Fuller v Westpac NZ Limited HC Hamilton CIV-2011-419-543
[2011] NZHC 903
•11 August 2011
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV-2011-419-543
IN THE MATTER OF the Insolvency Act 2006
BETWEEN SHEENA JOY FULLER Judgment Debtor
ANDWESTPAC NZ LIMITED Judgment Creditor
CIV-2011-419-544
AND IN THE MATTER OF the Insolvency Act 2006
BETWEEN THOMAS SHERWOOD FULLER Judgment Debtor
ANDWESTPAC NZ LIMITED Judgment Creditor
Hearing: 11 August 2011
Appearances: Judgment Debtors in Person
S Rawcliffe for Judgment Creditor
Judgment: 11 August 2011 at 11:00 AM
(ORAL) JUDGMENT OF ASSOCIATE JUDGE FAIRE
Solicitors: Turner Hopkins, PO Box 33-237, Auckland 0622
And To: T & S Fuller, PO Box 845, Cambridge 3450
FULLER V WESTPAC NZ LIMITED HC HAM CIV-2011-419-543 11 August 2011
[1] Bankruptcy notices dated 27 April 2011 were served on the judgment debtors.
[2] On 18 May 2011 the judgment debtors made application to the High Court in documents entitled ―Application to Set Aside Bankruptcy Notice‖.
[3] A debtor has several options when served with a valid bankruptcy notice. They are set out in Schedule 1, Form B2 of the High Court Rules 2008. A debtor can, within the time limit specified, pay the amount due before the time stipulated in the bankruptcy notice or enter into a new formal agreement with the creditor or obtain the High Court’s approval of terms of payment or satisfy the High Court that he has a cross-claim equalling or exceeding the amount of the judgment debt which could not have been used as a defence in the proceeding in which the judgment or order was obtained. These options are set out in s 17 of the Insolvency Act 2006 and Schedule 1, Form B2 of the High Court Rules 2008. For completeness sake, I record that I am not dealing with cases involving irregularity or cases which might involve the exercise of the Court’s inherent jurisdiction. In those cases, further considerations apply.
[4] These applications rely on paragraph 1(b) of the bankruptcy notice which provides:
1. Within (10 working days) after service of this notice on you
(excluding the day of the service) –
…
(b) You must secure or enter into a new formal agreement with the judgment creditor or, alternatively, obtain the High Court’s approval of terms of payment;
…
[5] These applications seek specifically the High Court’s approval of terms of
payment.
[6] The bankruptcy notice seeks payment of $67,687.87 and is recorded in the bankruptcy notice as:
… the amount the judgment creditor claims is due (or remains unpaid) on the final judgment or final order, including subsequent costs of obtaining certificate of judgment of $30.67 on which execution has not been stayed, that the judgment creditor obtained against you in the Hamilton District Court on 16 December 2010.
[7] The terms of payment for which approval is sought, are set out in Mr Fuller’s
application as follows:
… that 78 fortnightly payments of $100 (one hundred dollars) be deducted from his wife Sheena Joy Fuller’s full time salary in full and final settlement of the judgment creditor. Should Thomas Sherwood Fuller secure full time salaried employment then he shall apply for the sum of $100 to be deducted in 78 fortnightly payments from his salary on the same terms and conditions as his wife Sheena Joy Fuller.
[8] The terms of payment for which approval is sought are set out in Mrs Fuller’s
application as follows:
… that 78 fortnightly payments of $100 (one hundred dollars) be deducted by her employer from her full salary in full and final settlement of the judgment creditor.
[9] The grounds specified in the application by Mr Fuller for the orders sought are:
(a) He has no means to settle the debt;
(b)If he is bankrupted he will lose his right to work as an independent contractor as he is contracted in a position of trust. He will have no means of financial support and will have to seek emergency assistance from WINZ or Anglican Action; and
(c) At the age of 63, if he was declared bankrupt, it would be impossible to obtain full time employment in industries he is trained in. Those industries are real estate sales, property valuation, casual teaching or contract catering.
[10] The grounds specified in the application by Mrs Fuller for the orders sought are:
(a) She has no means to settle this debt other than by deduction of an affordable sum from her full time salary;
(b)If she is adjudicated bankrupt, she will lose her job as she is employed in a position of trust. She will have no means of financial support and will have to seek emergency assistance from WINZ or Anglican Action; and
(c) She is 54 years of age and will find it impossible to obtain full time employment as she is not trained in any other industry.
[11] The judgment debtors produce correspondence with the judgment creditor all of which is marked ―without prejudice‖. The judgment creditor does not consent or agree to the correspondence being produced to Court. Having regard therefore to the combined operations of ss 53 and 57 of the Evidence Act 2006, I disregard the content of those letters. They are marked ―without prejudice‖. They appear to be intended to be confidential and made with an attempt to settle the case.
