Lister v Lister
[2018] NZHC 2128
•17 August 2018
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE
CIV-2018-425-000010
[2018] NZHC 2128
UNDER the Insolvency Act 2006 IN THE MATTER
of the bankruptcy of DEBRA ANNE GRETA LISTER
BETWEEN
LANCE IAN LISTER, LINDA LOUISE LISTER and ROBYN ETHEL FRONTIN MATHEWS
Judgment Creditors
AND
DEBRA ANNE GRETA LISTER
Judgment Debtor
Hearing: 1 August 2018 Appearances:
D A G Lister (Judgment Debtor/Applicant) in person S N McKenzie for Judgment Creditors (Respondents)
Judgment:
17 August 2018
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
on application to set aside bankruptcy notice
Introduction
[1] The judgment creditors have issued a bankruptcy notice against Debra Lister pursuant to a judgment debt. Ms Lister applies to set aside the bankruptcy notice.
LISTER v LISTER [2018] NZHC 2128 [17 August 2018]
Short history
[2] In a previous judgment, the Court set out a short history of how the judgment debt came about.1 It is this:
A disputed property
[2] The [Wilson Family Home] Trust is the registered proprietor of an apartment in Royal Oak, Auckland. It came to be so through this route:
(a)Ms Lister’s aunt, the then-registered proprietor, died in 1995 leaving a life interest in the apartment to Ms Lister’s father and the apartment itself (in remainder) to the Trust;
(b)Ms Lister’s father died in 2011. The creditors are the current executors and trustees of his estate;
(c)Litigation ensued as Ms Lister commenced various proceedings, including a challenge to the aunt’s will and an application for further provision from the father’s estate. All Ms Lister’s claims failed,2 the Trust being found to be the legal and beneficial owner of the apartment.3
(d)On 15 May 2018 title to the apartment was transferred to the Waitemata Health Board as trustee of the Trust.
The costs judgment
[3] The High Court on 15 March 2017 ordered Ms Lister to pay costs and disbursements of $45,928.75 to the creditors as trustees of the father’s estate.4 The creditors’ bankruptcy notice refers to that judgment debt.
[4] Ms Lister was also ordered to pay costs and disbursements to the Trust. The Trust has not sought to recover that debt from Ms Lister.
Setting aside a bankruptcy notice – s 17 Insolvency Act 2006
[3] Section 17(1) Insolvency Act 2006 provides that a judgment debtor who is served with a bankruptcy notice commits an act of bankruptcy in stated circumstances. An act of bankruptcy will not be committed if, pursuant to s 17(1)(d)(ii), the debtor satisfies the Court that he or she has a cross claim against the creditor. Section 17(7) identifies what is required of a cross claim. It states:
1 Lister v Lister [2018] NZHC 1743 at [2] – [4].
2 Lister v Pegg Ayton Gordon Trustee Ltd [2014] NZHC 1956; Lister v Pegg Ayton Gordon Trustee Ltd [2014] NZHC 2553; Lister v Mathews [2016] NZHC 1540.
3 Lister v Pegg Ayton Gordon Trustee Ltd [2014] NZHC 2553 at [20]; Lister v Mathews [2016] NZHC 1540 at [6].
4 Lister v Lister [2017] NZHC 445.
(7)In subsection (1)(d)(ii), cross claim means a counterclaim, set-off, or cross demand that—
(a)is equal to, or greater than, the judgment debt or the amount that the debtor has been ordered to pay; and
(b)the debtor could not use as a defence in the action or proceedings in which the judgment or the order, as the case may be, was obtained.
[4] The case law establishes that the cross claim asserted must be one of true substance which the debtor genuinely proposes to pursue.5
Ms Lister’s grounds of application
[5] The grounds set out in Ms Lister’s application are somewhat discursive. As developed in her submissions, they may be grouped under four heads.
An entitlement to distribution from a trust
[6] Ms Lister identifies her intention to settle the debt (probably) from her interest in her parents’ family home at Tinopai. The explanation of that claim is as follows:
(a)Davison J, having made the 15 March 2017 costs order, on 17 March 2017 declined to make an order that the creditors be paid from any interest of Ms Lister in the father’s estate.6
(b)Ms Lister has “nominated” to pay the costs order from the Earl and Julia Lister Trust which holds for realisation Tinopai, the trustees (Lance and Linda Lister) to date not having obtained an updated valuation of Tinopai.
