Indiana Publications (NZ) Limited v Prasad HC Auckland CIV ,2010-404-3333

[2010] NZHC 1850

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2010-404-003333

IN THE MATTER OF     Section 13 of the Insolvency Act 2006

BETWEEN  INDIANA PUBLICATIONS (NZ) LIMITED

Judgment Creditor

ANDRAJENDRA PRASAD Judgment Debtor

Hearing:         8 October 2010

Counsel:         GM Harrison for judgment creditor Appearance:  R Prasad, judgment debtor in person Judgment:  11 October 2010 at 11:30

JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for an adjudication order]

Solicitors:           Parshotam & Co, PO Box 27 079, Auckland

And To:             R Prasad, 3 Mono Place, Ellerslie

INDIANA PUBLICATIONS (NZ) LTD V  PRASAD HC AK CIV 2010-404-003333  11 October 2010

[1]      The judgment creditor applies for an order adjudicating Rajendra Prasad a bankrupt.

[2]      The  judgment   creditor  has  obtained  a  number  of  judgments  against Mr Prasad.     They  are  recorded  in  paragraph  2(b)  of  the  application  for  an adjudication order and total $46,709.00.  Further orders of the High Court have been made in favour of the judgment creditor against the judgment debtor being:

a)        An order of Associate Judge Bell on 27 July 2010 in the sum of

$3,008; and

b)        An  order  of  Justice  Cooper  on  23 August  2010  in  the  sum  of

$9,700.00.

The  amount  due  under  the  judgments,  without  taking  into  account  interest,  is

$59,417.00.

[3]      The  judgment  creditor  requested  a  bankruptcy  notice  be  issued.     A bankruptcy notice was issued.   The judgment debtor raised an issue concerning service of it, which was dealt with by Associate Judge Bell.  As a result of Associate Judge Bell’s judgment the judgment debtor had until 2 August to satisfy the bankruptcy notice.   He did not.   Accordingly, as at 3 August 2010 the judgment debtor committed an act of bankruptcy.

[4]      The judgment creditor filed an application for an adjudication order.   The judgment debtor appeared at the first call of the application on 16 September 2010. The judgment debtor had, on 14 September 2010, filed a notice of opposition to the adjudication application.   Associate Judge Doogue adjourned the application for a defended fixture.

[5]      The judgment debtor, in his notice of opposition, recounted a series of steps and court decisions involving a dispute with the judgment creditor.  Mr Harrison has correctly,  in  my  view,  identified  what  are  the  three  grounds  advanced  by  the judgment debtor in opposition to the application for adjudication.

[6]      The first ground asserts that an application for an adjudication order may rely on one debt or one judgment only.  No authority is given for that proposition.  Nor can I find any proper basis for it.  It may well be that the judgment debtor, in this case,  confuses  the  position  which  arises  in  respect  of  a  bankruptcy  notice. Bankruptcy notices are dealt with in Part 24, Subpart 3 of the High Court Rules.  It has long been held that a bankruptcy notice can be issued in respect of only one

judgment: re Low,[1]  Carlyle v McCardle Richardson.[2]    The reason for that is that a

debtor can choose which notice he will satisfy or raise a counterclaim, set-off or cross-demand to extinguish the notice.   That is a debtor’s choice not a creditor’s choice.  However, once a bankruptcy notice is issued and is not complied with, an act of bankruptcy is committed giving rise to the ability of a creditor to apply, within

three months of that act of bankruptcy, for an order of adjudication.[3]    Accordingly,

the first ground in opposition cannot be sustained.

[1] re Low [1891] 1 QB 148.

[2] Carlyle v McCardle Richardson HC Wellington B394/96, 12 March 1997.

[3] Insolvency Act 2006, s 13(b).

[7]      The  second  ground  was  dealt  with  extensively  by  Mr Prasad  in  his submissions.    There  is  no  need  for  me  to  examine  those  submissions  in  depth because what was involved in Mr Prasad’s submissions was an attack on the very judgments that had been entered by this court.   Judgments may be challenged, in appropriate cases, by appeal, applications for rehearing or recall.   They are not matters, however, that can be the subject of review in an application for an adjudication order.  To allow this would be to allow a collateral attack upon the final decision where the parties have already had a full opportunity of contesting the decision in the court by which the judgment was made: Hunter v Chief Constable of

West Midlands Police.[4]

[4] Hunter v  Chief Constable of West Midlands Police [1982] AC 529 at 541; [1981] 3 All ER 727 (HL).

[8]      The  third  ground  calls  for  the  judgment  creditor’s  counsel  to  submit  all invoices which were the basis for the judgment for costs.  It faces the same objection that I have referred to when dealing with the second ground.  There is no justification for my opening up matters that have been the subject of a court order.

[9]      The judgment debtor drew attention to the fact that he had lodged an appeal against the judgment which is the foundation for the bankruptcy notice.   His application for leave to appeal that judgment was declined by Justice Wylie.   No further application pursuant to r 12 of the High Court Rules has been made.  Nor can I see, in this case, any justification for making an order pursuant to the Insolvency Act 2006, s 42.  Suffice to say, I have considered matters which were summarised in

re Pillay ex parte ANZ National Bank Ltd.[5]

[5] Re Pillay ex parte ANZ National Bank Ltd HC Auckland CIV 2009-404-4175, 3 December 2009.

