Public Trust of Rotorua v Ryder-Rogers
[2020] NZHC 1688
•15 July 2020
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE
CIV-2019-463-000122
[2020] NZHC 1688
UNDER the Insolvency Act 2006 IN THE MATTER OF
the bankruptcy of JULIE MICHELLE RYDER-ROGERS
BETWEEN
PUBLIC TRUST OF ROTORUA
Judgment Creditor
AND
JULIE MICHELLE RYDER-ROGERS
Judgment Debtor
Hearing: 9 July 2020 Appearances:
F Wood for Judgment Creditor
S McKenna and M Dempster for Judgment Debtor
Judgment:
15 July 2020
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by Associate Judge Andrew on 15 July 2020 at 2.00 pm
pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar
Date………………………..
PUBLIC TRUST OF ROTORUA v RYDER-ROGERS [2020] NZHC 1688 [15 July 2020]
Introduction
[1] The judgment debtor, Ms Ryder-Rogers, seeks to set aside a Bankruptcy Notice in reliance on the Court’s inherent jurisdiction to control an abuse of process and to avoid a miscarriage of justice. She claims that she had no notice of the formal proof hearing giving rise to the judgment debt on which the Bankruptcy Notice is based.
[2] To date, no application has been filed by Ms Ryder-Rogers seeking to set aside the formal proof judgment.
[3] In opposing the present application, the judgment creditor, the Public Trust of Rotorua (the Trust), contends that Ms Ryder-Rogers had the opportunity to file a statement of defence in the judgment debt proceedings but failed to do so. It also says that Ms Ryder-Rogers has not provided a sufficient evidential foundation to establish any legitimate challenge to the formal proof judgment.
Factual background
[4] Ms Ryder-Rogers is married to Mr John Rogers. Mr John Rogers’ first wife was Mrs Shirley Ann Rogers, who passed away in June 2013.
[5] The Trust was appointed to administer the estate of the late Mrs Shirley Rogers (the estate) in May 2014.
[6] Mrs Shirley Rogers had four children prior to her marriage to Mr John Rogers. None of Mrs Shirley Rogers’ children were named as beneficiaries in her Will. Mr John Rogers was the sole executor and beneficiary named in Shirley’s Will.
[7] In February 2014, three of Mrs Rogers’ four children lodged a Family Protection Act 1955 claim (FPA) against her estate (“the FPA claim”). A key component of the FPA claim was the family home at 507 Kopuku Road, Te Kauwhata (the property), as it was likely to be determined to be relationship property and therefore part of the estate the children were claiming against.
[8] While a caveat was initially placed on the property, Mr Rogers was permitted to sell it only after he gave assurances to the Court that he would hold the proceeds on
trust until matters were determined.1 On the basis of those assurances, the caveat was removed.
[9] In breach of the assurances he gave the Court, Mr Rogers then transferred the proceeds of the sale of the property, with $100,000.00 going to the judgment debtor, then known as Ms Ryder, and the remaining balance of $65,208.35 going to Portage Plumbing Ltd (“Portage”), a company in the sole control of Mr Rogers.
[10] Once appointed as the administrator of the estate, the Trust sought a determination of Mrs Rogers’ share of relationship property arising out of her marriage to Mr Rogers and applied to have the dispositions to Ms Ryder-Rogers, and Portage, set aside.
[11]That meant that two relevant proceedings were running parallel to each other:
(a)The children’s FPA claim against the estate; and
(b)The application by the Trust under the Property (Relationships) Act 1976 (“the PRA claim”) for determination of the relationship property.
[12] The FPA claim remains on hold until the Trust has completed its recovery proceedings against the three respondents in the PRA claim.2 The size of any successful claim the children may have against the estate, is dependent on the Trust recovery proceedings against those three respondents, which include the current judgment debtor.
[13] On about 16 May 2018, Ms Ryder-Rogers was served with the PRA proceedings, a minute of Sargisson AJ dated 9 April 2018 and a letter from the lawyer representing the Trust.
