Ministry of Business, Innovation and Employment v Iskandar
[2024] NZHC 2123
•1 August 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-2368
[2024] NZHC 2123
UNDER
AND
the High Court Rules 2016 IN THE MATTER
of the Insolvency Act 2006
BETWEEN
MINISTRY OF BUSINESS, INNOVATION AND EMPLOYMENT
Plaintiff
AND
WIDHARNI RAHAJU ISKANDAR
Defendant
Hearing: 10 June 2024 Appearances:
J Ussher and C Kim for the Applicant/Judgment Debtor TM Gray for the Respondent/Judgment Creditor
Judgment:
1 August 2024
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 1 August 2024 at 3 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Legal Services, Ministry of Business, Innovation and Employment, Auckland Sinisa Law, Auckland
King Law, Auckland
MINISTRY OF BUSINESS, INNOVATION AND EMPLOYMENT v ISKANDAR [2024] NZHC 2123
[1 August 2024]
Introduction
[1] The judgment debtor, Widharni Iskandar, applies to set aside the bankruptcy notice served on her by the judgment creditor, the Ministry of Business, Innovation and Employment (MBIE).
[2] The bankruptcy notice relates to an alleged “judgment debt” of $178,107.52. The debt arises from 149 orders made by the Tenancy Tribunal in respect of failures to lodge tenancy bonds with the Bond Centre at Tenancy Services. The 149 orders were made in relation to 197 separate applications by MBIE heard together in a consolidated hearing.
[3] When the judgment creditor requested a bankruptcy notice, they relied on a single High Court judgment issued pursuant to s 120 of the District Court Act 2016. Section 120 provides for the removal of a District Court judgment for the payment of money to the High Court.
[4] It is settled law that a bankruptcy notice can only relate to one judgment debt; although there have been exceptions where, for example, a bankruptcy notice adds together costs orders made in the same proceedings. In this case, 149 orders were made separately, partly it appears to ensure that the Tenancy Tribunal’s jurisdictional limit of $50,000 was not engaged.
[5] Counsel for Ms Iskandar questions how a single judgment was issued by the High Court when it relates to 149 separate orders and submits the bankruptcy notice ought to be set aside because it does not relate to a single judgment debt as is required.
[6] MBIE acknowledges the long-standing single judgment rule but says that the single High Court judgment was validly obtained and there has been no challenge to its validity. There is therefore no breach of the single judgment rule in this case. MBIE submits further that even if the Court instead focuses on the 149 separate orders made, this is an appropriate case for an exception to apply because the nature of the debts is the same and the judgment debtor’s response does not differ between them.
Issues
[7]The issues for the Court to determine are therefore:
(a)How did the 149 separate Tribunal orders become one judgment of the High Court?
(b)Should the bankruptcy notice be set aside or other steps be taken, depending on the outcome of (a)?
[8] I set out the procedural background before summarising the relevant legal principles and considering the above issues.
Procedural background
[9]The bankruptcy notice is dated 12 October 2023 and demands payment of
$178,108.52. It attaches the sealed copy of what is headed a “Final Judgment” of the High Court recording that on 20 May 2019, in the Tenancy Tribunal at Auckland, MBIE obtained judgment against the defendant, Ms Iskandar, in the sum of
$177,720.56 and that the whole of that sum still remains unpaid. Subsequent costs, including the costs of the certificate of judgment and sealing, are added to reach the total figure of $178,108.52.
[10] Following difficulties with service of the bankruptcy notice, an order for substituted service was made on 7 December 2023.
[11] Service was completed in accordance with that order. The judgment debtor then applied to set aside the bankruptcy notice on 29 December 2023. The grounds included that there was a defect in the process by which the judgment was obtained.
[12] The first hearing of the application to set aside was adjourned following serious illness of counsel for the judgment debtor, Mr King. Sadly, Mr King passed away and new counsel, Mr Ussher, was instructed. The focus of the judgment debtor’s application was adjusted at this stage to query the process resulting in the single
judgment and to submit the bankruptcy notice should be set aside as not being in accordance with the single judgment rule.
