Ryal Bush Transport Limited v Allfrey
[2012] NZHC 3454
•17 December 2012
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2012-409-002022 [2012] NZHC 3454
IN THE MATTER OF the Insolvency Act 2006
BETWEEN RYAL BUSH TRANSPORT LIMITED Debtor
ANDOF THE BANKRUPTCY OF MAXWELL ALLFREY
Creditor
Hearing: (Determined on the Papers) (Heard at Christchurch)
Appearances: B A Pamatatau for Creditor
No appearance for Debtor
Judgment: 17 December 2012
JUDGMENT OF ASSOCIATE JUDGE OSBORNE [AS TO RENEWAL OF BANKRUPTCY NOTICE]
[1] This judgment concerns whether a bankruptcy notice, previously renewed on three occasions, may be renewed again.
[2] Mr Pamatatau has submitted that the Registrar’s rejection of a request for further renewal is out of keeping with the practice in other registries. Given that submission, I am dealing with the matter in this way.
The facts of this case
[3] The bankruptcy notice was issued on 13 September 2012. It was renewed
(within time) by the Deputy Registrar for a period of one month from 13 October
2012. It was then again renewed, within time, for a period of one month from
12 November 2012.
RYAL BUSH TRANSPORT LIMITED V ALLFREY HC CHCH CIV-2012-409-002022 [17 December 2012]
[4] Accordingly, the period of three months from the date on which the notice was first issued expired on 12 December 2012.
[5] The case officer, when notifying counsel of the extension of one month from
13 November 2012, included the comment in an email:
A reminder that the bankruptcy notice is only valid until 12 December 2012.
[6] On 13 December 2012 counsel forwarded a memorandum seeking judicial consent for a further renewal of the bankruptcy notice under r 24.9(3) High Court Rules.
[7] The case officer immediately responded with the observation that time had expired on 12 December 2012 requiring the creditor to start over. (The case officer’s observation accorded with the previous practice in this registry, which had been adopted on judicial direction). There was subsequently a series of exchanges between counsel and the case officer. Mr Pamatatau observed that starting the bankruptcy notice procedure again would have an extremely prejudicial effect on the creditor as a further substituted service order would need to be applied for and, if the requested order was made, the bankruptcy notice advertised.
The legislation as to renewal of bankruptcy notices
[8] There is no material before me as to the original rationale for finite extensions of bankruptcy notices.
[9] Rule 24.9 High Court Rules provides:
24.9 Service of bankruptcy notice in New Zealand
(1) A bankruptcy notice that is to be served in New Zealand must be served within 1 month from the date of its issue.
(2) If, however, the Registrar is satisfied that reasonable efforts have been made to comply with subclause (1) and service has not been effected, the Registrar,—
(a) on the request in writing of the judgment creditor made not later than 1 month after the end of that period, may extend the time by 1 month or by successive periods of 1 month:
(b) must mark the notice with the word “renewed” and the date of the
renewal.
(3) A notice must not, without a Judge's consent, be extended for a period exceeding 3 months from the date on which the notice was first issued.
[10] The effect of r 24.9 High Court Rules is to permit the Registrar (if satisfied that reasonable efforts have been made to effect service within the initially permitted period) to extend the time for service for successive periods of one month at a time.
[11] By virtue of r 24.9(2) it is a precondition of the Registrar’s extension that the creditor requests the extension in writing not later than one month after the expiring period. There is no power given to the Registrar in r 24.9 to deal with a request for extension where the request is made after the expiry period. On that approach the bankruptcy notice would be defunct and unable to be resuscitated.
[12] I note the judgment of Master Kennedy-Grant in Re Hampton ex parte Westpac Banking Corp1 which is authority for the proposition that the one month renewal period prescribed in r 24.9 (rr 41(6) and 42 of the former Insolvency Rules
1970, as they then were) runs from the expiry of the initial period, or from the expiry of the last period of renewal (not from the date of the order or the sealing of the order for renewal).
[13] I turn then to a Judge’s consent, which is provided for in r 24.9(3). That rule provides:
A notice must not, without a Judge’s consent, be extended for a period
exceeding 3 months from the date on which the notice was first issued.
[14] Mr Pamatatau observed that he has obtained judicial consent after the expiry of the three month period on many occasions previously in all registries around the
country. He is unaware of any authority on the point.