[10]     I have also considered the fact that there is a challenge to Associate Judge Bell’s judgment dealing with the bankruptcy notice.  I do not consider that there is any justification for ordering a stay on general principles in respect of that judgment either.

[11]   The jurisdictional requirements which must be met before an order of adjudication  is  made  are  contained  in  the  Insolvency  Act  2006,  ss 13  and  36. Section 13 provides:

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

Section 36 provides:

36.      Court may adjudicate debtor bankrupt

The  Court  may,  at  its  discretion,  adjudicate  the  debtor  bankrupt  if  the creditor has established the requirements set out in section 13.

[12]     The jurisdictional requirements are met in this case.

[13]     I must now consider the Insolvency Act 2006, s 37.  Section 37 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.

[14]     In Eide v Colonial Mutual Life Assurance Society[6]  the general principles involved in the exercise of the discretion under the Insolvency Act 1967, s 26 (which is now the Insolvency Act 2006, s 37) were summarised and the following important matters were noted:

[6] Eide v Colonial Mutual Life Assurance Society Limited [1998] 3 NZLR 632 at 635.

1)“A creditor who establishes the jurisdictional facts set out in s 23 is not automatically entitled to an order. On the other hand, it is for an opposing  debtor  to  show  why  an  order  should  not  be  made.” McHardy v Wilkins & Davies Marinas Ltd (Court of Appeal, Wellington, CA 54/93, 7 April 1993) at p 3.

2)“. . . in the exercise of the discretion under s 26 it is proper for the Court to consider not only the interests of those directly concerned – the petitioner, other creditors, the debtor – but also the wider public interest.” McHardy v Wilkins & Davies Marinas Ltd (supra) at p 3.

3)In determining whether an order should be made, the wider public interest   must   be   taken   into   account   to   determine   whether adjudication is “conducive or detrimental to commercial morality and the interests of the general public.” Re Nisbett, ex parte Vala [1934] GLR 553 at p 556.

4)“. . . on a bankruptcy petition the Court must have regard to public interest in a way which transcends the interest of the immediate parties to the proceeding. . . . The public interest in exposing and controlling an insolvent debtor is one which exists quite independently of  the  separate  question  of  debt  collection  by  his immediate creditors.” Re Fidow [1989] 2 NZLR 431 at p 444.

5)        Absence of assets is a factor but:

“.  .  .  even  the  undoubted  absence  of  assets  will  not necessarily preclude an order, for the circumstances may be

such that the debtor ought in the public interest to be visited with   the   disqualifications   that   go   with   bankruptcy.” McHardy v Wilkins & Davies Marinas Ltd (supra) at p 3.

6)        Another matter:

“. . . is the potential for further investigation. A bankruptcy makes available to creditors an array of procedures for investigating  the  financial  circumstances  of  the  debtor. Those procedures are likely to prove more effective than an investigation conducted by other means.” Re Fidow (supra) at p 444.

7)        There is a need:

“. . . for the Court to balance the various considerations relevant to the case, and to determine whether in the end the debtor has succeeded in showing that an order ought not to be made”. McHardy v Wilkins & Davies Marinas Ltd (supra) at p 4.

[15]     But for one matter, I am satisfied that there are no discretionary matters which would justify refusing to exercise the discretion to adjudicate the judgment debtor in this case.  The one matter, however, that I raised in the course of argument with the judgment debtor was whether he was in a position to pay the judgment in favour of the judgment creditor.  He assured me that if he was allowed a period of

21 days he could make such payment.  The sums due in the judgments attached to the judgment creditor’s affidavits in support total $59,417.00.  I announced in open court that I would allow an adjournment to allow payment to be made in cleared funds before the adjourned date of hearing.

[16]     Accordingly, I adjourn this proceeding to 10am on 29 October 2010.   If in fact the sum of $59,417.00 has not been paid to the judgment creditor in clear funds before that time, the judgment debtor can expect that an order of adjudication will be made.  If, however, that sum is paid there is still a risk to the judgment debtor that an order of substitution would be made in favour of the Crown which has a judgment against  the  judgment  debtor  for  $13,227.07.    That  arises  from  the  judgment  of Justice Cooper of 23 August 2010 and sealed on 9 September 2010.  An order for substitution may be made in appropriate circumstances pursuant to the Insolvency Act 2006, s 44.

Costs

[17]     Although I have not yet made an order of adjudication, the justification for the application is well made out.   This case has been adjourned simply as an indulgence to the judgment debtor to give him the opportunity to pay the debts if he can.   In the circumstances, the judgment creditor is entitled to costs on this adjudication proceeding based on Category 2  Band B but excluding the matters which are covered by the order for costs arising from the judgment of Associate

Judge Bell of 27 July 2010.  I so order.

JA Faire

Associate Judge