Heeni v Commissioner of Inland Revenue
[2020] NZHC 2764
•21 October 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-128
[2020] NZHC 2764
IN THE MATTER OF the Insolvency Act 2006 BETWEEN
AROHA HEENI
Applicant
AND
THE COMMISSIONER OF INLAND REVENUE
Respondent
Hearing: 11 September 2020 Appearances:
Ms Heeni in person, with her support person Noa Ehine C Van Der Merwe for the Respondent
Judgment:
21 October 2020
RESERVED JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by me on 21 October 2020 at 3pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Inland Revenue, Auckland
Copy to:
A Heeni, Auckland
Heeni v The Commissioner of Inland Revenue [2020] NZHC 2764 [21 October 2020]
[1] Ms Heeni was adjudicated bankrupt on the application of the respondent (the Commissioner), by order made by Associate Judge Bell on 14 May 2020. Ms Heeni did not appear at the hearing on 14 May 2020, and she now applies for an order under s 309(1)(a) of the Insolvency Act 2006 (the Act) annulling the adjudication order.
The bankruptcy
[2] According to the Commissioner’s application for the adjudication order, which was duly verified as required by the High Court Rules 2016, Ms Heeni owed taxes and penalties totalling $736,644.78. The Commissioner calculated that sum as follows:
(1) amount due on a final judgment given in the Waitakere District Court on 5 November 2018 - $330,506.28
(2) additional penalties and interest - $406,138.50.
[3] A bankruptcy notice had earlier been served on Ms Heeni, but her application to set that notice aside was dismissed in an oral judgment given by Associate Judge Bell on 31 October 2019.1 The Commissioner then filed her application for the adjudication order.
Associate Judge Bell’s judgment on Ms Heeni’s application to set aside the bankruptcy notice
[4] The Associate Judge first noted that Ms Heeni had not filed any appeal against the District Court judgment, and had not applied for a stay of execution. The District Court decision was therefore final.
[5] Associate Judge Bell referred to Ms Heeni’s contention that the Commissioner had made incorrect assessments of Ms Heeni’s income tax liabilities. His Honour recorded that he had pointed out to Ms Heeni at an earlier call of the setting aside application that assessments of income tax are final and conclusive under s 109 of the Tax Administration Act (the TAA) once the period for challenge had expired, and the period for challenge had expired in Ms Heeni’s case. The only avenue of relief that
1 Commissioner of Inland Revenue v Heeni [2019] NZHC 2843.
might have been available to Ms Heeni would have been a request by her to the Commissioner to review the assessments under s 113 of the TAA. But that was not something the Court could compel.
[6] Ms Heeni had supplied some further information to the Commissioner after the earlier hearing, but she was unable to persuade the Commissioner that the assessments were wrong and should be reviewed under s 113. An officer of the Inland Revenue Department gave evidence that she had reviewed the further information provided by Ms Heeni, but was satisfied that the original assessments should stand.
[7] No other ground for setting aside the bankruptcy notice having been advanced, the Associate Judge dismissed Ms Heeni’s application.
The notice issue
[8] There is a question as to whether Ms Heeni had proper notice of the adjudication hearing on 14 May 2020.
[9] The bankruptcy application was first called in this Court before Associate Judge Sargisson on 19 March 2020. Ms Heeni was present in Court with her support person, Mr Makaere, as was Mr Van Der Merwe representing the Commissioner. The Associate Judge recorded in her Minute of the hearing that Ms Heeni wished to take the opportunity to oppose the bankruptcy application. Ms Heeni was directed to file any notice of opposition, with a supporting affidavit, by 28 April 2020. The Associate Judge directed that any affidavit in opposition was to set out any factual matters relied on by Ms Heeni for the exercise of the Court’s discretion to refuse an order under s 37 of the Act, on the grounds that it would be just and equitable to refuse an order of adjudication. The case was then adjourned to 14 May 2020.
[10] Associate Judge Sargisson’s Minute of the 19 March 2020 hearing records that Mr Makaere asked for a transcript of the hearing, but that request was declined on the basis that the Court would not ordinarily grant such a request in relation to a mentions hearing (particularly as the Judge’s Minute of the hearing would record the directions made).
