Schmidt v Hair

[2012] NZHC 2452

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2011-404-008142 [2012] NZHC 2452

UNDER  Insolvency Act 2006

IN THE MATTER OF     the bankruptcy of Anthony Mikhal Schmidt (also known as William Perese and previously known as Wiremu William Anthony Te Whairoa Wanoa, William Daniel Hirchkop and Bill Khan Reichfeld)

BETWEEN  ANTHONY MIKHAL SCHMIDT Judgment Debtor

ANDNOEL HAIR Judgment Creditor

Hearing:         17 September 2012

and 21 September 2012

Appearances: R S Pidgeon for the Judgment Debtor

N W Woods for the Judgment Creditor

Judgment:      21 September 2012

ORAL JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

Solicitors/Counsel:

N Woods, Rice Craig, Papakura –  [email protected]

R Pidgeon, Pidgeon Law, Auckland –  [email protected]

T Schmidt –  [email protected]

I Razak, Smith and Partners, Henderson – [email protected]

ANTHONY MIKHAL SCHMIDT V NOEL HAIR HC AK CIV 2011-404-008142 [21 September 2012]

[1]      Mr Schmidt has applied to set aside the bankruptcy notice or to stay the execution of the bankruptcy notice or to halt the adjudication application.

[2]      Yesterday  I delivered  my judgment  in  proceeding  CIV 2012-404-001793 (CIV 1793) upon the applications by the defendants to strikeout the proceeding filed by Mr and Ms Schmidt.

[3]      In the opening paragraphs of that judgment I outlined some facts surrounding this matter.  I did so to explain why I would be delivering a judgment in relation to CIV 1793 before ruling in relation to Mr Schmidt’s applications in this matter.  I did so in part also to provide a chronology to identify when that proceeding CIV 1793 was filed in relation to service of the bankruptcy notice upon Mr Schmidt.

[4]      In yesterday’s judgment, I reviewed Mr Schmidt’s grounds for making the applications he has in this matter.   Those included his claim that an order for adjudication would cause an injustice by preventing him from pursuing his claim under CIV 1793.

[5]      The balance of his reasons for opposing adjudication focussed upon claims that service of the bankruptcy notice was not properly effected; that the bankruptcy notice was defective; and that he claimed he could in any event meet payment of the

‘correct’ amount due under the bankruptcy notice.

[6]      The purpose of adjourning this matter to today was to enable the Court to better consider Mr Schmidt’s grounds for opposition in the outcome of the strike out applications.

Service of the bankruptcy notice

[7]      The evidence about whether service occurred was disputed by Mr Schmidt. Accordingly I heard evidence from the process server Mr Proctor and in response from Mr Schmidt.

[8]      Mr Schmidt says that on 16 February 2012 he was alone in an interview room on the ground floor of the High Court preparing for a court appearance that morning. Apparently there was no desk in that room.

[9]      Mr Schmidt said he saw Mr Proctor ‘hanging around’ the Court.  He could see Mr Proctor through the glass panel in the door.  He says Mr Proctor came up to the door.  At no time were documents served on him nor was there any endeavour to hand documents to him.  He did not know what was in Mr Proctor’s hand.  He did not see anything in his hand.   He agrees Mr Proctor could have seen him with a mobile phone is his hand.

[10]     Mr Proctor says he was at the High Court expecting to see Mr Schmidt there in order to serve documents on him.  He knew who Mr Schmidt was he having seen him  a  number  of  times  previously.    He  said  he  opened  the  door  and  put  the documents on the floor in front of Mr Schmidt.   Mr Schmidt was talking into his phone at the time.

[11]     Mr Proctor then left but returned three or four minutes later.  Mr Schmidt was still there.  Mr Proctor said he had picked the papers up and held them.  He said Mr Schmidt informed him that he could not serve him with papers at the High Court.

[12]     I prefer the evidence of Mr Proctor.  Mr Proctor’s evidence as to the manner of service was largely unchallenged.   Service at a Court is permissible as is the placing of documents at the feet of the person being served.  Also in this case Mr Schmidt clearly received them because as much was confirmed by his memorandum to the Court dated 2 March 2012.  That memorandum contained a header page which included the parties and identified the Courts file reference number for this matter.

