Harrison v Harrison
[2016] NZHC 2027
•30 August 2016
IN THE HIGH COURT OF NEW ZEALAND IN BANKRUPTCY
CHRISTCHURCH REGISTRY
CIV-2016-409-000400 [2016] NZHC 2027
IN THE MATTER of the Insolvency Act 2006 AND
IN THE MATTER
of the bankruptcy of ANGELA JANICE HARRISON
BETWEEN
GRAEME ROSS HARRISON AND ADRIENNE HARRISON
Judgment Creditors
AND
ANGELA JANICE HARRISON Judgment Debtor
Hearing: 22 August 2016 Appearances:
R O Parmenter for Judgment Creditors/Respondents
Ms A J Harrison, Judgment Debtor/Applicant, self representedJudgment:
30 August 2016
JUDGMENT OF ASSOCIATE JUDGE MATTHEWS
Introduction
[1] On 27 April 2016 the High Court ordered that the applicant (Ms Harrison)
pay to the respondents (the trustees of the Valerie Geard Trust) costs in the sum of
$12,749.90. The order was duly sealed by the Court. [2] Ms Harrison has not paid any part of this sum.
[3] On 25 May 2016 the trustees issued a bankruptcy notice to Ms Harrison in relation to this order. The bankruptcy notice was served on Ms Harrison on 28 June in accordance with an order for substituted service made by the Court on 17 June.
On 12 July 2016 Ms Harrison applied for an order setting aside the bankruptcy
HARRISON v HARRISON [2016] NZHC 2027 [30 August 2016]
notice. She also applied for an order adjourning the bankruptcy proceeding to enable her to seek legal aid. Further, she applied for an order for a case stated under Part 21 of the High Court Rules on questions of law and fact on the basis that the law was not correctly applied in a judgment in an Auckland proceeding CIV-2016-404-162, a judgment of Faire J dated 27 April 2016.1 Finally, Ms Harrison applied for an order under r 7.51 of the High Court Rules to rescind the judgment of Faire J on the basis that judgment was entered by default, was fraudulently and improperly obtained, and provides no legal foundation for a bankruptcy action as it was obtained by illegality.
[4] On 18 July the Court issued a minute in which time for compliance with the bankruptcy notice was extended until further order of the Court, and a fixture date for hearing the application was allocated.2 Ms Harrison was given an opportunity to file further affidavit evidence if she wished to do so, and the Court referred to her wish to seek legal aid, expressing an expectation that she would apply forthwith. The Court noted that in the event Ms Harrison instructed a solicitor, on legal aid, and that solicitor could not reasonably be ready for the hearing on the allocated date (22 August 2016) a memorandum should be filed and referred to an Associate Judge
for consideration. This did not occur, and Ms Harrison represents herself on her application.
[5] The two orders sought in relation to the judgment of Faire J concern a proceeding in the Auckland Registry of the High Court. Prior to now, Ms Harrison has not taken any formal steps in relation to that judgment, either as she now suggests in her application, or by way of appealing. The applications cannot be filed in this registry of the Court, and on the present application to set aside the bankruptcy notice I do not take them into account. Ms Harrison did not apply to transfer them to Auckland. Given this, the nature of the applications, and the fact that they are not substantiated by any probative evidence, I will not transfer them.
Ms Harrison’s application
[6] The application by Ms Harrison to set aside the bankruptcy notice makes a number of points. First, Ms Harrison expresses the view that the Auckland
1 Harrison v Harrison [2016] NZHC 574.
2 Harrison v Harrison HC Christchurch CIV-2016-409-400, 18 July 2016.
proceeding, and the present proceeding, should be removed to the Court of Appeal as the decision of Faire J and the decision I had made on the Auckland proceeding (an interim order extending the caveat) are “totally different”. This is not a proper application for removal of a proceeding to the Court of Appeal, nor could there be any realistic prospect of that step being taken. There is nothing unusual or contradictory in a final judgment being at variance with an interim judgment to sustain a caveat. Her right of appeal to the Court of Appeal has now expired.
[7] The application then sets out various criticisms of the judgment of Faire J. Ms Harrison concludes this portion of her application by stating she does not owe any money to the Valerie Geard Trust, and she makes reference to costs and damages for blackmail, humiliation, distress and invasion of rights.
[8] As further grounds on which her orders are sought, Ms Harrison refers, without details, to fraud upon the Court and says that the Valerie Geard Trust has engaged in deceptive conduct and self-dealing and that its lawyer has used blackmail and menacing threats. She refers to unconscionability, miscarriage of justice, a cross-claim (without details) and a case stated on questions of law and fact (again without details). Ms Harrison says she has been caused loss from what she describes as her adversaries’ fraud on the Court in respect of which she cross-claims, again without details.
