Prescott v Auckland Council
[2017] NZHC 2698
•26 October 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-933
CIV-2017-404-935 [2017] NZHC 2698
UNDER the Insolvency Act 2006 IN THE MATTER OF
the bankruptcy of PETER RICHARD PRESCOTT
BETWEEN
PETER RICHARD PRESCOTT Applicant
AND
AUCKLAND COUNCIL Respondent
Hearing: 25 and 26 October 2017 Appearances:
Peter Richard Prescott, self-represented
K F Quinn and J Cooper for the Auckland CouncilJudgment:
26 October 2017
ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL
Solicitors:
Auckland Council in-house solicitors (K F Quinn/J Cooper), Auckland
Copy for:
P R Prescott, Applicant
PRESCOTT v AUCKLAND COUNCIL [2017] NZHC 2698 [26 October 2017]
[1] Mr Prescott applies to set aside two bankruptcy notices issued by the Auckland Council. The bankruptcy notice in CIV 933 is for $2,300.00. That is based on a costs order of the District Court on 12 April 2011 in which Mr Prescott discontinued a claim against the council and a council employee. The bankruptcy notice in CIV
935 is for $4,941.00. That is for costs ordered against Mr Prescott in a proceeding in the District Court at Auckland in which his claim against the council was dismissed. The date of the District Court order is 21 April 2015.
[2] Yesterday, I dealt with another application by Mr Prescott to set aside a bankruptcy notice. In that case the creditor was the New Zealand Police. Mr Prescott applied to set aside the Police bankruptcy notice and the Auckland Council bankruptcy notices in June this year. The three proceedings have been case- managed together. On 13 July 2017, Associate Judge Doogue gave directions for the hearing of all three applications on 25 October 2017. All cases were called yesterday. I had issued a minute in which I indicated that the council applications would be heard on the afternoon of 25 October. In the event, the time required for the Police application went into the afternoon and I adjourned the council applications until today.
The adjournment application
[3] At the start of the hearing on 25 October 2017, Mr Prescott asked for an adjournment. I declined the adjournment application and gave reasons for that in my judgment on the Police application. I now repeat matters, but do not go into the matter as extensively as I did with the Police application.
[4] When he gave case management directions. Associate Judge Doogue directed that Mr Prescott was to file and serve his submissions in support of both applications
15 working days before the hearing. He directed the Police and the Auckland Council to file their submissions 10 working days before the hearing. Mr Prescott was late in filing his submissions and the creditors sought extensions of time to file theirs. I directed them to file their submissions by 13 October 2017. That gave Mr Prescott 12 days in which to prepare for the hearing. Mr Prescott said that he was unable to prepare adequately because the creditors sent him copies of authorities
they relied on for their cases and he did not have enough time to research the law in response. I considered that he had had adequate opportunity to prepare for the hearing, and I did not think that there would be any useful advantage in adjourning the case further. I apply the same reasons here. In oral argument Mr Prescott developed matters beyond what he had set out in his written submissions. Mr Prescott is not legally qualified but he appears to have done significant legal research in support of his applications. I do not consider that he has been under any disadvantage in the matter proceeding today. I made a similar observation in relation to his preparation for the application against the Police.
Appeal pathway
[5] In the hearing yesterday, I discussed with counsel for the Police the new appeal pathways under the Senior Courts Act. In my decision, I set out my views as to appeal from a decision on an application to set aside a bankruptcy notice. The practice before the Senior Courts Act 2016 was that an associate judge could hear a setting-aside application in chambers or in court. Heath J’s decision in Balzac v
Zhang1 recognised that the application could be heard in those two ways. The Court
of Appeal recognised that as well in Sharma v Wati.2 That has changed under the Senior Courts Act. Associate judges continue to have jurisdiction to decide matters under the Insolvency Act 2006 apart from four provisions, none of which are in issue here.3 An associate judge still has jurisdiction to hear applications to set aside bankruptcy notices.