[13] Finally, in respect of background, I record that the judgment debtor has also filed judicial review proceedings in the High Court challenging the process adopted by the Tenancy Tribunal in its hearing of the 197 applications.
Application to set aside - relevant legal principles
[14] To succeed in an application to adjudicate a person bankrupt, a judgment creditor is required to establish that a debtor has committed an act of bankruptcy within three months prior to filing the bankruptcy proceedings.1
[15] Section 17 of the Insolvency Act 2006 provides that failure to comply with a bankruptcy notice is an “act of bankruptcy”:
17 Failure to comply with bankruptcy notice
(1)A debtor commits an act of bankruptcy if—
(a)a creditor has obtained a final judgment or a final order against the debtor for any amount; and
(b)execution of the judgment or order has not been halted by a court; and
(c)the debtor has been served with a bankruptcy notice; and
(d)the debtor has not, within the time limit specified in subsection (4),—
complied with the requirements of the notice; or
(ii)satisfied the court that he or she has a cross claim against the creditor.
[16] As set out in s 17(1)(d), the Court may set aside a bankruptcy notice if the debtor has complied with the requirements of the bankruptcy notice or has satisfied the Court that they have a cross claim against the creditor.
1 Insolvency Act 2006, s 13. See the discussion in Mainzeal Property and Construction Ltd (in liq) v Yan [2019] NZHC 3145 at [10].
[17] In Māori Trustee v Hill, Associate Judge Smith held that aside from the circumstances set out in s 17(1)(d), the Court retains an inherent jurisdiction to set aside a bankruptcy notice to prevent any abuse of process in the issue of the notice.2 His Honour, however, continued:3
… but the Court will only intervene in the exercise of its inherent jurisdiction to prevent an abuse of process in very special circumstances. The "abuse of process" ground is unlikely to be available to a debtor whose real argument is over a claim which could have been brought before the Court which entered the judgment relied upon by the creditor.
[18] The Court’s inherent jurisdiction does not therefore provide an avenue to relitigate the underlying proceedings on which the bankruptcy notice is based.4 The appropriate time to raise any defence capable of being raised in the proceedings is by way of an appeal.
How did the 149 money orders made by the Tenancy Tribunal become one High Court judgment?
[19] I set out below a chronology of the events leading to the issue of the bankruptcy notice.
[20] The chronology begins with MBIE commencing proceedings in June 2016 against Ms Iskandar in relation to 197 residential tenancies pursuant to ss 124A–124B of the Residential Tenancies Act 1986.
[21] Ms Iskandar questioned the jurisdiction of the Tenancy Tribunal in respect of the 197 applications because the total amount sought exceeded the $50,000 jurisdictional limit for the Tribunal.5 In a decision on 1 February 2017, the Tenancy Tribunal held its jurisdiction was not exceeded.
[22]Ms Iskandar then appealed to the District Court.
2 Māori Trustee v Hill [2017] NZHC 2377.
3 At [18] (footnotes omitted).
4 Jason Bull (ed) McGechan on Procedure (online ed) at [HR24.10.05].
5 Residential Tenancies Act 1986, s 77(5) as at 21 August 2017.
[23] The District Court issued a decision on 21 August 2017 dismissing the appeal and confirming that the Tenancy Tribunal had jurisdiction to hear the 197 applications together.6
[24] District Court Judge LI Hinton described the Tribunal proceeding as concerning 197 individual applications under s 19 of the Residential Tenancies Act against Ms Iskandar for failure to lodge a bond within 23 working days of payment being made. MBIE was seeking 197 orders at that stage cumulatively totalling
$202,769 for amounts paid to Ms Iskandar by tenants for bonds not forwarded by Ms Iskandar to the Bond Centre. MBIE applied for orders that those amounts be held in the Chief Executive’s trust account where they would be contestable by both the tenants concerned and Ms Iskandar. There were also 68 claims for exemplary damages and MBIE was seeking a restraining order against the commission of further unlawful acts for a period of six years.
