Moxham Milk Limited v Clark
[2022] NZHC 2729
•20 October 2022
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE
CIV-2021-463-86
[2022] NZHC 2729
BETWEEN MOXHAM MILK LIMITED
Plaintiff
AND
STEPHEN GEORGE GIBSON CLARK
Defendant
Hearing: 24 August 2022 Appearances:
Glenn Mason for the Plaintiff Defendant is self-represented
Judgment:
20 October 2022
Reissued:
21 October 2022
JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
[Adjudicating defendant bankrupt]
This judgment was delivered by me on 20 October 2022 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules 2016
This judgment is re-issued on 21 October 2022 at 3:00pm
[with amendments to paragraph [39]] pursuant to r 11.10 of the High Court Rules 2016
………………………….
Registrar/Deputy Registrar
Solicitors/Counsel:
Fenella Devlin, Palmerston North, for the Plaintiff
Copy for:
Glenn Mason, Barrister, Palmerston North, for the Plaintiff Stephen George Gibson Clark (the Defendant)
District Court Judge Stephanie B Edwards, District Court, Palmerston North
MOXHAM MILK LIMITED v CLARK [2022] NZHC 2729 [20 October 2022]
Introduction
[1] Moxham Milk Ltd (Moxham) seeks that Mr Stephen Clark be adjudicated bankrupt.
Background
[2] This adjudication application relates to a debt deriving from a judgment of the District Court at Levin of 14 December 2020.1 The debt owed is said to be $34,667.31, comprising the order made in the District Court, subsequent costs of $1,014 relating to a charging order over land and $50 for the cost of the certificate of judgment.
[3] Moxham served a bankruptcy notice dated 16 November 2021 and the certificate of judgment on Mr Clark on 22 December 2021. The last day for compliance with the bankruptcy notice was 12 January 2022. Mr Clark did not comply with the bankruptcy notice or apply to set it aside.
[4] Moxham made the present adjudication application on 16 March 2022, Mr Clark’s act of bankruptcy (the noncompliance with the bankruptcy notice) being within three months of that date.
[5] The background facts to the District Court decision are that Moxham mistakenly paid a sum of $26,509.80 into Mr Clark’s bank account on 18 June 2018. It had intended to pay the sum into the bank account of Zenith Ltd in satisfaction of an invoice for fertiliser. Moxham was unsuccessful in its attempts to reverse the payment and sought judgment on the basis it did not owe Mr Clark any money and he was not lawfully entitled to retain the funds. Judge Edwards was satisfied Mr Clark had no defence to Moxham’s claim. The Judge gave summary judgment to Moxham in the sum of $26,509.80, together with interest, schedule costs and disbursements.2
1 Moxham Milk Ltd v Clark [2020] NZDC 24751.
2 At [16].
Creditor’s application for adjudication order
[6]Moxham seeks orders adjudicating Mr Clark bankrupt and as to costs.3
[7]The grounds on which the orders are sought are:4
(a)the debtor has, for the greater part of the past 6 months, resided at 69 Paparoa Road, RD 2, Opotiki; and
(b)the debtor owes the creditor $34,667.31 following a final judgment or final order made by the Levin District Court on 18 December 2020 which sum includes subsequent costs of $1,014.00 and $50.00 for the cost of the certificate of judgment; and
(c)the debtor has committed an available act as follows:
i.a bankruptcy notice was served on the debtor on 22 December 2021 requesting payment of the $34,557.31 within 10 working days; and
ii.the debt remains unpaid.
(d)the creditor has no security for the debt.
Affidavit of Wayne Moxham dated 16 March 2022
[8] Mr Wayne Moxham, director of Moxham, has made an affidavit in support of the creditor’s application. He deposes he has knowledge of the facts to which the application relates, and says they are, to the best of his knowledge, information, and belief, true.5
Affidavit of Wayne Moxham dated 26 April 2022
[9]Mr Moxham filed a further affidavit dated 26 April 2022, stating the debt of
$34,667.31 owing by Mr Clark to Moxham, upon which the creditor’s application is based, remains unpaid and is unsecured by Moxham.6
