Morris v Hetaraka

[2018] NZHC 270

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KOTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2016-419-282

[2018] NZHC 270

IN THE MATTER OF

the Insolvency Act 2006

AND IN THE MATTER OF

The Bankruptcy Proposal of WILLIAM TAU HETARAKA

BETWEEN

ANTHONY JOHN MORRIS

Judgment Creditor

AND

WILLIAM TAU HETARAKA

Judgment Debtor

Hearing:

28 February 2018

Appearances:

N D Smith for Judgment Creditor

W T Hetaraka Judgment Debtor in person

Judgment:

28 February 2018

ORAL JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

MORRIS v HETARAKA [2018] NZHC 270 [28 February 2018]

[1]        The judgment creditor (Mr Morris) applies to bankrupt the judgment debtor (Mr Hetaraka).

Background

[2]        In January 2008 Mr Morris lent Mr and Mrs Hetaraka $336,000 to complete the purchase of a house at Lewis Street, Hamilton.

[3]        In mid-2008 Mr Morris telephoned Mr Hetaraka and requested repayment of the loan. On 6 November 2008 Mr Morris’s solicitors wrote to Mr Hetaraka demanding repayment of the loan.

[4]        On 27 February 2009 Mr Morris obtained judgment against Mr and Mrs Hetaraka for the sum of $316,000 together with interest. The High Court proceeding had been defended by Mr and Mrs Hetaraka. They claimed the loans were not for a fixed term and were not repayable until they had got back on their feet in a financial sense.

[5]        Granting summary judgment to Mr Morris, Allan J held the loans were made for a term expiring in July 2008. His Honour recorded that it was Mr Hetaraka who approached Mr Morris for the loan.

[6]        In February 2009 Mr Morris lodged a charging order over the property. On 23 September 2014 that charging order was removed by the Registrar General of Land.

[7]In June 2016 Mr and Mrs Hetaraka sold the property.

[8]        In July 2016 Mr Morris instructed counsel to take steps to enforce the charging order over the house, to be advised later that the charging order had already lapsed.

[9]        In August 2016 Mr Morris issued the bankruptcy proceeding against Mr Hetaraka. By his notice of opposition Mr Hetaraka claimed, inter alia:

(i)Because Mr Morris had failed to pursue his rights for over eight years it would not be just and equitable to grant the application for bankruptcy;

(ii)He believes Mr Morris has abandoned his rights in respect of the original judgment “by the passage of time and laches”;

(iii)The original judgment was obtained “in pursuance of a scheme to deprive Mr Morris’s wife of her relationship property assets.”

[10]Mr Hetaraka deposes, inter alia:

(a)He and Mrs Hetaraka sold the property in 2016 having learned the charging order had been removed and believing, he said, Mr Morris had abandoned recovery of the debt;

(b)Mr Morris lent them the money when Mr Hetaraka suffered a severe brain bleed-stroke evidence of which was provided by an attached medical certificate;

(c)Mr  Morris  has  already  bankrupted  Mrs  Hetaraka.  He  believes  Mr Morris lent the money to him in order to conceal the funds in question from Mr Morris’s wife at a time when there were relationship issues.

[11]By his response Mr Morris deposes, inter alia;

(a)When he obtained his judgment he had the option of pursuing bankruptcy proceedings or placing a charging order over the Hetaraka property. He choose the latter having been advised by Mr Hetaraka’s lawyer he would get nothing if he pursued him to bankruptcy;

(b)He was not aware a charging order could be removed without his approval after two years had passed;

(c)In July 2016 he instructed his lawyers “to enforce the judgment and the charging order over the house” but learned soon after that the charging order has been removed/lapsed;

(d)Since then he has pursued the bankruptcy proceedings;

(e)Allegations made in relation to an alleged scheme to defraud his ex- wife are completely false. He and his former wife had separated 14 years ago and completed a matrimonial property division and settlement in 2004;

(f)Mr Morris’s former wife has sworn an affidavit. She confirmed her relationship  property  settlement  long  preceded  any  advance  to  Mr Hetaraka. She knew nothing of Mr Morris’s business transactions in 2008-2009 as they had already divided their assets and separated well before then.

[12]      Mr Hetaraka has filed an affidavit sworn on 14 February 2018 in reply to those earlier affidavits of Mr Morris and his former wife sworn in July 2017. He believes Mr Morris’s former wife was influenced by intimidation through her ex-husband and the possible approach by his solicitor. In that outcome he has made a formal complaint to the New Zealand Police for perjury, conspiracy to attempt to pervert the course of justice and attempting to pervert the course of justice. He expected Mr Morris and his former wife to have been present at this hearing before me so he could cross examine them on their affidavits. Mr Morris was present but the Court confirmed he would not be required for cross examination.