The evidence
[9] Ms Harrison swore and filed an affidavit in support of her application titled “Affidavit of Merit Sworn by Angela Janice Harrison in Support of Exempt Interlocutory Application Case Stated – Set Aside Bankruptcy Notice on Questions of Law and Fact (as defined in Regulation 4 High Court Fees Regulations 2013 and Item 7 Schedule).” The affidavit contains 60 paragraphs. Ms Harrison covers a range of topics. She alleges blackmail on the part of Mr Parmenter in respect of an email he sent her suggesting that all issues between the Valerie Geard Trust and her might be settled on a basis which he sets out, one term of which is that she not bring any further proceedings against certain parties. Because Ms Harrison’s view of this document was also the subject of a number of memoranda filed on Friday, 19 August
for my attention, and not because it has any relevance to the issue presently before the Court, I record that the document is a straight-forward offer to settle and cannot in any sense be construed as any form of blackmail.
[10] Ms Harrison then levels a range of criticisms against the judgment of Faire J and against the trustees and the administration of the Trust. Any issues relating to the judgment could have been raised by way of appeal, but have not been. It is not the function of the Court on this application to review the merit of that judgment.
Application of the relevant provisions of the Insolvency Act 2006
[11] Before a person may be adjudicated bankrupt, that person must have committed an act of bankruptcy, within a period of three months before the filing of the application.3 An act of bankruptcy is committed if a creditor has obtained a final judgment against the debtor for a sum of money, execution of the judgment has not been halted by a court, the debtor has been served with a bankruptcy notice, and the debtor has not within a specified time either complied with it or satisfied the Court that he or she has a cross claim against the creditor.4 In this case, each of these requirements is satisfied. The bankruptcy notice is based on a final judgment of this Court which is not under appeal, nor has execution of that judgment been halted by this Court. Ms Harrison was served with a bankruptcy notice, and she has not complied with it.
[12] That leaves only the question of whether she has satisfied the Court that she has a cross claim against the trustees. Nothing in Ms Harrison’s affidavit goes further than being a trenchant criticism of the trustees of the Trust, as well as an earlier judgment of this Court. To rely on having a cross claim a judgment debtor must demonstrate that there is a cross claim of true substance which the debtor
genuinely proposes to pursue.5 The debtor must establish that the cross claim is
equal to or greater than the judgment debt, and that the judgment debtor could not use the cross claim as a defence in the action or proceeding on which the judgment
or order providing the basis for the bankruptcy notice was entered. There is no
3 Insolvency Act 2006, s 16.
4 Section 17.
5 Sharma v ANZ Banking Group (1992) 6 PRNZ 386 (CA) at 389.
evidence before the Court establishing the quantum of any cross claim, nor establishing that the issues now raised by Ms Harrison could not have been raised in the court prior to the judgment on which reliance is now placed. Indeed, the evidence presented by Ms Harrison does not specify the basis of a claim at all; rather it is a string of criticisms without focus on how, if at all, they might found liability on the part of the trustees in respect of which they might be accountable at law. Ms Harrison’s evidence stops well short of establishing that she has a genuine triable
claim.6 Ms Harrison is not a beneficiary of the Trust so does not appear to have any
right to challenge the actions of the trustees in any event, as discussed below.
[13] For these reasons, I find that Ms Harrison has committed an act of bankruptcy.
Inherent jurisdiction to prevent abuse of process
[14] The Court has an inherent jurisdiction to prevent abuse of process. Ms Harrison devoted a good deal of time in presentation of her case to her view that the issue of the bankruptcy notice, and the intention of the trustees to adjudicate her bankrupt if not paid the sum demanded, is an abuse of process. Whilst the parameters of this jurisdiction remain unsettled to a degree, I am unable to agree with Ms Harrison that this proceeding is an abuse of process, for the reasons which
follow.7
[15] Ms Harrison’s mother is a beneficiary in the Trust. There have been a number of disputes between Mrs Harrison and the trustees. At present she has a proceeding against the trustees filed in the High Court at Auckland. Ms Harrison told me that her mother intends to pursue that action and has recently sent a memorandum to the Court asking that it be set down for a hearing. Mr Parmenter informed me that the proceeding is stayed as a result of Mrs Harrison not having paid a sum of $25,000 which she was ordered to pay by way of security for costs, with part, $2,500, to be applied immediately by the trustees to payment of an
outstanding costs award against her. Mr Parmenter informed me, and Ms Harrison
6 Clark v UDC Finance Ltd [1985] 2 NZLR 636 (HC).
7 For discussion on the Court’s inherent jurisdiction to prevent abuse see Brookers Insolvency Law
& Practice (online looseleaf ed, Thomson Reuters) [IN17.11].
confirmed, that Mrs Harrison has paid $22,500. Mr Parmenter says that Mrs Harrison has refused to pay the remaining $2,500 because it relates to a costs order which she does not intend to pay, and for that reason the stay remains in force.