1 Re Hampton ex parte Westpac Banking Corp HC Auckland B1925/91, 21 September 1992
[15] I equally am unaware of any authority directly in point. In my view, the correct interpretation of r 24.9(3) is to be drawn from the clear provisions of r 24.9 itself.
[16] The act of extension of a bankruptcy notice lies with the Registrar. Rule
24.9(2) makes it clear that it is the Registrar who extends time. Rule 24.9(3) engrafts onto that power of extension, in the cases of renewal periods exceeding three months, a requirement that there be in addition a Judge’s consent. There is nothing in r 24.9(3) to suggest that the fundamental requirement in relation to all extensions spelt out in r 24.9(2), whereby the request for extension must be made no later than one month after the end of the period, is no longer to be met when there is the additional layer of a Judge’s consent.
The “old law”
[17] What might be called “the old law” was that a bankruptcy notice was defunct once the period for any application for renewal has expired. Authority for that view was contained in judgments of the members of the Court of Appeal in Re McPhail ex parte Holt.2 In that case the Court of Appeal allowed an appeal and quashed an adjudication in bankruptcy which had relied upon a bankruptcy notice served out of time. Herdman ACJ characterised the bankruptcy notice thus:3
The notice when served upon him was no longer operative; it had run its course; it was a spent force.
[18] To similar effect were the conclusions reached by Master Kennedy-Grant in Re Hampton,4 in which his Honour adopted reasoning and observations in a number of earlier cases including the Court of Appeal’s judgments in Re McPhail ex parte Holt. Herdman ACJ had further observed in that case:5
In considering such a case as the present one it is necessary to ascertain whether all the formalities have been strictly complied with. In Re Collier 8
Morr 80, Cave J, said that “since the commission of an act of bankruptcy
was a serious matter and involved consequences of what has been called a
2 Re McPhail ex parte Holt [1929] NZLR 426.
3 At 429.
4 Above n 1.
5 Above n 2 at 428.
penal nature, it was important to see that the necessary preliminaries were complied with.
[19] Reference may also be made to Master Towle’s judgment in Re Rowles,6 in which his Honour refused to validate service effected without obtaining the required prior leave, saying:
I believe the act of bankruptcy is a statutory creation and if a petitioning creditor has not complied with the requirements of the Act then it is not a situation which should lend itself appropriately to validation by a retroactive order.
[20] There was no permitted retroactivity whether the retroactivity was requested months later or a day later.
[21] Similarly, while the relevant rules existed in the form of the Insolvency Rules, under the umbrella of the Insolvency Act, there was no basis upon which to effectively override the express requirements of the predecessor rules to r 24.9. Counsel’s attempts to salvage a proceeding by invoking provisions such as r 11 of the Insolvency Act 1967 (now s 418 of the Insolvency Act 2006) failed because the
incorrectly issued notice fell to be treated as a nullity rather than as an irregularity.7
The current position – the High Court Rules
[22] The rules governing bankruptcy notices are no longer contained in Insolvency Rules under the Insolvency Act. With r 24.9 and associated rules forming a part of the High Court Rules, the other parts of the High Court Rules apply, unless inconsistent with or modified by the Insolvency Act 2006.
[23] Rule 1.19 High Court Rules deals with extending and shortening time. It provides:
1.19 Extending and shortening time
(1) The court may, in its discretion, extend or shorten the time appointed by these rules, or fixed by any order, for doing any act or taking any
6 Re Rowles HC Auckland B1463/90, 3 December 1990.
7 See Best v Watson [1979] 2 NZLR 492.
proceeding or any step in a proceeding, on such terms (if any) as the court thinks just.
(2) The court may order an extension of time although the application for the extension is not made until after the expiration of the time appointed or fixed.
[24] As the edition of McGechan on Procedure notes at HR1.19.01:
The rule confers an unfettered discretion to extend and shorten time: Caltex
Oil (NZ) Ltd v Hughes (1986) 1 PRNZ 235.
The fact that an application for extension occurs after the time specifically prescribed by the rules for such application is not a bar to the exercise of this discretion: see r 1.19(2).
[25] There is a combined effect of bringing the rules in relation to bankruptcy notices together in the High Court Rules. The line of authority, stemming from Best v Watson,8 is no longer applicable in this context.
