Haden v Wells

[2012] NZHC 546

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-7979 [2012] NZHC 546

UNDER  the Insolvency Act 2006

IN THE MATTER OF     the Bankruptcy of GRACE HADEN of

Auckland, Private Investigator

BETWEEN  GRACE HADEN Applicant

ANDNEIL EDWARD WELLS Respondent

Hearing:         22 March 2012

Appearances: Applicant in person

B Atkins for Respondent

Judgment:      22 March 2012

ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL

Solicitors:

Brookfields, P O Box 240 Auckland 1140 for Respondent (Judgment Creditor) Email:   [email protected]

Copy for:

Grade Haden, 23 Wapiti Avenue, Epsom, Auckland 1051

Email:   [email protected]

Case Officer: [email protected]

HADEN V WELLS HC AK CIV-2011-404-7979 [22 March 2012]

[1]      This is an application to set aside a bankruptcy notice.

[2]      The bankruptcy notice was filed on 12 December 2011.   It is based on a judgment of the District Court at Auckland of 30 July 2008 and a costs order made in the same proceeding on 11 November 2008.  The judgment of 30 July 2008 was a damages award in the sum of $57,500. The costs award was for $41,253.75.

[3]      Mr Wells is the judgment creditor under the judgment and the costs order.

[4]      The bankruptcy notice also claims interest under s 65A of the District Courts Act 1947 at the rates fixed under that Act.  The original damages award, costs order and interest come to an amount of $123,887.08 as at the date the bankruptcy notice was filed in this court.

[5]      The law allows a person served with a bankruptcy notice to apply to the court to have the bankruptcy notice set aside.   There are two bases on which a debtor served with a bankruptcy notice can apply to the court to have the bankruptcy notice set aside

(a)      The first is on the basis that the debtor has a cross-demand, set-off or counterclaim against the creditor for an amount which exceeds the amount of the judgment debt and which could not be raised in the original proceeding in which the judgment creditor obtained judgment against the debtor.

(b)The second ground is the court’s inherent jurisdiction to prevent abuse of process.  The leading judgment is that of Master Kennedy-Grant in Re Wise.1 Master Kennedy-Grant reviewed the law on setting aside to prevent abuse of process very thoroughly.   He held that the High Court has an inherent jurisdiction to control abuse of its process.  He indicated  that  the  grounds  on  which  the  jurisdiction  had  been

exercised  are  (1)  there  was  a  procedural  defect  in  obtaining  the

1      Re Wise HC Auckland B227/95, 21 June 1995.

judgment on which the bankruptcy notice is based; and/or (2) the existence of arguable grounds of defence to the claim on which the judgment was given.

Invariably, in cases which rely on the court’s inherent jurisdiction to prevent abuse of process the creditor has obtained judgment by default against the debtor.  The debtor has  not  taken  any steps  to  oppose but  there are circumstances  in  the  way that judgment was obtained that suggest that the judgment ought to be set aside. Applications to set aside a bankruptcy notice that invoke the inherent jurisdiction of the court are usually accompanied by reasons why the judgment should be set aside in the original court.

[6]      In this case, Mr Wells and people who claimed to be trustees of the Animal Welfare Institute of New Zealand sued Ms Haden, a company associated with her called Verisure Investigations Ltd, and a body called the Animal Welfare Institute of New Zealand in defamation.   Mr Wells has attached to his affidavit in opposition copies of the judgments that have been given in that proceeding, including the later appeals.

[7]      It  appears  from  the  judgment  of  Judge  Joyce  in  the  District  Court  that Ms Haden had not paid costs ordered in that proceeding.   That court later made orders debarring her from defending the proceeding.  The case went to hearing on

13 March 2008.  Because the District Court had ruled that Ms Haden was debarred from defending the proceeding, the case went to hearing on issues of quantum, that is, the amount of damages that could be awarded.  Ms Haden was not able to raise an argument that she was not liable for defamation because she had been debarred from defending the proceeding.    Judge Joyce gave his decision on 30 July 2008.   He made an award of $50,000 for general damages and $7500 for exemplary damages.

[8]      Ms Haden appealed against that decision.  Rodney Hansen J heard that appeal on 25 February 2009.  In his decision of 20 November 2009 he dismissed the appeal and upheld the decision of District Court Judge Joyce.  He also awarded Mr Wells costs on the appeal.

[9]      Ms Haden was not satisfied with the decision of Rodney Hansen J.   She applied for leave to appeal to the Court of Appeal.   She needed leave to appeal because this was a second appeal.2   The application for leave was heard by Rodney Hansen J on 5 May 2010.  He gave his decision on 23 June 2010.  He dismissed the application for leave to appeal and he awarded Mr Wells costs on that application.

[10]     Ms Haden was not satisfied with the dismissal of her application for leave to appeal.   She applied directly to the Court of Appeal for leave to appeal.   That application was heard by O’Regan, Hammond and Arnold JJ on 16 November 2010. In its decision of 6 December 2010 the court dismissed the application for leave to appeal and ordered Ms Hayden to pay Mr Wells costs.