(c)The creditors, as trustees of the father’s estate, value the estate’s cash in hand at $113,132.44 as at 8 March 2018, with debts owed to it (including Ms Lister’s costs debt) of $85,912.75 and shareholdings of
$186,535.86. Tax and legal fees are yet to be deducted. Ms Lister, in 2017, after the costs judgment, had called on the creditors’ solicitors to
5 Sharma v ANZ Banking Group (1992) 6 PRNZ 386 (CA).
6 CIV-2014-488-57, CIV-2014-443-11, Minute 16 March 2017.
forward $117,000 to her bank account. The solicitors sought Ms Lister’s permission to deduct the costs debt from Ms Lister’s entitlement. Ms Lister did not give such permission. She asserted that the 17 March 2017 Minute gave her the choice as to how to pay those costs. She has chosen that she will “probably” pay the costs from her interest in Tinopai (or from any other trust entitlement) if that is “her better option”.
(d)Ms Lister rejected a subsequent offer by the creditors made on 18 January 2018 to make her an interim distribution of $52,000 of which
$47,912.75 would have been deducted to meet the costs award, leaving Ms Lister a net cash interim distribution of $4,087.25.
Maladministration of the family trust and/or the father’s trust
[7]Ms Lister asserts:
(a)an independent trustee of the family trust (P A G Trustees Ltd) who remained in office and continued to be a registered proprietor of Tinopai should have been removed earlier by the co-trustees (with that situation finally rectified in December 2014).
(b)There is still no up-to-date valuation of Tinopai.
Unresolved issues in relation to the Royal Oak apartment
[8] Ms Lister refers also to what she regards as unresolved issues in relation to the Royal Oak apartment previously owned by the aunt. She asserts that the Royal Oak property, now vested in the Waitemata Health Board (above at [2]), may yet be the subject of appeal. On the basis of an observation of the Court of Appeal, which referred to the possibility that there might be an appeal, Ms Lister believes that the creditors should be pursuing an appeal.
Unresolved issues with the mother’s Māori land
[9] Ms Lister refers to Māori land previously owned by her late mother who died in 2004. She asserts:
(a)Julia Lister (the mother) held Māori land in Northland.
(b)Ms Lister has no idea who now has legal ownership of the one-third shares she and her two siblings should each have received – she believes she has been “swindled”.
[10] Ms Lister draws the threads of her various grounds together with reference to this Court’s judgment in Re Willis ex parte Willis.7 In that case, Anne Willis (a debtor for $12,000 under a costs award) successfully sought annulment of an order adjudicating her bankrupt which had been obtained by her husband, Leslie Willis. The Court found that Leslie’s application had smacked of abuse and oppression.8 The Court also found that Leslie had considerable influence over Anne’s solvency, specifically her ability to meet her outstanding debts and obligations. Leslie (with a co-trustee) could have effected a distribution from the family trust but did not do so.9 He chose not to set-off or release the $12,000 necessary to pay her costs award, nor the $16,000 necessary to lift her out of bankruptcy.10 The Court found:11
There is no question that Anne would have paid off her debts as soon as sufficient money was released to her from the Trust fund;
and:
…Leslie has deliberately chosen bankruptcy as a weapon of oppression.
[11] Adopting the focus on abuse of process identified in Re Willis, Ms Lister submitted that the Court should in this case set aside the bankruptcy notice as being an abuse of process.
7 Re Willis ex parte Willis [2017] NZHC 2586.
8 At [43].
9 At [56].
10 At [57].
11 At [60] and [65].
[12] Ms Lister concluded her submissions by stating that the setting aside of the bankruptcy notice would give the creditors and the trustees of the Aunt’s estate, time to attend to five matters:
(a)to file an affidavit as to the complete financial structure of the father’s estate;
(b)to obtain an updated valuation of Tinopai and of chattels and to file an affidavit of the complete financial situation of the family trust;
(c)to appeal the 1 December 2016 High Court judgment dismissing Ms Lister’s claims under the Family Protection Act 1955 and granting the creditors’ application to have Ms Lister removed as an executor of the father’s estate;12
(d)to file an affidavit in opposition in this proceeding;
(e)to have the Public Trust audit Ms Lister’s family protection claim.
[13] Ms Lister submitted that it would be a case of “problem solved” if the Court were in the present proceeding to grant her $2,000. She would use it to pay the required deposit for a Public Trust audit. This would enable Ms Lister to gain her one- third share of the Māori land. Ms Lister would then nominate a source from which the Public Trust would pay the costs to the creditors.