[6] For proceedings started after 1 March 2017, there is no longer a right to review the decision of an associate judge made in chambers.4 Instead, there is a right of appeal under s 27 of the Senior Courts Act from this court to the Court of Appeal. Section 56 of the Senior Courts Act applies to appeals under s 27:
56 Jurisdiction
(1) The Court of Appeal may hear and determine appeals—
1 Balzat v Zhang HC Auckland CIV-2008-404-6062, 22 September 2009.
2 Sharma v Wati [2012] NZCA 195, (2012) 21 PRNZ 161.
3 Senior Courts Act 2016, s 20(2)(d).
4 As under the Judicature Act 1908, s 26P (1).
(a) from a judgment, decree, or order of the High Court: (b) under the Criminal Procedure Act 2011:
(c) from any court or tribunal under any other Act that confers on the Court of Appeal jurisdiction and power to hear and determine an appeal.
(2) Subsection (1) is subject to subsections (3) and (5) and to rules made under section 148.
(3) No appeal, except an appeal under subsection (4), lies from any order or decision of the High Court made on an interlocutory application in respect of any civil proceeding unless leave to appeal to the Court of Appeal is given by the High Court on application made within 20 working days after the date of that order or decision or within any further time that the High Court may allow.
(4) Any party to any proceedings may appeal without leave to the Court of Appeal against any order or decision of the High Court—
(a) striking out or dismissing the whole or part of a proceeding, claim, or defence; or
(b) granting summary judgment.
(5) If the High Court refuses leave to appeal under subsection (3), the Court of Appeal may grant that leave on application made to the Court of Appeal within 20 working days after the date of the refusal of leave by the High Court.
(6) If leave to appeal under subsection (3) or (5) is refused in respect of an order or a decision of the High Court made on an interlocutory application, nothing in this section prevents any point raised in the application for leave to appeal from being raised in an appeal against the substantive High Court decision.
[7] There is a question whether a decision on an application to set aside a bankruptcy notice is a decision on an interlocutory application under s 56(3). “Interlocutory application” is defined in s 4 of the Senior Courts Act:
interlocutory application –
(a) means any application to the High Court in any civil proceedings or criminal proceedings, or intended civil proceedings or intended criminal proceedings, for—
(i) an order or a direction relating to a matter of procedure; or
(ii) in the case of civil proceedings, for some relief ancillary to that claimed in a pleading; and
(b) includes an application to review an order made, or a direction given, on any application to which paragraph (a) applies.
[8] In my judgment, an application to set aside a bankruptcy notice is not an interlocutory application under this definition. An application to set aside a bankruptcy notice is a stand-alone proceeding. A decision on an application to set aside a notice goes to whether the notice can be used under s 17 of the Insolvency Act to establish an act of bankruptcy. A bankruptcy notice by itself is not the start of a proceeding for the court’s determination in its civil jurisdiction. Instead, it requires a debtor to take steps, in the absence of which the debtor will be treated as having committed an act of bankruptcy. A decision upholding a bankruptcy notice or setting it aside is a decision on the merits and disposes of the setting aside application. It goes beyond mere interlocutory relief.
[9] Accordingly, because the application to set aside a bankruptcy notice is not interlocutory under the definition in s 4 of the Senior Courts Act, leave to appeal is not required. Because of the new appeal provisions, it is not necessary for me to say whether I am sitting in court or chambers. For good order I record that I am sitting in court.
[10] For completeness, I also refer to s 414 of the Insolvency Act 2006. That allows the High Court to review, rescind or vary any decision of a judge under the Insolvency Act. As Heath J pointed out in Balzat v Zhang,5 that power is discretionary and may not be used widely. He gave no assurance that it could be used invariably to challenge a decision made on an application to set aside a bankruptcy notice.
Procedural questions
[11] Mr Prescott challenges the validity of both bankruptcy notices. A process- server says that he served the notice in 933 on Mr Prescott on 24 May 2017 and the notice in 935 on 25 May 2017. Everyone accepts that the process server gave Mr Prescott the bankruptcy notices but there is a dispute whether he also served
Mr Prescott with the certificates of judgment. The form for a bankruptcy notice,
5 Balzat v Zhang HC Auckland CIV-2008-404-6062, 22 September 2009.
B1 in Schedule 1 of the High Court Rules, requires that a certified copy of the judgment or order on which the notice is based must be attached to the bankruptcy notice. Council staff who prepared the notices, believe that they would have given certificates of judgment with the bankruptcy notices when they were arranging service. They base that on their invariable practice. The process server is not confident on the point. Mr Prescott says that he did not receive the certificates. The council has the burden of proving that the certificates were given with the bankruptcy notices. I find that the evidence is evenly balanced. That means that the matter has not been proved on the balance of probabilities.