[11]     That record of judgments indicates a number of things.

[12]     First, in addition to the judgment of the District Court, Mr Wells is a creditor of Ms Haden for costs orders made in this court and in the Court of Appeal on the later appeal and applications for leave to appeal.  I am not required to consider those orders for costs.

[13]     The second is that Judge Joyce gave a very lengthy decision on 30 July 2008

– his decision runs to over 360 paragraphs.  It shows a very thorough consideration of the issues.  It is apparent that she took an active part in the hearing on 13 March

2008 in the District Court, and that she put her case to the court strongly.

[14]     Third, Ms Haden has since used all appeal rights that could be available to her to challenge the correctness of the decision of Judge Joyce.

[15]     I have recorded those matters because today Ms Haden challenges the fact that judgment has been given against her in the District Court.

[16]     Given the history of the appeals plus the way the hearing was conducted in the District Court, it is quite clear that I cannot now look through the judgment.  A final judgement has been given in the District Court and all appeal rights have been

exhausted.  It is not now open to this court to take a fresh view of what was decided in the District Court.     For the purpose of the bankruptcy jurisdiction, I have to accept the finality and conclusiveness of the decision out of the District Court.  It is not now open to me to look beyond it.

[17]     In bankruptcy law there are rare occasions when the court can look through a judgment to see whether there is a true, underlying liability.3    But where the District Court has held a full hearing on the merits of the case and that the decision has been later appealed, albeit unsuccessfully, that is not one of those rare cases where a bankruptcy court may look through the decision to the underlying obligations.   I have to accept the finality of the District Court decision.  That means that under the

approach taken in Re Wise, based on the inherent jurisdiction of the court, it is not open to me to say that the bankruptcy notice itself amounts to an abuse of process.

[18]     Mr Wells is a judgment creditor.  He has filed a bankruptcy notice after the appeal rights have been exhausted.   He is entitled to take that step under the law. There is nothing in the way that he has obtained judgment that I could regard as an abuse of process for the purpose of the decision in Re Wise.

[19]     The other matter to consider is whether Ms Haden has any kind of cross- demand.   In the documents she has submitted to the court she has set out her complaints against Mr Wells.  Effectively, she is accusing him of corruption.  Her earlier allegations of corruption are the matters on which she was sued in defamation by Mr Wells and his co-plaintiffs.  She has not, however, set out anything that could constitute a cross-demand that she could not have raised in the original proceeding in the District Court in which judgment was given against her.  To show any kind of cross-demand, she would have to show an arguable basis that Mr Wells is liable to her in law.  There is nothing that I can see in the material that she has placed before this court that would give her any entitlement to recover relief against Mr Wells.

[20]     She has said that the process has been used ‘maliciously’ against her.  I do not regard that as arguable.  For her to make a claim that proceedings have been brought against her ‘maliciously’ she would have to show that the proceedings have come out

in her favour. Unfortunately for her, the proceedings in the District Court, in the High Court and in the Court of Appeal went against her.  That would deprive her of a claim for malicious prosecution.  There is also the added difficulty that New Zealand courts do not allow claims for malicious civil proceedings except in a very narrow range of cases.  Claims for defamation are not in the narrow range of cases in which

New Zealand courts allow claims for malicious civil proceedings.4

[21]     The two  grounds on which an application could be made to set aside a bankruptcy notice have not been made out.

[22]     Ms Haden has also raised the question that the debt claimed in the bankruptcy notice is over-stated.  On the face of it, the amounts set out in the bankruptcy notice seem to be in order in that they represent the total of the initial damages award, the later costs award, and the calculation of interest under s 65A of the District Court Act.  I am not persuaded that the amounts in the bankruptcy notice are over-stated.

[23]     Because I do not see any basis on which this court can set aside a bankruptcy notice, I am unable to make an order that it should be set aside. Instead, I dismiss Ms Haden’s application to set aside the bankruptcy notice.

[24]     The bankruptcy notice has been suspended until now.5     The effect of my order is that that suspension has stopped and the bankruptcy notice will continue to run.  If the bankruptcy notice is not complied with there may be an act of bankruptcy. An act of bankruptcy gives a creditor grounds to apply for a debtor to be made bankrupt.  On the hearing of a bankruptcy application the court exercises a discretion whether the debtor ought to be made bankrupt.  I am not required to exercise that discretion today.  It would not be correct for me to do so. Anything I have said today is not intended to interfere with the exercise of a discretion on the hearing of an application for adjudication, if such an application is made.

[25]     This  application  has  been  heard in  court.    It  has  not  been  conducted  in chambers.

4      Jones v Foreman [1917] NZLR 798; Official Assignee v Menzies (No.4) HC Auckland

CIV-2009-404-3391, 4 May 2011 at [41].

5      Rule 24.10 High Court Rules.

.........................................................

R M Bell

Associate Judge