The creditors’ opposition
[14] For the creditors, Ms McKenzie observed that Ms Lister does not dispute the existence of the debt created by the 15 March 2017 judgment. It is a final judgment.
[15] Ms McKenzie observed that Ms Lister’s grounds of application do not involve the assertion of a cross claim of the kind described in s 17 of the Insolvency Act 2006. Rather, at the heart of Ms Lister’s argument (based on Re Willis) is that there exists a
12 Lister v Lister [2016] NZHC 2887.
background of delays by the creditors in the administration of the father’s estate and delays in the administration of other trusts. Ms Lister’s argument is that, against the background of the creditors’ failure to make any distribution, the creditors have acted oppressively by issuing the bankruptcy notice.
[16] Ms McKenzie submits that there are at least three points of distinction between the position of Anne Willis in Re Willis and the position of Ms Lister here:
(a)The context of Re Willis was the Court’s discretion to prevent the abusive use of an adjudication application (not the earlier point at which a judgment creditor seeks by serving a bankruptcy notice to obtain evidence of insolvency).
(b)Whereas, in Re Willis, there was a factual finding of duress based on a number of Leslie Willis’s actions, the creditors here have not used any Court process to advance their position beyond simply seeking payment of the costs.
(c)In Re Willis, Anne Willis’s bankruptcy cut across her ability to pursue relationship property entitlements. Ms McKenzie submits that any bankruptcy proceedings which ensue against Ms Lister, will not prevent her pursuing her entitlement to raise valid issues concerning the administration of the father’s estate.
[17] Finally, Ms McKenzie submitted that the significant feature of this case is that it is within Ms Lister’s means to settle the judgment debt by accepting the creditors’ proposals. She would thereby receive an interim estate distribution of the estate from which the debt would be paid in full. Instead of that she prefers to receive any distribution to use as she chooses and to pay her debt at a later date of her choosing from a source of her choosing. When Ms Lister has the number of grievances which she remains intent on pursuing, the creditors have a reasonable concern to retain in the estate sufficient funds to be able to defend the estate’s interests.
Discussion
[18] The facts of this case are not comparable to those considered in Re Willis. Anne Willis’s adjudication was annulled because the Court had no doubt that her debt would have been paid before her adjudication but for Leslie Willis’s oppressive use of his power to withhold the very distribution which Ms Willis would have used to settle her debt.
[19] Here, the creditors urged Ms Lister to accept an interim distribution ($52,000) which would be (for the greatest part – $47,912.75) appropriated to settle the debt. It is Ms Lister who has stopped that happening by her decision not to accept the creditors’ proposal. She would prefer to receive the proposed distribution in full, not settle the debt for the time being, and instead offer to settle it from some other source at some other time. She has also explained, understandably, that the net distribution of
$4,087.25 would not have been of significant help to her. She describes her present circumstances as being that she is a beneficiary living in a car.13
[20] The creditors’ use of the bankruptcy notice procedure itself contains no element of oppression. Unlike Anne Willis in Re Willis, Ms Lister has not been denied the funds from which she could have settled the debt.
[21] In the absence of an arguable case of oppression or amounting to abuse of procedure, it is unnecessary to consider in detail Ms McKenzie’s alternative submission, that there is not a residual discretion available to the Court on a setting aside application.14
[22] There is no conduct of the creditors in this case on which the residual discretion could bite.
13 When I reserved my judgment, I indicated to the parties that I would not release it for a period so as to enable them to have further discussions as to interim distribution. If agreement had been reached, anticipated that the need for the Court’s determination of this application would fall away. In the event, agreement was not reached.
14 The absence of a residual discretion under s 17(1) of the Act (as contrasted with s 37 of the Act) has been recognised by this Court in Re Saker ex parte Blackler HC Wellington CIV-2008-485- 124, 26 May 2008 at [26] and Minter Ellison Rudd Watts v Hampton [2012] NZHC 1715 at [55]
– [61].
[23] A number of Ms Lister’s submissions beyond those asserting oppressive conduct on the creditors’ part are not relevant in this case. The creditors are judgment debtors in their capacity as trustees of the father’s estate. Most of Ms Lister’s identified grievances relate to other estates or trusts, be they the family trusts, the aunt’s estate or the mother’s Māori land. Any cross claim raised by a judgment debtor under s 17(1)(d)(ii) of the Act has to be a “cross claim against the creditor”. Claims which Ms Lister might pursue against other estates or trusts (even if the creditors also have status as trustees in those instances) are not able to be raised as a setting aside ground under s 17(1) of the Act.
