Harrison v Harrison

[2015] NZHC 244

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2014-409-000496 [2015] NZHC 244

IN THE MATTER	of the Insolvency Act 2006
AND
IN THE MATTER OF	the bankruptcy of PAULINE JANICE HARRISON
BETWEEN	GRAEME ROSS HARRISON and ADRIENNE HARRISON Judgment Creditors
AND	PAULINE JANICE HARRISON Judgment Debtor

Hearing:	23 February 2015
Appearances:	S J Shamy for Judgment Creditors P J Harrison (Judgment Debtor) in person with A J Harrison as McKenzie Friend
Judgment:	23 February 2015

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

on application to set aside bankruptcy notice

Introduction

[1]      The debtor (Miss Harrison) seeks an order setting aside a bankruptcy notice.

The judgment debt

[2]      Miss Harrison is indebted to the creditors as a result of a judgment debt, the judgment being of this Court and dated 1 March 2013.  Miss Harrison was ordered to

HARRISON v HARRISON [2015] NZHC 244 [23 February 2015]

pay to the creditors a total of $6,354 (with interest subsequently accruing at 5 per cent per annum).1

[3]      The creditors in turn give Miss Harrison a credit for costs of $1,666 awarded to her in subsequent proceedings.

Bankruptcy notice

[4]      The creditors had a bankruptcy notice issued on the basis of their judgment

(less credit).   The bankruptcy notice was served on Miss Harrison on 18 August

2014.

Application to set aside the bankruptcy notice

[5]      On 1 September 2014, Miss Harrison filed a document in the nature of an application to set aside the bankruptcy notice.  I say “in the nature of” because it was headed by Miss Harrison:

Defence motion to strike out bankruptcy notice of trustees by defrauded fixed final beneficiary victim – the Valerie Geard Trust on grounds of no case to answer under the rules and equity – and on grounds of vexatious abuse of Court process and violation of the rule of law doctrine of unclean hands.

[6]      The  document  itself  commenced  with  a  statement  that  Miss  Harrison disputed the validity of the notice served on her on 18 August 2014.

[7]      As no form is prescribed for an application to set aside a bankruptcy notice, I have treated the document filed by Miss Harrison as valid, at least in terms of its form.  Miss Harrison’s application was subsequently made the subject of a formally correct amended application.

[8]      The creditors, in their bankruptcy notice, had included as one address for service a facsimile number.  Miss Harrison sent the documents by facsimile to that number.  Raymond Parmenter, the barrister at that point acting for the creditors, has

exhibited   a   relevant   page   from   the   application   documents   which   indicates

1      High Court Rules, r 11.27; Judicature Act 1908 s 87; Judicature (Prescribed Rate of Interest) Order 2011.

transmission at 5.27 pm on 1 September 2014.  The page in question is the second page, the first page receipt details having been illegible.  Mr Parmenter deposes that the first page would have arrived moments before the second page.

[9]      Miss Harrison has not provided any evidence to directly dispute the timing of the facsimile transmission either from records or from her own recollection.   An affidavit of her daughter who was with her that afternoon refers to events at the Registry on 1 September which “caused the documents to evidently be faxed after

5.00 pm”.

[10]     I find as a probability that the facsimile transmission occurred later than 5.15 pm on 1 September 2014.

[11]     Miss Harrison suggested through her daughter’s evidence that the Registry was in some way to blame for the time it took for her documents to be accepted for filing on 1 September – those events saw the documents eventually accepted, apparently late in the afternoon.  I have no reliable basis upon which to conclude that Miss Harrison’s problem in filing documents on that day were due to the fault of

someone else.  Even the document eventually filed was formally very defective.2   In

any event, the judgment creditors are not implicated in the delays that afternoon and, in terms of the law, it is they who were required to be served by 5.00 pm.

The timing of the service

The statutory regime

[12]     The time limit of 10 working days for an application to set aside a statutory demand arises from ss 17(1)(d) and 17(4) of the Insolvency Act 2006.

