Page v Wanganui District Council

[2012] NZHC 2622

IN THE HIGH COURT OF NEW ZEALAND WANGANUI REGISTRY

CIV-2012-483-183 [2012] NZHC 2622

IN THE MATTER OF     an application to annul the bankruptcy of AN Page under s 309(1)(a) of the Insolvency Act 2006

BETWEEN  ADRIAN NEIL PAGE Applicant

ANDWANGANUI DISTRICT COUNCIL Respondent

Hearing:         3 October 2012

(Heard by Video-Conference Link)

Counsel:         Applicant in person

JM Woodcock for the Respondent Wanganui District Council

Judgment:      11 October 2012

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

Under r 11.5 of the High Court Rules I direct the Registrar to deliver this judgment at 3.00 pm on 11 October 2012.

Solicitors:           Armstrong Barton, Solicitors, PO Box 441, Wanganui

Official Assignee, Private Bag 5091, Wellington 6145

AN PAGE V WANGANUI DISTRICT COUNCIL HC WANG CIV-2012-483-183 [11 October 2012]

Introduction

[1]      On 24 February 2011 the applicant Mr Adrian Neil Page (Mr Page) was adjudicated bankrupt on an application brought by the judgment creditor respondent, Wanganui District Council, at the High Court at Wanganui in proceeding number CIV-2010-483-134.

[2]      The debt upon which the bankruptcy application was brought amounted to

$12,000.00 and was based upon an order for costs of this amount made against both Mr Page and his wife/partner Nicola Janet Wilson (Ms Wilson) in the Environment Court on 11 March 2010.

[3]      Mr Page now applies for orders under s 309(1)(a) of the Insolvency Act 2006 (the Act)  annulling  his  bankruptcy.  This  is  his  second  application  of  this  sort, following an earlier application by Mr Page to this Court to annul the adjudication order, also essentially under s 309(1)(a) of the Act, which application was dismissed on 21 July 2011.

[4]      The  present  application  as I have noted is advanced  on  the  sole  ground contained  in s 309(1)(a) Insolvency Act 2006 which states:

309       Court may annul adjudication

(1)        The Court may, on the application of the Assignee or any person interested, annul the adjudication if –

(a)         the Court considers that the bankrupt should not have been adjudicated bankrupt ...

Background

[5]      Mr Page and his wife/partner Ms Wilson had a series of dealings with the

Wanganui District Council (the Council) over the development of a property at 86

Ikitara Road, Wanganui which culminated in an Environment Court hearing at which they were ordered to pay the Council’s costs of $12,000. On the basis of that order, the Council applied for orders of adjudication of Mr Page and Ms Wilson which

were granted at the High Court at Wanganui on 24 February 2011.[1]

[1] See CIV-2010-483-134, and CIV-2010-483-133.

[6]      On 14 March 2011, Mr Page applied to have his adjudication annulled on the basis that he should not have been adjudicated bankrupt. As noted above, on 21 July

2011  that  application  was  dismissed  as  it  did  not  raise  any  new  matters  not previously before the Court, and was seen as an attempt to relitigate grievances that Mr Page had with the Council.

[7]      The present application is Mr Page’s second attempt to have his bankruptcy annulled.  He  appeared  before  me  in  person,  as  he  has  done  throughout  the bankruptcy proceedings and on an earlier Application to Set-Aside the Bankruptcy Notice.  At the hearing before me, Mr Page called Ms Wilson as a witness to give evidence and to provide some background to the costs order made against she and Mr Page in favour of the Council.   Mr Page’s written and oral submissions were essentially directed towards the legal validity of various steps taken by the Council as part of the whole dispute.  He claims that this Court in its bankruptcy jurisdiction has the power to examine and declare invalid a judgment given by a separate Court, if it deems that judgment to be based on a series of unlawful steps taken by the Council as judgment creditor here.  As I see it, Mr Page is essentially asking this Court to reopen the merits of the substantive Environment Court case which set in train the bankruptcy proceedings.