[14] A court conference in the PRA claim was scheduled for 23 May 2018, but that was vacated to provide Ms Ryder-Rogers with time to file a statement of defence.
1 Public Trust v Rogers & Ors [2018] NZHC 2622, 12 February 2019 at [20].
2 See minute of Powell J of 12 October 2018 in Ellis & Ors v Public Trust CIV-2014-463-000190.
[15] On about 17 July 2018, Ms Ryder-Rogers’ solicitor telephoned the solicitor for the Trust. The solicitor for the Trust advised the PRA claim had been scheduled for a formal proof hearing in mid-October 2018.
[16] The solicitor for Ms Ryder-Rogers then made contact with the Court on a number of occasions to confirm the date of the formal proof hearing. On 26 September 2018, the solicitor for Ms Ryder-Rogers received advice from the Ministry of Justice call centre that there was no formal proof hearing set down in the PRA claim. The solicitor for Ms Ryder-Rogers then emailed the Court seeking clarification of the next court event date.
[17] On 1 October 2018, the Court advised the solicitor for Ms Ryder-Rogers by email that there was no event date for the PRA claim.
[18]On 1 October 2018, the PRA claim proceeded by way of formal proof.3
[19]The Court determined:
(a)Ms Ryder-Rogers’ share in the relationship property totalled
$228,434.67;
(b)The transfers to Ms Ryder-Rogers and Portage were set aside;
(c)Ms Ryder-Rogers was to pay the Trust $100,000.00;
(d)Portage was to pay the Trust $65,208.35; and
(e)Mr Rogers was to pay $228,534.67 to the Trust, less any sums recovered from the judgment debtor and/or Portage.
[20]The formal proof orders of Powell J were sealed on 13 February 2019.
[21] In February 2019, the solicitor for Ms Ryder-Rogers tried once again to find out what was happening with the PRA claim. On 28 February 2019, the solicitor was advised by the Court that there was no event listed for the PRA claim and that there
3 Public Trust of Rotorua v Rogers CIV-2016-463-006, 1 October 2018, general court order of Powell J.
were no active proceedings in the Court to which Ms Ryder-Rogers was named as a party.
[22] On 10 May 2019, the solicitor for Ms Ryder-Rogers sought confirmation by email from the Court that there were no active proceedings before the Court to which Ms Ryder-Rogers was named as a party. The Court replied by email the same day confirming that there were no active proceedings in the High Court in Rotorua to which Ms Ryder-Rogers was named as a party.
[23] On 31 January 2020, Ms Ryder-Rogers, as the judgment debtor, was served with the Bankruptcy Notice requiring her to pay the judgment debt of $100,000 plus interest of $21,517.70.
Relevant legal principles
[24] The Court may, within its inherent jurisdiction to control abuse of process, set aside a bankruptcy notice.4 The Court intervenes to avoid a miscarriage of justice. The jurisdiction exists even when relief is unavailable (by reason of the absence of a cross-claim) under s 17(1)(d) of the Insolvency Act 2006. Master Kennedy-Grant found in Re Wise ex parte Benecke5 that grounds for intervention may arise, for instance, where there was a procedural defect in the obtaining of the original judgment or arguable grounds of defence existed at the time judgment was given. In such cases, the Court may be justified in adjourning the debtor’s application (on conditions) to check the progress of any relevant appeal or other review procedure, rather than setting aside the bankruptcy notice.6
[25] As Osborne AJ noted in Izard Weston v Ayers,7 the observations in Re Wise should be seen in their context, namely a case in which the judgment against the defendant was obtained by default.
4 Izard Weston v Ayers [2017] NZHC 3000 at [10].
5 Re Wise, ex parte Benecke HC Auckland B227/95, 21 June 1995 at [6].
6 Re Wise, ex parte Benecke, above n 5, at [7]; Holmes Construction Wellington Ltd v Rees HC Auckland CIV-2006-404-4219, 9 February 2007 at [33]–[34].