[12] I note the importance of the certificates for this case. The council has more than one order for costs against Mr Prescott: the order for costs of April 2011 in 933, the order for costs of April 2015 in 935, and potentially a third order. Peters J ordered costs against Mr Prescott in February 2012 when he discontinued a judicial review proceeding against the council. Given the number of costs orders, Mr Prescott needs to be able to identify which bankruptcy notices related to which order for costs. I accept that without the certificate of judgment he may be at a
disadvantage and be unsure of his position.6 Mr Prescott says that after he was
served he contacted the court registry. It sent him by email the relevant certificates of judgment for the bankruptcy notices.
[13] The question here is whether the bankruptcy notices are invalid because of the failure to serve certificates of judgment with the bankruptcy notices. The council says that while the failure to serve certificates with the bankruptcy notices arguably did not comply with the requirements for bankruptcy notices under s 29 of the Insolvency Act, the matter can be cured under s 418:
418 Defects in proceedings
(1) A proceeding under this Act must not be invalidated or set aside for a defect (which includes misdescription, misnomer, or omission) in a step that must be taken as part of, or in connection with, the proceeding, unless a person is prejudiced by the defect.
6 I note incidentally that the council correctly issued separate bankruptcy notices for each costs order. That was to enable Mr Prescott to address each notice separately as he might be at a disadvantage if he were required to address more than one order for costs combined in the one notice.
(2) The court may order the defect to be corrected, and may order the proceeding to continue, on the conditions that the court thinks appropriate in the interests of everyone who has an interest in the proceeding.
[14] Mr Prescott says that the failure to serve the certificates makes the notices a nullity. For that he cites Best v Watson, where the Court of Appeal said:7
There must, of course, be proceedings before the Court before rectification may be directed under s 11. So if the document is so defective that it is a nullity there is nothing before the Court capable of rectification. The distinction between nullity and irregularity is well recognised in other areas of the law (see, for instance, New Zealand Institute of Agricultural Science Inc v Ellesmere County [1976] 1 NZLR 630, particularly at p 636; and Police v Thomas [1977] 1 NZLR 109). In that latter case, Cooke J. referring to s 204 of the Summary Proceedings At 1957 which is in essentially the same terms as s 11 of the Insolvency Act, said at p 121: “no doubt s 204 is unavailable if a defect is so serious as to result in what should be stigmatised as a nullity.” He went on to observe that “nullity or otherwise is apt to be a question of degree”.
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.
That was a decision under s 11 of the Insolvency Act 1967, which is in similar terms to s 418 of the Insolvency Act 2006. Best v Watson has been applied consistently under s 418 of the Insolvency Act 2006.
[15] The question of failure to serve a certificate of judgment with a bankruptcy notice has come up before. In Sharma v Wati8 the Court of Appeal dismissed the debtor’s application for leave to appeal on the grounds that he had no arguable points on appeal (including his point about no certificates of judgment). Other decisions are Re Stockco ex parte Denize9 and Body Corporate 324525 v Butcher.10 All recognise that non-compliance can be cured under s 418. That applies in this case as
well.
7 Best v Watson [1979] 2 NZLR 492 (CA).
8 Sharma v Wati [2012] NZCA 195, (2012) 21 PRNZ 161.
9 Stockco v Denize HC Auckland CIV-2011-404-3557, 31 October 2011.
10 Body Corporate 324525 v Butcher [2016] NZHC 887.
[16] Mr Prescott filed his applications to set aside the bankruptcy notices on 6 June
2017. He cannot tell me the date when he received the email from the High Court registry, but I accept that he had that information by 6 June 2017. I accept the council’s submission that the irregularity in service can be cured by extending the time when Mr Prescott can be considered to have been served by treating the date of service as 6 June 2017, that being the date by which he had the entire information required. That is a correction under s 418(2).
[17] With that adjustment, the time for Mr Prescott to comply with the bankruptcy notice or to apply to set aside a bankruptcy notice was 10 working days. That expired on 20 June 2017. The council takes the point that although Mr Prescott filed his application on time, he did not serve it until 26 June 2017 when Mr Prescott sent it the applications by email. Mr Prescott did not serve his affidavit in support of his applications until 28 June 2017. The council says that that is too late, and the present application is out of time.