3 Creditor’s application for adjudication order dated 16 March 2022 at [1].
4 At [2].
5 Affidavit supporting creditor’s application for adjudication at [2].
6 Affidavit of Wayne Owen Moxham on behalf of judgment creditor that debt remains unpaid dated 26 April 2022 at [2].
Affidavit of Wayne Moxham dated 12 May 2022
[10] In a further affidavit dated 12 May 2022, Mr Moxham deposes that in June 2020, Moxham made an application for summary judgment against Mr Clark in the District Court following Mr Clark’s refusal to refund money paid to him in error. He says the District Court judge found that the money, which is the subject of the present application for adjudication, had been paid to Mr Clark and that he was not lawfully entitled to retain it. Mr Moxham says the Court awarded summary judgment to Moxham.7
Affidavit of Wayne Moxham dated 31 May 2022
[11]In an affidavit dated 31 May 2022, Mr Moxham reiterates that the debt of
$34,667.31 owing by Mr Clark to Moxham, upon which the creditor’s application is based, remains unpaid and is unsecured by Moxham.8
Notice of opposition
[12]Mr Clark opposes Moxham’s application on the following grounds:9
A.That the bank account identified as belonging to the defendant in the decision of Judge S.B Edwards 14th December 2020, Paragraph 15, was not and is not under the control of the defendant at any relevant time.
B.The defendant was, at no time in control of the funds and so at no time could possibly be “in possession” of the funds.
C.That the defendant did not “unlawfully retain the payment” (Paragraph 15 of Judge Edwards decision). The payment was transferred to the bank account of Eco-Farm Aotearoa Ltd on 26th June 2018; five days after the payment was deposited, in accordance with the lawful instructions received from the administrator of Eco-Farm Aotearoa Ltd.
D.That the statement contained in paragraph 15 of Judge Edwards decision that the defendant “refused to return it [the payment] to the plaintiff” is Null and Void as it is not based on any facts and evidence that demonstrates the alleged refusal. There was no comprehension of the simplicity of this matter and so there was a failure to strike it
7 Affidavit of Wayne Owen Moxham dated 12 May 2022 at [2]–[3].
8 Affidavit of Wayne Owen Moxham on behalf of judgment creditor that debt remains unpaid dated 31 May 2022 at [2].
9 Notice of intention to oppose application dated 30 May 2022 at [2].
out. Instead, and incorrectly the process was continued despite the absence of evidence supporting Judge Edward’s statement.
E.Because the defendant was not authorised, was not in control and was not in receipt of the funds at any time, therefore was not in a position to make any decisions regarding the payment.
F.Based on the facts and evidence contained in the affidavit filed in support of this notice.
Affidavit of Stephen Clark dated 30 May 2022
[13] Mr Clark has made an affidavit in support of his opposition to Moxham’s creditor’s application. He deposes the bank account identified as belonging to him in the District Court decision of 14 December 2020 was not, at any relevant time, under his control. He says the account was a trading account for EcoFarm Aotearoa Ltd, an entity that he does not own, control or manage. He says the District Court judge’s decision is fundamentally wrong and that he could not have unlawfully retained the payment where the account in question was not under his control.10
[14] Mr Clark deposes he is being falsely held to account for monies that he has not been in possession of, received, or had control over. He says further that he has no means to pay or return funds that he never possessed. He deposes that Moxham was informed by EcoFarm Aotearoa Ltd that it alone was in receipt of the funds; there was no nexus between receipt of funds, control of those funds and him; he could not and has not benefited from the funds; the lawyer for Moxham was aware of these facts; and the issuing of proceedings and continuation of them was therefore repugnant and vexatious.11
[15] Mr Clark says he does not have the financial means to properly defend himself against the claim and that he is forced to appear as a lay litigant. He says he has almost no assets; the Moxham funds are not in his possession; he has not retained any funds paid by Moxham to EcoFarm Aotearoa Ltd; if he is bankrupted there will be no assets to realise to settle any debt; and bankruptcy will serve no useful purpose at all.12
