Haines v Memelink

[2021] NZHC 3205

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2019-485-773

[2021] NZHC 3205

BETWEEN

QUENTIN STOBART HAINES

Judgment Creditor

AND

HARRY MEMELINK

Judgment Debtor

Hearing:

16 November 2021

Appearances:

Judgment Creditor in Person

D Livingston for Judgment Debtor

A O’Connor for BC 68792 (supporting creditor) C Bell for BC 378945 (supporting creditor)

Judgment:

26 November 2021

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]    Following a hearing on 25 February 2020, in a judgment dated 9 March 2020, I made an order pursuant to s 36 of the Insolvency Act 2006, bankrupting the judgment debtor, Mr Harry Memelink.1 At the time, Mr Memelink was already bankrupt. This, then, was a second adjudication.   Mr Memelink appealed.   In a judgment dated     14 April 2021, the Court of Appeal set my judgment aside and remitted the case back for re-hearing.2 It was re-heard on 16 November 2021.

[2]    The error I made in my earlier judgment was to decline to bring to account a judgment debt owed to Mr Memelink by the judgment creditor, because the debt was owed to him in his capacity as a trustee of a trust. I concluded that, as such, it was an asset not of Mr Memelink but of the Official Assignee. That led to my assessment that

1      Haines v Memelink [2020] NZHC 434.

2      Memelink v Haines [2021] NZCA 116.

HAINES v MEMELINK [2021] NZHC 3205 [26 November 2021]

the judgment creditor was owed at least $1,000 by Mr Memelink. On that basis, I determined that the judgment creditor was prima facie entitled to the order he sought, and went on to conclude that there were no proper grounds upon which the Court might exercise its discretion to decline to make such an order.

[3]    The Court of Appeal determined that I was wrong to conclude that the judgment debt in question was not an asset of Mr Memelink, by reason of s 104 of the Insolvency Act 2006.3

[4]    That meant that, on the evidence, as at 25 February 2020, the judgment creditor was a debtor of Mr Memelink.

[5]Under the heading “Result”, the Court of Appeal said:

[55]The appeal is allowed.

[56]      The order made on 9 March 2020 adjudicating Mr Memelink bankrupt is set aside. The proceeding brought by Mr Haines is remitted back to the High Court at Wellington for re-hearing.

[6]    During the course of the re-hearing, Mr Livingston submitted on behalf of  Mr Memelink that:

This matter has been remitted back to the Court to consider supporting a substituting creditor.

[7]    On that basis, Mr Livingston did not address the merits of Mr Haines’ application. He confined himself to the issue of whether it was open to the Court to make an order substituting one of the supporting creditors for Mr Haines as the applicant. He submitted that it was not.

[8]    In my view, that is to misunderstand the outcome in the Court of Appeal. The Court simply remitted the case back for re-hearing. It did so without pre-empting the issues for examination.

[9]Thus, the usual issues arise:

3 At [42].

(a)Can the judgment creditor establish that the s 13 criteria are met so as to entitle him prima facie to the order sought?

(b)If so, should the Court exercise its discretion to refuse an order in this case?

(c)If not, can and should a substitution order be made under s 44 of the Insolvency Act?

[10]Section 13 of the Insolvency Act 2006 provides as follows:

13       When creditor may apply for debtor’s adjudication

A creditor may apply for a debtor to be adjudicated bankrupt if –

(a)the debtor owes the creditor $1,000 or more or, if 2 or more creditors join in the application, the debtor owes a total of $1,000 or more to those creditors between them; and

(b)the debtor has committed an act of bankruptcy within the period of  3 months before the filing of the application; and

(c)the debt is a certain amount; and

(d)the debt is payable either immediately or at a date in the future that is certain.

[11]   A point that neither the judgment creditor nor Mr Livingston addressed expressly — possibly because they regarded the answer as self-evident — is whether, in this re-hearing, the s 13 requirements are to be determined as at the date of the previous hearing or as at the date of the re-hearing.

[12]   It appears to me that the answer must be as at the date of the re-hearing. Otherwise, the Court could be placed in a position of having to determine the s 13 issues on one basis when the situation might have changed altogether between the dates of the original hearing and the re-hearing.

[13]   I therefore approach this re-hearing on the basis that the s 13 requirements are to be determined as at 16 November 2021.

[14]   As already identified, the first of those requirements is that the judgment creditor is owed at least $1,000 by the judgment debtor.

[15]   In my assessment, the judgment creditor’s application does not get past this first requirement.

[16]   The Court of Appeal’s judgment was to the effect that it was necessary to bring to account the $6,195.22 costs judgment in favour Mr Memelink against the judgment creditor, thereby reducing the amount of the debt owed to the latter by that amount. That so alters the position as between the judgment creditor and Mr Memelink that, as at 25 February 2020, the former would not be able to establish that Mr Memelink owed him at least $1,000.4

[17]   If I am correct in my earlier conclusion that the re-hearing requires the Court to reconsider the financial position as at 16 November 2021, then that of course necessitates an analysis of any movement in the position as between the parties since 25 February 2020.

[18]   In my assessment, the Court does not have sufficient evidence properly before it to make that determination.

[19]   On the day of the hearing, the judgment creditor filed an affidavit in which he traversed further judgment debts incurred by the parties to each other down to that date, and  submitted  that  the  net  position  as  at  16  November  2021  was  that  Mr Memelink owed Mr Haines considerably more than $1,000.

[20]   The judgment debtor had no opportunity to respond to that evidence, but    Mr Livingston submitted that it was incomplete and referred me to other judgments over the relevant period which might affect the position.

[21]   Further, neither the judgment creditor nor Mr Livingston addressed anything other than judgment debts, and for all I know other debts may have arisen or been discharged during the relevant period of time.

4 At [43].

[22]   In the end, I find myself unable safely to determine, on the basis of the available evidence, whether or not Mr Haines can establish that he is  an overall creditor of  Mr Memelink to the tune of at least $1,000.

[23]   What that means is that the judgment creditor cannot satisfy the first s 13 requirement, and that this application must fail.

[24]   That brings me to the question of whether it is open to the Court to make an order substituting one of the supporting creditors for Mr Haines.

[25]   As Mr Livingston submits in relation to this, s 44 of the Insolvency Act confers jurisdiction on the Court to make such an order where the titular applicant has not proceeded with due diligence to prosecute his, her, or its application, or at the hearing, offers no evidence, and the debtor is said to owe another creditor — who or which has given notice of an intention to appear — $1,000 or more.5

[26]   Deciding whether a creditor has proceeded with due diligence will of course be fact dependent, but it can generally be said that the insolvency regime requires a degree of urgency for bankruptcy proceedings.6

[27]   There is no suggestion in this case that Mr Haines has not prosecuted this matter with vigour throughout, and, far from not offering evidence at the hearing, he swore and filed the affidavit referred to earlier and relied on it in argument.

[28]   It appears to me that, in such circumstances, it is not open to the Court to make an order for substitution.

[29]   The judgment creditor’s application is dismissed, and I decline to make an order substituting either of the supporting creditors for Mr Haines.

5      See Re Bruns, ex parte Trust Bank Central Ltd (1992) 6 PRNZ 382 (HC) at 384–385.

6      See  Re  Gold  Band  Finance,  ex  parte  Henderson   HC  Christchurch  CIV-2010-409-559,   27 September 2010 at [19]–[20].

[30]Costs are reserved.

Associate Judge Johnston

Solicitors:

Thomas Dewar Sziranyi Letts, Lower Hutt for judgment creditor and interested parties Livingston & Livingston, Wellington for judgment debtor