Palmer v Harts Contributory Moragages Nominee Co Ltd HC Auckland B No 297-Im01

[2001] NZHC 718

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY B NO 297-IM01

BETWEEN GARY MARK PALMER
Debtor

AND HARTS CONTRIBUTORY MORTGAGES NOMINEE CO LTD
Creditor

Hearing: 30 July 2001

Counsel: J C La Hatte for Debtor
M Edwards for Creditor

Judgment: 8 August 2001

JUDGMENT OF MASTER ANNE GAMBRILL

Solicitors:
J C La Hatte, PO Box 4188, Shortland Street, Auckland
P L Thomas, PO Box 91449, Auckland
Russell McVeagh, PO Box 8, Auckland

[1] The debtor opposes the petition on the basis the petition is flawed and is a nullity. It has not been properly executed and he relies on rules 831 and 838 of the High Court Rules.

[2] I turn to the petition. The petition is drawn in accordance with the High Court Rules down to paragraph 5. The document is then signed up as follows:

“Dated at Auckland 9th day of April 2001

FJ Thorp,

Solicitor for the Creditor”

[3] The debtor therefore relies on the fact:

(a) the signature is by F J Thorp a solicitor not the creditor or a representative signing on behalf of the company

(b) there is no witness to the signature.

The Bankruptcy Rules 1970 revoked in 2000 provided as follows:

“Rule 44:

(1) Every application for adjudication shall be commenced by a petition filed in the Court.

(2) Every bankruptcy petition shall be in form 16 or 17 in the First Schedule hereto, as the case may require, and shall be dated, signed and witnessed.

(3) Every person shall have endorsed thereon a memorandum of the name of the person suing out the petition and his address for service.

Rule 45:

Petition to be witnessed - the signature of the petitioning debtor or creditor shall be witnessed by a Registrar of the Supreme Court or of any Magistrate’s Court, or by a solicitor or a Justice of the Peace, or if the petition is signed out of New Zealand by a notary public, and the identity of the petitioning debtor or creditor shall be deemed to be proved if the signature of the petitioner to the petition is so witnessed.”

The actual format of the petition refers at the end to the requirement for a signature and witness to the signature. (Form 17)

“Form 17

Creditor’s Petition

Section 23, Insolvency Act 1967

. . .

Dated at . . . . , this . . . . day of . . . . 19. . . .

. . . .

Witness to Signature: C.D.”

The new High Court Rules Part 16 were added as from 1 February 2000. They provide under r 831:

“Every application for adjudication must be commenced by filing in the Court a petition in form 91 or form 92 as the case may require”.

“Form 91

Debtor’s Petition

[General heading as in form 1 and rule 824]

. . .

Dated at [Place] [Time and Date]

. . . .

Debtor

Witness:

. . . .

(Deputy Registrar or Solicitor or Justice of the Peace”

“Form 92

Creditor’s Petition

[General heading as in form 1 and rule 824]

. . . .

Dated at [Place] [Date].

. . . .

Petitioning Creditor

. . . .

(Deputy) Registrar or Solicitor or Justice of the Peace”

In the creditor’s petition there is no reference to the word “witness”.

[4] I turn to the debtor’s counsel’s submissions. Counsel submitted in Best v Watson [1979] 2 NZLR at page 492 the test at 494 where the Courts were considering whether there was a degree of failure as to comply with an apparently mandatory requirement of the Act or the Rules.

“We think that the same considerations apply under s 11. That provision may be invoked in any case where the proceedings are defective and however the defect may be characterised. It will always be a question of degree whether or not it can be said that, notwithstanding failure to comply with an apparently mandatory requirement of the Act or of the Rules, there is before the Court what can fairly be described as proceedings under the Act; and that question should not be approached in a mechanical or technical way.”

[5] This case was followed in 1994 in Re Moss [1994] 3 NZLR 98 where the Master did not exercise a discretion under s 11 of the Insolvency Act because the departure was too serious. On that occasion the Master noted the number of errors. Counsel’s submission is there is a distinction between matters which are capable of correction and whether the proceeding itself is a nullity.

r 41 of the High Court Rules specifically prescribes the authority to file documents instead of the issue of a warrant to act.

“Rule 41 - Authority to file documents - No solicitor shall file any document on behalf of any party unless the solicitor is either-

(a) A solicitor who is in practice on his or her own account or as a principal in a firm of solicitors; or

(b) A Crown counsel employed in the Crown Law Office; or

(c) Where the party is the Public Trustee, -

(i) A person of a kind described in paragraph (a) or paragraph (b); or

(ii) The Office Solicitor (as defined in section 2 of the Public Trust Office Act 1957); or

(d) Where the party is a Department (as defined in section 2 of the Public Finance Act 1989), -

(i) A person of a kind described in paragraph (a) or paragraph (b); or

(ii) The solicitor who is employed by that party as its Office Solicitor or principal legal adviser; or

(e) Where the party is a corporation, -

(i) A person of a kind described in paragraph (a) or paragraph (b); or

(ii) The solicitor who is employed by that part as its principal legal adviser.”

