Official Trustee in Bankruptcy of Henare v Henare
[2019] NZHC 248
•25 February 2019
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV 2018-419-000357
[2019] NZHC 248
UNDER The Insolvency (Cross-border) Act 2006 AND UNDER
The High Court Rules
IN THE MATTER
Of an application pursuant to Schedule 1, Chapter III, Article 15 and rules 24.56, 24.57 and 18.7 of the Rules
BETWEEN
THE OFFICIAL TRUSTEE IN BANKRUPTCY as
Trustee of the Bankrupt Estate of Pinehuia Mary Josephine Henare
ApplicantAND
PINEHUIA MARY JOSEPHINE HENARE
Respondent
Hearing: On the papers Judgment:
25 February 2019
JUDGMENT OF VAN BOHEMEN J
This judgment was delivered by me on 25 February 2019 at 12.30pm Pursuant to Rule 11.5 of the High Court Rules
…………………………
Registrar/Deputy Registrar
Solicitors:
J MacGillivray
Tompkins Wake, Hamilton
THE OFFICIAL TRUSTEE IN BANKRUPTCY as Trustee of the Bankrupt Estate of Pinehuia Mary Josephine Henare v HENARE [2019] NZHC 248 [25 February 2019]
Introduction
[1] On 15 November 2018 the Official Trustee in Bankruptcy of Australia, as trustee of the bankrupt estate of Ms Pinehuia Mary Josephine Henare, applied pursuant to the Insolvency (Cross-border) Act 2006 and the High Court Rules 2016 for recognition of the bankruptcy of Ms Henare in Australia as a foreign main proceeding and for related orders. For reasons that are not apparent to me, the application was not put before a judge until late January 2019. Whatever the reasons, this delay should not have occurred.
Relevant Background
[2] Ms Henare was born in New Zealand and possesses a New Zealand passport, but has resided in and been employed in Western Australia for some time. On 8 June 2018, Ms Henare filed a Debtor’s Petition in Australia pursuant to the Bankruptcy Act 1966 and was subsequently declared bankrupt by the Australian Financial Security Authority.
[3] The Debtor’s Petition filed by Ms Henare contained a declaration of her assets, including a property located in Kawerau, New Zealand (the Kawerau Property). The Kawerau Property had been jointly owned by Ms Henare and her late husband Mr Roger Rota Brown. Upon Mr Brown’s death, his share in the Kawerau Property was left to Ms Henare, resulting in her sole ownership of the property.
[4] Following Ms Henare’s bankruptcy, by operation of the Australian Bankruptcy Act 1966 the Official Trustee in Bankruptcy was appointed trustee of the estate of Ms Henare, vesting Ms Henare’s assets including the Kawerau Property, in the applicant. The applicant seeks various orders to facilitate dealing with the Kawerau Property.
Application
[5] Pursuant to the Insolvency (Cross-border) Act 2006 (the Act) and the High Court Rules 2016, the applicant seeks orders:
(a)That the Australian Bankruptcy be recognised as a foreign main proceeding;
(b)That the application may proceed without service on Ms Henare;
(c)That the administration of Ms Henare’s New Zealand assets be entrusted to Joanne Margaret McCarthy (Official Assignee);
(d)That the applicant notifies Ms Henare of her right to modify or terminate the recognition of her bankruptcy as a foreign main proceeding;
(e)Granting leave to serve any orders made by the Court outside of New Zealand; and
(f)That any order made by this Court be served as soon as possible on Ms Henare.
Application to Proceed Without Service
Applicant’s Submissions
[6] The Official Trustee has applied for recognition of the Australian Bankruptcy as a foreign proceeding by way of originating application, as required under r 24.56(1) of the High Court Rules. The first question that requires determination is service of the proceeding.
[7] Currently, no other person has been served with notice of the proceeding, and the applicant submits that, in accordance with r 24.56(2)(b), the application should proceed without service. The applicant further seeks directions as to service under r 18.7, as required by r 24.57(2).
[8] The applicant submits that the following circumstances are relevant to the determination of whether the application should proceed without service on Ms Henare:
(a)Rule 24.57 does not expect immediate service on the debtor; instead this rule requires an application for directions as to service be made within 25 days of the date of filing the recognition application.
(b)Under the Act an application for recognition of a foreign proceeding should be decided at the earliest possible time,1 and given the strength of the current application, it should not be delayed by service on Ms Henare.