[16] Mrs Harrison apparently has major issues which she wishes to raise in relation to the Trust’s administration by the trustees. Ms Harrison informed me that these include the alleged sale of a Waiheke Island property at below its value, and inappropriate use of Trust funds, no doubt amongst other matters. Ms Harrison herself, though, is not a beneficiary in the Trust. The judgment of Faire J, of which Ms Harrison is very critical, relates to a decision to remove a caveat from the title to the Waiheke Island property, and Mr Parmenter informs me that at least part of the reason for his Honour deciding to remove the caveat was that Ms Harrison does not have any right to caveat the property, as she is not herself a beneficiary. Evidently, should Mrs Harrison die, Ms Harrison would then become a beneficiary by substitution, but that is not presently the position.
[17] The relevance in the present context is that Ms Harrison also trenchantly criticises the actions of the trustees. As she is not a beneficiary in the Trust it seems she does not have any right to sue the trustees herself in respect of what she sees as their breaches of trust. She therefore argues that the reason the trustees wish to have the Court adjudicate her bankrupt is to put pressure on her mother to discontinue her case against the trustees.
[18] To support this contention Ms Harrison relies in part on the offer made by Mr Parmenter on behalf of the trustees that Mrs Harrison, Ms Harrison and the trustees all drop their respective actions and claims, thereby effectively bringing an end to all of the disputes which have been ongoing for some years.
[19] In my opinion, this attempt to settle all outstanding issues cannot be characterised as inappropriate, let alone as blackmail as Ms Harrison sees it. I do not discern any difference between this suggestion of settlement and any other attempt to settle litigation involving three parties by, effectively, everyone walking away from their claims. Ms Harrison sees it as the trustees applying pressure to her by this proceeding with the intended effect of persuading Mrs Harrison to drop her claim.
[20] I do not see it that way. It is commonplace for attempts to be made by one or more parties to ongoing litigation to resolve that litigation by settlement. In this case, there were obvious benefits to both sides in the saving of costs and time, as well as achieving certainty of outcome. For Ms Harrison, there was a benefit in that she would not be required to pay the outstanding costs order on which the bankruptcy is based, nor face the bankruptcy proceeding any further. Nonetheless both Ms Harrison and, I understand, Mrs Harrison characterise this not only as blackmail but, as I understand it, an attempt by the trustees to cover up their own actions and avoid liability for them. There is nothing before the Court, apart from the personal opinions of Ms Harrison, to substantiate that view and I find it to be without foundation.
The finality of Faire J’s judgment
[21] A second major part of Ms Harrison’s argument centred on her belief that the judgment of Faire J, which led to the costs award against her, is flawed. As I explained to Ms Harrison more than once during the course of the hearing, it is not the function of the Court on this application to go behind the final judgment of the Court on an earlier occasion. There are avenues by which an earlier judgment can be challenged, including appeal. No such step has been taken by Ms Harrison. When asked why, given her strong criticism of the judgment, her response was that she cannot spend all her time in court. I accept that, but that is not a position different from any other litigant in this Court. There is a system for the determination of disputes by which all who use the civil jurisdiction of the High Court are bound. One consequence of failing in civil litigation is the almost invariable liability for a contribution to the other party’s costs. If an appeal against a judgment is later successful, this usually results in an earlier award of costs being reversed, but unless and until that happens, a costs order stands as a judgment of this Court, enforceable by any one of a number of enforcement measures, including an application for adjudication in bankruptcy.
[22] I informed Ms Harrison during each of her numerous attempts to tell me why the judgment of Faire J was wrong, that I would not go behind the judgment, and I
explained to her carefully why that was so. I have set out this reason in this judgment so that there can be no misunderstanding on this point.
