Pillay v ANZ National Bank Limited

[2010] NZCA 261

IN THE COURT OF APPEAL OF NEW ZEALAND

CA150/2010
[2010] NZCA 261

BETWEENSATAYA NANDAN PILLAY

Applicant

ANDANZ NATIONAL BANK LIMITED

Respondent

Hearing:15 June 2010

Court:William Young  P, Ellen France and Randerson JJ

Counsel:No appearance for Applicant

R J Gordon for Respondent

Judgment:22 June 2010 at 2.30 pm 

JUDGMENT OF THE COURT

A            The application for an extension of time to appeal is declined.

BThe applicant must pay the respondent costs for a standard application on a Band A basis and usual disbursements.

REASONS OF THE COURT

(Given by Ellen France J)

Introduction

[1]        This is an application under r 29A of the Court of Appeal (Civil) Rules 2005 for an extension of time to appeal a decision of Associate Judge Faire adjudicating the applicant, Sataya Nandan Pillay, a bankrupt.[1]

Background

[1]      Pillay v ANZ National Bank Ltd HC Auckland CIV-2009-404-004175, 2 December 2009.

[2]        Before his bankruptcy Mr Pillay was the director and shareholder in a company called Cohesive Integration (NZ) Ltd (now in liquidation) (Cohesive).  Cohesive was incorporated by Mr Pillay to buy an information technology (IT) business.

[3]        The purchase price for the Cohesive business was $2,285,000.  Mr Pillay funded $1.1 million of the purchase price himself by way of a property swap.  He sought funding from the ANZ National Bank Ltd (ANZ), the respondent, for the balance.  ANZ agreed to lend $1,450,000 to Cohesive to enable the settlement of the purchase and to provide some operating capital.  ANZ took security for the loan in the form of a general security agreement over all of Cohesive’s assets.  Mr Pillay also gave an all obligations personal guarantee.  Mr Pillay received independent legal advice before signing the guarantee and his solicitor, Aaron Kashyap, provided a solicitor’s certificate to ANZ.

[4]        The Cohesive business failed.  Mr Pillay initially attributed blame for this failure to the vendors for allegedly misrepresenting the business to him before he entered into the agreement to buy the business.  In December 2007, Mr Pillay and Cohesive brought proceedings claiming damages of over $450,000 against the vendor.  This claim was settled and was discontinued in September 2008.

[5]        Mr Pillay next sought to attribute fault to a former customer of Cohesive, Mitre 10, for allegedly giving notice of termination in breach of its services agreement with Cohesive.  Proceedings were brought claiming damages of over $340,000 against Mitre 10.  This claim was struck out in March 2009 after Cohesive was placed into liquidation.

[6]        ANZ sought repayment of the loan from Mr Pillay personally under the guarantee.  No payment was forthcoming.  ANZ then issued proceedings on 3 March 2009 and sought summary judgment.  Mr Pillay’s response at this point was to say that ANZ was responsible for what had occurred because it had breached its fiduciary duties to Mr Pillay.  Mr Pillay filed a counter-claim for $2.2 million against ANZ claiming that ANZ as a lender to Cohesive owed Mr Pillay personally (as the guarantor) a fiduciary duty to, amongst other things, undertake due diligence on the purchase of the IT business.

[7]        In a judgment delivered on 1 July 2009, Associate Judge Christiansen entered summary judgment in favour of ANZ.  Mr Pillay’s counter-claim was struck out.[2]

[2]      ANZ National Bank Ltd v Pillay HC Auckland CIV-2009-404-001220, 1 July 2009.

[8]        Mr Pillay filed an appeal in this Court against Associate Judge Christiansen’s decision on 27 July 2009.  Security for costs was paid on this appeal but no other step was taken.

[9]        Meanwhile, because Mr Pillay had not met the terms of the bankruptcy notice, on 2 September 2009 ANZ applied for an adjudication order.  This was opposed, ultimately, on the basis of s 42 of the Insolvency Act 2006.  That section provides for a creditor’s application for adjudication to be stayed or refused if the debtor has appealed against the judgment or order underlying the bankruptcy notice and that appeal is still outstanding.

[10]       In addition to the debt owed to ANZ (by then $1,335,147.32), appearances in support were entered by five more of Mr Pillay’s unpaid creditors:

(a)         ASB Bank Ltd – owed $180,552.20 plus interest;

(b)         Boston Securities (2006) Ltd – owed $1,340,966.65;

(c)          Bank of New Zealand – owed $387,576.16 plus interest and costs;

(d)         Westpac New Zealand Ltd – owed $892,322.27; and

(e)         Public Trust – owed $316,713.66.

The Associate Judge noted these debts had yet to be proven by judgment.

[11]       Associate Judge Faire, in the decision against which Mr Pillay now wishes to appeal, refused to grant a stay and made an order adjudicating Mr Pillay bankrupt.  Against that background, Mr Pillay filed an application for an extension of time to appeal on 22 March 2010.  The application is opposed. 

Discussion

[12]       The test for whether an extension of time to appeal should be granted under r 29A is as expressed in My Noodle Ltd v Queenstown-Lakes District Council:[3]

A number of factors are relevant to a decision as to whether time to appeal should be extended, including the reason for the delay, the length of the delay, the conduct of the parties and the extent of any prejudice caused by the delay: New Plymouth District Council v Waitara Leaseholders Association Incorporate [2007] NZCA 80 at [22]. The overall test, however, is whether granting an extension would “meet the overall interests of justice”: Havanaco Ltd v Stewart (2005) 17 PRNZ 622 at [5](CA).

