Monschau v Bamber
[2018] NZHC 2566
•26 September 2018
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE
CIV-2018-463-49 [2018] NZHC 2566
BETWEEN SHANE MAURICE MONSCHAU and
HARRY TE NGARU as majority trustees of the TAHORAKURI A NO.1 33A2 AHU WHENUA TRUST
Judgment Creditors
AND
BRUCE ANDERSON BAMBER Judgment Debtor
AND
KATHEEN MATA BAMBER Judgment Debtor
Hearing: 26 September 2018 Appearances:
J Temm and Ms Douch for the Judgment Creditors
F Wood for the Judgment DebtorsJudgment:
26 September 2018
ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL
Solicitors:
Mark Copeland Lawyers, Rotorua, for the Judgment Creditors
Tompkins Wake, Rotorua, for the Judgment Debtors
Copy for:
Jonathan Temm, Rotorua, for the Judgment Creditors
MONSCHAU and TE NGARU v BAMBER [2018] NZHC 2566 [26 September 2018]
[1] This is a decision on an application to set aside a bankruptcy notice. The bankruptcy notice was issued in May this year. The creditors are Shane Maurice Monschau and Harry Te Ngaru. They are two of the trustees of an ahu whenua trust, the Tahorakuri A No.1 33A2 Ahu Whenua Trust. It is the trust for land at 442 Te Toke Road, Reporoa. The trust was established in 2011. The other trustee is Aaron Bamber, the son of the debtors named in the notice. For obvious reasons he is not involved in this proceeding.
[2] The amount claimed in the bankruptcy notice is $175,851.25. That is made up of debts claimed in four court judgments and court orders: a decision of the Waiariki Māori Land Court on 10 December 2015; a decision of the Māori Appellate Court on
23 September 2016; a decision of the Māori Appellate Court of 11 October 2016; and a decision of the Waiariki Māori Land Court on 22 February 2017.
[3] The bankruptcy notice is directed at two debtors, Bruce Anderson Bamber and Kathleen Mata Bamber. The main ground advanced for setting aside the bankruptcy notice is that Mr and Mrs Bamber assert a cross claim under s 17 of the Insolvency Act 2006. They say they have a counterclaim, set-off or cross-demand that is equal to or greater than the judgment debt, and which they could not use as a defence in the proceedings in which the judgment was obtained.
[4] There are however other issues that need to be addressed. The bankruptcy notice is addressed to two debtors, not one. The bankruptcy notice is based on four court orders and judgments. Only Mr Bamber has been served with the bankruptcy notice. The Bambers also attack the status of the trustees to enforce the judgments.
[5] The background to the matter goes back many years. The beneficial interests in the land are held by descendants of Mrs Bamber’s father, Stacey Mark Keremete. Mr and Mrs Bamber lived on the land rent-free from 1983. They worked to clear the land and make it productive. Mrs Bamber says that the land did not become productive until about 2000. They later sub-leased the land to a farmer and received rent from him. The ahu whenua trust was established in 2011.
[6] In 2013 Mr Monschau and Mr Te Ngaru, as trustees of the Ahu Whenua Trust, began a proceeding in the Waiariki Māori Land Court to recover from Mr and Mrs Bamber the rent that they had received from their sublessee. In a decision of
10 December 2015, Judge Savage held that the trustees were entitled to recover from Mr and Mrs Bamber the rent that they had received from the time that the trust was established, but he held that the trustees had no right to claim for rent received before the trust was established. He ordered them to pay $10,687.50.
[7] The transcript of that hearing has been put in evidence for this case. It is relevant for some of the issues that the Bambers have raised in opposition to the bankruptcy notice. The counterclaim that they want to advance is that the work they did on the land to clear it and bring it into production entitles them to a credit which should be taken into account against their liability under the various judgments. They were represented in the hearing in 2015, and when they raised that issue.
[8] Part of the transcript shows that the judge asked Mr Bamber questions about this. Judge Savage put it to Mr Bamber that the arrangement under the lease was that Mr and Mrs Bamber could live on the land for six years rent-free with the option of another four years rent-free and there was to be a meeting of owners to take place on approximately 1 April 1989, being the end of the six year period. Mr Bamber agreed with that. Judge Savage put it to Mr Bamber that the arrangement meant that Mr and Mrs Bamber had a rent-free holiday for six years, and perhaps ten years, but in return they would have to develop the land. The transcript shows that Mr Bamber broadly agreed with what Judge Savage put to him.