[18] There is case law to support the council’s submission. While there is one decision holding that all that is required is for the application to be filed in court within 10 working days but service after those days does not invalidate the application,11 the preponderance of decisions goes the other way.12 The requirement for service of the application and affidavit is set out in the notes for the bankruptcy notices, which accompanied the notices in this case. Under the heading “Procedure
for Counterclaiming etc”, the notice says:
Procedure for counterclaim, etc.
If you consider you have a counterclaim, setoff, cross demand against the judgment creditor that comes within paragraph 1(c) or you wish to seek the court’s approval to terms of payment, you must, within 10 working days from the date of receiving this notice, apply to the High Court. Your application must be supported by an affidavit.
You must, within the same time, also serve a copy of the application and supporting affidavit on the judgment creditor.
11 Re Waruhia ex parte Next Level Finance Ltd HC Auckland CIV-207-404-7275, 20 February
2008.
12 Sanco (NZ) Ltd v Memelink HC Wellington CIV-2008-485-2691, 10 March 2009; Re Guthrie ex parte Build West Ltd HC Auckland B92/02, 23 August 2002; and Reynolds v Bartlett [2014] NZHC 447.
[19] Mr Prescott does not dispute that he served the applications on 26 June and the affidavit on 28 June 2017. I find that that was service out of time. Because of that non-compliance his applications are ineffective as challenges to the bankruptcy notices. The purpose of requiring timely service is to bring the matter to the notice of the creditor so that the creditor knows, on expiry of the 10 working days, whether an act of bankruptcy has occurred and time has started to run under s 13(b) of the Insolvency Act or whether r 24.10 of the High Court Rules applies so that the time for complying with the notice is extended. Because Mr Prescott has not complied with these procedural requirements in the bankruptcy notice, acts of bankruptcy had already occurred when he served his applications on the council. The effect of the Memelink and Reynolds decisions is that late service cannot cure or undo the act of bankruptcy – that had already happened.
[20] There is another aspect to this matter. It is necessary to consider the effect of r
24.10 of the High Court Rules:
24.10 Setting aside bankruptcy notice
(1) If an application to set aside a bankruptcy notice cannot be heard until after the expiration of the time specified in the notice as the day on which the act of bankruptcy will be complete, the time is treated as extended until the application has been determined.
(2) An act of bankruptcy is not committed by reason only of non- compliance with the notice until the application has been determined.
The council says that r 24.10 has operated in this case so that time has not started to run under s 13(b) of the Insolvency Act. With that, the council is trying to have it both ways. If it is correct in taking the point that late service of the application is unfavourable to Mr Prescott, it must accept that the act of bankruptcy has already occurred. With that, it cannot be possible to extend the time for complying with the bankruptcy notice under r 24.10. In short, r 24.10 can apply only when the debtor has filed and served an application to set aside within the time allowed in the bankruptcy notice. Once the act of bankruptcy has occurred, it is pointless to treat the time for complying with the notice as extended. Mr Prescott committed acts of bankruptcy in relation to both notices at the end of 20 June 2017. Time for filing a bankruptcy application started running under s 13(b) of the Insolvency Act. The
three months for the council to file a bankruptcy application expired on
20 September 2017. The time for any bankruptcy application based on these notices has now expired. Therefore the acts of bankruptcy cannot be used in a bankruptcy application.
[21] I explored this with Ms Quinn for the council. I invited her to withdraw the procedural point so that I could deal with the merits of the bankruptcy notices. She took instructions and said that she still wished to take the point. While I find that time for relying on non-compliance with these bankruptcy notices has now expired, I will consider the merits of Mr Prescott’s arguments. A decision on those points may be of assistance to the parties if fresh bankruptcy notices are issued.
[22] I say this for the guidance of creditors considering taking the point that an application to set aside a bankruptcy notice has been filed and served out of time. They need to take the point promptly. Invariably an application to set aside a bankruptcy notice is called in court within the three months under s 13(b). Counsel acting for judgment creditors, who wish to take the point that a bankruptcy notice has been filed and served out of time, should raise the matter with the court at that call, and either seek a ruling then as to the merits of the argument or, failing that, draw the court’s attention to the fact that time is running under s 13(b) and seek an early determination of the point. An early determination of the point is desirable, because it may save the parties going to unnecessary effort to prepare further argument on the merits of any setting-aside application.
