Grey District Council v Banks
[2017] NZHC 1110
•26 May 2017
IN THE HIGH COURT OF NEW ZEALAND GREYMOUTH REGISTRY
CIV-2016-418-000022 [2017] NZHC 1110
BETWEEN GREY DISTRICT COUNCIL
Judgment Creditor
AND
DOUGLAS BANKS Judgment Debtor
AND
CHRISTINE SANDRA BANKS Judgment Debtor
Hearing: 25 May 2017 (On the papers) Appearances
J Shackleton for Judgment Creditor
Judgment Debtors - in personJudgment:
26 May 2017
JUDGMENT OF DUNNINGHAM J
Introduction
[1] Douglas and Christine Banks were adjudicated bankrupt by Associate Judge Matthews. They then applied for a stay of adjudication until their appeal against the adjudication judgment had been heard. This was refused.
[2] Mr and Mrs Banks now seek a review of the refusal to stay. Despite being offered an oral hearing, they confirmed a hearing was not required and they were content for me to determine their application on the papers.
[3] For the reasons outlined below, this application for review is unsuccessful.
GREY DISTRICT COUNCIL v BANKS [2017] NZHC 1110 [26 May 2017]
History of the matter
[4] The Grey District Council has a judgment debt against both Mr and Mrs Banks. The Council issued bankruptcy notices against them, but neither notice was met. Consequently, the Council filed an application to have Mr and Mrs Banks adjudicated bankrupt. On 3 February 2017, Associate Judge Matthews granted the application.1 However, taking into account the efforts Mr and Mrs Banks were making to arrange for family members to buy their house and thus make available funds to meet their debt, the Associate Judge gave them until 17 February to make full payment of their entire debt to the Council.
If they could not, the bankruptcy orders made would take effect.
[5] On 17 February, Associate Judge Matthews dismissed an application from Mr and Mrs Banks to stay adjudication.2 The Associate Judge noted that Mr and Mrs Banks had both filed an appeal to the Court of Appeal against his
3 February decision. The Court of Appeal registry had not yet finally accepted it for filing, so the Associate Judge considered that this meant s 416 Insolvency Act 2006 did not apply.3 However, having satisfied himself that the Court of Appeal registry had received the appeal, he proceeded on the basis that there was an appeal in place and considered the Banks’ application in that light.
[6] In their application, Mr and Mrs Banks pointed out that they had paid the sum of $44,321.22. This covered the Council’s claim as contained within the bankruptcy notices, the application for adjudication, the summons to debtors attached to the notices and a memorandum filed by the Council. However, it did not cover their full debt to the Council, which included amounts owing under costs judgments. This was calculated by the Council to be $92,084.22 as at 7 February 2017 when it wrote to Mrs Banks.
[7] Associate Judge Matthews noted that Mr and Mrs Banks did not give any specific reason for seeking a stay of the adjudication. He therefore inferred that their
reason was that they believed the orders were unsound and should not take effect
1 Grey District Council v Banks HC Christchurch CIV-2016-418-000022, 3 February 2017.
2 Grey District Council v Banks [2017] NZHC 190.
3 Which allows the Court, in its discretion, to suspend the adjudication, on any terms it considers appropriate, until the appeal is decided.
until that point is determined by the Court of Appeal. He also inferred that that the reason they considered the adjudications to be unsound was because of the requirement that the adjudications would come into effect at 1.00 pm, 17 February unless they repaid to the Council their entire debt, rather than just the sum referred to in the bankruptcy notice.
[8] The Associate Judge noted that this issue was dealt with in argument before him on 3 February. At the hearing on that day, the Associate Judge had explained to Mr and Mrs Banks that, while the bankruptcy notice was based on just one of their debts to the Council, the Council was entitled to proceed with the bankruptcy until all indebtedness to the Council was paid. The Associate Judge considered that Mr and Mrs Banks understood the point, although they did not agree with it.
[9] Associate Judge Matthews considered that there was nothing in the stay application before him which set out any basis on which the Court might take a different view from that which it had already taken on 3 February. He noted that the adjudications would not preclude Mr and Mrs Banks’ appeals to the Court of
Appeal.4
[10] The Associate Judge then considered a number of factors relevant to the Court’s power to stay a judgment pending appeal.5 He refused to allow the stay because:
(a) he could not see any novel or important point of law that will be raised on the appeal;
(b)there were no consequences for Mr and Mrs Banks above those normally arising under the insolvency laws for those who do not pay
established debts; and
4 Lindsay v Vacluse Holdings Ltd CA272/99, 13 December 1999; Harrison v Harrison [2015] NZHC 1054.
5 Based on those outlined in Dymocks Franchise Systems (NSW) Pty Ltd v Bigolta Enterprises Ltd [1999] 13 PRNZ 48 and applied to the present situation by Kroon v Westpac Banking Corporation HC Auckland CIV-2006-404-4720, 15 May 2007 at [24].