[7] This provision has been considered in Time Ticket International Ltd v Broughton [1996] 2 NZLR 176. The Court found that the proceedings were irregular and not a nullity even though the solicitor issuing the proceedings and named thereon did not have a practising certificate. His argument was that the petition before the Court had not been executed at all. He says that the requirement for the signature goes back to the early days following Chancellor Eldon issuing a general order requiring petitions to be timely and tested by the solicitor presenting the petition or by a person who was either Attorney, Solicitor or Agent of the person signing. I quote from Cases in Bankruptcy; by George Rose, Esq (Vol 1) 1813, containing reports of cases decided by Lord Chancellor Eldon,

“In the Matter of Bankruptcy:

Whereas great Mischief has arisen by Petitions being presented in Matters of Bankruptcy, in the Names of Person, who have afterwards either abandoned them, or stated that they had given no Authority for presenting such Petitions: It is therefore ordered, that from and after the 1st day of October, 1809, all Petitions in Bankruptcy presented for Hearing, shall, before they are presented, be respectively signed by the Petitioners, except in Cases of Partnership, or Absence from the Kingdom; in the former of which Cases the Signature of one of the Partners is to be deemed sufficient; and in the latter Case the Petition is to be signed by the Person presenting the same, on Behalf of the Person so abroad : And it is further ordered, that the Signature of each Person, signing as a Petitioner, shall be attested by the Solicitor Actually presenting the Petition, or by some Person who shall state himself, in his Attestation, to be Attorney, Solicitor, or Agent of the Party signing, in the Matter of the Petition”.

He said that though the reasoning is ancient, the wording is reflected in the now repealed r 41 of the High Court Rules. The Lord Chancellor was concerned about authority of people signing petitions and he wanted therefore people with status to witness the attestation. He says therefore the failure to witness is a failure that gives rise to a finding the petition is invalid and therefore a nullity. The witnessing is an inherent part of execution. He distinguished this case from all other cases mentioned because the defects were matters of form. This case, he submits is a matter of the validity of the petition.

[8] I refer to CRO Group Holdings Ltd (B525/00) where the Court noted three defects:

(i) The petition was signed by Ian David Parton as the petitioning creditor. Mr Parton was not the creditor. The company was the creditor, but he was the sole director.

(ii) The second defect records a requirement for interest.

(iii) The third defect arises through a plea that the substituted creditor had no security, but there was security for the debt. Master Faire found the defects were clear and the test he applied was, “is the document so defective that it is a nullity as stated in Best v Watson (supra)?”

Master Faire’s view was the document was capable of rectification. My view is similar herein. The document is capable of rectification. There has, indeed, been an amended petition served but the Court has been satisfied that Mr Thorp properly executed his document and indeed his signature could be witnessed or verified by not only F Thorp but others to whom it is known. He has deposed to the execution. There is no other defect in the petition and the debtor is not disadvantaged by the lack of a witness to a signature.

[9] The debtor’s case is the summons should not have been issued by the High Court because of the very fact there is no petition. The debtor’s counsel’s argument is that the amendment to the Rules does not give the judgment creditor’s solicitor authority to execute the petition in terms of r 41 of the High Court Rules. The debtor says the petition was not executed by the creditor, therefore it is a nullity. Counsel relies on the fact there is a change of status in bankruptcy and therefore there must be strict compliance with rules. He noted the High Court Rules, r 40 onwards as the provision for a solicitor’s authority to file and sign documents. He says it is relevant to refer r 43 which specifically gives authority to have a document signed by the solicitor unless the party’s personal signature is expressly required.

“Rule 43 Authority to sign documents - (1) Any document which is required by these rules to be signed by a party may, unless the party’s personal signature is expressly required, be signed on behalf of the party by the party’s solicitor on the record.

(2) Nothing in subclause (1) shall derogate from the authority of counsel to sign documents.”

[10] A new High Court Rule was bought in, in 1991 to allow the solicitor on the record to sign documents on behalf of the party concerned. There is no doubt that there was in this case a solicitor on the record as a bankruptcy notice had issued in the creditor’s name.

[11] Counsel submits there can be no doubt that in this instance he says the relevant High Court Rule together with the form as prescribed under the Rules does expressly require such a signature to be by the creditor not by the solicitor.

[12] Mr La Hatte’s argument was that a bankruptcy notice may require “an act of bankruptcy” - it does not give rise to a final order changing status. It is generally accepted that there are comparatively few documents other than wills, that witness attestation is essential. A deed falls into this category but a land transfer document, for example, where there is a question over the witnessing there is provision for a party to appear before the District Land Registrar and depose as to the signature. Cross on Evidence chapter 20 para 20.18 refers to proof of handwriting by testimony, this being relevant to wills. However, it appears that any lack of witnessing can be corrected by subsequently asking for the witness or a party to verify the creditor’s signature. There are two issues:

(a) Could Mr Thorp sign as the agent of the company or the solicitor on the record? I am satisfied that in both capacities he was authorised to sign. The company is not a natural person and must act through human agents. An obligation is required by law to be in writing. It may be entered into on behalf of a company in writing by a person under the company’s express or implied authority. In this case I am satisfied that Mr Thorp had the authority of the company to sign on its behalf the petition. Even if that authority can be challenged the company has in later evidence made it clear that the petition is its petition.

