Guy v Bank of New Zealand

[2013] NZHC 50

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-004366 [2013] NZHC 50

UNDER  the Insolvency Act 2006

BETWEEN  RICHARD HUGH CLEVELAND GUY (Judgment Debtor) Applicant

ANDBANK OF NEW ZEALAND Judgment Creditor (Respondent)

Hearing:         4 February 2013

Appearances: Mr Guy in person

M L Dillon for Judgment Creditor

Judgment:      4 February 2013

ORAL JUDGMENT OF ASSOCIATE JUDGE DOOGUE

Solicitors:

Mr R H C Guy, R D 4 Pukekohe – [email protected]

Turner Hopkins (D Mitchell) P O Box 33-237, Takapuna, Auckland – [email protected]

GUY V BANK OF NEW ZEALAND HC AK CIV-2012-404-004366 [4 February 2013]

[1]      Mr Guy has brought an application pursuant to s 17 of the Insolvency Act to set aside a bankruptcy notice.  He says that the bank ought not to be permitted to proceed with the bankruptcy notice which it has issued based upon a judgment of Judge P A Cunningham issued in the District Court at Auckland on 25 February

2012.  He says that his position comes within the requirements of s 7 of s 17 in that he has a counter claim, set off or cross-demand that is equal to or greater than the judgment debt and that he was not able to use that counter-claim, set off or cross- demand in the proceedings in which the Judge entered the judgment.  I should add that there has been no appeal against the judgment of Judge P A Cunningham.

[2]      The matter has some history.  The Bank considered that Mr and Mrs Guy had not met their obligations owing on credit card and other facilities and on 25 August

2010 obtained judgment in the District Court by default.  However, the Guys did not accept  that  the  proceedings  had  properly been  served  and  the  Court  apparently agreed with them because on 3 February 2011 the judgments were set aside.

[3]      A judicial settlement conference was scheduled for 13 April 2011.   That conference duly went ahead.  It resulted in a settlement agreement being arrived at. The  parties  to  the  settlement  agreement  were  the  Bank  and  Mr  Guy  and  Mrs Michaela  Guy.    After  setting  out  the  background  to  the  matter  the  agreement recorded a compromise which had been entered into by the parties.  Before that point had been reached the Guys had filed a response by defendant which is apparently the statutory form that a defendant wishing to oppose the entry of judgment must file in the District Court.  When completing that form the defendants, the Guys, set out as fact to it that they had written to the BNZ requesting the amount of credit they believed was outstanding and saying that they, that is the Guys, intended to carry out an audit based on those original agreed terms and conditions to pick up “the anomalies that we believe are material and could require compensation”.  In Fact 3 of the response form the Guys said that the BNZ had confirmed an amount as being outstanding but the Bank refused:

... to provide or discuss the original agreement.

After further correspondence but without any response to our request for the original agreement we sent a notice to the BNZ that failure to respond within

a month of receiving the notice we deemed they are unable or unwilling to comply will thereafter consider the matter between us to have been legally and financially settled.

[4]      In their notice of response the Guys also made reference to the fact that the arrangements between themselves were governed by the Credit Contracts Act 1981 and the Hire Purchase Act 1971 “now Credit Contracts and Consumer Finance Act

2003”.[1]

[1] BD 99.

[5]      The  matters  that  Mr  and  Mrs  Guy raised  in  the  notice  of  response  and elsewhere made it clear that there was a dispute upon their part about the entitlement of the Bank to claim the amount that it sought by way of judgment in the District Court proceedings.

[6]       Returning to the settlement agreement which was dated 13 April 2011, it is significant that the parties in their agreement made reference to the earlier proceedings.  Paragraph 3.4 of their agreement reads as follows:

3.4The settlement agreement is in full and final settlement of all issues arising directly or indirectly from the claim and proceeding.

[7]      This provision is significant for the reason that as counsel for the Bank, Mr Dillon, has submitted today all of the issues about the Bank’s entitlement had been previously raised and were now placed off limits by the terms of the settlement agreement.  I consider that that submission is correct.

[8]      The Guys apparently did not comply with the requirements of the settlement agreement and in due course the Bank moved for summary judgment.  It was at this stage  that  Judge Cunningham  entered  her oral  judgment.    In  the  course of her judgment she mentioned the fact that Mr Guy had raised issues before her about disclosure from the Bank concerning the original credit card contract which was not provided and that he has “some concerns over the fees and interest rates that were

being applied to amounts under the credit card”.   The Judges conclusion was that

those were matters that could not be gone into at the hearing before her.[2]   As I have said there was no appeal against that particular judgment.

[2] BD 113.

[9]      The Judge also referred to the fact that Mr Guy had raised questions about the agreement having been entered into under duress and I will deal with that shortly.

[10]     This background is of significance because at the hearing before me today Mr Guy has again  raised the question about the  Bank’s entitlement to charge.   He advanced a wide ranging argument about questions of what authority the bank had to make a claim, issues about whether the Bank was entitled to issue credit and other matters which though interesting, are not relevant to the present case.

[11]     The point is that the BNZ has obtained a judgment which has remained undisturbed since it was entered in February 2012.  In those circumstances can it be said that Mr and Mrs Guy have a counter-claim, set off or cross demand against the judgment  creditor  that  equals  or  exceeds  the  amount  claimed  by  the  judgment creditor and that they could not have put forward in the action or proceeding in which the judgment was entered?