7 Izard Weston v Ayers, above n 4, at [10].
Analysis and decision
[26] Ms Ryder-Rogers seeks to have the Bankruptcy Notice set aside on three grounds:
(a)That she was misled by the Court about the hearing date for the formal proof hearing, and would have taken steps had she been advised of the date;
(b)She has a valid defence to the PRA claims; and
(c)She is not insolvent.
[27] The critical issue I must determine is whether there was a procedural defect to the obtaining of the original judgment such that the Bankruptcy Notice should be set aside on the grounds of an abuse of process and with a view to avoiding a miscarriage of justice.
(a) Misled by the Court
[28] There is no dispute that the solicitor for Ms Ryder-Rogers was given incorrect information by the Court as to the status of the PRA claim and in particular, about whether there was a date for the formal proof hearing. I accept that neither Ms Ryder- Rogers nor her solicitor at the relevant time were aware of the formal proof hearing that took place on 1 October 2018 and did not become aware of it until 2020.
[29] However, I do not accept Ms Dempster’s submission that this case is identical to Re Wise, ex parte Benecke.8 In that case, the judgment debtors alleged they had a defence to the claim made by the creditor in the District Court. The debtors did not put that defence forward because they were not aware of the hearing at which judgment was granted. The judgment debtors filed an application to set aside the judgment of the District Court. Master Kennedy-Grant held that there was a valid basis for the debtor’s claims and adjourned the application to set aside the bankruptcy notice so that the Court could determine if the judgment debtor’s application to the District Court to set aside the judgment against them had been heard and determined.
8 Re Wise, ex parte Benecke, above n 5.
By contrast, no action has been taken in this case to set aside the formal proof judgment.
[30] Furthermore, I do not accept that Ms Ryder-Rogers did not advance any defence to the liability of $100,000.00 in the PRA claim because the Court had made an error in advising her solicitor that there was no event set down in the proceedings. On the facts, Ms Ryder-Rogers had ample opportunity to file a statement of defence but did not do so. There were clearly other factors at play.
[31] Ms Ryder-Rogers was served with the PRA claim on about 16 May 2018. She has not provided any real explanation as to why she did not at any time file a statement of defence. If she had a viable defence, that was the appropriate action to take and, had she done so, the case would not have proceeded by way of formal proof.
[32] As from at least July 2018, Ms Ryder-Rogers was legally represented, and her solicitor was advised at that time that a formal proof hearing had been scheduled for October 2018. As Mr Wood submitted, that gave Ms Ryder-Rogers more than two months to file a statement of defence.
[33] While it is regrettable that Ms Ryder-Rogers was provided with inaccurate information by the Court, and to some extent she was misled by that, she has taken no steps to challenge the formal proof judgment by way, for example, of an application to set aside. I accept she may only have become aware of the formal proof judgment in January this year, but to date she has not taken what Mr Wood properly described as the “appropriate response” to set aside the judgment.
[34] I would further note that the enquiries made on Ms Ryder-Rogers’ behalf by her solicitor in 2018 and 2019 appear to have been focused on finding out whether judgment had in fact been entered against Ms Ryder-Rogers, rather than seeking to defend the proceedings. No evidence has been given by the solicitor and, if at the relevant times, the solicitor had instructions to defend the PRA claims, that would surely have been made clear in the email correspondence to the Court and/or been communicated to the solicitor for the Trust. The only reasonable inference available from the evidence before me is that the solicitor for Ms Ryder-Rogers must have known that no statement of defence had been filed at any time and the solicitor had no instructions to file one.
[35] While I accept that there was some procedural defect, it has not in my view given rise to a miscarriage of justice. The procedural error cannot in my view be said to have been a material cause of the failure to defend the proceedings.