[3]My Noodle Ltd v Queenstown-Lakes District Council [2009] NZCA 224, (2009) 19 PRNZ 518 at [19].

[13]       We deal first with the reasons for the delay in filing.

[14]       Mr Pillay explains the delay on the basis of the shock of being adjudicated bankrupt, being overseas for some of the relevant period and difficulties in getting counsel to pursue an appeal.  He says that it was only after he phoned this Court in early 2010 that he became aware he did not need a lawyer to submit the application to the Court.  None of these reasons are particularly compelling. 

[15]       Further, there is merit in ANZ’s submission that the whole history of the matter tells against granting an extension of time.[4]  The various different bases on which Mr Pillay has sought to avoid liability for the business failure are relevant here. 

[4]      Avery v No2 Public Service Appeal Board [1973] 2 NZLR 86 (CA).

[16]       No submissions were filed by Mr Pillay in relation to this application. Further, Mr Pillay did not appear at the hearing, although he had been notified of the hearing at his address for service.  This means we have not heard any explanation from him about his conduct of the various proceedings.  We can certainly say that his approach has led to what appear to be unnecessary delays. 

[17]       As to the merits of the appeal, the grounds of the proposed appeal include various challenges to the approach taken by the Associate Judge.  For example, it is asserted that the Associate Judge failed to give Mr Pillay a proper opportunity to pursue his appeal to this Court, gave unfair consideration to the position of other creditors and took a premature view of the prospects of the appeal to this Court.  In addition, Mr Pillay maintains that there was a claim against one of the other creditors, Westpac, to be heard on 4 December 2009, which is more than the outstanding debt for which Mr Pillay was bankrupted, and that there were properties on the market to pay some of the other creditors who had joined the petition.

[18]       In terms of the objection based on the appeal to this Court against the decision of Associate Judge Christiansen, Associate Judge Faire noted first that there was no evidence to show that Mr Pillay had instructed counsel to prosecute his appeal or taken any steps whatsoever to progress matters.  Associate Judge Faire expressed “serious reservations” as to whether Mr Pillay intended prosecuting his appeal “at all”.[5] 

[5] At [16].

[19]       The Associate Judge then addressed the question of potential prejudice to a judgment creditor.  Associate Judge Faire noted that any delay in the making of an order of adjudication would affect the transfer of the judgment debtor’s assets by virtue of s 101 of the Insolvency Act.  There would also be difficulties of proof where there was a delay in determining an adjudication application.  The Associate Judge considered it relevant that Mr Pillay’s disclosure of his interests in property was less than satisfactory.  On the limited material available, the Associate Judge took the view that Mr Pillay was in a negative not a positive equity situation.  Any delay in bankruptcy would mean he was free to incur further credit and enter into transactions with any property he owned.  That would reduce the pool of assets that may still exist.  Hence, the Associate Judge considered that delay was “very likely” to be prejudicial to ANZ and other creditors.[6]

[6] At [22].

[20]       The Associate Judge also considered whether an adjudication order would render the appeal nugatory.  He saw that as one of the factors but in this case one that should not be given any particular significance.  That was because of the substantial, although yet unproven by judgment, further indebtedness of Mr Pillay. 

[21]       The Associate Judge considered the jurisdictional requirements in ss 13 and 36 of the Insolvency Act for an order of adjudication were met.  Further, that there was no basis for refusing to adjudicate Mr Pillay bankrupt.

[22]       As Associate Judge Faire had predicted, Mr Pillay in fact took no steps to prosecute the appeal against Associate Judge Christiansen’s decision within the six month period allowed by the Court of Appeal (Civil) Rules 2005.  This Court’s records show that Mr Pillay’s appeal has now been deemed to be abandoned.  That means that the central thrust of Mr Pillay’s basis for opposing the adjudication has disappeared, which must adversely affect any prospects of success on appeal.  As to the asserted claim against Westpac, Mr Gordon for ANZ explains that this was a claim brought by Westpac to which Mr Pillay pleaded a counter-claim again relying on lender liability and fiduciary duties.  Even if that claim was successful and Mr Pillay awarded all of the $900,000 apparently sought by way of damages, that figure is still well below the indebtedness to ANZ and is a fraction of his total indebtedness when the positions of the other creditors in support are brought into the mix.  None of the other matters raised by Mr Pillay in his notice of appeal have any merit.

[23]       Finally, there is some force in ANZ’s submission that it will be prejudiced by further delay.  Mr Gordon pointed out that by the hearing of this application, six months had elapsed since Mr Pillay was adjudicated bankrupt.  Over that period, the Official Assignee has been responsible for the administration of the bankrupt estate.  ANZ says that it would be prejudicial to ANZ and to other creditors to effectively undo that administration at this point. 

[24]       Given the reasons advanced for the delay, Mr Pillay’s overall conduct, the absence of any merits of the appeal, and the possible impact on ANZ of further delays, the interests of justice do not favour granting an extension of time to appeal. We decline the application for an extension of time.

Costs

[25]       There is no reason why costs should not follow the event.  Mr Pillay must pay the respondent costs for a standard application on a Band A basis and usual disbursements.

Solicitors:

Buddle Findlay, Wellington for Respondent