The “proportionality” of invoking bankruptcy procedure
[23] The third principal issue raised by Ms Harrison is that applying to adjudicate her bankrupt is disproportionate to the issue of the unpaid costs award. By this I take it to mean that she should not be adjudicated bankrupt for a comparatively modest sum, given the bigger picture of the issues which are raised against the trustees. Two of these – and there are others – relate to their allegedly selling the Waiheke Island property at some $50,000 or so below its value, and to some $30,000 which they could have obtained for the Trust had they let that property for a period while it lay vacant. No evidence was presented in relation to either of these issues. Even if it had been, those issues are for the beneficiaries and the Trust, not for Ms Harrison. She appears to conflate her mother’s position and her position, in the sense that she sees them as jointly entitled to call the trustees to account. That however is not so. Mrs Harrison has her own proceeding which she may pursue, provided the proceeding does not remain stayed as I have discussed. Ms Harrison is not a beneficiary. Her attempt to hold up the Waiheke Island property sale led to the adverse costs award in issue.
[24] Ms Harrison expressed to me that her mother is unwell, that she stands to lose her home if bankrupted, that neither she nor her mother will have any prospect of renting another property if they are both bankrupt, and that apart from their own welfare they also have pets to look after. All of these are understandable concerns. Being placed into bankruptcy involves a change of status and it does have personal commercial consequences. However, I cannot guess what the result of an adjudication in bankruptcy would be on any property owned by Ms Harrison. She said she owns the house in which she and her mother live and that it has a mortgage on it. I accept that if she is bankrupt this could result in the Official Assignee taking steps in relation to the house, though I explained to Ms Harrison that certain assets are exempt. It is not for this Court on this application to speculate on what the result of a bankruptcy might be.
[25] There is just one point, however, which may be of relevance and which should not be overlooked by Ms Harrison. I expressly asked her whether she is in a position to pay the debt, and she informed me that she is. I asked whether she had any other debts and she informed me that she did not, apart from a mortgage on her house, and a credit card with a limit of $1,000. If that is the true position, the Official Assignee may well be able to realise assets, quite apart from the house, from which the apparently sole debt that Ms Harrison has to the trustees could be paid. Beyond that, I can make no further comment. If Ms Harrison is bankrupted that would be a matter for the Official Assignee.
[26] I also expressly asked Ms Harrison whether granting more time to meet the bankruptcy notice would assist her in paying the debt. She did not respond directly to this, preferring instead to refer me to a judgment of Lord Denning in which he stated that fraud unravels everything.8 She told me there is fraud and deception on the part of the trustees who are self-serving and have an ulterior motive in seeking to adjudicate her bankrupt. She said that she is in a totally different position, therefore, from a person who simply elects not to pay debts.
[27] I record once more that I disagree. Ms Harrison is not a beneficiary in the Trust. Nor is there any evidence before me of any probative value that the trustees have any liability for the actions to which Ms Harrison made reference. It is clear she is electing not to comply with the judgment of this Court.
[28] For these reasons I find that there is no basis to set aside the bankruptcy notice issued by the trustees, nor are there grounds to stay the proceeding as an abuse of process, and the application is declined.
Costs
[29] Mr Parmenter seeks costs. He acknowledges that whilst, on an application of this kind, it may have been possible to appoint other counsel to appear on the trustees’ behalf, and thereby save an airfare and taxi charges, he submits that this
would not have been appropriate in this case, for two reasons. First, he informed me
8 Lazarus Estates Ltd v Beasley [1956] 1 QB 702 (CA).
that every counsel who becomes involved with litigation between the trustees, Mrs Harrison and Ms Harrison ends up the subject of a complaint to the Law Society and in some cases to the Minister of Justice, and is also mentioned in a number of memoranda to the Court. For this reason he would not instruct other counsel, whereas he simply has to put up with this occurring.
[30] Mr Parmenter’s second reason is that the trustees could not commit to paying an agent as they do not presently have funds. He informed me that he is appearing for the trustees on credit and has done for a number of years.
[31] I agree that in the circumstances of this case the disbursements to be paid by
Ms Harrison are to include the cost of Mr Parmenter’s airfares and taxi fares.
Outcome
[32] The application to set aside the bankruptcy notice is dismissed.
[33] Ms Harrison will pay to the trustees costs on a 2B basis together with disbursements fixed by the Registrar, to include the cost of air and taxi travel as stated.
[34] The time for Ms Harrison to comply with the bankruptcy notice is extended to 4.00 pm on Tuesday, 6 September 2016. I acknowledge that Ms Harrison informed me more than once that she would not pay the sum demanded, but nonetheless I think it appropriate to give her a further brief period to do so. If the demand is not met by the time stated, the trustees may file an application for
adjudication.
J G Matthews
Associate Judge
Solicitors:
Birdsey & Associates, Auckland. Counsel: R O Parmenter, Auckland.
Ms A J Harrison, self-represented.
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