(b) Is the petition is a nullity or not because of the failure to witness a signature? The witnessing of the signature is merely verification that the party whose signature appears has indeed signed the document. That signature can also be verified by oral testimony if the signatory is called and gives evidence that he is the author of the document and it is his signature thereon. The purport of witnessing does not go to the content of the document or the evidence on which the petition is founded but merely to verification that the document has indeed been signed by the party whose signature appears. There is an affidavit by Mr Thorp verifying his signature and the debtor’s counsel does not dispute the authenticity of the signature.

[13] What is the effect of this failure then in this case to fail to comply with the rule which appears to require a signature before certain parties. Significantly r 45 of the Insolvency Rules 1970 was dropped from the new Rules and the requirement is to execute a petition in the form 91 or 92. Form 91 clearly shows the requirement of a witness ie on the debtor’s petition. That word witness has been dropped off from form 92. I therefore raise the question is witnessing necessary? There is nothing in the Rules now to say that a creditors’ petition must be witnessed. All that is in the Rules is that the application must be commenced by filing a petition in form 92. Whilst, prima facie, it is assumed that there is a requirement for the documents to be signed before parties such as a Solicitor or Justice of the Peace or Deputy Registrar, there is nothing that actually says a witness is necessary or required if the petition is in form 92. The stipulation was previously so clear as to the requirement for signing and witnessing, now the matter appears to be at large and one questions whether a witness is actually necessary, although it appears this is the intent. The situation for a debtor who files his/her own petition is distinguishable. The petition must be witnessed as shown on form 91. The question therefore, is this one omission an irregularity or does it go to the validity of the petition. I regard it as an irregularity. I accept the submission that because of the irregularity normally the petition, if it had been properly checked, would not have been issued by the Court who issued the accompanying summons. Regrettably the error was not picked up. The test must be, however, was the debtor fully informed of the nature of the claim and his obligations thereunder. In this case service was effected by advertising (and on that occasion the full text of the petition was not advertised), merely the summons and part of the petition detailing the act of bankruptcy and date of hearing. The debtor saw the advertisement and responded with a notice of opposition and affidavit. The summons is the critical document to advise of the hearing date. The summons complies with the Rules and the only challenge can be to the petition document itself. Rules 44 and 45 were specifically not brought forward. A subsequent amended petition has issued. If the point is pursued there is no difficulty in proceeding on the amended petition if I do not hold the original petition a nullity. I accept that it is a distinction between a nullity and an irregularity is a question of degree. Recently in Khan v Selling [1999] 6 NZBLC 102,776 omission of a date in the actual petition was held not to render the petition a nullity but an error capable of remedy by an order under s 11. I accept in this case the alleged defect is to form. It is not sufficient to declare the petition a nullity. Verification has been obtained. I accept there has been a departure from the strictly proper practice which should not be condoned and which the petition should not have issued in this Court if perfection is the standard which we can all attain. However, the mistake has occurred. There is no evidence of disadvantage to the debtor, merely the debtor putting the creditor to proof. I believe under r 11 that the amendment to the petition could be made if that is what the creditor seeks or alternatively that the hearing could proceed on the original petition as it is not disputed it is Mr Thorp’s signature or that he lacked authority, merely he was not the party who had the right to sign the petition.

[14] The Court intends to accept Mr Thorp’s signature of the petition and therefore the petition is not invalid.

[15] At the hearing I had indicated to counsel that I would reserve to consider the various documentary evidence and cases but that I would hear them so that if I found the petition valid I could make the order of adjudication. Both counsel accepted that this would be the basis on which the hearing proceeded. As I have not made a final determination I invited counsel in another proceeding relating to Mr Palmer to argue the summary judgment which they did and I have made a decision in that hearing.

[16] I turn to this application for an order for adjudication. Apart from arguing the petition was a nullity, which I find it not to be, Mr La Hatte offers no further submissions in opposition to the petition. There was a certificate of non-payment at the hearing and the Court has re-checked that no payments have been made. The judgment which had earlier been challenged was not challenged and therefore I accepted the creditor’s application on an order for adjudication. There is accordingly an order for adjudication. The time is the time of release of this judgment.

Costs

[17] The additional time and cost has been caused through the error of the petitioning creditor’s solicitors. Whilst I understand how the failure to witness arose, I believe that the signature by Mr Thorp, although accepted, should not have occurred as I have said previously. For these reasons the creditor will be entitled to costs only at 2B on the normal filing and including substituted service cost and brief appearance but no costs on the preparation of the additional affidavit and the hearing herein.