[9] The trustees had claimed for rent that Mr and Mrs Bamber had received before the ahu whenua trust had been established. Not satisfied with Judge Savage’s decision, they appealed to the Māori Appellate Court. That court held that Mr and Mrs Bamber were liable to account for all the rent they had received, both before and after the establishment of the trust, and that the trustees of the ahu whenua trust were entitled to recover the rent on behalf of all of the beneficial owners. The Māori Appellate Court made costs orders against the Bambers on 23 September 2016 for $2,035.25, and on 11 October 2016 for $4,830.
[10] The matter was then remitted to the Māori Land Court for re-hearing. In his decision in February 2017, Judge Savage recorded that he had issued these directions (and I refer to them as indicating what he was to decide):
[1] This matter has been returned from the Māori Appellate Court to this
Court for a further decision.
[2] There is however a question of whether there is to be further evidence or submissions.
[3] I direct counsel to discuss this matter and if possible reach an agreed position, and advise me within 14 days.
[4] If agreement as to the way forward is not possible I will then direct a telephone conference.
[11] Mr and Mrs Bamber were not represented. Counsel for the trustees submitted that while evidence might be given as to calculation of outstanding rent, no further evidence was required and it would be possible to rely on the evidence given at the earlier hearing in December 2015.
[12] In the hearing in February 2017 the Bambers sought to advance the set-off issue that they had raised through their lawyer in December 2015. Judge Savage dealt with it. He included these findings in his decision at para [5]:
There was an earlier period when they developed the land on an informal sort of arrangement whereby, in recognition of their work, they were permitted to farm the land.
Then at para [10] he said:
Mrs Bamber returned to the issue of the amount of effort that she and her husband had put into developing the land, and returned to the assertion that the land would be worth nothing but for their efforts.
At para [11] he said:
My finding in this regard is that the efforts they put in at an earlier time to develop the land was part of the implicit (and in part explicit) agreement that their effort was in fact the equivalent of rental paid. But in the period when rental was paid by a third party, that arrangement had ended and they must account for the rental.
[13] He ordered Mr and Mrs Bamber to pay the trustees $158,298.50.
[14] The bankruptcy notice is based on Judge Savage’s decisions of December 2015 and February 2017, and the Māori Appellate Court’s costs orders of September and October 2016, to give the amount claimed in the bankruptcy notice of $175,851.25.
[15] Mr and Mrs Bamber were dissatisfied with Judge Savage’s decision. Mrs Bamber sought to address that by filing in the Māori Land Court a counterclaim. I was advised by counsel that more recently the Bambers have filed documents with the Māori Appellate Court in an attempt to appeal against Judge Savage’s decision, but I note that the appeal period has now expired.
[16] There are no orders staying execution of any of the judgments or orders made by the Māori Land Court and the Māori Appellate Court. The judgments have all been registered in the District Court under s 81 of Te Ture Whenua Maori Act 1993. There is the usual certificate issued under the District Court Rules for the bankruptcy notice. The certificate deals with all four judgments.
[17] As I have noted, the bankruptcy notice is addressed to both Mr and Mrs Bamber. Mr Bamber, who is retired, says that he separated from his wife in 2011 and they have not lived together since then. He lives in Kawerau and Mrs Bamber lives in Rotorua.
[18] A point arises as to the bankruptcy notice being issued against two debtors. The Insolvency Act 2006 recognises that a bankruptcy application may be made by more than one debtor:
40 Orders if more than one debtor
If a creditor’s application for adjudication relates to more than one debtor, the court may refuse adjudication of one or some of the debtors without affecting the application in relation to the remaining debtor or debtors.
[19] In this case Mr and Mrs Bamber are jointly and severally liable for all the debts in the Court orders and judgments. It is however normal practice when a judgment has been given against more than one person for the judgment creditor to issue separate bankruptcy notices for each judgment debtor. That means that each judgment debtor responds separately to each bankruptcy notice. It allows the creditor to move separately against each debtor.