[24] A claim against a third party falls for consideration not in the context of s 17(1) but in the context of the Court’s discretion under s 37 of the Act.
A cross claim under s 17(1)(d) of the Act?
[25] As Ms Lister is self-represented, I have considered an alternative formulation of a cross claim although it was not advanced in such terms by Ms Lister. The beneficial entitlement of Ms Lister in the father’s estate is capable of description as a claim which Ms Lister has against the estate trustees (that is the creditors). Given that the costs judgment arose from an application for costs at the conclusion of substantive proceedings, it was not open to Ms Lister to raise her beneficial interest in the estate as a set-off or cross claim which should have led the Court to not impose a costs order.
[26] It is however established that to meet the requirements of ss 17(1) and 17(7) of the Act, there must be a mutuality of both the parties and the circumstances in respect of opposing claims.15 Here, the creditors’ claim is for payment of costs awarded following Ms Lister’s unsuccessful outcome in two proceedings. Ms Lister’s claim is to a beneficial interest in the estate of which the creditors are executor/trustees. The relationship between the two entitlements here lacks mutuality – the circumstances in which each entitlement arose are distinctly different. One involves a beneficial interest under a will trust. The other involves a debt incurred in unsuccessfully pursuing and defending litigation.
15 Re Jamieson ex parte Taradale Management Ltd HC Auckland B 942-IM99, 26/7/99 at p 10. See also, Insolvency Law & Practice (online looseleaf, ed, Thomson Reuters) at IN17.10(5).
[27] There is also a missing element in Ms Lister’s position – she identifies her beneficial interest in the father’s estate but she stops short of claiming or setting-off her entitlements. Her position has resolutely been that she will not allow a set-off of the two claims. To discharge her debt, she would instead set-off some other entitlement, not now but in the future. In short, Ms Lister is not at present in fact asserting her cross claim as a means of expunging her debt. That approach of Ms Lister also presents her with a difficulty in establishing that the cross claim she asserts is one which she genuinely proposes to pursue, within the meaning of the authorities (above at [4]). The concept of genuine intention of pursuit revolves around establishing and using the cross claim as a set-off against the judgment debt as soon as practicable. Here, the funds represented by the cross claim are immediately available – Ms Lister simply does not want to use those particular funds.
Clarification as to decisions concerning Tinopai
[28] The family had intended that the family home at Tinopai, upon the parents’ death, to become the home of Ms Lister’s brother, Lance. The expectation until now was that Lance would take ownership, utilising a third of the equity in Tinopai and in the father’s estate to fund the purchase on the basis of a valuation. Ms Lister and her sister would then receive cash distributions for their shares. Hence, Ms Lister’s explanation at [6](b) above) that she had plans to use her Tinopai entitlement to fund any payment of the debt to the creditors. She viewed the trustees of the family trust (which owns Tinopai) as having unnecessarily delayed obtaining the valuation needed if the transfer to the brother was to take place.
[29] At the hearing, Ms McKenzie explained from the bar that there had been a very recent development affecting Tinopai. Lance will not be proceeding with the proposed purchase. Instead, he has agreed that Tinopai (and its chattels) will be sold with the consequence that the net proceeds of sale will be distributed equally to the three siblings. No arrangements will be necessary for funds available to Lance through the father’s estate to be utilised in the no-longer planned purchase of Tinopai.
[30] Ms Lister’s interest as a beneficiary in the (Tinopai-owning) family trust has no relevance to the application before the Court. That is not to say that funds coming
available to Ms Lister from an imminent sale of Tinopai would not be relevant should the creditors proceed with an adjudication application. At that point, it may be relevant if it establishes that Ms Lister would shortly be in a position where she would be able to discharge the debt to the creditors.
[31] Ms Lister has not established a ground upon which the Court should set aside the bankruptcy notice. Her application must fail.
[32] Costs must follow the event. My present view is that they should be on a 2B basis.16
[33] As I did not hear from Ms McKenzie or Ms Lister as to costs at the conclusion of the hearing, I look to them to seek to resolve the quantum of costs. In the event there is not agreement on quantum, the Court will deal with the determination of quantum on the papers, with counsel for the creditors to file and serve a memorandum (three-page limit) within five working days and Ms Lister to file a memorandum (three-page limit) within five working days thereafter.
Associate Judge Osborne
Solicitors:
Saunders Robinson Brown, Christchurch (Counsel: S N McKenzie)
Copy to: D A G Lister
16 High Court Rules, Category 2 under r 14.3(1) and band B under r 14.5(2).
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