[11] Ms Heeni apparently did not take in the timetable orders made by the Associate Judge at the hearing on 19 March 2020, although Mr Van Der Merwe has confirmed that the orders were made in open Court when both he and Ms Heeni were present.
[12] The Associate Judge’s Minute of the 19 March 2020 hearing was emailed to Ms Heeni on 23 March 2020. Unfortunately, it was sent to the wrong email address. Ms Heeni’s correct email address contains the expression “bookkeeper”, but the last two letters of that expression were omitted from the email address to which the Minute was sent. Ms Heeni says that she never received the Minute.
[13] When she had not received the Minute by 24 March 2020, Ms Heeni sent an email to the Registrar requesting a copy of it. She asked in the alternative for a transcript of the 19 March 2020 hearing. She then said:
I rely on this to appreciate my movement going forward – I note the days are already going past from the Thursday 19th now to Tuesday 24th I also am very aware of timeframes that have been given for me to complete the information that is within the minute of the Judge.
[14] It is not disputed that this email was sent to the Registrar. Unfortunately, it was sent at 4.09pm on 24 March 2020, and it was not picked up before the commencement of the Level 4 lockdown for the coronavirus. Ms Heeni did not receive any reply.
[15] Ms Heeni apparently did not follow up again with the Court or the Commissioner after she sent her email to the Court on 24 March 2020, and she did not file any notice of opposition or affidavit in opposition as directed.
[16] At 12.27pm on 13 May 2020, the day before the adjourned hearing, the case manager sent an email to Ms Heeni and Mr Van Der Merwe reminding both of them of the list call at 10.45am the following day. This email was sent to Ms Heeni’s correct email address, but apparently she did not receive it in time for the 14 May 2020 hearing. At 3.04pm on 14 May 2020, after she had been adjudicated bankrupt, she sent an email to the Registrar saying:
I have just this minute received this first correspondence by email from you
… are you saying that I was supposed to appear today?? This was not provided to me at an earlier time to state a notice to attend … please be reminded that I still have not received the minute of the Judge as I requested.
[17] The situation was then referred to Associate Judge Bell. His Honour issued the following Minute on 15 May 2020:
On 14 May 2020 I made an order adjudicating Ms Heeni bankrupt and awarding costs to the Commissioner. Today I have been advised that Ms Heeni has contacted the Court Registry saying that she did not have notice of the hearing yesterday.
She says that Associate Judge Sargisson’s Minute of 19 March 2020 was sent to an incorrect email address.
One of Ms Heeni’s remedies may be to apply for annulment of her adjudication under s 309(1)(a) of the Insolvency Act 2006 on the ground that she should not have been adjudicated bankrupt.
She will need to file an application and an affidavit setting out the facts she relies on and serve it on the Official Assignee and the Inland Revenue.
Any application will be put in a bankruptcy list on a date fixed by the Registrar.
Ms Heeni’s annulment application
[18] Ms Heeni filed her application for an annulment order on 17 June 2020. The application relied on the following grounds:
(1) The reference in the Minute of Associate Judge Sargisson to the “just and equitable” grounds in s 37 of the Act; and
(2) The reference in Associate Judge Bell’s Minute of 15 May 2020 to the possibility that Ms Heeni might apply for an annulment order on the ground that she should not have been adjudicated bankrupt.
[19] With her application, Ms Heeni filed a short affidavit, referring to the Court Minutes set out above and the fact that she did not receive a copy of Associate Judge Sargisson’s Minute. She said that she believed she had an equitable right to have the situation rectified, so that she could make an appearance and have the matter appropriately resolved. Ms Heeni went on to say:
[5]Having provided Inland Revenue with three returns, one of which was an independent forensic audit, from the complete set of true accounts which are in my sole possession, I am totally mystified as to how Inland Revenue can disregard and discard the evidence in order to
arbitrarily insert its own figures as a true and accurate record; thus creating a “default” debt in its favour and requiring payment.
[6]In respect of point 5 above Inland Revenue, at no time, has provided documentary evidence supporting its “default” amount.
Other material filed for Ms Heeni in support
[20] On 27 August 2020, Ms Heeni submitted a document described as a “further affidavit”, which she had signed but which had not been properly attested as an affidavit. I will treat the document as a supplementary submission in support of her application.