[20] It is however possible to issue a bankruptcy notice against a partnership. Partnerships are not excluded from the Insolvency Act under s 6, which applies to incorporated bodies.1 A partnership can be bankrupted; that means that the partnership assets vest in the Official Assignee but the individual partners are not themselves bankrupted. In such a case the Official Assignee would have recourse to partnership assets, and if there is still a deficiency for creditors then proceed separately against the individual partners to require them to contribute to the deficiency for creditors in the partnership.
[21] Mr Temm referred me to evidence before Judge Savage where Mr Bamber had accepted in evidence that he and his wife had been farming in partnership. He sought to persuade me that the bankruptcy notice in this case should be treated as a bankruptcy notice issued against Mr and Mrs Bamber as members of a firm, albeit one that has been dissolved.
[22] In my experience if a creditor intends to issue a bankruptcy notice against a firm, the bankruptcy notice makes it expressly clear that the notice is directed against a firm and not against individual debtors. I do not read the bankruptcy notice in this case as issued against a firm; instead, it is better considered as a notice issued against Mr and Mrs Bamber separately as debtors. That creates difficulties which have come to light in the way that the parties have dealt with the bankruptcy notice. If there are debtors who are jointly and severally liable for the same debts, it is better practice to issue a notice against each debtor individually so that each debtor responds separately to the bankruptcy notice and the compliance of each debtor with the notice can be
assessed. Equally, each debtor is given their own opportunity to decide whether to challenge the bankruptcy notice.
[23] In this case, Mr Bamber was served but Mrs Bamber was not. The process server went to Mrs Bamber’s home in Rotorua. Mr Bamber happened to be there, but Mrs Bamber was absent. There is no dispute as to the service of bankruptcy notice on Mr Bamber.
1 See Insolvency Act 2006, s 48, which allows partners to file a joint debtors’ application.
[24] The process server maintains that Mr Bamber agreed to accept service on his behalf of his separated wife, but I do not regard that as valid service on Mrs Bamber. The rules for service of proceedings also apply to service of bankruptcy notices. That is made expressly clear by r 24.9(4) of the High Court Rules 2016. In any event r 24.3 of the High Court Rules applies the general rules to bankruptcy proceedings.
[25] Rule 6.4 deals with service on a married couple, civil union partners, and de facto partners. It provides that service on one spouse or partner is not to be treated as service on the other unless the court so orders. There is no relevant court order in this case. Mr Temm sought to argue that Mrs Bamber’s home was the address for service from the earlier proceedings, but service on an address for service is only effective if that place is the address for service for that proceeding. The bankruptcy notice was the start of a fresh proceeding. The debtors had not specified any address for service for the bankruptcy notice. Service at Mrs Bamber’s address would not constitute service on Mrs Bamber. She had to be served in person.
[26] I asked Mr Temm when Mrs Bamber was served, but he was unable to specify a date when he could say that she did receive the notice. I do not regard Mrs Bamber as having waived her point that she was not served by applying to the Court to decide that question. She raised the issue squarely in para [3] of her affidavit. While she could have resisted a bankruptcy application by contesting the act of bankruptcy by saying that she had not been served, she loses nothing by trying to address the matter at an earlier point. Because her application is directed at the point, she cannot be treated as served because she applied to set aside the bankruptcy notice. I rule that she has not been served with the bankruptcy notice. For good order it would be better if she were served with a bankruptcy notice which does not name any other person as a judgment debtor.
[27] Mr Bamber was served, as I have already recorded. I regard the service of the bankruptcy notice on him as valid, notwithstanding that there was another debtor named. The naming of the other debtor is at worst no more than an irregularity.
Mr Bamber has dealt with the bankruptcy notice appropriately by applying to set aside the bankruptcy notice. He has suffered no prejudice or injustice by his wife being named in the bankruptcy notice as well.
[28] He takes the point that the bankruptcy notice is for four judgment debts, and refers to authorities which have ruled that a bankruptcy notice should be confined to only one judgment debt. I refer here to the judgment of Stout CJ in Re Mills, and my decision in Body Corporate 341188 v Kelly.2
[29] I do not regard that irregularity as counting against the bankruptcy notice in this case. I follow the approach adopted by the Court of Appeal in Erwood v Maxted.3 In that case a bankruptcy notice was founded on three judgment debts, but they were all based on the same litigation. The Court of Appeal said at [60]:
We do not see Mills as being of assistance in the present case. The three debts which were referred to in the bankruptcy notice were all costs orders in the same litigation and, in any event, the bankruptcy petition (and the adjudication) was based on only one costs order. Given the nature of the debts, we do not consider that the Associate Judge erred in declining to set aside the bankruptcy notice because it related to three debts.