10 Affidavit of Stephen George Gibson Clark dated 30 May 2022 at [1]–[5].
11 At [6]–[16].
12 At [17]–[21].
[16] Finally, Mr Clark requests that Moxham’s application for adjudication be struck out; the District Court decision be made null and void; all costs decisions be reversed and awarded in his favour; or, in the alternative, that the Court set the adjudication aside and send the matter for a retrial that includes the correct defendant.13
Reply affidavit of Wayne Moxham dated 23 June 2022
[17] Mr Moxham has made an affidavit in reply to Mr Clark’s affidavit of 30 May 2022. He deposes he does not accept that the bank account into which Moxham paid funds was not owned, controlled or managed by Mr Clark. He points to email evidence from the New Zealand Police, an ANZ Bank diary note, and invoices from Probitas Systems NZ as confirming Mr Clark’s ownership and control of the bank account.14
Reply-to-reply affidavit of Mr Clark dated 29 June 2022
[18] Mr Clark has purported to make an affidavit in reply to Mr Moxham’s reply affidavit of 23 June 2022. He deposes that the New Zealand Police email stating “the ANZ account is held by Stephen Clark” does not mean that he controlled or managed the account.
Moxham’s submissions
[19] Mr Glenn Mason, for Moxham, submits that the requirements of s 13 of the Insolvency Act 2006 are met in the present case. Mr Clark owes a debt of more than
$1,000 to Moxham; there has been an act of bankruptcy within the period of three months before the filing of the application; the debt is of a certain amount; and the debt is immediately payable. He says s 36 of the Insolvency Act gives the Court the discretion to adjudicate Mr Clark bankrupt, and that the Court should not exercise its discretion under s 37 to refuse adjudication.15
13 At [22]–[26].
14 Affidavit of Wayne Owen Moxham dated 23 June 2022 at [1]–[7].
15 Synopsis of submissions by counsel for judgment creditor dated 12 August 2022 at [1]–[8].
[20] Mr Mason says District Court judgment underlying the creditor’s application has not been appealed and no application has been made for its recall. He says Mr Clark’s argument was always going to be difficult to sustain: Mr Clark has never suggested that he is not the Stephen Clark identified by the New Zealand Police as the holder of the relevant bank account. Mr Clark in fact acknowledges he held the account but denies he controlled it.16
[21] Of the District Court proceeding, Mr Mason says it concerned a straightforward mistaken payment into Mr Clark’s bank account where no reason was raised not to order restitution. He submits it was inevitable that judgment would be given in favour of Moxham. This, then, is not a case where it would be unjust and inequitable to make the adjudication order. Mr Clark has done no more than raise inconsistent and meritless reasons for suggesting the District Court judgment was wrong in law.17
[22] Finally, Mr Mason notes that Mr Clark evidently has some assets. The investigation that would follow adjudication may uncover further assets. He submits that because Mr Clark has been active in trade, the disqualifications that go with bankruptcy would be appropriate. He says, too, that there is a wider public interest at stake: commerce will be affected where ordinary trading debts become too expensive to pursue. Adjudication is the only appropriate course.18
Mr Clark’s submissions
[23] Mr Clark, representing himself, submits that all documents written in response to Moxham’s demand letter of 18 April 2019 were written by the controller of EcoFarm Aotearoa Ltd. He says Mr Mason was advised details of the identity of the controller of that company on 26 April 2019. He submits the bank account that the funds were paid into on 21 June 2018 was a trading account for EcoFarm Aotearoa Ltd, an entity that was and is not owned, controlled or managed by him. He submits that despite Mr Mason having been “notified of the facts pertaining to the ownership
16 At [11]–[12].
17 At [32]–[34].
18 At [35]–[41].
and control of the bank account the Judgement Creditor … continued to direct proceedings against the judgement debtor”.19
[24] Mr Clark says EcoFarm Aotearoa alone was in receipt of the misdirected funds. As an agent for Nga Tikanga Māori Law Society (NTMLS), he did not have authority to make any decisions relating to the payment and did not make any decisions relating to the payment. He was never in possession of the funds and could not therefore refuse payment to Moxham — sole authority to do so was and is held by the controller. He submits an adjudication would result in an unjust bankruptcy of a person that is being falsely held to account for monies that are unrelated to that person. He requests that Moxham’s adjudication application be declined and the District Court decision be sent back for remedy. He asks for all court orders made against him to be revoked.20
Legal principles
[25] The principal requirements for court adjudication on a creditor’s application are in s 13 of the Insolvency Act 2006 (the Act):
13 When creditor may apply for debtor’s adjudication
A creditor may apply for a debtor to be adjudicated bankrupt if—
(a)the debtor owes the creditor $1,000 or more or, if 2 or more creditors join in the application, the debtor owes a total of
$1,000 or more to those creditors between them; and
(b)the debtor has committed an act of bankruptcy within the period of 3 months before filing the application; and
(c)the debt is a certain amount; and
(d)the debt is payable either immediately or at a date in the future that is certain.