[21] The document is difficult to follow, but it appears that Ms Heeni was seeking in it (in some way that is not clear to the Court) to rely on Te Ture Whenua Maori Act 1993, ss 2(3) and 5. Ms Heeni submitted that there was a “variable” in the case, in that “Constructive Trust CIV-2019-404-000128 has been established to administrate the matter at hand”. That CIV number is the number (administratively assigned by the Registrar) which identifies this proceeding. Ms Heeni was said to be one of the objects of the constructive trust “as the sole beneficiary”, and the judicial officer appointed to preside at the hearing of the annulment application was purportedly appointed trustee of the claimed trust.
[22] Ms Heeni asked in the “further affidavit” that the “corpus” of the trust be applied to settle the matter at hand in the best interests of Ms Heeni as beneficiary.
[23] Ms Heeni went on in the “further affidavit” to seek compensation for the negative effects the bankruptcy proceedings have had on her. She said that after extended consultation with her kaumatua, she has assessed that the trustee should provide her with “succour and assistance”, in the sum of $10 million (to be paid in gold bullion). In the event that there was insufficient capacity in the trust to pay that sum, Ms Heeni purportedly authorised “the trustee” to access her beneficial interests in terms of “The Maori Real Estate Management Act 1867 as well as in terms of Te Ture Whenua Maori Act 1993, s 242”.
[24] In addition to the “further affidavit”, Ms Heeni submitted a document dated 10 September 2020 headed “Notice of Requirement to Settle Matters in Accord with Equity Law”. This document referred to the purported constructive trust, and to Ms Heeni’s “further affidavit” document. The document went on to record repeated requests said to have been made of the Commissioner for full disclosure of how the Commissioner arrived at the debt, and the Commissioner’s alleged failure to provide that disclosure. Ms Heeni said that the Commissioner has only ever provided a “Summary of Account”, specifically using the word “Assessment” (“thereby denoting that a proper and lawful true set of full accounts cannot have been used to lawfully establish the claimed debt”).
[25] The Notice document then challenged Ms Hilary Mattyasovsky’s affidavit sworn on 3 September 2020, on the basis that Ms Mattyasovsky did not have first- hand knowledge of the matters contained in the affidavit.
[26] Ms Heeni submitted a further brief “Notice” document on the morning of the hearing. In it, Ms Heeni emphasised her claim to standing as the sole beneficiary of the claimed constructive trust, and she acknowledged the Court and counsel for the Commissioner as the “appointed trustees”. She required “the trustees” to exercise their fiduciary duties and settle the matter as per the stipulations in the “further affidavit”.
[27] Ms Heeni purported to file a “Third and Final Notice of Requirement to Settle Matters in Accord with Equity Law”, on 12 October 2020. No leave was granted for the filing of this further submission, which appears in any event to repeat arguments made in earlier documents filed by or for Ms Heeni.
The Commissioner’s notice of opposition
[28] In a brief notice of opposition, the Commissioner contended that it is clear that Ms Heeni should have been adjudicated bankrupt. The debt to the Commissioner remains unpaid, and none of the grounds in s 309 of the Act have been satisfied. The Commissioner contended that there is a public interest in maintaining Ms Heeni’s bankruptcy.
[29] The Commissioner’s opposition was supported by an affidavit of Ms Mattyasovszky, a collections officer employed by the Commissioner. Ms Mattyasovszky summarised the background of the proceedings to date, including the District Court proceeding in the Waitakere District Court in which the Commissioner obtained judgment for $330,462.80, and subsequent proceedings in this Court following the issue of the bankruptcy notice.
The Official Assignee’s report
[30] The Official Assignee (“the Assignee”) provided a report on the annulment application on 21 August 2020. Ms Heeni had not then filed her statement of affairs in the bankruptcy, but the report referred to the following known assets:
(i)properties in Cobham Crescent, Kelston, and Stephen Avenue, Henderson.
(ii)an interest in the Tu Arahi Trust, and another trust of unknown name.
(iii)company shares in companies called BIZNZ Solutions Limited, BTNZ Limited, and Internet Promotions International Limited.
(iv)insolvent transfer of a share in Foci Solutions Limited.
(v)business called Bookkeeper Express.