(c) there was no issue regarding the validity of the underlying judgments which gave rise to the indebtedness.
Principles on review
[11] When Mr and Mrs Banks lodged their application to review Associate Judge Matthew’s decision, there was a right to review the judgment under s 26P Judicature Act 1908 and r 2.3 High Court Rules.6 The review proceeds as a rehearing.7
[12] The applicant on review has the burden of persuading the Court that the judgment was wrong, that it rested on unsupportable findings of fact or that it applied wrong principles of law.8 The Court will, though, apply the approach in Austin, Nichols & Co Inc v Stichting Lodestar which requires the Court to come to its own view as to whether the original decision was wrong.9 However, if the Associate Judge’s decision involves the exercise of a discretion, for example, a costs decision or, as here, a decision to stay the adjudication until the appeal was heard, the applicants must show the Associate Judge acted on a wrong principle or failed to take into account some relevant matter, or took into account some irrelevant matter, or was plainly wrong.10
Submissions
Applicants’ submissions
[13] The applicants submit that the Judge took a novel approach to dealing with the adjudication, which resulted in prejudice to them. The applicants submit that the respondent had a responsibility to file and serve separate bankruptcy notices if it had
intended to recover all court awarded costs.
6 Rule 2.3 was revoked in 1 March 2017 by the Senior Courts Act 2016.
7 Rule 2.3(4)(a).
8 McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR2.3.02] referencing Midland Metals Overseas Pte Ltd v Christchurch Press Co Ltd (2002) 16 PRNZ 107 at [13]; Poros v Bax [2015] NZHC 2772; and Ophthalmological Society of New Zealand Inc v Commerce Commission [2003] 2 NZLR 145 (CA).
9 Austin, Nicholls & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16].
10 Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [15].
[14] They also submit that it was not just and equitable for the Court to adjudicate them insolvent just days prior to satisfying, in full, the one debt referred to within the respondent’s adjudication application.
Respondent’s submissions
[15] The respondent’s submissions refer to the points set out in Bioletti v Commissioner of Inland Revenue as being relevant to the applicants’ circumstances.11 With reference to them, it submits that:
(a) the appeal against adjudication orders will not be rendered nugatory, as recognised by the Associate Judge;
(b)the Council will be injuriously affected if the bankruptcy is suspended;
(c) the appeal does not raise any novel or important question of law or issue of public interest as it turns on the facts that are unique to the parties;
(d) the overall balance of justice does not require suspension; and
(e) the appeal is unlikely to succeed before the Court of Appeal.
[16] As the Associate Judge considered all relevant issues and made a decision that was supportable on the facts, the respondent submits that this application should be dismissed.
Law
[17] In Bioletti v Commissioner of Inland Revenue, Mr Bioletti appealed an order adjudicating him bankrupt and sought a suspension of his adjudication pending
11 Bioletti v Commissioner of Inland Revenue [2013] NZCA 465 at [4]-[11].
appeal, pursuant to s 416 Insolvency Act 2006. The Court of Appeal set out the following factors as relevant to the decision:12
(a) whether the applicant's right of appeal will be rendered nugatory if no stay is given;
(b) the bona fides of the applicant as to the prosecution of the appeal;
(c) whether the successful party will be injuriously affected by the stay; (d) the effect on third parties;
(e) the novelty and importance of the questions involved; (f) the public interest in the proceedings;
(g) the overall balance of convenience; and
(h) the strength of the appeal.
Analysis
[18] Although, as the Associate Judge held, this was not strictly a s 416 case, I consider the Associate Judge correctly had regard to these factors, to determine whether to suspend the order of adjudication or not. Furthermore, as I discuss, none of his conclusions were erroneous in law or unsupported by the facts.
Will the applicant's right of appeal will be rendered nugatory?