[25] Judge Hinton recorded that the question before the Tenancy Tribunal was whether or not the limit on the Tribunal’s jurisdiction of $50,000 precludes the Tribunal hearing 197 applications which might result in an order requiring Ms Iskandar to pay more than $50,000 in total.
[26] Judge Hinton described the Tribunal’s decision that s 77(5) did not preclude its jurisdiction to hear all 197 applications as comprehensive, setting out the Tribunal’s reasons as follows:7
(a)The Tribunal was not prepared to read in words to s 77(5) to provide that the Tribunal has no jurisdiction to require any party to pay any sum in excess of $50,000 “at any one point in time”.
(b)The Tribunal considered there were 197 applications, in respect of 197 different tenancies, that would require 197 discrete orders to be made. Whatever the outcome of each application, self-evidently none of the resulting orders could require Ms Iskandar to pay any sum in excess of $50,000 in respect of that particular tenancy.
(c)The Tribunal's hearing and determining multiple applications filed by the Chief Executive, all involving the same landlord, is entirely consistent with what Parliament intended when it amended the Act to
6 Iskandar v Chief Executive of Ministry of Business, Innovation and Employment [2017] NZDC 18900 [District Court decision].
7 District Court decision, above n 5, at [7].
include ss 124A and 124B. The clear intention of the provisions was to enable the Chief Executive to act on behalf of tenants in cases where the landlord's conduct had been particularly egregious or follows a pattern of recurring breaches of the Act. The sections permit the hearing of each matter separately but in a manner that enables the Tribunal to determine the matters expeditiously. Consolidation does not have the effect of transforming the individual applications into one or resulting in one requirement to pay.
(d)There is scope to assess each application for exemplary damages in its own right under s 109(3), ameliorating any concern about application of a totality principle in that regard.
(e)The Principal Tenancy Adjudicator has the capacity to direct a particular adjudicator (for example, one with legal qualifications or expertise) to sit in a particular matter, thereby alleviating any concern about the Tribunal's ability to deal with complex proceedings.
[27] Judge Hinton considered that there was a preliminary threshold issue of whether or not just one application or, alternatively, 197 separate applications had been filed.8 He said that if just the one application had been filed the Tribunal would not have had jurisdiction. However, the judge considered that the Tribunal’s decision certainly proceeded on the assumption that there were 197 separate individual applications and counsel for MBIE also confirmed that was the case. So, Judge Hinton proceeded on the basis that separate applications had been filed.
[28] Judge Hinton declined the appeal on the basis that there were separate applications made and MBIE was standing in the shoes of tenants for the purposes of bringing proceedings under s 124A of the Residential Tenancies Act. He held, therefore, that there should not be any distinction when the proceedings were brought by MBIE as opposed to a tenant.
[29] The Judge held further that as the Chief Executive was acting on behalf of a tenant in respect of the relevant applications for exemplary damages the maximum amount that could be awarded was $1,000. Judge Hinton recorded that any amount awarded for exemplary damages is to be paid to the relevant tenant where the application is by the Chief Executive acting on behalf of a tenant by virtue of s 109(5).
8 At [8].
[30] MBIE’s applications were then heard in the Tenancy Tribunal in a single consolidated hearing occupying four days in August and November 2018.
[31] On 20 May 2019, the Tenancy Tribunal issued 197 orders. 149 of those orders required the payment of money by Ms Iskandar for a total amount of $177,720.56.
[32] MBIE says invoices were then issued and a letter of demand sent but no payments were made.
[33] On 6 July 2020, MBIE applied to the District Court for a charging order over property in Ms Iskandar’s name. This was granted allowing MBIE to register the charging order on 28 July 2020.
