

[9]      It  is  acknowledged  by  the  debtor  that  the  amount  claimed  under  the bankruptcy notice has still not been paid. Following the issue and service of these proceedings, the Inland Revenue Department has joined the proceedings. According to counsel for the Inland Revenue Department, the amount owing by the debtor to the Inland Revenue Department is $294,000. The proceedings have been adjourned from time to time because the debtor claimed that there could be arrangements for payment of the debt. Those arrangements have not resulted in any payment.

[10]     The debtor is not represented by counsel. She claims to have assigned all her assets and her identity to Ngai Tupango Hapu Incorporated. Mr Räkau attempted to represent the interests of the debtor by claiming to act on behalf of the hapu. For reasons I gave earlier, I concluded that Mr Räkau had no right to represent the debtor or the hapu. Be that as it may, he has from time to time attempted to persuade this Court to hear him and in the course of doing that he has attempted to persuade the Court to adjourn the proceedings. At first he sought an adjournment because of a bond whereby the hapu would agree to pay the outstanding sum. That bond as I understand it is not acceptable by the petitioner. In any event, even if the bond was accepted and payment made the  Inland Revenue Department is a creditor for  a significantly greater sum and any payment is likely to have to be set aside because the Inland Revenue Department’s application to proceed is likely to result in an

adjudication which, will result in the payment being made pursuant to the bond being set aside. (see ss 42 and 47 Insolvency Act 1967)

[11]     The   petitioner   has   presented   detailed   submissions   in   support   of   the application for the adjudication of the debtor. In those submissions, the petitioner deals with a number of grounds of opposition which have been advanced by the debtor. The first  ground  of opposition  attacks  the  judgment  of  Associate  Judge Doogue. Obviously, I cannot at this hearing overturn that decision. There are rights of appeal and there is no evidence that those rights have been exercised.

[12]     There was suggestions by the debtor that the decision requiring her to pay the amount to the petitioner which, forms the basis of this petition, was subject to an appeal. That quite clearly is not correct. That is a matter I have dealt with in an earlier decision.

[13]     The final two basis’ of objection, relate firstly to a claim by the debtor that she can in fact pay her debts and that she is not insolvent and, secondly that the petitioner  has  adequate  security  for  the  debt;  the  petitioner  having  registered charging orders against certain properties which are vested in the name of the debtor.

[14]     Dealing with the first objection namely, a claim by the debtor to be in a position to pay all her debts; namely that she is solvent. The fact that she has not paid this debt and still owes a significant sum of money to the Inland Revenue Department brings that claim into question. Furthermore, there was evidence at the commencement of this hearing that the debtor has assigned all her assets to the Ngai Tupango hapu. If that is the case then she has no assets and no funds from which she can pay these outstanding debts.

[15]     Whilst the debtor has supplied some information relating to her assets and liabilities, she has not provided any evidence to show that she has liquid funds from which she can pay the amounts owing to the petitioner and the Inland Revenue Department. As pointed out by the petitioning creditor, the test to be applied has been referred to in the case of Holgate v Blocassa Limited & anor (CA 131/06 17

April 2007) the Court stated at paragraph 19

Section 26 of the Insolvency Act provides that a Court may dismiss a bankruptcy petition if it is satisfied that the debtor is able to pay his or her debts. This means that the debtor must be able to pay his or her debts as they are incurred either immediately or within a reasonable time. If unable to do this, the debtor may be declared bankrupt even though he or she has more assets by value than liabilities. Put another way, a debtor will not necessarily avoid bankruptcy by showing a positive balance sheet. It is the capacity to pay either immediately or within a reasonable time that is critical.

[16]     In the present case, the evidence is that for nine months, the debtor has been aware of the petitioner’s claim for something in the vicinity of $30,000 in respect of monies due under a judgment from this Court and that sum has not been paid. Furthermore, there is evidence that the debtor owes significant sums of money to the Inland Revenue Department. In those circumstances, I have no hesitation in concluding that the test set forth in Holgate v Blocassa Limited which would justify the Court in dismissing the petition has not been met. In other words, the debtor has not been able to satisfy me that she is able to pay her debts as they are incurred either immediately or within a reasonable time.