[31] The Assignee was not aware of any secured creditors. Unsecured creditors have filed claims totalling $1,095,981.81, made up as follows:
(i)Bank of New Zealand $7,730.57.
(ii)Bookkeeper Express Limited (in liquidation) $252,620.
(iii)Commissioner of Inland Revenue $835,631.24
[32] The Assignee noted that there are two further creditors with relatively small claims who have not yet filed proofs of debt. The Assignee’s fees and disbursements to date totalled $12,176.95.
[33] The report advised that the Assignee would abide the Court’s decision as to whether an annulment order should be made.
Applications for annulment orders – legal principles
[34]Section 309 of the Act materially provides:
309 Court may annul adjudication
(1)The court may, on the application of the Assignee or any person interested, annul the adjudication if—
(a)the court considers that the bankrupt should not have been adjudicated bankrupt; or
…
[35] For an application under s 309(1)(a) to succeed, there must generally have been some defect in the procedure, or abuse of process, where subsequent evidence shows that not all of the facts were before the Court making the adjudication order (as long as the unknown facts would have made a difference on the adjudication application).
[36] Section 309 applications have been held to require a two-stage approach. First, the Court must be satisfied that one of the grounds in s 309(1) has been made out. Secondly, the Court must decide whether to exercise its discretion to annul the adjudication. In the exercise of that discretion, regard is had to the public interest, and to the wishes of the parties to the application.2
[37] In Frederickson v Centurion Finance Ltd, the Court found that a bankrupt’s alleged lack of knowledge of the adjudication proceeding may have been a “material fact” for the purposes of ss (1)(a) of s 119 of the Insolvency Act 1967 (the forerunner of s 309(1)(a) of the Act), but the Court nevertheless refused to grant an annulment on the basis that the presence of the bankrupt at the adjudication proceeding could not
2 Re Guest, ex parte BNZ Finance Ltd [1991] 1 NZLR 250 (HC), (1990) 4 PRNZ 351.
have changed the outcome.3 The bankrupt had failed to demonstrate that the Court would not have adjudicated him bankrupt had he been present.
[38] As the Court made clear in Re Hunter, ex parte Commissioner of Inland Revenue, once an order of adjudication is made and the bankrupt's rights of appeal are exhausted, the bankrupt is bound by the underlying judgment.4 The bankrupt cannot challenge the judgment upon which the adjudication was made in an annulment application, as the right to challenge the judgment vests in the Assignee — Boaler v Power,5 cited in Re Ironstone Holdings Ltd, ex parte Prasad.6
[39] The decided cases make it clear that s 309(1)(a) should be interpreted narrowly. As Associate Judge Sargisson said in Re Willis, ex parte Willis, the s 309(1)(a) procedure is not a vehicle for going behind or challenging a judgment debt on which the bankruptcy was founded. Section 309(1)(a) does not provide a forum for a bankrupt to re-litigate the merits of the adjudication application.7
The tax assessments
[40] Section 106 of the TAA empowers the Commissioner to make a default assessment in the absence of a tax return filed by a taxpayer. The section materially provides:
106 Assessment where default made in furnishing returns
(1) If any person makes default in furnishing any return, or if the Commissioner is not satisfied with the return made by any person, or if the Commissioner has reason to suppose that any person, although the person has not made a return, is a taxpayer, the Commissioner may make an assessment of the amount on which in the Commissioner’s judgment tax ought to be imposed and of the amount of that tax, and that person shall be liable to pay the tax so assessed, save so far as the person establishes on objection or in proceedings challenging the assessment that the assessment is excessive or that the person is not chargeable with tax.
…
3 Frederickson v Centurion Finance Ltd HC Auckland B259-01, 11 February 2005.
4 Re Hunter, ex parte Commissioner of Inland Revenue (2000) 19 NZTC 15722 (HC) at [48] - [52]. See also Kipping v UDC Finance Ltd [2012] NZHC 1707 at [62].
5 Boaler v Power [1910] 2 KB 229 (CA).
6 Re Ironstone Holdings Ltd, ex parte Prasad [2013] NZHC 3529 at [21].
7 Re Willis, ex parte Willis [2017] NZHC 2586 at [38].
(1D) If a person who is required to provide a GST tax return for a GST return period does not provide a GST tax return for the return period, or provides a GST tax return with which the Commissioner is not satisfied, the Commissioner may make an assessment of the GST payable by the person for the return period.