[13]     By that memorandum Mr Schmidt noted that he “had the proceedings in this matter brought against him by Noel Hair”; that on 16 February 2012 a party he assumed was hired by Mr Hair threw some documents at the glass portion of a door adjoining one of the interview rooms – that he did not know what those were.  He said he intended to oppose the making of any orders in this matter as Noel Hair seeks.

[14]     Those  statements  provide  a  clear  acknowledgement  of  receipt  of  the documents in question.

Validity of bankruptcy notice

[15]    Mr Schmidt submits he has already paid the amount claimed under the bankruptcy notice from the sum held by the court as security pending his appeal before Miller J.   That sum totalling $7,206 was ordered by Woolford J to meet outstanding  rent  arrears  and  was  to  be  held  pending  the  appeal  hearing  before Miller J. Also paid into court was the sum of $940 as security for costs.

[16]     It seems clear to me from reading the judgments of Miller J of 6 October

2011 and 15 December 2011 that of the sum of $8,146, $7,206 was held on account of rent arrears; that in fact the release of those funds was authorised for that purpose i.e. to pay rent arrears and that it was not received by Mr Hair on account of payment of costs.  Therefore, after deduction of rental arrears due there is a balance of $640 available to pay costs and due credit should be given for this amount.  This means that there is a balance owing on the bankruptcy notice of $3,065.04.

Validity of bankruptcy notice amount

[17]     It referred to a sealed order for costs awarding costs in an amount of $6,110 plus disbursements.   Mr Schmidt asserts that the costs order was sealed for an incorrect amount.   Indeed, that is arguably so for paragraph 5 of the judgment of Miller J as to costs appears to make it clear that of the total costs claimed of $6,110 plus disbursements, the sum of $3,705.04 inclusive of disbursements was appropriate for costs in respect of the appeal in respect of which Mr Schmidt was unsuccessful.

[18]     Mr Schmidt claims the bankruptcy notice is defective.  Even if that is so, I am satisfied:

(a)       All formal requirements for the making of an order for adjudication, have been met, including effecting service of the bankruptcy notice.

(b)There  can  be  no  doubt  that  there  is  an  amount  owing  under  a judgment given against the judgment debtor, in a specified court on a given day.

(c)      That there is no evidence of injurious effect caused if the order for judgment was sealed in an incorrect amount.

(d)In the circumstances if it was required I would order pursuant to s 418 of the Insolvency Act 2006 that any error as to the amount claimed to be owing in the bankruptcy notice, be corrected to show the correct amount.

[19]     The adjudication application refers to Mr Schmidts failure to make payment within the time specified in the bankruptcy notice.  It also refers to unpaid debts and costs (including the amount contained in the bankruptcy notice) in respect of other court proceedings, amounting to $27,247.97.

Whether Mr Schmidt can pay the debt

[20]     Mr Schmidt claims that he can pay his debts.  However he says he can only afford to pay $20 per week.  In short Mr Schmidt cannot on this evidence pay the debt within a timeframe the Court would expect. Also no part of his court debts have been paid since they were incurred.

Whether an adjudication order would unjustly prejudice his prosecution of his claims against Ebada and Mr Garrity?

[21]     Undoubtedly an order for adjudication would affect Mr Schmidt’s ability to continue those claims.  It is questionable whether the Official Assignee would want to pursue the matter on behalf of an insolvent estate.

[22]     The Court considers minimal weight ought to be given to claims of injustice if bankruptcy was to occur.   Besides, those claims are able to be pursued by Ms Schmidt for their interest in the outcome of those claims is common to them both.

Furthermore Ms Schmidt through her written and oral submissions to this Court demonstrated very considerable skills as an advocate.

[23]     The debt is owing, and Mr Schmidt cannot pay it.  The Court is not prepared to delay the adjudication application and for the purpose of serving Mr Schmidt’s interests in a proceeding which may be far from conclusion and in respect of which any outcome is far from clear.

[24]     Therefore Mr Schmidt’s applications to set aside the bankruptcy notice, and in opposition to any adjudication application, or for a stay or adjournment of the adjudication application, are dismissed.

[25]     There is an order for Mr Schmidt’s adjudication as a bankrupt.  The time of the order is 12:04pm.

[26]     There is an order for 2B costs and disbursements in that amount submitted by

Mr Woods’ memorandum for approval.

Associate Judge Christiansen