[34] On 30 May 2022, MBIE applied to remove the charging order to the High Court intending to apply for an order for sale of the property.
[35] It appears that it was not until September 2022 that a certificate of judgment of the Tenancy Tribunal orders was sought from the District Court. In a memorandum dated 29 September 2022, counsel for MBIE recorded that MBIE was intending to carry out further enforcement action by applying for a sale order in the High Court. MBIE recorded that it had already filed an application to remove the charging order into the High Court along with a supporting affidavit on 30 May 2022 but that it had been advised by the Registry that it must now obtain a certificate of orders and a certificate of the charging order to remove the charging order into the High Court.
[36] Counsel for MBIE set out the background to the proceedings in the memorandum, including that MBIE had brought 197 applications against Ms Iskandar under s 124A of the Residential Tenancies Act and that all 197 applications were consolidated “for the purposes of the hearing only” pursuant to s 124B(2) of the Residential Tenancies Act.
[37] MBIE’s memorandum further recorded that the Tenancy Tribunal made 149 orders in order of favour of MBIE against Ms Iskandar for the payment of
$177,720.56, including costs, and that those orders could be broken down as follows:
(a)exemplary damages payable to MBIE totalling $47,600;
(b)bonds required to be lodged with the Bond Centre administered by MBIE totalling $119,625; and
(c)costs totalling $10,495.56.
[38] The memorandum attached a schedule of the 149 orders the Tribunal made in MBIE’s favour and a copy of each of the 149 orders.
[39] Counsel then submitted that because the Tribunal’s orders are deemed to be orders of the District Court, MBIE seeks to obtain a certificate of orders. Importantly MBIE then proposes that the orders be consolidated into one certificate on the basis that all orders stem from applications made by MBIE against Ms Iskandar which were determined at the same hearing.
[40] In support of this proposal, MBIE says this is the most administratively efficient way of dealing with such a large volume of orders and refers to s 124B(4) of the Residential Tenancies Act which allowed proceedings against the same landlord in relation to two or more tenancies to be consolidated.
[41] The Deputy Registrar of the District Court accepted this proposal and on 21 October 2022 issued a single “certificate of orders”. The certificate of orders is for
$178,020.56, comprising the total amount of the money orders of $177,720.56 (plus subsequent costs of $300). The Deputy Registrar at the same time certified the charging order for the purposes of ss 120 and 189 of the District Court Act 2016. These sections provide for the removal of District Court judgments into the High Court with s 189 allowing a judgment creditor then to enforce a charging order as if it had been issued by the High Court. This includes the right to obtain a sale order.
[42] On 17 November 2022, MBIE filed the certificate of orders in the Auckland High Court together with a memorandum in support submitting that because each of the Tenancy Tribunal orders stem from applications made by MBIE against the same landlord and were determined at the same hearing, they were consolidated into one
certificate of orders. A footnote to that submission again refers to s 124B(4) of the Residential Tenancies Act.
[43] On 5 December 2022, the High Court then issued a “Final Judgment” pursuant to s 120 of the District Court Act, entering judgment for MBIE against Ms Iskandar for the sum of $178,107.52, being the amount of the District Court judgment sum of
$177,720.56 plus costs.
[44] On 15 December 2022, the Deputy Registrar of the High Court granted a charging order over Ms Iskandar’s property.
[45] On 10 January 2023, Ms Iskandar filed an application to discharge the charging order accompanied by an affidavit indicating that she owned the property as a trustee.
[46] On 9 March 2023, MBIE asked Land Information New Zealand to discharge the charging order leading to its discharge on 5 May 2023.
[47] On 12 October 2023, MBIE then filed a request for the issue of a bankruptcy notice relying on the single “Final Judgment” of the High Court.
[48] It appears therefore that the single High Court judgment results from the single District Court “certificate of orders” obtained in October 2022. This followed the memorandum from MBIE proposing that a single certificate be issued because the applications could have been consolidated and it would be more efficient administratively to deal with the large number of orders in this way.
