Klass Holdings Limited v Turner - [2018] NZHC 735

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2017-419-247

[2018] NZHC 735

IN THE MATTER OF the Insolvency Act 2006

AND

IN THE MATTER OF

the Bankruptcy of MAPUNA TERESA LYNETTE TURNER

BETWEEN

KLASS HOLDINGS LIMITED

Judgment Creditor

AND

MAPUNA TERESA LYNETTE TURNER

Judgment Debtor

Hearing: 18 April 2018

Appearances:

T M Braun and M A Harris for the Judgment Creditor Ms Turner in Person

Judgment:

19 April 2018

JUDGMENT OF ASSOCIATE JUDGE SMITH

[1] The judgment debtor (Ms Turner) applies to set aside a bankruptcy notice (the bankruptcy notice) served on her on 1 September 2017.

Background

[2] The bankruptcy notice claimed the sum of $42,624.57, that sum being said to be the amount due on a final judgment obtained against Ms Turner in the Morrinsville District Court on 9 August 2017. In fact, the date of the judgment was 14 November 2013, when judgment was entered against Ms Turner by default for the total sum of

KLASS HOLDINGS LIMITED v TURNER [2018] NZHC 735 [19 April 2018]

$38,639.79, including interest and costs. 9 August 2017 was the date on which the Morrinsville District Court issued a certificate of that judgment.

[3] The debt arose out of an agreement to lease dated 13 February 2012, entered into between OK Holdings Limited (OK Holdings) as landlord, and Ms Turner, on behalf of a company to be formed, as tenant. Ms Turner also signed the agreement to lease as guarantor.

[4] The premises were commercial premises situated in Te Aroha, and it appears that Ms Turner’s intention was to operate a food selling business from the premises.

[5] The agreement to lease provided for an annual rent of $14,400 plus GST. The lease commencement date was 1 December 2011, and the initial term was two years. There were three further terms of renewal possible (each of three years), and the final expiry date (assuming renewals) was to be 30 November 2022.

[6] The agreement to lease provided for a default interest rate of 15 percent per annum.

[7] Ms Turner acknowledges that she fell behind with the rent payments, and she accepts that there are arrears, which she believes should be only approximately $7,000. She denies any liability for interest, and says that she cannot understand how the amount claimed has increased approximately six-fold since the original debt was incurred.

[8] Ms Turner says that she was eventually evicted from the premises. At about that time she had some discussions with Mr Stephen Joe, a director of the judgment creditor, in which she indicated that she expected to be able to pay the arrears from funds she expected to receive as a beneficiary in the estate of her partner, who was then terminally ill. The partner (Mr Samson) died on 31 May 2012, but it appears that no funds have yet been forthcoming from the estate for Ms Turner. In any event, she did not make any payment to the judgment creditor.

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2018] NZHC 735
Decision Date: 19 April 2018

CaseChat Overview and Summary

The matter involves Klass Holdings Limited as the judgment creditor, and Mapuna Teresa Lynette Turner as the judgment debtor, in relation to a bankruptcy notice served on Turner. Turner seeks to set aside the bankruptcy notice on several grounds, including the contention that the amount claimed is in excess of the original debt, and that the creditor is engaging in corporate bullying and defamation. The High Court of New Zealand considers the legal principles governing the setting aside of bankruptcy notices, including the requirement that the debtor demonstrate a cross-claim of true substance, and the inherent jurisdiction of the Court to prevent injustice. The Court notes that Turner has not appealed the District Court judgment, and that there is no basis for setting aside the bankruptcy notice on the grounds raised. The Court corrects the amount claimed in the bankruptcy notice from $42,624.57 to $40,568.89, and dismisses Turner's application to set aside the notice. Klass is awarded costs on a 1B basis, with disbursements as fixed by the registrar.

The Court's decision highlights the importance of the finality of judgments, and the limited circumstances in which a bankruptcy notice may be set aside. The Court notes that Turner's arguments, including her claim for credit for work carried out on the premises, were known to her and could have been raised in the District Court proceeding. The Court also dismisses Turner's claims of corporate bullying and defamation, finding that the creditor is exercising its right to enforce the judgment. The decision provides guidance to judgment debtors seeking to set aside bankruptcy notices, and emphasises the need for debtors to challenge judgments at the appropriate time, and to raise any relevant cross-claims or defenses in the original proceedings.

Orders