Ministry of Justice v McGuire

[2018] NZHC 3322

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE

CIV-2018-454-66

[2018] NZHC 3322

UNDER

the Insolvency Act 2006

BETWEEN

THE MINISTRY OF JUSTICE

Judgment Creditor

AND

JEREMY JAMES MCGUIRE

Judgment Creditor

Hearing:

13 December 2018

Counsel:

J McGuire for judgment debtor

P Comrie-Thomson for judgment creditor

Minute:

14 December 2018

REASONS FOR JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]    The Ministry of Justice seeks an order adjudicating the defendant, Mr Jeremy McGuire, bankrupt. This matter was called for the first time in the Palmerston North commercial list on 13 December 2018. For the Ministry, Mr Comrie-Thomson sought to proceed. Mr McGuire resisted this. At the conclusion of the hearing, having heard from both Mr Comrie-Thomson and Mr McGuire, I declined to make an order adjudicating the latter bankrupt and adjourned the proceeding to the first Palmerston North list in the New Year which is scheduled for 14 March 2019. I indicated that I would give short reasons in writing and I now do so.

[2]    Prima facie the Ministry was entitled to proceed, subject only to the Court’s overarching discretion.

[3]Mr McGuire opposed this on two broad bases.

THE MINISTRY OF JUSTICE v MCGUIRE [2018] NZHC 3322 [14 December 2018]

[4]    Mr McGuire’s first argument was that the bankruptcy notice identified the judgment debt as totalling $7,483 and that he had paid that amount thus purging his act of bankruptcy and disentitling the Ministry from proceeding. That contention is plainly wrong. Under the Insolvency Act 2006 a judgment creditor may proceed against a judgment debtor following an act of bankruptcy by the latter. One way of establishing an act of bankruptcy is for the judgment creditor to serve a bankruptcy notice on the judgment debtor requiring him or her to pay the amount of a judgment. If that notice goes unanswered, then that constitutes an act of bankruptcy upon the basis of which the judgment creditor may commence proceedings. In doing so, the judgment creditor may claim any outstanding debt. He, she or it is not limited to the amount claimed in the bankruptcy notice. That is what happened here. The Ministry’s bankruptcy notice related to one judgment debt totalling $7,483. When Mr McGuire did not comply with the bankruptcy notice, thereby committing an act of bankruptcy, the Ministry commenced this proceeding in which it sought to recover debts exceeding the original judgment debt by some margin.

[5]    So in short, the mere fact that the amount referred to in the bankruptcy notice was paid shortly before this hearing is neither here nor there.

[6]    Mr McGuire’s second argument was that it would not be just and equitable in terms of s 37(e) of the Insolvency Act for an order to be made. In relation to this he mentions that one component of the litigation in which the parties have been involved was only resolved by the Supreme Court in a judgment delivered very recently and that he has only had a matter of days to consider the impact of that judgment, and that there is other litigation pending before this Court between the parties which has not yet been concluded. The reality is that the Ministry’s claim against Mr McGuire is made up of a number of different debts, many of which have been outstanding for a considerable period of time. These should have been paid long before now. I reject this argument.

[7]    Neither of the arguments advanced by Mr McGuire appear to me to be of any substance.

[8]    However, the plain fact of the matter is that this is the first call of this proceeding. Mr McGuire is a solicitor and an order adjudicating him bankrupt at this stage would be devastating for his professional life, and probably make it appreciably less likely that he will be able to meet his financial commitments to the Ministry and any other creditors.

[9]    In those circumstances, and against the strong submission made on the Ministry’s behalf by Mr Comrie-Thomson, I concluded that in the exercise of the Court’s discretion the proper course was to adjourn this proceeding to the next Palmerston North commercial list on 14 March 2019, effectively an order to give Mr McGuire a final opportunity to settle the indebtedness to the Ministry. I have signalled to him that if that is not done prior to 14 March 2019 I will not be sympathetic to any further application for an adjournment.

Associate Judge Johnston

Solicitors:
Meredith Connell, Wellington