[23] I also point out to debtors when they are out of time on applying to set aside a bankruptcy notice, that all is not necessarily lost. They may still be able to raise their arguments when the court comes to consider an application for adjudication. As an example, that was the course I took in Commissioner of Inland Revenue v
Faloon.13 Mr Faloon’s application to set aside the bankruptcy notice was served out
of time. I considered all his arguments when I heard the creditor’s application for
his adjudication.
Substantive matters
[24] These parts of my judgment are obiter. They may assist the parties.
The “person” argument
[25] Mr Prescott has an argument as to whether the court has jurisdiction. His argument goes to notions of what is a “person”. He raised those arguments in full for me on his application against the New Zealand Police. I ruled against him on that point. Today, he recognised that as I had ruled against him on that yesterday I was likely to come to the same decision today. He therefore did not repeat his argument but I record his submission and treat him as having raised it today as if he had argued the matter in full. That is so that if he wishes to challenge this decision it will be a live issue which may be taken on appeal. In short, in my decision yesterday
I followed the judgment of Allan J in Prescott v Police.14 In my view, Allan J’s
reasoning effectively disposed of Mr Prescott’s “person” argument. He is a natural person and as such is amenable to the jurisdiction of this court under the Insolvency Act. Section 6 of the Insolvency Act excludes from that Act incorporated bodies such as companies, incorporated societies and the like. Mr Prescott does not come within the exclusion under s 6 of the Insolvency Act.
Mr Prescott’s substantive responses to the notices
[26] Now for the notices themselves. Both notices are based on orders for costs made in the District Court. In the one case costs were ordered on a discontinuance of a proceeding. I understand that Mr Prescott applied for a judicial review of the costs order, but withdrew that application with a discontinuance in February 2012. The District Court costs order was final. Any rights to challenge it are spent. There is no order staying execution of that judgment.
[27] The order for costs in 935 was made on dismissal of a civil claim against the
Auckland Council. Mr Prescott has not challenged the validity of that order for
costs. He accepts that it is final, there is no appeal from that decision, and there is no order staying execution of that order.
[28] I mention those matters to set the context for Mr Prescott’s arguments in relation to each notice. For the notice in 933, Mr Prescott says that he has a binding settlement agreement with the council. He says that there is accord and satisfaction, which was put into effect before the bankruptcy notice was issued. As to how that argument can be raised in an application to set aside a bankruptcy notice, it would be an abuse of process by a creditor to issue a bankruptcy notice if the liability has already been discharged. It provides a ground for setting aside the notice.
[29] For his argument on the notice in 935, Mr Prescott says that he has an agreement with the council under which he is liable to pay off that debt at $10.00 per week. I treat that argument as going to compliance with the bankruptcy notice. The notice sets out three ways of complying with it. One of them, 1(b), says this:
You must secure or enter into a new form of agreement with the judgment creditor or alternatively obtain the High Court’s approval to terms of payment.
If Mr Prescott already has an agreement with the council to pay off the debt, and he is complying with that agreement, that would amount to compliance with clause 1(b) of the bankruptcy notice or it would give the court ground to set aside the bankruptcy notice in its inherent jurisdiction to prevent an abuse of process.
[30] Now for Mr Prescott’s challenge to the notice in 933. Mr Prescott says that the notice was issued in error and must be set aside because the debt was settled in full by cheque, hand-delivered to Mr Powell, a revenue officer with the Auckland Council, on 10 January 2012. The cheque was for $2,250.00. I refer to
Mr Prescott’s evidence on the point.15 To paraphrase, Mr Prescott says that
Mr Powell had been in touch with him about payment of the order for costs. He says that after some discussion on 10 January 2012 he went to the council offices to pay a post-dated cheque. He handed the cheque to Mr Powell. Mr Powell noticed that it was postdated and Mr Prescott confirmed that to be the case. He says that
Mr Powell studied the cheque for a short while, put it in his pocket and left. Mr Prescott contends that the acceptance of the post-dated cheque constituted a meeting of minds and the debt was then fully settled under the doctrine of offer and acceptance. He says the council stopped any collection process because the debt had been paid in full.
[31] For the hearing, Mr Prescott has tendered a photocopy of the cheque. The cheque is postdated to 26 December 2016. It is crossed and marked “Not Negotiable”. The payee is the Auckland Council. The amount of the cheque is
$2,250.00. The drawer of the cheque is Odyssey South Pacific Ltd as trustee for North Star Trust. I take the signature on the cheque to be Mr Prescott’s. Mr Prescott says that the council returned the cheque to him and he in turn sent it back to the council.