[13]     The  reference  to  “working  days”  incorporates  a  requirement  to  exclude weekend days from time calculations.3   The prescribed form for bankruptcy notices

2 In the first case management conference Minute issued in the proceeding (by Associate Judge Matthews on 8 September 2014), the Court noted that the Registry had elected to treat the first document as an application to set aside the bankruptcy notice. But the Associate Judge expressly refrained from ruling on the point. I subsequently proceeded on the basis outlined in this judgment at [7].

3      Interpretation Act 1999, s 29.

(Form B2, Schedule 1 High Court Rules) requires that the original application be filed within the 10 working day period and a copy served on the judgment creditor within the same time.

[14]     Because the judgment creditors in this case specified in the bankruptcy notice a fax number at which documents might be served,4 r 6.6(3) of the High Court Rules operates providing:

(3)       When a document is transmitted electronically on a day that is not a working day, or after 5 pm on a working day, it must be treated as served on the first subsequent working day.

Discussion – service in this case

[15]   The Court is therefore required to treat Miss Harrison’s service of the application upon the judgment creditors as having occurred on 2 September 2014, one day outside the 10 working day period for application and service.

The effect of non-compliance with the 10 working day period

[16]     It is well established that there is no provision for the Court to extend the time for the filing of an application to set aside a bankruptcy notice.  As Robertson J explained in Re Dillon ex p Blueprint Developments Limited, it would make no sense if the Court were unable to “undo” an act of bankruptcy (which has already occurred on the expiry of the 10 working day period).5

[17]     The same position applies in relation to the filing of the application and the service of the  application.    I respectfully adopt  in  that  regard the reasoning of Associate Judge Gendall in Re Memelink ex p Sanco (NZ) Ltd,6  and of Associate

Judge Bell in Re Reynolds ex p Bartlett.7

4      Pursuant to High Court Rules, r 6.1(d)(iii).

5      Re Dillon ex parte Blueprint Developments Ltd  HC Auckland B2164/89, 27 March 1990; See also Alexander v S H Locke (NZ) Ltd (1998) 12 PRNZ 246.

6      Re Memelink ex p Sanco (NZ) Ltd Wellington, CIV-2008-485-2691, 10 March 2009.

7      Re Reynolds ex p Bartlett [2014] NZHC 447.

Conclusion on timing of application

[18]     Miss Harrison’s application was not served upon the judgment creditors until the 11th  working day after service of the bankruptcy notice.   The application is accordingly a nullity.  The appropriate course, unless there is any other issue with the notice, is to formally dismiss the application.

“Non-starter bankruptcy notice”

[19]     In her submissions, Miss Harrison described the bankruptcy notice as a “non-

starter”.

[20]     Miss Harrison submitted that the bankruptcy notice served upon her was flawed and she identified three particular reasons.

[21]     First, Miss Harrison noted that it is only a creditor who has obtained a “final judgment or a final order” who may rely on an unmet bankruptcy notice as an act of bankruptcy.8

[22]     The costs judgment or order upon which the judgment creditors rely in this case is a final judgment or order.  The time for review or appeal has passed.  The order has not been stayed.   The creditor is entitled to use the judgment in this bankruptcy context.9

[23]     Miss Harrison, in her submissions, referred many times to Toogood J as having indicated that his judgment was to lie in Court.  But the judgment of 1 March

2013 is before me.   It contains no order that the judgment was to lie in Court. Furthermore, the very fact that the judgment was subsequently sealed clearly evidences the fact that the judgment no longer lay in Court and no longer lies in

Court today.

8      By reason of s 17(1)(a) of the Insolvency Act 2006.

9      Re Dempster ex parte Auckland District Law Society, HC Auckland, B959/95, 27 November

1995 per Master Gambrill at 5-6; Re Payne ex parte Attorney-General HC Wellington. CIV-

2004-485-1723, 23 May 2005.  See also High Court Rules, r 14.8(1)(b) – providing that costs on interlocutory applications become payable once fixed.

[24]     Secondly, Miss Harrison submitted that the judgment creditors had failed to provide a certified copy of the judgment on service as required by the rules.

[25]     In fact, the judgment creditors filed an original sealed copy of the Court’s costs judgment.   Further certification of the judgment is not required.   This Court takes notice of its own seal upon judgments.

