Ministry of Justice v McGuire

[2018] NZHC 2475

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 2475

IN THE MATTER

of the Insolvency Act 2006

BETWEEN

MINISTRY OF JUSTICE

Judgment Creditor

AND

JEREMY MCGUIRE

Judgment Debtor

Hearing:	20 September 2018
Appearances:	Mr P Comrie-Thomson for the Judgment Creditor Judgment Debtor in person
Judgment:	21 September 2018

ORAL JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]                  The question before the Court for determination is whether the judgment debtor’s application pursuant to r 24.10 of the High Court Rules 2016 to set aside the judgment creditor’s bankruptcy notice dated 19 July 2018 was filed and served within ten days of service of the same. If it was, then the judgment debtor’s application will need to be set down for hearing. If it was not, then the judgment debtor will have committed an act of bankruptcy entitling the judgment creditor to commence bankruptcy proceedings.

[2]                  The essential background against which this question arises is not controversial.

[3]                  The judgment creditor relies on a judgment debt consequent upon a costs judgment of this Court dated 21 June 2017 for $7,103.50 plus interest. The judgment

MINISTRY OF JUSTICE v MCGUIRE [2018] NZHC 2475 [21 September 2018]

was sealed on 13 April 2018 (in fact the sealed judgment is dated 2017, but that is clearly an administrative error).

[4]                  At the judgment creditor’s request this Court issued a bankruptcy notice based on the judgment debt on 19 July 2018.

[5]                  Personal service of the bankruptcy notice on the judgment debtor was effected on 30 July 2018. Contrary to the requirements of form B2 of the First Schedule to the High Court Rules, a certified copy of the judgment was not served with the bankruptcy notice.

[6]                  However, the very day on which the bankruptcy notice was served, the judgment debtor telephoned the judgment creditor’s representatives and alerted them to the omission, and, later the same day, they emailed a further copy of the bankruptcy notice and a certified copy of the sealed judgment to him. The judgment debtor does not deny having received that email, though he says that he did not read the attachments until some time later because of other commitments.

[7]                  The primary issue, then, is whether that constituted proper service on the judgment debtor so as to start time running for the filing of an application to set aside the bankruptcy notice.

[8]                  In Sharma v Wali [2012] NZCA 195, the Court of Appeal accepted that failure to serve a copy of a sealed judgment along with a bankruptcy notice was not necessarily fatal, provided that the omission did not prejudice the judgment debtor. The Court of Appeal’s decision in Sharma has since been following in this Court in Harrison v Harrison [2015] NZHC 244 at [28] and Prescott v Auckland City Council [2017] NZHC 2698 at [11]–[16].

[9]                  In this case, I am satisfied that the (surprising) omission by the judgment creditor, the Ministry of Justice, to comply with the Rules has not caused any prejudice. The bankruptcy notice itself could hardly have been clearer as to the judgment upon which the judgment creditor was relying, setting out the details of the same. As I have already said, the judgment debtor appears immediately to have

identified the omission and, that day, received an additional copy of the bankruptcy notice together with a certified copy of the sealed judgment.

[10]              Section 418 of the Insolvency Act 2006 provides in effect that the Court has a discretion to determine whether any defects in a step taken “… as part of, or in connection with …” a bankruptcy proceeding has prejudiced any party and on that basis whether or not the proceeding is invalidated or whether it may continue.

[11]              I am satisfied that the interests of justice in this case justify the making of such an order.

[12]              The effect of the above is that the judgment creditor must be regarded as having served a valid bankruptcy notice on 30 July 2018. That started time running in terms of the statutory period within which the judgment debtor was entitled to apply to set aside the bankruptcy notice.

[13]              That ten day period expired on Monday 13 August 2018. The judgment debtor did not file his application until the following day, Tuesday 14 August 2018.

[14]              Therefore, as is submitted on the judgment creditor’s behalf, on 13 August 2018, the judgment debtor committed an act of bankruptcy which the Court has no jurisdiction to “undo”. In this regard, it is only necessary to repeat the references to Harrison and Prescott mentioned already.

[15]              Accordingly, the judgment creditor is now at liberty to commence bankruptcy proceedings based on that act of bankruptcy on the judgment debtor’s part.

[16]              It does not of course follow that the judgment debtor may not defend any such proceeding. He may do by filing a notice of opposition and affidavit evidence in support of the same. This will facilitate any application being addressed on its merits, including as to whether it should proceed in the face of other litigation pending in the Court of Appeal and the Supreme Court.

[17]The judgment creditor is to have its costs in relation to this application on a 2B

basis together with disbursements which may be set by the Registrar.

Associate Judge Johnston

Solicitors:
Meredith Connell, Wellington