(1E) A person who is assessed under subsection (1D) is liable to pay the GST assessed unless the person establishes in proceedings challenging the assessment that the assessment is excessive, or that the person is not chargeable with GST.
…
[41] In this case, Ms Heeni failed to file income tax returns for each of the tax years 31 March 2013 through to 31 March 2016. The Commissioner issued notices of default assessment to Ms Heeni under s 106 of the TAA for those years. The notices of default assessment were issued in May 2017, with advice to Ms Heeni that if she wished to dispute the assessments she must file a notice of proposed adjustment (“NOPA”), along with the tax returns, within four months. Ms Heeni did not file any NOPAs within the four month period.
[42] The Commissioner’s decisions to issue the default assessments were “disputable decisions” under s 3 of the TAA. That meant that Ms Heeni could only challenge the assessment by objection proceedings under Part 8 of the TAA, or by challenge proceedings under Part 8A. Ms Heeni did neither, and the assessments are not now open to challenge in any court. That is the effect of s 109 of the TAA, which provides:
109 Disputable decisions deemed correct except in proceedings
Except in objection proceedings under Part 8 or a challenge under Part 8A,—
(a)no disputable decision may be disputed in a court or in any proceedings on any ground whatsoever; and
(b)every disputable decision and, where relevant, all of its particulars are deemed to be, and are to be taken as being, correct in all respects.
[43] The purpose and effect of s 109 has been considered by the Supreme Court on a number of occasions. In Tannadyce Investments v Commissioner of Inland Revenue Tipping J, delivering the judgment of the majority of the Supreme Court, said:8
8 Tannadyce Investments v Commissioner of Inland Revenue [2011] NZSC 158, [2012] 2 NZLR 153 at [53].
[53] … The definition of a disputable decision includes an assessment, so the effect of s 109 is that no assessment or other disputable decision, as defined, may be disputed in any court or in any proceedings on any ground whatsoever, except in proceedings taken under the [TAA]. It is clear that by means of s 109 Parliament was concerned to ensure that disputes and challenges capable of being brought under the statutory procedures were brought in that way and were not made the subject of any other form of proceeding in a court or otherwise.
[54] The words "on any ground whatsoever" [in s 109] must have been designed to emphasise the comprehensive nature of the embargo on bringing proceedings outside the statutory framework. Conversely, Parliament must have contemplated, by the use of those words, that disputable decisions could and should be contested and challenged under the statutory procedures on any ground whatsoever…
[44]The purpose of s 109 was again considered by the Supreme Court in Skinner v
R.9 The Court noted that the articulation of the purpose of s 109 in Tannadyce highlights the emphasis on the function of s 109 as being designed to channel proceedings contesting the accuracy or legality of an assessment or other disputable decision into the procedural framework of Part 4A and Part 8A of the TAA. That prevents collateral challenges or proceedings that are not subject to the same procedural requirements and time limitations as those prescribed in Part 4A and Part 8A.10
Discussions and conclusions
Did something go wrong with the procedure that led to the adjudication order being made?
[45] I accept that Ms Heeni did not receive Associate Judge Sargisson’s Minute of the hearing on 19 March 2020. That Minute stated the date by which Ms Heeni was to file and serve her notice of opposition and affidavit, and the date (14 May 2020) when the case would next be called in Court. Ms Heeni was present in Court when that information was provided by the Associate Judge, but I accept many litigants find Court appearances very stressful, and they may not take in what is said by the Court in the course of the hearing. And when the Minute was unfortunately sent to the wrong email address, Ms Heeni did follow up with a request for a copy of it soon after the hearing.
9 Skinner v R [2016] NZSC 101, [2017] 1 NZLR 289.
10 At [17].
[46] An important factor in Ms Heeni’s favour on the notice of hearing issue, is that the country went into Level 4 lockdown within a matter of a day or so after Ms Heeni sent her follow-up email to the Court on 24 March 2020. While essential services (including the Court Registry) did continue, most people’s routines were seriously disrupted. Auckland Bankruptcy list hearings scheduled for April 2020 were all adjourned. Ms Heeni had sent her email to the Court explaining that she needed confirmation of the dates fixed at the 19 March hearing, and when she did not receive a response to that email it would have been natural enough for her to have assumed that the Court had the matter in hand, and that she would receive further advice from the Registrar once arrangements had been sorted out for what could have been an extended lockdown period.