[26] Briefly stated, a creditor may bring a bankruptcy proceeding against a debtor who owes that creditor at least $1,000 and who has committed an act of bankruptcy within three months before the filing of the application. The sum must be a “certain amount” and payable immediately or at a future date that is certain.
19 Synopsis of submissions by Stephen George Gibson Clark dated 17 August 2022 at [1]–[9].
20 At [16]–[25].
[27] There are further relevant provisions in pt 2. Section 17 provides that a debtor commits an act of bankruptcy if:
(a)a creditor has obtained a final judgment or a final order against the debtor for any amount;
(b)execution of the judgment or order has not been halted by a court;
(c)the debtor has been served with a bankruptcy notice; and
(d)the debtor has not, within the relevant time limit, complied with the requirements of the notice or satisfied the court that he or she has a cross claim against the creditor.
[28] When hearing a creditor’s application, a court may, among other things, adjudicate the debtor bankrupt if the creditor has established the s 13 requirements;21 refuse to adjudicate the debtor bankrupt if those requirements are not established, or if the debtor is able to pay his or her debts, or if it is just and equitable that the Court does not make an order of adjudication, or for any other reason;22 or halt the application for adjudication.23
[29] The Court may also halt or refuse the creditor’s application for adjudication if the debtor has appealed against the judgment or order underlying the bankruptcy notice and that appeal is still to be decided.24
Analysis
[30]The issues to be determined in this judgment are:
(a)Are the requirements of s 13 of the Act satisfied?
21 Insolvency Act 2006, s 36.
22 Section 37.
23 Section 38.
24 Section 42.
(b)If so, are there grounds under s 37 of the Act upon which the Court should exercise its discretion not to make the adjudication order?
[31]I deal with each of these issues in turn.
Are the requirements of s 13 of the Act satisfied?
[32]It is clear that they are:
(a)Mr Clark owes Moxham more than $1,000;
(b)there is an act of bankruptcy within a period of three months before filing the application; and
(c)the debt is of a certain amount and the debt is immediately payable.
Are there grounds under s 37 of the Act upon which the Court should exercise its discretion not to make the adjudication order?
[33] Mr Mason submitted that the District Court judgment on which the bankruptcy notice and the application for adjudication is based has not been appealed, and no application has been made for recall of the judgment. He submits that the bankruptcy Court may at times look behind a judgment and the Court will do so more readily where there is a default judgment, rather than one that has gone to trial and where there has been a hearing on the merits.25
[34] Where there has been a hearing on the merits, it will be much more difficult to persuade a Court to look behind a judgment. Mr Mason refers to Corney v Bryan,26 where Fullagar J indicated the Court would look behind a judgment after a trial on the merits only where there was a prima facie case of fraud or collusion or a miscarriage of justice. Mr Mason submits that in Mr Clark’s case there was a determination on the merits after Mr Clark had two opportunities to raise any matters.
25 Re Reynolds ex parte Bartletts [2014] NZHC 447 at [26].
26 Corney v Bryan (1951) 84 CLR 343 at 356–358.
[35] In my view, the present case does not fit into any of the categories justifying looking behind the District Court judgment, and that alone would indicate a decision should be given in Moxham’s favour. However, in case I am wrong on this point, I will continue on to deal with the further submissions made by counsel on behalf of Moxham and submissions made by Mr Clark.