Legal principles: annulment of bankruptcy

[8]      Mr Page relies here solely on s 309(1)(a) of the Act, which allows annulment where the Court is satisfied that the bankrupt should not have been adjudicated bankrupt at the outset. The discretion contained in s 309 is not an opportunity for the bankrupt to relitigate the merits of the adjudication application, but rather a means to correct either defective procedure, or an abuse of process, or an omission of some material fact before the Court making the adjudication order.

[9]      Brookers Insolvency Law and Practice addresses s 309(1)(a) at IN 309.05(1)

and confirms this:

Despite the discretion it gives to the Court, subs (1)(a) should be interpreted narrowly.   Generally, it will not provide grounds for interfering with a discretion exercised on a properly brought adjudication petition unless there was some defect in procedure, abuse of process, or where some material fact was not brought before the Court making the adjudication order:   Re Hunter ex parte Commissioner of Inland Revenue (2000) 19 NZTC 15,722.

[10]     Mr Page’s present challenge in this application contends  that bankruptcy against him was entered purely on the basis of an invalid costs award of $12,000 in the Environment Court.  Essentially, he claims that the Environment Court decision against he and Ms Wilson and this costs award were invalid for two reasons: first, that the Court wrongly identified them as the owners of the property at 86 Ikitara Road, and secondly, that the procedure for issuing abatement notices, prescribed by s

325A Resource Management Act 1991, was not properly followed.

[11]     As to the first objection, Mr Page claims that the abatement notices, interim enforcement orders, and final enforcement orders issued by the Council did not correctly identify the Waikupa Trust (the correct registered proprietor at the time) as the owner of the property in queston. Therefore, he contends that any legal liability in respect of those notices before 9 October 2009 when ownership was transferred to Mr Page must lie against the trust and not Mr Page (and Ms Wilson) personally. Costs  (if  any)  should  have  been  ordered  against  the  Trust,  and  thus  Mr  Page maintains he is not personally liable for the $12,000 personally.

[12]     On this aspect, I am satisfied that this objection was before this Court and effectively taken into account when it heard Mr Page’s application to set aside the initial bankruptcy notice, its final adjudication orders, and its hearing of his first application for annulment. Therefore, in my view it does not amount to a material omission from the Court’s consideration in any of those instances.

[13]     For completeness I will go on to assess, however, that even if this objection alleged by Mr Page was not before the Court at first instance, whether in light of it, bankruptcy orders should  have been  made.   Throughout  as  I understand  it,  the Council identified the trustees of the Waikupa Trust (including Mr Page and Ms Wilson) as owners of the property and against whom judgment was entered and costs ordered. A trustee who conducts business for a trust in question is liable to creditors for the debts of the trust to the same extent as if the trustee had been carrying on business on his/her own account.  (Any provision in a Trust Deed whereby the Trust itself indemnifies its Trustees for any debt liability incurred is another matter and one entirely between the Trust and its Trustees alone).  The creditor of the trustees in this case, here the Council, has provable debts for the purposes of bankruptcy, whether those debts are incurred in the bankrupt’s personal capacity or in his capacity as

trustee. Therefore, this costs award against what may have been effectively the Trust is also a debt of Mr Page’s and can be the basis of the bankruptcy application against him personally. Had that matter been expressly pleaded and dealt with in the initial adjudication, the outcome would not have been any different.

[14]     Mr Page’s second objection is that the original costs award cannot be lawful when the correct procedure for issuing of abatement notices by the Council he says was not followed. On 31st October 2008, as I understand it, Mr Page and his partner Ms Wilson were issued an abatement notice by the Council, as the property they were developing was considered to be marginally stable and the hillside was subsiding. This notice required Mr Page and Ms Wilson to obtain an engineer’s report, and Mr Page commissioned Abuild Consulting Engineers to complete this. They produced their report on 2 December 2008. Mr Page then applied to cancel the extant abatement notice on 8th  December 2008, pursuant to s 325A(4) Resource Management Act 1991.   This provision allows any person directly affected by a notice to apply to the relevant council to have it cancelled.