(c)Service would have to be effected in Western Australia and the applicant is unaware of any New Zealand agent or representative.
(d)If Ms Henare were to oppose the application she would be in breach of her obligation under the Australian Bankruptcy Act 1966 to assist with the administration of her estate.
(e)Service was dispensed with in a previous case with similar circumstances.2
Analysis
[9] The determination of whether the current application should proceed without service on Ms Henare is governed by r 24.56(2)(b) of the High Court Rules 2016. The default position under the rule is that the application is to be served in accordance with Part 6 of the High Court Rules. However, an application may proceed without service where the Judge directs that in all the circumstances service should be dispensed with. The Rules provide no further specification as to what constitutes all the circumstances.
[10] In Official Trustee in Bankruptcy v Smith, Bell AJ stated that in considering an application under r 24.56(2)(b) the court must have regard to:3
(a)The just, speedy and inexpensive determination of proceedings under r 1.2; and
(b)Whether the application is one that can be properly determined without notice under r 7.46(3).
1 Insolvency (Cross-Border) Act 2006, sch 1, ch III, art 17(3).
2 Official Trustee in Bankruptcy v Smith [2014] NZHC 1305.
3 Official Trustee in Bankruptcy v Smith [2014] NZHC 1305, at [11].
[11] Bell AJ identified the circumstances where it would be appropriate, with regard to r 1.2, to dispense with service, namely, where the respondent has consented to the application, or where the debtor has gone to grounds, rendering service futile.4
[12] In the present case, there is no indication that Ms Henare consents to the application, or that she is even aware of it. There is also no evidence that Ms Henare has gone to ground. Rather, the applicant has provided her address and requested that any orders made by this court, be served on Ms Henare as soon as possible.
[13] I also do not accept that the requirement that a recognition application be decided at the earliest possible time requires the Court to dispense with service. This argument was not accepted in Official Trustee in Bankruptcy v Smith where Bell AJ emphasised that the Act ought to be read consistently with the principles of natural justice.5
[14] The suggestion that service should be dispensed with because service would have to be effected in Western Australia and the applicant is unaware of any New Zealand agent or representative is peculiar. The applicant is an Australian federal entity and presumably operates across the whole of Australia. There are also many process servers in Australia. While Western Australia may be some distance from New Zealand, given the links between the two countries, distance can hardly be a reason for dispensing with service. The fact that Ms Henare may not have an agent or representative in New Zealand upon whom the application can be served does not affect these considerations.
[15] Whether or not Ms Henare would be in breach of her responsibilities under the Australian Bankruptcy Act if she opposed the application is not an adequate reason for not informing her of the application.
[16] Rule 24.56 does not provide that service may be dispensed with solely in the interests of expediency. Rather, the rule envisages consideration of all the relevant
4 Official Trustee in Bankruptcy v Smith [2014] NZHC 1305, at [12].
5 Official Trustee in Bankruptcy v Smith [2014] NZHC 1305, at [13].
circumstances, including whether the case is one that can be properly determined without notice under r 7.46(3).
[17]Rule 7.46(3) provides that:
(3) The Judge may determine that an application can properly be dealt with without notice only if the Judge is satisfied that—
(a)requiring the applicant to proceed on notice would cause undue delay or prejudice to the applicant; or
(b)the application affects only the applicant; or
(c)the application relates to a routine matter; or
(d)an enactment expressly permits the application to be made without serving notice of the application; or
(e)the interests of justice require the application to be determined without serving notice of the application
[18]None of the factors outlined in r 7.46(3) applies:
(a)There is no indication that there would be any difficulty in serving Ms Henare with this application. To the contrary, the applicant is willing to serve any orders made by this Court on the debtor as soon as possible. I do not accept that to require service would cause undue delay or prejudice.
(b)The application cannot be said to affect only the applicant. Ms Henare will also be affected as the orders sought will vest the Kawerau Property in the Official Trustee. The application will also affect ANZ Whakatane which has a security interest in the Kawerau property by way of mortgage.
(c)The matter goes to the recognition of a foreign proceeding and the enforcement of a foreign bankruptcy order and as such is not a routine matter.6
(d)Subparagraph (d) does not apply.
(e)In my view, the interests of justice do not require the application be determined without notice.