[12]     In one sense the Guys if their counter-claim otherwise complied with the section could claim that they had a counter-claim that they were not able to put forward in the District Court but the reasons for that in my view are outside the type of  circumstances  contemplated  by  s  17.    S  17,  the  authorities  make  clear,  is concerned with inability in the sense of being matters outside the power or control of the judgment debtor. The position was reviewed in Clark v UDC Finance Limited:[3]

[3] Clark v UDC Finance Limited (1985) 2 NZLR, at 639.

Mr Jenkins submitted that the relevant terms of s 19(1)(d) and r 41 should be given a liberal interpretation, enabling the Court to do justice by finding that Mr Clark in these circumstances could not have set up his claim in the action in which he let judgment go by default. The meaning of the corresponding provision was also discussed at some length by Lockhart J in Re Brink, ex parte Commercial Banking Co of Sydney Ltd (1980) 30 ALR 433, at p 437:

"The words 'that he could not have set up in the action or proceeding in which the judgment or order was obtained' mean 'which he could not by law set up in the action': See Re Jocumsen [(1929) 1 ABC 82] at p 85; Re a Debtor [1914] 3 KB 726, per Avory J at 730; Re Stokvis (1934) 7 ABC 53,

especially per Lukin J at 57, where His Honour said: 'I take a counter-claim, set-off, or cross demand which could not be set up as one which, from point of time, or from its nature, or from absence of empowering provisions, or from positive inhibition so to do, could not be set up in the particular case in which judgment was obtained . . . Mere failure to take advantage of the opportunity can hardly be said to be inability.'"

I respectfully agree with this assessment. The Court of Appeal in Thomasen's case concentrated on the procedural ability to bring the cross claim, although there seems to have been no question of the debtor's ability in fact to do so. There may be room for some added qualification of a practical nature in the comment by Lukin J about "mere failure" to take advantage of the opportunity, implying that a failure may be justified if it is due, for example, to supervening circumstances making it factually impossible for the debtor to do anything about the claim at that time. But the primary emphasis on the legal nature of the impediment suggests that such other reasons must be carefully  scrutinised,   and  certainly  simple   neglect   to  take   even  the elementary step of seeking further information or advice cannot avail the debtor. Quite clearly that was the case here. Mr Clark was intimately connected with this development and said he worked with the receiver for some  months  after  his  appointment.  When  UDC  moved  in  to  sell  the property he did nothing to query its actions or to seek particulars of the sales and the application of the money. His only response to its reports and demands was to explain the group's insolvency and to emphasise his own perilous financial position and inability to pay. In these circumstances his belated discovery of a possible cause of action - well beyond the eleventh hour after such lengthy inactivity - is not enough to persuade me that the conditions to set aside the notice have been satisfied. The only reason he could not have set up these claims at the proper time was his failure to take advantage of the opportunity which was fully open to him

[13]     To like affect were the remarks of Tipping J in Hardie v Booth [1992]:[4]

The inability of which r 41(3) speaks is primarily a legal inability. Factual inability is also available but that requires some cogent circumstance. To take a looser view would be to frustrate the purpose of the rule which is obviously designed to ensure that all issues between the parties both ways be tried at once and that a bankruptcy notice only be set aside if the debtor has a cross-claim which either legally or factually could not be set up in the same proceedings. As Casey J said in Clark's case the primary emphasis is on the legal nature of the impediment and therefore any factual grounds for the suggestion that the cross-claim could not be set up must be carefully scrutinised. (p 362)

[4] Hardie v Booth [1992] 1 NZLR 356.

[14]     The conclusion that I reach, but for one matter, which I will need to consider shortly which concerns duress, is that the Guys put it beyond their own control to raise matters of authority to charge and particulars etc from the moment when they entered  into  the  agreement  with  the  bank  and  in  particular  clause  3.4  of  the

agreement to which I have already made reference.

[15]    Mr Guy raised in the District Court hearing on the summary judgment application and has again adverted to the same subject in the submissions filed in this Court to the fact that the settlement agreement was entered into under “duress” on his part.  He has made references to the fact in support of that submission that he was not represented by counsel and that he was under pressure.   While it is not necessary for someone in the position of Mr Guy to prove that there was duress he would have to go a lot further than the material before the Court which is under consideration today could give rise to an arguable case that the agreement that he entered into was vitiated by duress.  The circumstances of which he speaks, that he had no legal advice and that he was under pressure are everyday circumstances which attend the entry into agreements by people in business.   Duress calls for a higher level of unacceptable and unconscionable pressure being applied and there is no evidence of that in this case.  In any event the District Court ruled against Mr Guy on that point and my view of it is that it is not now open to him to raise the point in this Court.

[16]     If the settlement agreement and in particular clause 3.4 applied, therefore, any inability on the part of Mr and Mrs Guy to raise questions about the Bank’s authority was put out of their reach by their own considered act when they entered into the consent agreement.  If they did have an admissible counter-claim, and I do not think they do, it would not in any event be one that falls within the requirements of s 17 of the Act.

[17]     I might also add that it seems to be reasonably clear that any counter-claim that the applicant for an order under s 17 must put forward has to be one for a money amount.  The amount of money does not need to be established with precision.  On the other hand, I agree with the submission of Mr Dillon that all that Mr Guys reference to obtaining additional disclosure in particulars amounts to is that he wants to make enquiries, he wants to have them answered and it is possible that once they are responded to a situation may be disclosed where the Bank has overcharged him and his wife.   In my view that is not sufficient to establish that he has a counter- claim sufficient to comply with the requirements of s 17.   For these reasons, the application must be dismissed.

[18]     The applicant as the unsuccessful party must pay the costs of the application and will do so on a category 2B basis and is also to pay disbursements as fixed by

the Registrar.

J.P. Doogue

Associate Judge