[30] The reason for requiring a bankruptcy notice to be confined to one judgment debt is to allow the debtor the opportunity to address different debts separately (for example to pay one debt while challenging the other). In this case however that rationale does not apply. Mr Bamber has a common response to all the debts, and that is his counterclaim against the trustees requiring them to pay him for his work in clearing the land and bringing it up to production. He claims $300,000; he has pitched that figure at a sum higher than the amounts claimed in the bankruptcy notice.
[31] To make out his claim under s 17 of the Insolvency Act he has to be able to show that he was not able to raise this in the proceedings in which judgment was given against him. He could not of course raise it in the costs orders made against him in the Māori Appellate Court, but those are for relatively insignificant sums. The important thing is that he did raise that matter in both Māori Land Court hearings in December 2015 and February 2017.
[32] The complaint made for Mr Bamber is that he was prevented from giving evidence on the point in the February 2017 hearing. It seems clear from Judge
2 Re Mills (1918) 32 NZLR 801 (SC); and Body Corporate 341188 v Kelly [2016] NZHC 2230.
3 Erwood v Maxted [2012] NZCA 110.
Savage’s decision of February 2017 that he was relying on the evidence that he had heard in December 2015.
[33] As I read his decision, Judge Savage did consider the issue, and he did give a ruling on it on the merits. On that he found against Mr and Mrs Bamber. As the issue was before him and was decided, it is not open to Mr and Mrs Bamber to say that they were not able to raise the matter there. Their complaint, at its highest, is that they consider that Judge Savage erred in rejecting their claim on the merits, but for that their remedy is to appeal. They cannot raise the matter in a fresh hearing. Judge Savage’s decision is final, and an estoppel operates against Mr and Mrs Bamber. They cannot relitigate the matter which has been the subject of a final decision against them.
[34] In short then, because there has been a determination of the matter on the merits, it is not open to them to say that they have a counterclaim that they could not raise earlier. Accordingly, I rule against Mr Bamber on his ground that he has a counterclaim that he was not able to raise in the original hearing.
[35] I note that the Bambers have filed an appeal to the Māori Appellate Court. Lodging an appeal is not by itself a ground for setting aside the bankruptcy notice. I note that when an application for bankruptcy is lodged, the court may adjourn or stay a proceeding pending the hearing of an appeal against the judgment debt on which the bankruptcy notice is founded.4 That is a discretionary power. Nothing I say here is to be taken as indicating whether or how the court should exercise its discretion if that situation should arise.
[36] The position reached now is that Mrs Bamber has not been served, and there has been no determination against her. Mr Bamber has been served. His ground for setting aside the bankruptcy notice has not been made out. I have upheld the bankruptcy notice against him.
[37] Ordinarily the decision on a setting aside application marks the expiry of the time for complying with the notice (see r 24.10 of the High Court Rules). In this case Mr Temm proposed that Mr Bamber should have further time by which to comply with
4 Insolvency Act 2006, s 42.
the notice. Accordingly, I am adjourning this application to
5 November 2018 to give him the opportunity to comply. If he does not comply with the notice, the judge sitting on that day may dismiss the application.
Costs
[38] Mr Temm did not seek costs, more out of a spirit of magnanimity than anything else. Mr Wood sought costs for Mrs Bamber, but the spirit of magnanimity ought to apply both ways. While Mrs Bamber has obtained a finding that the bankruptcy notice was not served on her, other aspects of the judgment may apply to her.
[39] I was also advised that there is a proceeding underway in the Māori Land Court to have Mr Monschau and Mr Te Ngaro removed as trustees. They are for the time being trustees of the ahu whenua trust, and as such are entitled to enforce the judgments in favour of the trust. If there is a change of trusteeship it will be for any new trustees to decide whether to change course, but that is not a matter that affects this Court in deciding whether to set aside the bankruptcy notice.
……………………………….
Associate Judge R M Bell
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