[26]     Thirdly,  in  focussing  on  the  act  of  service,  Miss  Harrison  complains particularly that the bankruptcy notice served upon her did not have attached to it a copy  of  the  judgment.    I observe  that  Miss  Harrison  did  not  provide  affidavit evidence as to the form in which she received the bankruptcy notice.   Equally, however, the deponent of the affidavit of service of the bankruptcy notice does not specifically depose to the notice having had attached to it a judgment.  I proceed on the basis that the service copy did not have a judgment attached to it.  The sealed judgment on which the judgment creditors rely has nonetheless been filed in the proceeding.   Miss Harrison does not dispute the fact the judgment was given but rather attacks it on the ground that it should not have been given.

[27]    Section 418 of the Act deals with defects in a bankruptcy proceeding. Relevantly it provides:

418     Defects in proceedings

(1)       A proceeding under this Act must not be invalidated or set aside for a defect (which includes misdescription, misnomer, or omission) in a step that must be taken as part of, or in connection with, the proceeding, unless a person is prejudiced by the defect.

(2)      …

[28]     If the judgment was not attached to the bankruptcy notice served on Miss Harrison then there plainly was an omission in a step that was a part of the proceeding.  This Court, by s 418(1) is required not to treat the bankruptcy notice as invalidated unless a person is prejudiced by the defect.  The only relevant person in this case would be Miss Harrison.  She has not deposed to any particular prejudice through the defect itself.  I am satisfied that there can have been no prejudice.  From the documents she has filed it is clear that Miss Harrison was at all material times

well aware of the judgment and was in a position to respond to the bankruptcy notice without receiving a copy of the judgment with the bankruptcy notice.10

[29]     Accordingly, just as my conclusion was in relation to the timing of service, I find that there is no basis to set aside the notice for the failure in relation to the attachment  or  lack  of  attachment  of  the  bankruptcy  notice.    I  must  treat  the application as a nullity.

Costs

[30]     Having given the above judgment, I heard from Miss Harrison and Mr Shamy on the issue of costs.    I indicated to Miss Harrison that the High Court Rules generally expect a Judge to deal with the costs of an interlocutory application when it is determined, as this has been.  I indicated to Miss Harrison that the usual rule is that costs follow the event, in relation to a proceeding.   The judgment creditors, having been successful, would generally be entitled to costs.  Miss Harrison stated in no uncertain terms to me that she would not be paying the costs order.  I asked her to focus on whether a costs order should be made in the first place.  She referred me to issues  which  I  will  have  to  come  to  consider  in  the  course  of  the  opposed adjudication application which will now be heard this afternoon.  Those issues relate to Miss Harrison’s suggestions that the creditors are acting with ulterior motives, that the bankruptcy proceeding involves an abuse of process and that to award costs would amount to a breach of the rule of law.

[31]     I view the appropriate outcome of this application as involving a relatively straightforward  application  of  the  rules  applying  to  the  bankruptcy  jurisdiction. There is no reason to engage in concepts such as abuse of process for the reasons set out earlier in this judgment.  The judgment creditors, in having the bankruptcy notice issued, relied upon a debt for which judgment had been obtained regularly, and the judgment had not been subsequently stayed or appealed.  Justice and the rule of law are  two-way  streets.    The  judgment  creditors  can  reasonably  look  to  Court  to

approach costs consistently with the way they have been applied in the past.  An

10     See the comment of Rodney Hansen J in Re Sharma, ex parte Wati HC Auckland CIV-2009-404-

6367, 30 September 2011 at [27] and Associate Judge Sargisson in Don v GR International Ltd
HC Auckland CIV-2005-404-1720, 21 December 2005 at [7].

award  of  costs  was  utterly  predictable  in  this  case  if  the  debtor  failed  in  her application.

[32]     It is therefore appropriate that there be an award of costs on a Category 2B

basis.

Order

[33]     The orders I make are these:

(a)       Miss Harrison’s application is dismissed;

(b)Miss Harrison is to pay to the judgment creditors the costs of the application on a 2B basis together with disbursements to be fixed by the Registrar.

Associate Judge Osborne

Solicitors:

Birdsey & Associates, Auckland

Counsel: Ray Parmenter, Barrister, Auckland.

S J Shamy, Barrister, Christchurch

Ms P J Harrison, Christchurch – Judgment Debtor.