[47] Ms Heeni did receive advice by email on 13 May 2020 that the hearing would take place the following day, but it appears that she did not check her emails between the time that email was sent (12.27pm on 13 May 2020) and the afternoon of 14 May 2020. By then it was too late: the adjudication order had been made.
[48] In Norris Ward McKinnon v Kaye, Associate Judge Doogue considered whether any error, no matter arising from what cause, concerning the hearing date, would suffice to justify the making of an annulment order.11 The Associate Judge concluded on that issue:12
I consider that the legal requirements can be formulated by stating that the court is unlikely to exercise its discretion to order annulment unless it is satisfied that the applicant took reasonable steps to protect his or her own interests and in particular made a reasonable effort to ascertain what the true hearing date was.
I accept that in determining what is a reasonable effort is not necessarily excluding considerations personal to the party served. Obviously questions of literacy, familiarity with the English language, illness and the like could all affect the ability of the parties serve (sic) to come to a correct understanding of what the document meant.
[49] In the very unusual circumstances of this case (Minute going to the wrong email address, prompt request by Ms Heeni for written advice of the adjourned hearing date, and the supervening Covid lockdown period requiring the adjournment of many
11 Norris Ward McKinnon v Kaye [2016] NZHC 3089.
12 At [26] - [27].
scheduled cases in any event), I do not think it would be fair to conclude that Ms Heeni failed to take steps that a reasonable lay litigant in her position would reasonably have taken to ascertain the hearing date. And while notice of the adjourned hearing date was eventually sent to her correct email address, it was only sent in the middle of the day before the hearing. In the particular circumstances of this case I do not think Ms Heeni can be criticised for failing to check her emails for a period of around 24 hours. She had asked for advice about the hearing date approximately seven weeks earlier, and she would reasonably have expected to receive more than half a day’s advance notice of the adjourned hearing.
[50] For all those reasons, I am satisfied that something did go wrong with the procedure in this case, and that the defect in the procedure played a material part in Ms Heeni’s failure to appear at the hearing on 14 May 2020.
The exercise of the Court’s discretion
[51] The law is clear that, on an annulment application, I cannot entertain argument to the effect that the tax debt is not owing. The tax debt is the subject of a judgment in the District Court, and that judgment has not been the subject of any appeal or setting aside application. Any appeal or setting aside application would in any event be a matter for the Official Assignee, not Ms Heeni.
[52] Ms Heeni relied on the Minutes of Associate Judge Sargisson dated 19 March 2020 and Associate Judge Bell dated 15 May 2020, but there is nothing in those Minutes which could be relied upon as a basis for enquiring into the validity of the underlying judgment on which the adjudication application was based.
[53] Associate Judge Sargisson said in her Minute of 19 March 2020 that the jurisdictional grounds for an order of adjudication had been established. The jurisdictional grounds for an adjudication order are set out in s 13 of the Act, and one of them is that the debtor owes the creditor $1,000 or more.13 The Associate Judge was
13 Section 13 of the Insolvency Act 2006 provides:
13 When creditor may apply for debtor’s adjudication
A creditor may apply for a debtor to be adjudicated bankrupt if—
clearly satisfied that was the position, and when she referred to the possibility of Ms Heeni raising arguments under s 37 of the Act she was not inviting further argument from Ms Heeni on whether or not the debt was owing.
[54] Associate Judge Sargisson’s reference to the “just and equitable” jurisdiction of the Court was a reference to the Court’s discretion to refuse to make an adjudication order under s 37(c) of the Act, even where the debt is clearly owing to the creditor. Section 37 of the Act provides:
37 Court may refuse adjudication
The court may, at its discretion, refuse to adjudicate the debtor bankrupt if—
(a)the applicant creditor has not established the requirements set out in section 13; or
(b)the debtor is able to pay his or her debts; or
(c)it is just and equitable that the court does not make an order of adjudication; or
(d)for any other reason an order of adjudication should not be made.