[12] In his affidavit in support, Mr Fuller sets out his position. He advises that he is qualified and registered as a graduate teacher. His attempts to get employment have been virtually unsuccessful in the teaching industry. All he was offered was one day’s teaching at Rotoorangi School in December 2010. He says that he can register as a valuer. He also holds a manager’s certificate under the Sale of Liquor Act. He says that since May 2008, the only work that he has been able to perform is that of an independent contractor doing contract hospitality catering and contract commercial cleaning. He is concerned that if he is declared a bankrupt, which of course will not occur on this application, he would lose the opportunity to undertake any employment in industries of trust. He says he owns no assets other than basic household items. Somewhat surprisingly, he goes on to say that he is representing himself because he does not qualify for legal aid, although he does not say why he does not qualify for legal aid.
[13] In her affidavit in support, Mrs Fuller sets out her position. She has been employed full time in the healthcare industry since she was 17 years old and has
never been unemployed. Her employment is in an industry of trust. She has no assets other than basic household items. She would have to seek emergency assistance from WINZ or Anglican Action if she were deprived of her income. She is unable to get assistance from friends or extended family. Once again, somewhat surprisingly she says that she is representing herself because she does not qualify for legal aid although she does not say why she does not qualify for legal aid.
[14] The respondent bank opposes the application, although it cites no particular matter pertaining to the issue of whether the Court should approve terms of payment.
[15] Both debtors in this case have attempted, through the back door, to secure something akin to the approval of a Part 5 proposal with the consequence that follow and which are provided for in s 334 of the Insolvency Act 2006. If a proposal is successful and is then approved by the Court, it is then binding on all creditors whose debts are provable under Part 5 of the Insolvency Act 2006.
[16] I do not consider approval of the payment plan advanced is appropriate. It provides for a total payment of $7,800 involving 78 fortnightly payments of $100. That is proposed in respect of a judgment debt of $67,687.87. It might be increased if Mr Fuller is able to obtain employment.
[17] I do not consider that this is an appropriate case for the exercise of the Court’s inherent jurisdiction to set aside the bankruptcy notice. The Court has such jurisdiction: re Wise 21/6/95, Master Kennedy-Grant B227/95; B228/95. There is no question of an abuse of process involved in this case.
[18] It must be remembered that this application is made in respect of a bankruptcy notice. If an application for an order of adjudication is made, different considerations apply. In that situation, the Court is first required to be satisfied that the jurisdictional requirements for the making of an order of adjudication, as set out
in s 13, are met.1
[19] Next, the Court must consider s 37.
[20] Section 37 provides:
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.
[21] At the appropriate time, this case may well require a consideration of whether it is just and equitable that the Court make an order of adjudication.
[22] In Eide v Colonial Mutual Life Assurance Society2 I summarise the general principles involved in the exercise of the discretion under the then s 26 of the Insolvency Act 1967 which is the equivalent to s 37 of the Insolvency Act 2006. I noted that important matters were the following:
1)―A creditor who establishes the jurisdictional facts set out in s 23 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.‖ McHardy v Wilkins & Davies Marinas Ltd & Ors (CA 54/93, p 3, 7
April 1993, Hardie Boys J)
2)―In the exercise of the discretion under s 26 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.‖ McHardy v Wilkins & Davies Marinas Ltd & Ors (supra) p 3
3)In determining whether an order should be made, the wider public interest must be taken into account to determine whether adjudication is ―conducive or detrimental to commercial morality and the interests of the general public.‖ Re Nisbett, ex parte Vala (1934) GLR 553, 556.
4)―On a bankruptcy petition the court must have regard to public interest in a way which transcends the interest of the immediate parties to the proceeding. ...The public interest in exposing and controlling an insolvent debtor is one which exists quite independently of the separate question of debt-collection by his immediate creditors.‖ Re Fidow [1989] 2 NZLR 431 at 444
5) Absence of assets is a factor but
―even the undoubted absence of assets will not necessarily preclude an order, for the circumstances may be such that the debtor ought in the public interest to be visited with the disqualification’s that go with bankruptcy.‖ McHardy v Wilkins
& Davies Marinas Ltd & Ors (supra), p 3
6. Another matter
―is the potential for further investigation. A bankruptcy makes available to creditors an array of procedures for investigating the financial circumstances of the debtor. Those procedures are likely to prove more effective than an investigation conducted by other means.‖ Re Fidow (supra) 444
7. There is a need
―for the Court to balance the various considerations relevant to the case, and to determine whether in the end the debtor has succeeded in showing that an order ought not to be made‖. McHardy v Wilkins & Davies Marinas Ltd & Ors (supra) page 4.
[23] That judgment was upheld by the Court of Appeal.3
[24] It must be observed however that a refusal to adjudicate does not discharge the judgment debt. Under the insolvency legislation, that can only be done in the bankruptcy context through the application of Part 5 and proposals or as a result of adjudication. The debtors’ objective, therefore, cannot be met in the application they are making before me. That is a full and final settlement of the debt.
[25] Accordingly, I decline the applications to set aside the bankruptcy notices.
[26] I encourage the parties, however, before any application for an adjudication order is filed, to attempt to find a solution. Clearly, a meeting of the parties and a full disclosure of all assets and liabilities and the reasons why a legal aid application would not be successful, should be undertaken.
[27] The creditor is entitled to costs. The debtors shall pay costs based on 1A and disbursements as fixed by the Registrar.
JA Faire
Associate Judge
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