Gifkins, ex parte Blackbird Finance Limited HC Auckland CIV-2011-404-2234

[2011] NZHC 811

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-2234

UNDER  the Insolvency Act 2006

BETWEEN  BRETT KENNETH GIFKINS, A Debtor

ANDEX PARTE BLACKBIRD FINANCE LIMITED

A Creditor

Hearing:         14 July 2011

Appearances: Mr Gifkins in person

Ms Lethbridge for judgment creditor

Judgment:      14 July 2011

ORAL JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

Solicitors:

Grove Darlow, Auckland – Attn: Ms Lethbridge –  [email protected]

Mr Gifkins, 865 Waikaretu Valley Road, R D 5, Tuakau, 2695

GIFKINS, V EX PARTE BLACKBIRD FINANCE LIMITED HC AK CIV-2011-404-2234 14 July 2011

[1]      This is a defended application for an order adjudicating Mr Gifkins bankrupt under the Insolvency Act 2006.  Mr Gifkins has represented himself (and has put his case  forcefully  to  me)  at  the  hearing  today.    He  opposes  the  making  of  an adjudication order.  I was able to deal with the matter at first call today because the state of the list was such that time was available.

[2]      There is no dispute about the debt in this case, in the sense that the judgment which it is based upon has not been impeached by means of appeal, review or other proceedings taken in a superior Court to the Court where the judgment was entered. The judgment certificate given by the Registrar of the District Court shows that, including costs, a little over $60,000 was the amount owing.  The creditor served a bankruptcy notice on Mr Gifkins on 20 April this year.  Adjudication proceedings were filed in this Court on 1 June 2011.

[3]      Mr Gifkins states in his notice of opposition that the grounds upon which he opposed the making of the adjudication order were „miscarriage of justice”.   Ms Lethbridge for the creditor, though, has accepted that essentially the grounds that are being invoked are those in s 37 of the Act that it is “just and equitable that the Court does not make an order of adjudication”: 37(c).

[4]      Mr Gifkins puts forward a number of reasons why he finds himself in the predicament he is in today.  Before I describe those I will say something brief about his background.   He is apparently a builder by trade originally.   Mr Gifkins is currently working in a position where he fabricates agricultural machinery.  He is an employee in that role and does not own the business.  Mr Gifkins describes himself as an entrepreneur and inventor who has been inventing all his life.   He has commendable enthusiasm for his latest project which is some type of toy the details of which were not supplied to me.  Mr Gifkins spoke of it in the most glowing terms and said that it was one of the most “dynamic”  toys of this generation; that it had the potential to off-set problems with sedentary children by getting them outside as a result  of  owning  the  toy  and  which  apparently  is  operated  outdoors.    He  says however that his attempts to manufacture and market the toy in mass volumes have been frustrated by various events.  He told me that the manufacturer let him down

and in fact breached its contract with him.  He also said the recession arrived at an untimely point in the development path of the toy.   Nonetheless he said the toy demonstrated great potential and that it was on the Toyworld top sellers list after only two weeks of sales.

[5]      Nonetheless the project has brought him close to financial ruin.  The family home has been the subject of a mortgagee sale apparently.  He says that the recession also caused detriment to him because the family property had to be sold at a lower price value than it was worth.   He says that he is not a criminal and has high standards and tells me that he has attempted to settle matters with the plaintiff.  He opposes being made bankrupt because he has no assets and there is no financial benefit to anyone in his bankruptcy.   He submitted that the people who have put money into his project will “sustain a substantially higher risk of losing their money” if he is bankrupted.   He says he does not deserve to be punished with all of the consequences of bankruptcy and finally he asks the Court to show a level of compassion and mercy to release him to rebuild his life and his business.

[6]      Ms Lethbridge was critical of certain aspects of Mr Gifkins case.  She noted that there had been quite a volume of evidence given from the bar in that it was unsworn.   Further, she submitted, statements contained in the affidavits including that the toy had been in the Toyworld bestseller list were uncorroborated.  I should note   that   Mr   Gifkins   disputed   this   last   point   saying   that   he   had   email communications  which  would  support  his  position  but  the fact  remains  that  no supporting documentary evidence has been put in evidence.

[7]      Ms  Lethbridge  was  particularly  critical  of  the  unabated  enthusiasm  Mr Gifkins has for returning to business.  Having failed once, Ms Lethbridge submitted in summary, he is going to run the same risk again if he is not bankrupted.   This aspect of the case was relied upon as demonstrating the necessity for making an order of adjudication, she said.

[8]      Ms Lethbridge submitted to me that the onus was on the debtor to convince the Court that there should not be an order made and that something more than “bald assertions” were required of the financial circumstances which the defendant said he

was in.  She referred to other authorities including in Re Taylor a decision of Justice

Thomas.[1]

[1] Re Taylor (1992) 4 NZBLC 102,875 (HC).

[9]      One  of  the  leading  cases  in  this  area  is  Baker  v  Westpac  Banking

Corporation[2] where in his Court of Appeal judgment Richardson J said:[3]

It is proper for the Court to consider not only the interests of those directly involved – the petitioner other creditors, the debtor – but also the wider public interest.  A creditor who establishes the jurisdictional facts as 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.  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 does not necessarily preclude an order given the range of interests involved including the public interest in the continuing oversight of the 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.

[2] Baker v Westpac Banking Corporation CA212/92, 13 July 1993.

[3] At 4.

[10]     It may be that if Mr Gifkins had had the assistance of legal advisors he may have produced evidence which was not as sparse in detail and as lacking corroboration.  But the end result is that I cannot say I am in a position where I am convinced that an adjudication and a resulting investigation would not turn up any assets.   From what Mr Gifkins tells me he has a highly prized commercialisable concept but the proof of the pudding is that he does not seem able to obtain funding from sources which recognise what a significant financial opportunity his intellectual property represents.  It is of some concern, as Ms Lethbridge has pointed out, that Mr Gifkins having come to the point of financial defeat with this business is not seeking to start some other, perhaps more modest, business which would provide an assured  income  stream  for  him,  but  intends  to  get  back  into  exactly  the  same industry.   While I admire his initiative and the boldness of his vision it will be obvious that the type of industry that he wants to go into developing a consumer product which of all consumer products will depend for its acceptability on the whims of fashion and the appetite of young consumers – all these matters represent

very substantial elements of risk.   I therefore conclude that not only is there no

sufficient proof of the futility of making an bankruptcy order but indeed I can see some good reasons why Mr Gifkins should not be allowed to get into a position again where creditors can suffer financial damage.

[11]     I accept that Mr Gifkins is not a criminal.  I accept that he is a man of good standards but what, in the circumstances of this case, the focus of my order must be on is the mitigation of risk to the commercial community.  For all those reasons I consider that an adjudication order ought to be made.  I will stay my decision for a period of 21 days in order to give Mr Gifkins a final opportunity to negotiate terms with the creditor, that is until the next bankruptcy list on 11 August 2011 at 10.45 a.m.  That should not be viewed as putting pressure on him to pay the debt. It simply leaves him with an additional option before the terms of the judgment, which I have pronounced today, take effect.

[12]     I note that a solicitor with instructions from the judgment creditor has signed the requisite certificate of unpaid debt.

[13]     Matters of costs can be left until the next time that this matter is before the

Court.

J.P. Doogue

Associate Judge