Minter Ellison Rudd Watts v Hampton - [2012] NZHC 1715

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2011-409-0002055 [2012] NZHC 1715

IN THE MATTER OF the bankruptcy of DAVID JOHN HAMPTON

BETWEEN MINTER ELLISON RUDD WATTS Judgment Creditor

ANDDAVID JOHN HAMPTON Judgment Debtor

Hearing: 28 May 2012
(Heard at Christchurch)

Appearances: D J Hampton (Debtor/Applicant) In Person
C A Levermore for Creditor/Respondent

Judgment: 20 July 2012

JUDGMENT OF ASSOCIATE JUDGE OSBORNE [as to application to set aside bankruptcy notice]

Introduction

[1] This proceeding is yet another product of the litigation which has grown around Mr Hampton and his related entities (which I will refer to collectively as “Mr Hampton”) since they fell out with the Commissioner of Inland Revenue approximately 20 years ago.1

[2] Minter Ellison Rudd Watts (“Minter Ellison”) on 11 February 2010 obtained a judgment for $172,462.57 (plus interest and costs). They now have served a
bankruptcy notice on Mr Hampton.

1 Reference to my judgment in Chesterfields Preschools Ltd v Commissioner of Inland Revenue
(2011) 25 NZTC 20-092 at [2] provides details of some of that litigation.

MINTER ELLISON RUDD WATTS V HAMPTON HC CHCH CIV-2011-409-0002055 [20 July 2012]

The grounds of the application

[3] This judgment concerns Mr Hampton’s application for an order setting aside

the bankruptcy notice under s 24.10 High Court Rules.

[4] Mr Hampton says that the bankruptcy notice should be set aside for two reasons. These are:

(a) Mr Hampton has a cross-claim against Minter Ellison (s 17(1)(d) Insolvency Act 2006); and

(b)the Court in its discretion (reliance being placed on ss 37 and 38 of the Act) and pursuant to its inherent jurisdiction should set the notice aside because there is reason to believe that Mr Hampton will shortly receive quantification and payment of a costs judgment in his favour against the Commissioner of Inland Revenue.

Setting aside a bankruptcy notice – the principles

[5] Rule 24.10 provides:

Setting aside bankruptcy notice

(1) If an application to set aside a bankruptcy notice cannot be heard until after the expiration of the time specified in the notice as the day on which the act of bankruptcy will be complete, the time is treated as extended until the application has been determined.

(2) An act of bankruptcy is not committed by reason only of non- compliance with the notice until the application has been determined.

[6] Section 17(1)(a) of the Act provides:

17 Failure to comply with bankruptcy notice

(1) A debtor commits an act of bankruptcy if—

...

(d) the debtor has not, within the time limit specified in subsection (4), —

(i) complied with the requirements of the notice; or

(ii) satisfied the Court that he or she has a cross claim against the creditor.

...

[7] Both Mr Hampton and Ms Levermore adopted as the test for setting aside a bankruptcy notice the formulation of Cooke P in Sharma v ANZ Banking Group to which I return below.2

Factual background

[8] The background to Minter Ellison’s work for and judgment debt against Mr Hampton is set out in…

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: [2012] NZHC 1715
Decision Date: 20 July 2012

CaseChat Overview and Summary

In the High Court of New Zealand, Associate Judge Osborne dismissed an application by David John Hampton to set aside a bankruptcy notice served by Minter Ellison Rudd Watts, a law firm. Hampton, who owed Minter Ellison a judgment debt of $172,462.57, sought to set aside the bankruptcy notice on the grounds that he had a cross-claim against the firm and that the court should exercise its discretion to set it aside due to his expectation of receiving a costs judgment against the Commissioner of Inland Revenue. The court found that Hampton's cross-claim was not arguable, as it had been previously determined in a summary judgment proceeding. The court held that the principle of issue estoppel applied, precluding Hampton from relitigating the same issue. Additionally, the court found that the inherent jurisdiction was not available to assist Hampton in this case, as he had already had the opportunity to argue his cross-claim in the summary judgment proceeding. The court granted an extension of time for compliance with the bankruptcy notice until 20 August 2012 and ordered Hampton to pay the costs of the setting aside application.

Orders