[36] Mr Mason submits that Mr Clark has never suggested that he is not Stephen Clark identified by the Police as the holder of the bank account into which the payment was made. In fact, Mr Clark acknowledges he held the account but denies he had control of it. Mr Clark says:
(a)He was the agent for NTMLS and did not have authority to make any decisions relating to the payment.27 In the District Court, Mr Clark made the following statement: “Stephen George Gibson Clark is an agent for Nga Tikanga Māori Law Society (Inc) Aotearoa (NZ) the internal and external sovereign Aotearoa (NZ) Ltd.” He says that the account of “S Clark, trading as EcoFarm Ltd, was under the control of NTMLS as a vested business of the Sovereign”.
(b)A company called EcoFarm Supplies Ltd (renamed EcoFarm Aotearoa Ltd) acquired full administrative control, including control of the finances and the bank account, on 2 May 2018, and that all financial transactions from 2 May 2018 were conducted by the administrator of EcoFarm Supplies Ltd.28
(c)The funds were transferred on 26 June 2018 in accordance with instructions of the administrator of EcoFarm Aotearoa Ltd.
[37] Mr Mason submits that the bank statements supplied by Mr Clark show that the $26,509.80 was paid into the S Clark t/a EcoFarm Aotearoa account on 21 June 2018, and subsequently $20,000 was paid to “EcoAotearoa BNZ” with a coding of “Redirect Mox” on 26 June 2018. Mr Mason makes the point that not all of the
27 Affidavit of Stephen George Gibson Clark dated 22 April 2022 at [9]; and affidavit of Stephen George Gibson Clark dated 30 May 2022 at [14].
28 Affidavit of Stephen George Gibson Clark dated 22 April 2022 at [2].
$26,509.80 was transferred into the EcoFarm trust account. Mr Clark’s explanation of what happened to the balance of the $26,509.80 given by him at the hearing was that it was used to pay other EcoFarm Aotearoa creditors at the direction of the controller of the account.
[38] Mr Mason submits that the evidence of Mr Clark on control of the relevant bank account has, at the least, been inconsistent — originally Mr Clark claimed the amount was controlled by NTMLS and then subsequently by EcoFarm Aotearoa. Mr Mason is asking the Court to draw adverse inferences on the credibility of Mr Clark’s evidence from these inconsistencies.
[39] Subsequent to the hearing, Mr Clark filed an affidavit sworn by Mick Gerritsen in support of his evidence. I summarise the affidavit made by Mr Gerritsen. He deposes:
(a)That he entered into a contract with EcoFarm Supplies Limited/EcoFarm Aotearoa Ltd to manage the financial administration of the company from 1 April 2018.
(b)From 25 May 2018, a BNZ trading account was set up to replace the ANZ Bank account ‘S Clark t/a EcoFarm Aotearoa’ as the EcoFarm Ltd trading account.
(c)EcoFarm Aotearoa had control of the transition from the ANZ account S Clark t/a EcoFarm Aotearoa to the EcoFarm Ltd Aotearoa BNZ trading account, and could control its directions.
(d)The bank account EcoFarm Aotearoa BNZ that is identified in the transaction dated 26 June 2018 (recorded on the S Clark t/a EcoFarm Aotearoa account bank statement) was, at the time, the BNZ trading account for EcoFarm Aotearoa Ltd.
(e)Mr Clark notified EcoFarm Aotearoa Ltd that $26,509.80 was deposited in the S Clark t/a EcoFarm Aotearoa account on 26 June 2018.
(f)Mr Clark was instructed to transfer $20,000 of the funds to the EcoFarm Aotearoa BNZ account in accordance with the direction of the controller of EcoFarm Aotearoa Ltd.
(g)From 1 April 2018, Mr Clark did not have any involvement in the administration of EcoFarm Aotearoa and, to the best of Mr Gerritsen’s knowledge, did not have authority with regard to the S Clark t/a EcoFarm Aotearoa bank account.
[40]My conclusions on this point are:
(a)Subject to the discussion below on Mr Clark’s liability as an agent (on which I conclude he remains liable), the issue of who may ultimately control the account is not relevant to the liability of Mr Clark for repayment of the money. The fact that a third party may have instructed him to pay the funds elsewhere does not relieve him from responsibility of repaying money had and received. While Mr Clark may have been badly used by a third party, this does not relieve him from personal liability for repayment of the money.