[19] As the Associate Judge recorded, there is clear law that an adjudication of bankruptcy will not prevent an appeal against the adjudication order, so the right of
appeal would not be rendered nugatory.13
12 At [4]-[11].
13 Lindsay v Vacluse Holdings Ltd, above n 4; Harrison v Harrison, above n 4 at [4].
Bona fide appeal
[20] The Judge considered that there was no reason to suppose that the appeal was not bona fide. Thus, he took this matter into account.
Will the successful party will be injuriously affected by the stay?
[21] The Associate Judge accepted there would be some injurious effect on Mr and Mrs Banks if the stay was not granted, but he assessed that as logically flowing from their failure to by their debt to the Council. It was not a sufficient reason to grant a stay, particularly as the Banks say they have no assets to meet the remaining debt owed.
[22] The respondent, however, submits that it will be injuriously affected if the bankruptcy is suspended. The Official Assignee is currently administering the applicants’ affairs. Given they admit they have no other asset to meet the debt except the house they sold to family members, it may be that the Official Assignee will need to investigate whether the sale of the applicants’ house was at market value. A stay would preclude such an investigation and further delay any repayments to the Council on the debt owed. Therefore, there will be some injury to the Council if the stay is allowed.
[23] While I consider the prejudice to the Council is not great, I accept that delay could impact on the Official Assignee’s ability to set aside transactions that were designed to prejudice creditors, so it can not be dismissed as irrelevant.
[24] No matters have been raised under this consideration which point to the
Associate Judge’s conclusion being wrong.
Novelty and importance of the questions involved
[25] The Associate Judge concluded that no novel or important point of law would be raised on appeal. However, the applicants suggest that Associate Judge Matthews took a novel approach to the application of s 37 Insolvency Act when he adjudicated them bankrupt. However, nothing in their submissions on his decision persuades me
that the judgment departed from settled and clear law and I accept his conclusion that the appeal will not discuss any novel or important questions of law.
Public interest in the proceedings
[26] There is no public interest that would support suspending the stay. It is not a matter of particular significance to the public.
Overall balance of convenience
[27] As in Bioletti, the respondent still has a considerable debt owed to it and, as the Associate Judge concluded, it is entitled to enforce the underlying judgments of the High Court giving rise to that indebtedness, the validity of which is not challenged. The balance of convenience is therefore weighed towards the respondent and against a stay.
Strength of the appeal
[28] The respondent submits that Mr and Mrs Banks’ appeal to the Court of Appeal against the bankrupt adjudication is unlikely to succeed, and it is clear that “once a creditor has shown that the requirements of s 13 of the Insolvency Act are satisfied, the debtor has the onus of persuading the Court not to make an order of
adjudication.”14 As the requirements of s 13 have been clearly established by the
respondent, the onus is on Mr and Mrs Banks to show why it is just and equitable that the court not make an order of adjudication.
[29] As the factors previously discussed indicate, there is little reason why the Court should have not made an order. Given the conclusions on the novelty and importance of the questions involved, it follows that I consider the strength of the appeal is weak.
[30] Weighing these factors together, it was entirely open to the Associate Judge to decline the stay which was sought.
14 Re Far North District Council, ex parte Pollock [2014] NZHC 2473 at [24].
Other issues
[31] The only other issues raised by the applicants is that adjudication should not have proceeded when the Council had “consented” to the sale of their leasehold property for the express purpose of satisfying the judgment debt, and where the judgment debt had been “satisfied in full”.
[32] However, as the Council points out, it is incorrect to suggest that approval of the transfer of the lease (which Council could not have withheld in any event) was related to accepting any payment proposal. It was clear that Council expected all debts to it to be paid in full. Similarly, it is clear from the judgment that neither the Court nor the Council considered that the Banks had paid the indebtedness to the Council in full.
[33] In any event, these matters go to the merits of the adjudication order which is subject to an appeal. They are not relevant to the stay application, except insofar as they have already been considered in weighing up issues such as the strength of the appeal and the potential prejudice to either party.
Conclusion
[34] The applicants have not demonstrated that the Associate Judge’s decision was incorrect. He had regard to all relevant considerations, correctly applied the relevant principles of law and made no unsupportable findings of fact.
[35] The application for review is dismissed.
[36] The respondent seeks costs. However, I reserve that issue, noting such an order may prove to be of no utility in any event. Unless a memorandum seeking costs is filed by 22 June 2017, the Court’s order is that costs will lie where they fall.
Solicitors:
Simpson Grierson, Wellington
Copy to:
Mr and Mrs Banks
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