[55] In this case, there is an issue as to whether the Court would still have adjudicated Ms Heeni bankrupt if she had been present at the hearing on 14 May 2020. I do not think it is sufficiently clear that the Court would have done so, that I can apply authorities such as Frederickson v Centurion Finance Ltd and conclude that there would be no point in annulling the adjudication order and allowing the bankruptcy application to continue. Once the Court is satisfied that the judgment debtor has not had sufficient notice of the hearing at which the adjudication order is made, I think there would normally need to be a very clear case that annulment would be pointless for the Court to exercise its discretion against making an annulment order. I am not satisfied that the evidence satisfies that test in this case.
(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.
[56] The primary matter of concern is that Ms Heeni told me at the hearing that she is concerned that her mokopuna should be cared for in an appropriate manner, and she was concerned how that could be achieved while she remained an undischarged bankrupt. She did not say how many children she has to care for, or how they have been looked after since her company was put into liquidation, but those may well be considerations to be taken into account by the Court in the exercise of its discretion under s 37(c) or (d) of the Act. I appreciate that it might be said that Ms Heeni could have produced evidence on those matters in support of her annulment application, but she has been acting without legal assistance, and I think it would have been understandable if she assumed that, whatever arguments she might wish to advance in opposition to the bankruptcy application, the problems that arose with the written notice of 14 May 2020 hearing gave her a trump card on the annulment application.
[57] Ms Heeni did not delay in making her application to annul the adjudication order, and I think it is important that a litigant in her position should not be prejudiced by any reasonable risk that she might not have had a fair opportunity to present her case. In my view she should be given a further opportunity to present any relevant evidence in respect of her family/whanau situation, and how a bankruptcy might impact on her ability to support herself and any children in her care.
[58] However any further evidence or argument designed to show that she does not owe the debt claimed by the Commissioner is unlikely to be allowed. That is an issue on which Associate Judge Bell ruled against Ms Heeni on her application to set aside the bankruptcy notice, and she did not appeal that judgment.
[59] Nor was there any merit in the “further affidavit”, or in the various Notices to Settle. They did nothing to assist Ms Heeni’s position. The constructive trust argument, which neither Ms Heeni nor Ms Ehine (who I allowed to address me at the hearing) was able to satisfactorily explain, was clearly hopeless (there could be no question of the Court somehow acting as a “trustee” for Ms Heeni, to somehow settle the proceeding on her behalf). Nor was there any merit in the purported claim for $10 million in damages.
[60] Various references were made in the documents filed by Ms Heeni to provisions in Te Ture Whenua Maori Act 1993, but I do not think any of those references assisted Ms Heeni’s case. For example, reference was made to s 242 of that Act, which permits the “Court” to order that any money held in trust for any Maori be paid to the person beneficially entitled to the money. There was no evidence before me that Ms Heeni is beneficially entitled to any money held in trust that might be sufficient to meet her substantial debts, and even if there were, this Court would have no jurisdiction to order that such money be paid to Ms Heeni or her creditors – the word “Court” in s 242 refers to the Maori Land Court (or the Maori Appellate Court as appropriate), not this Court.
[61] Ms Heeni may have little prospect of successfully resisting the bankruptcy claim, but the issues relating to the written notice of the hearing, and the risk that Ms Heeni might not have had a fair opportunity to put her case before the Court, persuade me that the justice of the case requires that I make the annulment order sought. As that order will not involve a determination of the merits of the Commissioner’s adjudication application, the Commissioner’s existing adjudication application will need to be reheard, on a date to be fixed by the Court.
Result:
[62]I make the following orders:
(1)Under s 309(1)(a) of the Act, annulling the adjudication order made on 14 May 2020;
(2)Directing that the Commissioner’s adjudication application is to be the subject of a rehearing. The case is to be called for mention in the bankruptcy list on 12 November 2020 at 10.45am, with a view to a fixture then being allocated for a half day hearing.
(3)Ms Heeni is to file and serve a formal notice of opposition, and further affidavits directed to any arguments she may have under s 37(c) or (d) of the Act, by 5pm on 5 November 2020.
(4)I make no order for costs.
Associate Judge Smith
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