[17]     The second issue relates to the fact that the petitioning creditor is a secured creditor. This relates to the charging orders that have been registered by the petitioning creditor against a number of the debtor’s properties. Pursuant to s 25

Insolvency Act 1967, if the petitioning creditor is a secured creditor, the Court is not to make an order of adjudication unless a creditor satisfies the Court that the amount of debt exceeds the value of the security by at least $200. In the present case, the petitioner can satisfy me that its debt does exceed the value of the security by the sum of $200.

[18]     In respect of the number of properties and, I won’t go through them in detail, I am satisfied that in actual fact, the debtor is not the beneficial owner but holds the property as a trustee. When one of the properties was sold the debtor established that the properties was held by her as a trustee and the petitioning creditor received nothing as a result. In respect of another property the evidence establishes that the debtor, before the registration of the charging order, sold the property to herself and another. A caveat was registered. Consequently, the debtor is not the beneficial owner of the property at the time when the charging order was registered and the

value of the petitioning creditor’s interest in that property under the charging order is absolutely nothing.

[19]     Whilst there may be some equity in the final property, the problem faced by the debtor, is that the creditor in this case if it withdraws, will create a situation where the Inland Revenue Department would elect to proceed with the petition under s26(a) Insolvency Act 1967. In that situation, the security held by the creditor is of no value. That arises by virtue of s 50 of the Insolvency Act 1967. The relevant parts of that section provide:

Where a creditor has issued execution against the goods or lands of a debtor or has attached any debt to him, he shall be entitled to retain the benefit of the execution or attachment including any proceeds thereof if he has completed the execution or attachment before the debtor is adjudicated bankrupt and before notice of the filing of any bankruptcy petition against the debtor or of the commission of any available act of bankruptcy by the debtor but otherwise shall not be entitled to retain the benefit thereof.

[20]     Pursuant to s 50(2) for the purpose of ss (1) an execution against land is completed by sale. In the present case there has been no execution by the petitioning creditor of the interest of the debtor in the land concerned. Consequently, if the petitioning creditor is dismissed the Inland Revenue Department would proceed. There will therefore be an order of adjudication before there is an execution by the petitioning creditor of an exercise of its power of sale under the charging order and obviously, the charging order will be of no effect in providing security to the petitioning creditor for its debt.

[21]     These circumstances are similar to the situation in Re Cole (HC Auckland B

1738/92 2 December 1992 Williams J) where the Court decided that a creditor who had the benefit of a charging order was not a secured creditor for the purpose of considering a proposal under paragraph 15 Insolvency Act 1967 because there was no prospect of the creditor receiving any benefit of any execution of its security.

[22]     For  those  reasons  therefore  I  conclude  that  the  value  of  the  petitioning creditor’s security after taking into account the debts owing by the debtor, is not more than $200. I am therefore satisfied that the petitioning creditor is entitled to proceed. I am satisfied that the amount claimed has not been paid and the petitioning

creditor is entitled to an order adjudicating the debtor a bankrupt. I record that the order is therefore made at 12.55 p.m.

Costs

[23]     The petitioning creditor sought costs on an indemnity basis. I accept that the proceedings have been somewhat complex. However, that is not entirely the fault of the debtor. A significant part of the case the petitioning creditor had to meet resulted from the petitioning creditor having registered a charging order. I am not questioning the right of the petitioning creditor to do that but it would be wrong to increase the costs provable in the bankruptcy of the debtor because of that complicating factor. There have been a number of arguments advanced by the debtor relating to the jurisdiction of this Court. However, those arguments I am satisfied would not have caused too much extra work on the part of the creditor. The arguments had very little merit. The lack of merit was patently obvious. I had at the outset made it clear that such arguments relating to jurisdiction would not succeed. Another factor I take into account, is that any order for costs will not be met by the debtor but will be met by the creditors. In those circumstances I don’t feel that I consider it just for other creditors to be penalised by any conduct on the part of the debtor.

[24]     There will therefore be costs on a 2B basis. Those costs include costs for half a day hearing today and also costs assessed on the time taken to prepare for the hearing today and for earlier hearings. The petitioning creditor is therefore entitled to costs on a 2B basis with disbursements as fixed by the registrar and counsel for the

Inland Revenue Department is entitled to costs.

Associate Judge Robinson