[26] Support for the approach which I take may be found in the judgment of this Court in Melgren v Public Trustee.9 Under the then Code of Civil Procedure, a writ had to be served within 12 months of the date of issue and, if not so served, the Court could on application made before the expiration of the 12 month period renew the writ. The parallel to the situation in the present case is evident. (The time limit in the Code for applying an extension in relation to writs was subsequently removed but it is the approach established by Melgren in relation to procedure as it then stood which is relevant).
[27] At the time of the decision in Melgren, the equivalent of r 1.19 High Court Rules was to be found in r 594 of the Code of Civil Procedure (which subsequently became r 9 of the original High Court Rules).
[28] Moller J found, notwithstanding the previous expiry of the 12 months for service of the writ, that the Court had power to extend the time for renewal under
r 594 of the Code.
8 Above n 7.
9 Melgren v Public Trustee [1971] NZLR 681.
[29] I accordingly find that, by r 1.19, it is open to a Judge to extend the time for requesting consent under r 24.9 and for requesting extension under r 24.9(2) notwithstanding the previous expiry of the bankruptcy notice.
The basis of exercising the discretion to extend under r 1.19
[30] I adopt the commentary in McGechan on Procedure as to the principled approach which ought to be adopted when extension of time is sought:
This [unfettered discretion to extend] obviously gives rise to a tension with the notion that time limits are included in the High Court Rules in order to be obeyed. This tension can only be resolved by balancing a wide variety of factors in order to determine where the overall justice lies.
In order to justify the exercise of the discretion, the Courts will require a proper foundation to be laid: Day v Ost (No 2) [1974] 1 NZLR 714. That case applied the decision of the Privy Council in Ratnam v Cumarasamy [1965] 1 WLR 8, [1964] 3 All ER 933 (PC) at 12 and 935, per Lord Guest:
“The rules of Court must prima facie be obeyed, and in order to justify a Court in extending the time during which some step in procedure requires to be taken there must be material upon which the Court can exercise its discretion. If the law were otherwise, a party in breach would have an unqualified right to an extension of time which would defeat the purpose of the rules, which is to provide a timetable for the conduct of litigation.”
The above statement of principle was cited with approval by the High Court in Spicers Paper (NZ) Ltd v B P K & G A Buckley Ltd (1993) 6 PRNZ 16.
The length of any delay is a relevant consideration. An example of a refusal to grant an extension of time (although in the context of a statutory time limit) can be seen in Gillespie v McKay (1999) 13 PRNZ 90. The Court refused to allow further time for the provision of particulars of ill will under s 41(3) of the Defamation Act 1992. The delay had been inordinate and an extension of time could result in a miscarriage of justice. 10
[31] The discussion by Moller J in Melgren, with reference to a very similar situation to that in the present case, is also instructive. Following a review of English authority, his Honour found that there must be “good reason” for the applicant having to seek an order to renew. In cases where renewal would deprive a defendant of a Limitation Act defence, the standard to justify extension would be altogether higher.
[32] On an application for extension made out of time, the Court will look to counsel to provide adequate information as to the circumstances giving rise to the failure and/or inability to obtain the extension in time. There must be, as Lord Guest required in Ratnam v Cumarasamy,11 material before the Court to justify the exercise of discretion. For this reason, the material supporting the application should almost always be verified by affidavit. For counsel to seek to generally proceed simply by
memorandum is to ignore the Court’s expectation (in implementing the rules of procedure) that the rules and the Court’s directions will be observed.
The exercise of discretion in this case
[33] On the information before the Court it is clear that the creditor has had difficulty in locating the debtor and more recently has found that it had insufficient time within which to complete the advertising required by way of substituted service. This is an unusual case in that the request under r 24.9(3) was a single day out of time. Reasonable grounds exist for an extension of time.
Orders
[34] I order:
1) In terms of r 1.19 High Court Rules, I extend the time permitted under rr
24.9(2) and 24.9(3) for extension of the bankruptcy notice in this
proceeding and for a Judge’s consent to 21 December 2012;
2) I consent to the extension of the period for service of the bankruptcy notice to 14 January 2013.
[35] I now leave it to the Registrar to grant the extension to 14 January 2013, upon production of the original service copy by the creditor’s solicitor to the Registry.
Associate Judge Osborne
Solicitors:
Whitlock & Co, PO Box 91449, Victoria Street, Auckland
Counsel: B A Pamatatau, PO Box 2422, Shortland Street, Auckland
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