Jacobs-Maxwell v Commissioner of Inland Revenue

[2012] NZHC 904

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV 2009-419-1298 [2012] NZHC 904

IN THE MATTER OF     the Insolvency Act 2006

AND

IN THE MATTER OF in the bankruptcy of HA Jacobs-Maxwell

BETWEEN  HEATHER ANNE JACOBS-MAXWELL Judgment Debtor

ANDCOMMISSIONER OF INLAND REVENUE

Judgment Creditor

Hearing:         3 May 2012

Counsel:         DG Hayes for judgment debtor

M Deligiannis and CD Walmsley for judgment creditor

Judgment:      3 May 2012

(ORAL) JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application to set aside a bankruptcy notice]

Solicitors:           Brook Law, PO Box 9600, Hamilton

Crown Law Office, PO Box 2858, Wellington 6140

JACOBS-MAXWELL V COMMISSIONER OF INLAND REVENUE HC HAM CIV 2009-419-1298 [3 May

2012]

[1]      An application to set aside the bankruptcy notice issued on this file was filed on 21 October 2009.  It has been dealt with by the court on a number of occasions as minutes on the file reveal.

[2]      Without   disposal   of   that   application,   a   creditor’s   application   for   an adjudication order was issued of 11 December 2009.  It is clear that that application was filed prematurely because no act of bankruptcy had occurred at that time.  It was struck out by me on 15 March 2010.  Rule 24.10 of the High Court Rules provides that where an application to set aside a bankruptcy notice cannot be heard until after the expiry of the time specified in the notice as the day on which the act of bankruptcy will be complete, the time is treated as extended until the application has been determined.   There was no act of bankruptcy at the time the creditor’s application for an adjudication and summons was filed.

[3]      Accordingly, there is no valid application before me today to adjudicate the judgment debtor as a bankrupt.

[4]      It is necessary, however, that the application to set aside the bankruptcy notice be determined.

[5]      The application  to  set  aside  the bankruptcy notice appears to  have been founded on a request to the court to exercise its inherent jurisdiction.  That request was made with a view to an appeal being disposed of in respect of the judgment that founded the bankruptcy notice.  That judgment is the judgment in the District Court of District Court Judge AIM Tompkins.  The appeal against that decision, however, was  abandoned  or  discontinued  as  the  court  file  minute  of  14 December  2009 reveals.   The judgment debtor was then invited to file any further affidavits that might support new grounds to set aside the bankruptcy notice.

[6]      There have, since that time, been a series of adjournments some of which may have been  on  the  misunderstanding that  there was  still  in  existence a life application for an adjudication order.  Be that as it may, what I must do is treat as still alive the application to set aside the bankruptcy notice.

[7]      I am satisfied that there are no longer grounds existing that would justify the court in invoking its inherent jurisdiction to set aside the bankruptcy notice.  That jurisdiction was the subject of comment in re re Wise, ex parte Benecke where Master Kennedy-Grant noted that relief was not available to debtors in that case pursuant to the then s 19(1)(d) of the Insolvency Act 1967 and the appropriate rule

because the debtors did not have a counterclaim, set-off or cross-demand.[1]   What the

debtors wished to do, however, was to challenge the founding judgment.   Master Kennedy-Grant concluded that was an exercise under which the inherent jurisdiction could be invoked and what was appropriate in the circumstances was simply to adjourn the application to set aside the bankruptcy notice until the appropriate appeal or challenge procedure in respect of the founding judgment had concluded.

[1] Re re Wise, ex parte Benecke HC Auckland B227/95 and B228/95, 21 June 1995.

[8]      I have questioned counsel as to whether there is any specific challenge to the judgment of District Court Judge Tompkins in this case.  There is no such challenge extant at the present time, nor do I understand that there are any steps contemplated to challenge that judgment.

Conclusions

[9]      When I weigh up all these factors I conclude that there is no justification for the making of an order setting aside the bankruptcy notice.

[10]     Accordingly, the application to set aside to the bankruptcy notice is refused.

[11]     The effect of this order is that an act of bankruptcy will occur almost straight away because time will have expired within which the judgment debtor could take steps in relation to the bankruptcy notice.

[12]   Whether the Commissioner determines to issue an application for an adjudication order and summons to debtor is, of course, over to the Commissioner to decide.  Suffice to say, I have been told that there are other challenge proceedings to this taxpayer’s liability that are due to be heard on 20 July 2012. As the current court

calendar is structured and bearing in mind that an application to obtain an order of

adjudication may be filed at any time within three months of the act of bankruptcy, this may well be an appropriate case for the Commissioner to consider delaying the filing of such application until the other challenge proceeding is disposed of.  This is not something that I make an order on in this judgment, but I simply draw to counsel and the parties’ attention that this may well be an appropriate way forward.

Costs

[13]     Counsel confirmed to me that it is not appropriate that any order for costs be made. Accordingly, no order for costs will be made.

JA Faire

Associate Judge