[32] The minute of Peters J of 22 February 2012 in Mr Prescott’s judicial review proceeding against the order for costs made against him in the District Court recorded that Mr Prescott had filed a notice of discontinuance on 10 January 2012, the date he gave the cheque to Mr Powell. Peters J said:
I have viewed the notice of discontinuance. The notice records the plaintiffs’ contention that he has paid the debt due to the defendant by tendering a post- dated cheque, which cheque the plaintiff considers the defendant accepted. The defendant does not agree that the debt has been paid. That, however, is not relevant for present purposes. The fact is that the plaintiff filed a notice of discontinuance on 10 January 2012. The reason he chose to discontinue is a matter for him. If the defendant remains of the view that the debt, or part of it, remains outstanding, presumably will take steps to recover the same. The issue as to whether or not the debt has been paid can be resolved then, if it remains an issue.
On receipt of the notice of discontinuance, the defendant wrote to the plaintiff and advised that it did not accept the discontinuance and that the defendant required the plaintiff to continue his proceeding.
It is a matter for a plaintiff if they choose to discontinue their proceeding …
She confirmed that the proceeding had been discontinued.
[33] Mr Prescott’s case is that there was resolution of a dispute. The dispute was his liability under the costs order of the District Court in April 2011. It had been resolved by his discontinuing his judicial review proceeding and tendering the
cheque for a postdated payment. That, at least, is how he generally put the matter in court today. His evidence as such does not show that when he handed the cheque to Mr Powell, Mr Powell as an officer of the council bound the council to an agreement for the costs liability to be discharged in that way.
[34] There is no evidence from Mr Prescott that he was handing over a postdated cheque on a conditional basis – that is, that acceptance of a cheque would amount to a resolution of the proceeding then pending in the High Court. His evidence points only to a postdated cheque being handed to the council and goes no further than that. Mr Prescott filed the notice of discontinuance unilaterally, not under any agreement with the council. In short, his evidence does not establish a binding agreement with the council.
[35] Mr Prescott submitted that he only had to show that there was a genuine dispute whether there had been a settlement of his liability with the council. That misunderstands how the court decides questions as to whether debts have been discharged. The starting point is that there is an undisputed liability under the order for costs. On an application to set aside a bankruptcy notice, the court can consider whether that liability has been discharged. Payment in full before the issue of a notice is a discharge of liability. A compromise of other proceedings may give consideration for discharging a liability. On a discharge argument in an application to set aside a bankruptcy notice the court decides on the merits whether the liability under the notice has been discharged or not. It is not enough for the debtor to say that there is a dispute and ask for the matter to be sent off somewhere else. In an application to set aside a bankruptcy notice, the court must consider the merits of any argument that the debt has been discharged before the bankruptcy notice was issued. On that point, Mr Prescott has not persuaded me, on the balance of probabilities, that there was a binding agreement between the council and Mr Prescott that liability under the order for costs would be discharged simply by the tender of a post-dated cheque payable in four years’ time. I note also that the simple tender of a cheque is not by itself payment. Payment only occurs when the cheque is presented to the
bank and cleared.16
16 Budget-rent-a-car v Goodman [1991] 2 NZLR 715 (HC).
[36] There is a further point. By tendering the cheque, Mr Prescott was recognising an obligation for the payment. The present position is that there has been no payment. The council, under his alleged bargain, was to get something. In the event, it has received nothing. The council can legitimately say that there has been a total failure of performance because it did receive $2,250 on or after Boxing Day
2016. It only issued the bankruptcy notice after the date on which the postdated cheque could have been presented to the bank.
[37] There is another matter that goes against Mr Prescott. Mr Prescott has made payments to the council. The council has identified them as occurring in June 2012. After the discontinuance Mr Prescott made some payments at $10.00 a time. The council says that it has never sealed the costs order made by Peters J in February
2012. The only evidence of any other order for costs against Mr Prescott during
2012 is the order for costs which was the subject of bankruptcy notice in 933. The fact that Mr Prescott made payments to the council during 2012 is evidence that he recognised that he did not have a binding settlement with the council for the District Court costs order.