[49] As an Associate Judge, I do not appear to have jurisdiction to set aside the “Final Judgment” issued by the High Court9 (or the “certificate of orders” issued by the District Court) and nor has such an application been made. One option would be to stay these proceedings to allow Ms Iskandar to make such an application. Before determining whether that option is appropriate, however, I consider whether the bankruptcy notice would be set aside for breaching the one judgment rule if it was instead based on 149 separate orders or whether it should be an exception.
9 District Court Act 2016, s 120(6). See analysis in Boult v Crux Publishing Ltd [2022] NZCA 473.
Should these circumstances be an exception to the one judgment rule?
[50] As set out in the introduction, MBIE acknowledge the long-standing general rule that a bankruptcy notice should be issued in respect of only one judgment, referring to Re Mills.10
[51]Counsel for MBIE cite McGechan on Procedure where it states:11
The reason for this rule is so that the debtor can choose which notice he will satisfy or raise a counterclaim, set-off, or cross-demand to extinguish it. It is imperative that this choice lies with the debtor and not the creditor. Exceptions to this rule include where the debtor has a common response to all the debts or the nature of the debts is the same: Erwood v Maxted [2012] NZCA 110 at [60]; Monschau v Bamber [2018] NZHC 2566 at [30] and Re Ebbett, ex parte Fletcher Merchants Ltd HC Tauranga B109/92, 9 October 1992 at 2. The Court of Appeal has signalled it may revisit the scope of this rule in an appropriate case: Haines v Memelink [2022] NZCA 82 at [18].
[52] MBIE submits that even if the Court were to look through the single judgment pursuant to which the bankruptcy notice was issued and instead focus on the 149 separate money orders requiring payment to MBIE, the Court ought to be persuaded that this is a case where the nature of the debts is the same and the Judgment Debtor's response does not differ.
[53] Counsel for MBIE says that each of the cases relied on by Ms Iskandar are clear on the reasoning for the default position requiring the issue of separate bankruptcy notices, that is, “so that the debtor can choose which notice he will satisfy or raise a counter-claim [or] set-off or cross-demand to extinguish it.”12
[54] MBIE submits that even if the judgment debt were separated into the orders underlying it, each responds to a breach under section 19(2) of the Residential Tenancies Act and awards a combination of exemplary damages, orders to lodge bonds, and costs. MBIE says the response by Ms Iskandar to each order has been the same: no money has been paid. MBIE submits, therefore, that this is not a case where the judgment debtor has or will avail themselves of the opportunity to satisfy particular
10 Re Mills (1913) 32 NZLR 801 (SC).
11 Bull, above n 4, at [HR24.8.05(5)].
12 Carlyle v McCardle Richardson HC Wellington B394/96, 12 March 1997 at 3. See also Indiana Publications (NZ) Ltd v Prasad HC Auckland CIV-2010- 404-3333, 11 October 2010 at [6].
orders or raise individual counter-claims. The only “counter-claim” they say the judgment debtor has pleaded is to attack the entirety of the judgment debt based on complaints about the composition of the Tribunal's Orders and the conduct of MBIE’s investigation.
[55] MBIE submits that to set aside the bankruptcy notice at this juncture would only indulge an attack on the judgment that has been entered in the High Court. They say there has been no appeal, nor any application for rehearing or recall of the Tribunal's Orders or the “Final Judgment” entered in this Court. There is no justification, they say, to open up matters that are already the subject of Court order at the eleventh hour.