[13]      Mr Hetaraka requested an adjournment of today’s hearing until the Police investigation and or any prosecution arising therefrom, was completed. The Court refused the adjournment application.

[14]      Mr Hetaraka’s focus upon what he believes he was told by Mr Morris’s former wife is an unnecessary distraction and certainly is of questionable value in any event. It is about Mr Hetaraka’s belief that Mr Morris’s motivation for lending him money

was to conceal the existence of that from his former wife. However there is no question but that the money was lent to Mr and Mrs Hetaraka. The source of those funds has no relevance to issues arising upon the bankruptcy application.

[15]      Mr Hetaraka claims the application has not been brought in good faith or for the purposes contemplated by Section 13 (which provides when a creditor can apply to adjudicate a debtor bankrupt) and that the proceeding should be dismissed and not commenced again without leave, on grounds set forth in s 37(c) and (d) of the Insolvency Act 2006 (by which a Court may refuse to make an order for adjudication if it is just and equitable to do so).

[16]      Mr Hetaraka submits that because Mr Morris wants to take this step after a long period of time he, Mr Hetaraka, should have the opportunity of re-opening and re-examining the merits of the original claim. He says:

9.I would simply like the chance to seek leave if I need to, notwithstanding the time, although I am bound to say years have now passed and the applicant seems to be trying to re-visit to obtain a tax advantage or something of a similar nature with a completely different motive than enforcing the original judgment.

[17]      Mr Hetaraka states that even if the statute of limitation did not apply the equitable principle of laches would.

[18]      He places a lot of reliance on the fact that due to a complaint of his the matter is now subject to Police investigation. As earlier noted the focus of that was about his perception of support from Mr Morris’s former wife to challenge Mr Morris’s claim for repayment of his loan.

Considerations

[19]      It is the essence of Mr Hetaraka’s defence, indeed as by paragraph [10] he acknowledges:

10.My essential argument is the history is too old for this to have its head raised again and ought to be dismissed on the basis of laches.

[20]      The fact that Mr Hetaraka has lodged a complaint with the Police is of no interest to this Court at this time. Also the evidence provided in support of that complaint contains  only  an  acknowledgment  of  the  complaint  by  the  Police.  Mr Hetaraka’s transcript of a brief discussion with Mr Morris’s former wife has no value at all for present purposes.

[21]      As the judgment of Allan J, earlier referred to, noted there was clear evidence of a loan of approximately $320,000 by Mr Morris to assist Mr and Mrs Hetaraka to purchase a house and that debt was not paid when demand for repayment was made. Judgment was entered against the Hetaraka’s. Subsequently they sold their house in June 2016 and there have been no payments made in reduction of that debt.

[22]      Mr Hetaraka invites the Court by use of s 37(c) and (d) not to make an order for adjudication. It is Mr Hetaraka’s case that due to the lapse of time and because of the impact of that lapse of time on him it would be unjust to bankrupt him.

[23]      Mr Hetaraka’s position is that he believed Mr Morris had no intention to pursue recovery but that the possibility of bankruptcy is effecting his health due to the stress involved. Had he been bankrupted earlier he would have been discharged long before now. He has lost his business and he has no assets and for that reason bankruptcy will achieve no financial return.

[24]      Although there is evidence of suffering a stroke in 2007 there is no evidence of a medical update since then.

[25]      A lot of Mr Hetaraka’s focus is upon his personal circumstances and those of Mr Morris at the time the money was advanced. However, that can have no value for present purposes. The judgment of Allan J was clear there was a debt and it had to be repaid.

[26]The issue is whether there is any purpose in granting the order for adjudication.

[27]      These proceedings are not only about the debtor and the creditor. They also involve considerations of the wider public interest.

[28]      It appears clear Mr Hetaraka does not have sufficient assets to pay the debt or any part of it. Wider public interest considerations include whether his bankruptcy would be in the interests of the general public. Absence of assets is a factor but that does not necessarily preclude an order. This is not a case requiring further investigation, despite Mr Hetaraka’s attempts to sidetrack the present hearing.

[29]      What is needed is for the Court to balance the various considerations to determine whether in the end Mr Hetaraka has succeeded in showing that an order ought not to be made.

[30]      The fact is that Mr Hetaraka is in no better position now than he ever was to pay the debt since his house was sold. There is no evidence of any equity realised from that sale.

[31]      A significant debt is still owed to Mr Morris. This is a clear case where it is in the public interest that an order for bankruptcy be made. He clearly needs assistance with the management of his affairs.

Judgment

[32]There is an order adjudicating Mr Hetaraka bankrupt. The time of the order is

10.40 a.m. on 28 February 2018.

[33]      Costs on a 2B basis, together with disbursements are payable to the judgment creditor.

Associate Judge Christiansen