[19] Despite the absence of the factors listed in r 7.46(3), the applicant correctly submits that there is a strong case for recognition of the foreign proceeding. Furthermore, as Bell AJ observed in Official Trustee in Bankruptcy v Smith, relations between New Zealand and Australia are close and the two countries have great confidence in each other’s legal system. Bell AJ considered that these factors meant that there would be little injustice in allowing immediate recognition of an Australian bankruptcy order while reserving the right to apply later to challenge that recognition.7 For that reason, Bell AJ adopted a ‘middle path’ of allowing the order to proceed without service while extending the time to apply to review the order under r 2.3 of the High Court Rules.8
[20] Rule 2.3 of the High Court Rules 2016 has since been repealed so the middle path adopted by Bell AJ is no longer available. The applicant submits, however, that it would still be open to Ms Henare to challenge recognition of the bankruptcy under Article 17(5) of Schedule 1 of the Act which, as Bell AJ noted, operates in addition to the right to review under r 2.3.9 The applicant submits that the Court should direct that the application proceed without service but, in order to preserve Ms Henare’s position the Court should also direct that the order recognising the foreign proceeding be served as soon as possible and that her rights under Article 17(5) be brought to her attention.
6 Official Trustee in Bankruptcy v Smith [2014] NZHC 1305, at [13].
7 Official Trustee in Bankruptcy v Smith [2014] NZHC 1305, at [14].
8 Official Trustee in Bankruptcy v Smith [2014] NZHC 1305, at [15].
9 Official Trustee in Bankruptcy v Smith [2014] NZHC 1305, at [16].
[21] The difficulty is that the right to apply under Article 17 does not place a debtor in the same position as he or she would have been if served with the proceedings. Service allows a debtor to oppose or consent to an order and to bring to the Court’s attention matters that the debtor may consider relevant. However, to succeed with an order for modification or termination a debtor must show that the grounds for granting the order were fully or partially lacking, or that they now cease to exist. That is a considerably more difficult threshold to satisfy.
[22] Furthermore, Official Trustee in Bankruptcy v Smith and this case show that there are likely to be future occasions where there will be applications for recognition of Australian bankruptcy orders in New Zealand. I consider it undesirable to establish a practice that such applications proceed without notice in the absence of specific circumstances of the kind identified in r 7.46(3).
[23] Accordingly, I consider that the current application is not one that should properly be determined without notice and I decline to direct that service be dispensed with.
Service of the recognition application on Ms Henare in Australia
[24] While an application for recognition of a foreign proceeding in New Zealand would ordinarily be a “civil proceeding”, the present application would appear to be excluded from the application of s 12 the Trans-Tasman Proceedings Act 2010 by clause 4 of the Trans-Tasman Proceedings (Specified Australian Insolvency Judgments Excluded from Recognition or Enforcement in New Zealand and Excluded Matter) Order 2013. Accordingly, leave is required under r 6.30.
[25] Leave to serve the application on Ms Henare is granted. In the alternative, I leave it open to the applicant to obtain the consent of the debtor to the application by way of affidavit, in which case the Court will dispense with service of the application on Ms Henare.
Other Interested Parties
[26] The material filed with the application indicates that the ANZ branch in Whakatane has a security interest in the Kawerau Property by way of mortgage. 10 I consider that, in accordance with r 18.8, the application for recognition should also be served on ANZ Whakatane as an interested party.
Other Orders
[27] I adjourn consideration of the other orders sought pending resolution of the issue of service.
Result
[28]Accordingly:
(a)I decline the application to dispense with service on Ms Henare of the application for recognition of Ms Henare’s bankruptcy in Australia as a foreign main proceeding;
(b)I grant leave to serve the application for recognition of Ms Henare’s bankruptcy in Australia as a foreign main proceeding on Ms Henare;
(c)I reserve leave to re-apply to dispense with service of the application on Ms Henare upon the filing of evidence of Ms Henare’s consent to the application;
(d)I direct that the application for recognition of Ms Henare’s bankruptcy in Australia as a foreign main proceeding be served on the ANZ Bank in Whakatane as an interested party;
10 Whittman v UCI Holdings Ltd [2016] NZHC 1754. In determining whether a recognition application should succeed emphasis was placed on the fact that the creditors had been served with proceedings and did not oppose them.
(e)I adjourn the determination of the further orders sought until the application has been served on Ms Henare or Ms Henare’s consent to the application has been obtained
G J van Bohemen J
2
1