[15]     It  seems  that  Mr  Page  and  Ms  Wilson  then  received  a  conceptual development plan prepared by Abuild Consulting on 23rd December 2008. There is a dispute between the parties as to who commissioned this report and the nature of its effects, which it is not appropriate to traverse here. Mr Page characterises it as a “variation to the first abatement notice” and on that basis, it seems the Council issued a second abatement notice on 2 January 2009.  The Environment Court issued final enforcement orders on 22 June 2009. However, Mr Page contends as I understand it that the second notice was unlawful as he contends the Council had not adequately dealt with his application to cancel the first notice as they were required

to do under s 325A.  Resource Management Act 1991.

[16]     It is clear to me that this objection amounts to a challenge to the Environment Court’s  decision  which  this  Court  cannot  review  in  its  hearing  of  a  second application for bankruptcy annulment.  Significantly, Mr Page has not appealed the orders made by the Environment Court.  Certainly, an appeal would have provided the appropriate forum to challenge and review the merits of those orders. The matters submitted by Mr Page in the present application were before the Court when the original adjudication order was made, and I am satisfied no material facts were

omitted that might justify an annulment on the basis of new evidence. For that reason alone I am of the view that the very narrow discretion prescribed by s 309(1)(a) of the Act should not be exercised here.

[17]     Although  Mr  Page’s  present  annulment  application  is  brought  only  in reliance on s 309(1)(a) of the Act, for completeness I will turn now to mention briefly the position under s 309(1)(b), (c) and (d) of the Act.

[18]     The second and third grounds for annulment of an adjudication order set out in s 309(1)(b) and (c) of the Act are that the Court needs to be satisfied that the bankrupt’s debts have been fully paid together with the official assignee’s fees and costs or that there has been a substantial change in the bankrupt’s financial circumstances since the date of adjudication.

[19]     As to s 309(1)(b) of the Act, on 3 September 2012 the Official Assignee has filed a memorandum in this Court and an updated report.  While a part payment has been made by Mr Page the total debt together with costs and fees has not been satisfied.    There  is  presently  a  shortfall  of  at  least  $24,859.46,  excluding  the

$12,000.00 Environment Court costs order, (or $36,859.46 including this sum).

[20]     A finding that the adverse Environment Court costs order was invalid would only excuse $12,000.00 of the total outstanding debt.   It would not affect the remaining undisputed amount of at least $24,859.46 as identified in the Official Assignee’s report and confirmed as owing principally to  the Farmlands Trading Society.

[21]     As to the third ground for annulment of an adjudication order set out at s

309(1)(c) of the Act, there is no evidence of any kind before the Court in relation to any change in Mr Page’s financial circumstances and certainly nothing that would constitute a substantial change. This ground has not been met here.

[22]     The final ground set out at s 309(1)(d) of the Act is where the Court has approved a composition.  In this case there has been no agreement between Mr Page and his creditors by way of compromise to repay part of his debts in satisfaction of all debts, far less Court approval for this course.   This ground similarly has no application here.

Conclusion

[23]     The present application is without merit and  for all the reasons outlined above must be dismissed.   Mr Page is once  again attempting to re-litigate past grievances against the Council and it is not proper for the insolvency regime to be used for this purpose.

[24]     The basis for annulment in s 309(1)(a) of the Act has not been made out here. Nor indeed would any annulment under s 309(1)(b), (c) or (d) be appropriate in this case.    The present annulment application by the applicant Mr Page accordingly is dismissed.

Costs

[25]     The  respondent  Council  has  been  successful  in  opposing  this  further annulment application brought by Mr Page.  I see no reason why both the Council and the Official Assignee (who has filed a report and memorandum for this matter) should not be entitled to awards of costs here.

[26]     Costs on this application therefore are awarded against the applicant Mr Page to both the Council and the Official Assignee on a category 2B basis together with disbursements (if any) approved by the Registrar.

‘Associate Judge D.I. Gendall’