Rajan v Rani
[2015] NZHC 715
•15 April 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-002318 [2015] NZHC 715
UNDER The Insolvency Act 2006 BETWEEN
DEO RAJAN AND LYDIA DAMAYANTHI RAJAN Judgment Creditors
AND
SANTOSH RANI Judgment Debtor
Hearing: 6 March 2015 Appearances:
B Parshotam for Judgment Creditors
M S S Khan for Judgment DebtorJudgment:
15 April 2015
JUDGMENT OF KEANE J
This judgment was delivered by me on 15 April 2015 at 4pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Parshotam Lawyers, Auckland
Singhs Lawyers, Auckland
RAJAN v RANI [2015] NZHC 715 [15 April 2015]
[1] Deo and Lydia Rajan own 77A Hutton Street, Otahuhu, a property on which there are four two bedroom units, which they acquired in 2009 from Muhammad Bhatti, the former husband of Santosh Rani, who had acquired it from her in 2005.
[2] On 5 July 2012 Ms Rani lodged caveats against Hutton Street, and another property belonging to the Rajans. Their bank, the Bank of New Zealand, became concerned. Their loan was then for renewal. The BNZ declined to renew it. Instead the bank issued a property law notice, to be able to sell Hutton Street and the other property; and, when Ms Rani refused to withdraw her caveats, issued proceedings against her.
[3] On 23 September 2013 Ms Rani, who had by then withdrawn the caveat against the other property, conceded she had no basis to sustain her Hutton Street caveat and Katz J made an order by consent enabling the BNZ to have it withdrawn, as long as it retained until further order any surplus to which Ms Rani might be entitled in the event that the bank did exercise its power of sale. The following day the Judge awarded the bank $9,346 costs and disbursements. In the event, the Rajans refinanced and the BNZ assigned its costs award to them.
[4] On 16 July 2014 Ms Rani brought a claim in this Court against Mr Bhatti, as first defendant, from whom she had separated in 2004. She alleged that he had deprived her by fraud of her interest in five properties, including Hutton Street. She claimed that the Rajans, as fourth and fifth defendants, had since 2009 been holding it on trust for him. She sought to have it transferred to her. She looked to Mr Bhatti and to the Rajans for $1M special damages.
[5] On 5 September 2014 the Rajans requested this Court to issue a bankruptcy notice to enforce the costs award; and on 30 September 2014 Ms Santos applied to have that notice set aside. She has, she contends, a claim against them far exceeding theirs, which she could not have brought against the BNZ. She also contends that they issued the bankruptcy notice only after she claimed against them, to prevent her
pursuing her claim. Her brother, she says, is willing to guarantee the payment of her debt.
[6] On 6 March 2015, after hearing Ms Santos’s application, I reserved my decision. On 9 March 2015 Ms Santos applied for leave to adduce further evidence concerning the 2005 sale to Mr Bhatti, which she contends was fraudulent. The Rajans oppose that application and rely on contrasting evidence. Ms Santos’s further sentence is not new evidence. But to be complete I will take it into account, together with the contrasting evidence.
Legal principles
[7] Section 17 of the Insolvency Act 2006 sets out the consequence of a failure to comply with a bankruptcy notice; and its effect is, as the Court of Appeal recently said in Robertson & Robertson v ASB Bank Limited, this:1
An act of bankruptcy is committed if a debtor has been served with a valid bankruptcy notice, has not made payment within the stipulated time, and cannot satisfy the Court that he or she has a ‘cross claim against the creditor’ in an amount that is equal to, or greater than, the judgment debt and which could not have been set up as a defence in the proceeding in which judgment was entered.
[8] The cross-claim, the Court continued to say, must be ‘genuinely triable’ as to both liability and quantum. Under s 17(7) ‘not only … the existence of a cross claim must be established but also that it is equal to or greater than the judgment debt.’2
As to that, the Court said, the judgment debtor carries the onus, which it described in this way:3
All that is required is a genuinely triable claim. It is not necessary to go so far as to say that the claim for an amount equal to or greater than that shown on the bankruptcy notice is probable, or even likely, to succeed.
[9] As with other summary procedures, it said, this Court cannot on affidavit evidence alone determine any disputed question of fact. But this Court must
evaluate the strength of the claim to decide whether it is genuinely triable, and:
1 Robertson & Robertson v ASB Bank Ltd [2014] NZCA 597 at [12].
2 At [22].
3 At [31].
In assessing the strength of a claim the Court need not accept uncritically evidence that is inherently lacking in credibility; for example, where it is inconsistent with the contemporary documents or inherently improbable.
[10] In that case the Court held that the Judge at first instance should not have assessed the claim’s merit. He should only have assessed whether it was genuinely triable. The Court assessed that for itself on the extensive affidavit evidence given at first instance and held the claim genuinely triable. I must resolve this present application with that limited focus.
Cross claim
[11] In 2012 Ms Rani brought in the Family Court a claim under the Property (Relationships) Act 1976 which is still pending. In her July 2014 claim in this Court she contends that 2005 – 2012 Mr Bhatti transferred their five properties to others to defeat her 2012 claim. She seeks to have them set aside under s 44 of the Property (Relationships) Act 1976, and other relief.
[12] As to Hutton Street, Otahuhu Ms Rani contends firstly that in 2005 Mr Bhatti took that property from her by fraud. He forged her signature to the transfer. In her claim against Mr and Mrs Rajan, she contends that they have held the property for Mr Bhatti as trustee since 2009, and that he has continued to control it.