(b) Defences to the PRA claim
[36]In her affidavit Ms Ryder-Rogers says that Mr John Rogers deposited the
$100,000.00 into her bank account where the funds were held by her on constructive trust for Mr John Rogers. The funds were not a gift to her. She says that Mr Rogers accessed her bank account and has spent the $100,000.00. She says she has a defence to the PRA claim on the basis of constructive trust principles as set out in Lankow v Rose.9
[37] She further claims that the $100,000.00, being the property of Mr John Rogers (and not the judgment creditor), was not made with the intention of defeating the claim or right of any person and that s 44 of the Property (Relationships) Act 1976 did not apply. She further contends that she has a defence of change of position based on the principles of Lipkin Gorman v Karpnale Ltd10 and/or ss 74A and 74B of the Property Law Act 2007.
[38] However, I find that Ms Ryder-Rogers has failed to provide a sufficient evidential foundation for me to conclude that these claims/defences would have any reasonable prospect of success.
[39] There is no evidence before me about what has happened to the $100,000.00, whether it has been spent or by whom. Ms Dempster submitted that Mr Rogers had spent the money but there is no evidence of that in Ms Ryder-Rogers’ affidavit. Likewise, she has not provided any bank statements or other information to show what has happened to the funds.
[40] Furthermore, there is no evidence to show how Mr John Rogers could have accessed Ms Ryder-Rogers’ bank account, if in fact he has spent the money. I also note that there is no plausible or reliable explanation as to why the funds were placed into Ms Ryder-Rogers’ bank account. The explanation that Mr John Rogers did not
9 Lankow v Rose [1995] 1 NZLR 277 (CA) at 282.
10 Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548, [1991] WLR 10.
have his own bank account at the time makes no real sense, given that there was a company bank account available to him into which some of the relationship property funds were transferred (i.e. the Portage account).
[41] As to the change of position defence, there is very little information before the Court to assess the merits of such a defence. The evidential foundation is weak indeed.
[42] In her submissions Ms Ryder-Rogers contended that the judgment creditor’s claim before Powell J was under the Family Protection Act 1955 and not under the PRA. However, that submission is incorrect. It is clear from the formal proof judgment of Powell J that the proceedings before him were brought under the PRA, including an application to set aside pursuant to s 44(2) PRA.
[43] I also accept the submission of Mr Wood that even if I were satisfied that Ms Ryder-Rogers had received the funds in good faith, she has provided no evidence of any consideration given in exchange for the disposition, whether valuable or otherwise. Consideration would be a necessary element that Ms Ryder-Rogers would have to have made in order to convince the Court not to have set aside the disposition and ordered her to pay the $100,000. Ms Ryder-Rogers’ affidavit does not address that point at all.
[44] For all these reasons I find that the defences proposed do not meet the threshold of reasonably arguable claims. This is a further basis for distinguishing this case from Re Wise ex parte Benecke.11
(c) Claim that Ms Ryder-Rogers is insolvent
[45] In her application to set aside the Bankruptcy Notice dated 14 February 2020, Ms Ryder-Rogers contends that she is not insolvent.
[46] However, once again, there is no real evidential foundation to support that claim.
[47] The only relevant statement in Ms Ryder-Rogers’ affidavit is at paragraph 26 where she states:
11 Re Wise ex parte Benecke, above n 5.
I do not believe that I should be held liable and now face potential financial ruin because of the funds that I received in good faith.
[48] Furthermore, as I have already noted, there is no evidence before the Court as to what has happened to the $100,000.
Conclusion
[49] None of the grounds advanced by Ms Ryder-Rogers support a finding that the Bankruptcy Notice should be set aside on the grounds of a miscarriage of justice. As Smith AJ held in Klass Holdings Ltd v Turner,12 generally, a debtor must show very special circumstances before the Court will set aside a bankruptcy notice in reliance on its inherent jurisdiction to prevent miscarriages of justice. That threshold has not been met in this case.
Result
[50] The application by the judgment debtor, Ms Ryder-Rogers, to set aside the Bankruptcy Notice is dismissed.
[51] I order that the judgment debtor, Ms Ryder-Rogers, is to pay costs to the judgment creditor, the Public Trust of Rotorua, on a 2B basis together with disbursements as fixed by the Registrar.
Associate Judge P J Andrew
12 Klass Holdings Ltd v Turner [2018] NZHC 735 at [19].
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