[56] MBIE submits that as noted in Re Ebbett, the general rule exemplified by Re Mills is concerned with judgments entered in distinct actions, whereas the Tribunal Orders were a consolidated proceeding addressing one type of breach by Ms Iskandar replicated across 197 tenancies.13
[57] Similarly, MBIE submits that Re Mills was distinguished in Erwood v Maxted because the costs orders, on which the bankruptcy notice in that case was based, all derived from the same litigation. The bankruptcy notice did not, therefore, deprive the judgment debtor of the ability to satisfy or challenge an individual debt.14
[58] MBIE further points to Monschau v Bamber where, as in this case, a single certificate of judgment was issued under the District Court Rules in the amount of
$175,851.25 relating to four separate court orders in the Waiariki Māori Land Court and the Māori Appellate Court relating to rent owed by the Bambers to Mr Monschau and others pursuant to a lease of Māori land.15
[59] I consider the circumstances in this case, however, are different to those cases as Ms Iskandar may have a different response to each of the separate 149 orders made. Of the amounts ordered to be paid, $119,625 relates to orders requiring bond to be lodged with the Bond Centre administered by MBIE. I have considered several of the
13 Re Ebbett, ex parte Fletcher Merchants Ltd HC Tauranga B109/92, 9 October 1992 at 2.
14 Erwood v Maxted [2012] NZCA 110 at [59]–[60].
15 Monschau v Bamber [2018] NZHC 2566.
individual orders made and where an order was made for the bond to be lodged, the Tribunal’s order records:
If Ms Iskandar has any claim against the bond money in respect of this tenancy then she will need to file an application with the Tribunal setting out that claim.
[60] In other examples, where no order was made for the bond money to be paid, it was because the Tribunal found that Ms Iskandar had established that it was more probable than not that the bond money was repaid to the tenant.
[61] So, in some cases Ms Iskandar may have a right to claim against the bond money in respect of damage done to her properties and in others she may be able to establish that, in fact, the bond money has been repaid.
[62] Counsel for Ms Iskandar submits that those parts of the orders relating to repayment of the bond are not final orders because of Ms Iskandar’s right to follow the process to establish whether those amounts are payable.
[63] Furthermore, many of the orders were for less than $1,000 and there is no right of appeal from decisions of the Tenancy Tribunal for less than $1,000.16 As a result, although MBIE notes that Ms Iskandar has not appealed the Tribunal’s orders (see above at [55]), the fact that Ms Iskander has not appealed the individual orders in some cases may be because there is no right of appeal. Different responses by Ms Iskander to each of the orders making up the “Final Judgment” may therefore be required.
[64] These differences emphasise why it is not appropriate for this case to be an exception to the one judgment rule. The fact that the Tenancy Tribunal jurisdiction was not exceeded because the applications were made separately further supports a finding that it would not be appropriate for this case to be an exception.
Conclusion
[65] As a result, the validity of the single certificates issued by the District Court and then the High Court directly impacts on this application to set aside the bankruptcy
16 Residential Tenancies Act 1986, s 117(2)(b).
notice. If the single certificates are valid then the bankruptcy notice has been issued on the basis of a single judgment. If, however, the single certificates are not valid, then I do not consider that this case ought to be an exception to the single judgment rule.
[66] As I have mentioned above, Associate Judges do not appear to have jurisdiction to set aside the “Final Judgment”. I therefore order a stay of Ms Iskander’s application to set aside until the validity of the “Final Judgment” can be determined. The stay is on condition that Ms Iskander applies to set aside the “Final Judgment” by the date directed below.
Result
[67]I order:
(a)Ms Iskandar’s application to set aside the bankruptcy notice is stayed pending further order of the Court to allow Ms Iskandar to apply to set aside the single “Final Judgment” issued by the High Court dated 5 December 2022 based on the 149 orders of the Tenancy Tribunal;
(b)Ms Iskandar is to file and serve any application to set aside the “Final Judgment” by 23 August 2024 and prosecute that application diligently; and
(c)the parties are granted leave to return to the Court for further orders as necessary by memoranda (preferably joint).
Costs
[68] I do not consider it is appropriate to determine costs until the validity of the “Final Judgment” issued by the High Court is determined. Costs are therefore reserved.
Associate Judge Sussock
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