[38] For these reasons, I rule against Mr Prescott on his attack against the bankruptcy notice 933.
[39] I note some incidental matters about that bankruptcy notice. The original amount of the bankruptcy debt was $2,250.00. With a certificate of judgment that came to $2,300.00. Council records show that there was an order for examination, which cost the council $392.00. Mr Prescott made two payments to the council in
2011, $50.00 in total, and he made seven payments of $10.00 each in 2012. With my arithmetic, that leaves the balance owing under that order for costs at the end of
2012 at $2,572.00. In that respect, I regard the amount claimed in the bankruptcy notice as slightly understated. That does not disadvantage Mr Prescott.
[40] Next, the bankruptcy notice 935. Mr Prescott says that this notice was issued in error and must be set aside because there is a payment arrangement of $10.00 a week and all payments have been made on time. The council has checked its records. It says that it has located seven payments made by Mr Prescott and those have been
made only since the issue of the bankruptcy notice. Mr Prescott goes further. He tendered a printout by his bank showing payments of $10.00 made by him. That schedule of payments goes back to 2014. In many cases the payee is the Auckland Council. It is arguable for Mr Prescott that those payments can be taken into account in establishing his indebtedness under the District Court order for costs in April
2011. For payments after the order for costs made in April 2015 the Council may appropriate payments to whichever debt it likes. The council staff apparently have difficulties tracing all payments made by Mr Prescott. He has given reason to believe that further enquiries by council staff may find more payments made by him. I accept the argument for the council when it says that tracing payments made by a particular person may be time-consuming. All the same, Mr Prescott is entitled to have any payment he has made taken into account.
[41] Here, I am concerned with whether Mr Prescott made payments under a settlement. His evidence on the point is at paragraphs [8] and [9] of his affidavit of
28 June 2017 on the 935 application. Mr Prescott’s payments were unilateral in the sense that he had not negotiated any arrangement with the council under which he was to make part-payments of $10.00 a week to pay off his liability under the costs order. His payments are simply that – payments. He has not made any agreement with the Council that it would accept such a repayment arrangement. A payment of a lesser sum is not a discharge of a debt for a greater sum and payment later is not
consideration for payment due now.17
[42] Mr Prescott’s payments of $10.00 a time can be taken into account, but the fact that he has made some payments in reduction of his liability does not mean that the council is bound to accept payment at that rate. I do not find there is any agreement for payment of the debt by instalments for the bankruptcy notice. There was no agreement before the issue of the bankruptcy notice and no such agreement has been entered since. Under the decision of the Court of Appeal in Commissioner of Inland
Revenue v Wilson,18 I do not have the power to direct any payment arrangement
between the council and Mr Prescott.
17 Pinnel’s Case (1602) 5 Co Rep 117a; Foakes v Beer (1884) 9 App Cas 605 (HL).
18 Commissioner v Wilson [2017] NZCA 100.
[43] I note an incidental matter. The order for costs under bankruptcy notice 933 was made in April 2011. There is a limitation period for enforcing money judgments. Under s 36 of the Limitation Act 2010 that is six years for bringing an action on a judgment. A bankruptcy application is regarded as an action on a judgment. On the face of it, six years have expired. There is, however, a further provision in the Limitation Act which the council may be able to rely on. Under s 47 of the Limitation Act there is extension of time when a debtor has made part- payments or has acknowledged their indebtedness in writing. The council may be able to rely on the payments made during 2012 to show that time to enforce the debt has not expired.
Result
[44] The point reached now is that the bankruptcy notices can serve no useful purpose. If the council had withdrawn the procedural point I would have held that Mr Prescott did file a valid application and considered the merits. I would then most likely have adjourned the application as I would want greater certainty as to what payments Mr Prescott has made. It is not clear exactly how much he has paid and how his payments ought to be allocated between the two bankruptcy notices. I would have adjourned the matter to a bankruptcy list date to take further evidence and to give Mr Prescott the opportunity to comply with the notices once the amounts had been fixed. As it is, the notices are now redundant. The council will have to start again. I do encourage the parties to resolve the amounts owing under the bankruptcy notices by taking account of all the payments that Mr Prescott has made.
[45] I make no order for costs. Ms Quinn indicated that the council does not seek costs. Mr Prescott cannot apply for costs because he is self-represented.
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Associate Judge R M Bell
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