[13] Ms Rani seeks an account of the Hutton Street rental income since 2005, set against the outgoings, costs and expenses. She seeks an order that the Rajans transfer Hutton Street to her. She looks to them and to Mr Bhatti, as it seems independently, for $1M special damages on a basis she has yet to define plainly or to quantify.
Rani evidence
[14] In her two affidavits in support of her application, filed before the hearing, Ms Rani affirms that to be the nature of her claim against Mr Bhatti and the Rajans. That is all she does. Otherwise she relies on ‘will say’ statements. In a ‘will say’ statement she then made herself, she says nothing to advance her claim as to Hutton
Road. She then relies on two others, neither of which has been signed by the proposed witness.
[15] In her third affidavit, filed after the hearing, Ms Rani does give some evidence to support her claim that Mr Bhatti forged her signature to the 2005 transfer. She also attaches a handwriting expert’s report from which the first of the two other ‘will say’ statements derives. She also contends that she did not receive any surplus from her solicitor (in this answering the Rajans’ evidence set out in paragraph [19] of this decision).
[16] As to the 2009 transaction, Ms Rani continues to rely on a ‘will say’ statement said to be from a close friend of Mr Bhatti, who is to say that in 2007 he was asked to purchase the service station Mr Bhatti now runs, and he did so. She relies also on a letter, dated 8 August 2012, from the then solicitors for the third defendant named in her claim.
[17] In that letter the solicitors said that the third defendant had agreed to take title to two of the five properties in question, that he had no interest in them, and that he had no wish to remain responsible for the liabilities. If Mr Bhatti did not bring this to a halt, they said, they would go to the banks.
Rajan evidence
[18] To answer Ms Rani’s claim that Mr Bhatti obtained the property in 2005 by a forgery the Rajans will rely, as he does, on the opinion of a police document examiner that the transfer signature, said to be that of Ms Rani, cannot be compared definitively with her undisputed signature on other documents, but appears consistent with them, or not obviously inconsistent.
[19] The Rajans, like Mr Bhatti, will also rely on a statement made to the police on 25 June 2013 by the solicitor, Boon Toh, who acted for Ms Rani when she purchased Hutton Street in 2002, and when she sold it in 2005 to Mr Bhatti. He says that after settlement on 22 April 2005 he paid off Ms Rani’s mortgage to ASB Bank Limited and a personal loan she owed to Provincial Finance Limited. He paid to her the surplus remaining, $73,482.11.
[20] In an affidavit Boon Toh has since given in response to Ms Rani’s third affidavit, filed after the hearing, he attaches his file relating to the 2005 transaction, which culminates in a settlement statement he issued to Ms Rani on 22 April 2005, all of which is consistent with his police statement.
[21] As to the 2009 transaction, the Rajans, like Mr Bhatti, will rely on the solicitor, who acted on both sides. The solicitor no longer has her file. However, she has retrieved the settlement statement. It shows that the Rajans purchased for
$770,000, and that they paid a $154,000 deposit, and $616,411 on settlement. She retains the statement to Mr Bhatti confirming that she paid on his behalf $111,262.31 to Bridging Finance Limited and $467,084.47 to the ASB Bank and that, after the usual deductions, he obtained $28,671.
[22] The Rajans also rely, I understand, on evidence relating to the transaction given in the BNZ proceeding, which Ms Rani did not dispute when she consented to the withdrawal of her Hutton Street caveat.
Conclusions
[23] On the face of it, Ms Rani has committed an act of bankruptcy. She owes the Rajans the cost award assigned to them by the BNZ. She has not paid it to them within the time prescribed in the notice. She has not given them any security or reached any arrangement with them. She has not looked to this Court for approval. She must show that she has a qualifying cross claim.
[24] The ‘will say’ statements on which Ms Rani relies may suggest she has a claim against Mr Bhatti and perhaps his present partner, the second defendant, and the third defendant. As to that I need express no view. The issue is whether he has any such claim against the Rajans.
[25] To sustain a claim against them, Ms Rani will first have to establish that Mr Bhatti forged her signature to the 2005 transfer; and that will turn not just on the expert evidence as to her signature, but on that of her then solicitor, Boon Toh. The
2005 transaction, as recorded in Boon Toh’s file, is on the face of it entirely
conventional. That apart, Ms Rani will then have to establish that the 2009 transaction was also a sham.
[26] As to the 2009 transaction, Ms Rani has no direct evidence and the solicitor’s statements are consistent rather with the Rajans’ evidence that they purchased legitimately from Mr Bhatti, when he could not meet his mortgage liability. Furthermore, the BNZ proceeding also confirms that since 2009 the Rajans have been reliant on mortgage finance. It is also undisputed that rents received have been devoted to that liability.
[27] On the evidence as it is, therefore, Ms Rani’s claim against the Rajans is inconsistent with such contemporary documents as there are. And the Rajans say that they have in this proceeding, and as a result of the earlier BNZ proceeding, already disclosed everything relevant. There are no more documents to discover. Whether or not that is so I find that on the evidence as it is Ms Rani does not have a genuinely triable claim against them.
[28] To be complete I should say that I have not ignored Ms Rani’s concern that the Rajans are seeking to make her bankrupt to halt her 2014 claim against them. But they have had the benefit of the award since 2013 and, until they apply to her adjudicated bankrupt, she will be able to continue her claim in her own right. Nor have I ignored her brother’s guarantee, but she will have to pursue that first with the Rajans and, thus far, she has not done so. It is not relevant to her present application.
[29] I dismiss Ms Rani’s application to set aside the bankruptcy notice. I award
costs at scale 2B and disbursements to Mr and Mrs Rajan, which are to be fixed by the Registrar.
P.J. Keane J