(b)There is no evidence before the Court as to transfer of the remainder of the $25,000 to other suppliers of EcoFarms Aotearoa Ltd. The Court is therefore unable to make any judgment as to whether the statement from Mr Clark that these payments went to other suppliers of EcoFarm Aotearoa Ltd is correct.
Does Mr Clark have a defence being an agent?
[41] In supplementary submissions dated 23 August 2022, Mr Mason dealt with the issue of whether Mr Clark may have a defence as an agent. He referred the Court to the following passage from Laws of New Zealand:29
The agent’s receipt of money from a third party on the principal’s behalf does not itself render the agent liable to repay it when the third party becomes entitled to repayment from the principal, whether the money remains in the hands of the agent or not. The agent is, however, liable personally to repay it if a third party has paid the money to him or her under a mistake or fact, or in consequence of some wrongful act. However, if before the claim for repayment is made the agent has paid it, or has done something equivalent to paying it, to the principal, and this has so prejudiced the agent’s position that it would be inequitable to require him or her to refund it, the agent will not be liable.
[42] Mr Mason contends that this statement is an over-simplification of the law and refers to ANZ Group Ltd v Westpac Banking Corp, where the High Court of Australia said:30
… on balance, both authority and principle support the conclusion that an agent who has received money on his principal’s behalf will, without more, have a good defence if, before learning the money was paid under fundamental mistake, he has “paid it to the principal or done something equivalent” thereto
… The rationale of such a general rule can be identified in terms of the law of agency and of notions of unjust enrichment. If the money is paid to an agent on behalf of the principal and the agent receives it in his capacity as such and, without notice of any mistake or irregularity in the payment, applies the money for the purpose for which it was paid to him, he has applied it in accordance with the mandate of the payer who must look to the principal for recovery … .
[43] Mr Mason submits that in the present case Mr Clark never received the money as an agent for a principal. Mr Mason submits it was not paid to Mr Clark by Moxham as agent for Ecofarm Aotearoa but was instead received by him with notice of irregularity of the payment from the start. Accordingly, in those circumstances, Mr Mason submits that Mr Clark is personally liable to repay the money.
29 C Hawes and D Lester Laws of New Zealand Agency: Money Received by Agent (online ed) at
[144] (footnotes omitted).
30 ANZ Group Ltd v Westpac Banking Corp (1987) 164 CLR 662 at 681–682 (citations omitted).
Mr Clark’s circumstances and the public interest
[44] Mr Mason submits that Mr Clark says that he has no assets other than a personal bank account with $8,904.62. Mr Mason refers to Eide v Colonial Mutual Life Assurance Society Ltd,31 where the Court recognised that even the undoubted absence of assets will not necessarily preclude an order, for the circumstances may be such that the debtor ought, in the public interest, to be visited with the disqualifications that go with bankruptcy.
[45] Mr Mason submits that Mr Clark has some assets and the investigation of his assets that would follow adjudication is desirable, as it may uncover further assets. Mr Mason further submits that the rapid retrieval of funds paid under a mistake is in the public interest of the commercial community. In that sense, it is in the public interest that an adjudication order be made.
Conclusions
[46]In my view:
(a)There are not sufficient grounds to look behind the District Court judgment, which was a trial on the merits. Mr Clark did not appeal that judgment or seek to set it aside. In addition, Mr Clark did not seek to set aside the bankruptcy notice.
(b)While the ultimate control of the account into which the funds were mistakenly paid is unclear, this does not relieve Mr Clark from personal responsibility for repayment of monies paid under a fundamental mistake. While he may have been badly used by third parties, his personal liability to repay the funds remains.
(c)Mr Clark cannot avail himself of the defence of being an agent, as the payment was not made to him as an agent for EcoFarm Aotearoa and he had notice of the mistake when the funds were received into the account.
31 Eide v Colonial Mutual Life Assurance Society Ltd [1998] 3 NZLR 632 (HC) at 635.
(d)While Mr Clark’s declared position is that he may not have many assets, an investigation into his assets would be beneficial.
(e)There is public interest for the commercial community in the assurance from the courts of recoverability of money paid under a fundamental mistake.
Result
[47] I order that the defendant, Steven George Gibson Clark is adjudicated bankrupt at 3:00pm on 20 October 2022.
…………………………….. Associate Judge Taylor
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