Senior Trust Capital Limited v Holmes - [2024] NZHC 2060

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-2745

[2024] NZHC 2060

UNDER the Insolvency Act 2006

IN THE MATTER OF

The bankruptcy of Christopher Alan Holmes

BETWEEN

SENIOR TRUST CAPITAL LIMITED

Judgment Debtor

AND

CHRISTOPHER ALAN HOLMES

Judgment Creditor

Hearing: 22 July 2024

Appearances:

M J Tingey for the Judgment Creditor

M D Pascari/J C Murdoch for the Judgment Debtor

Judgment:

26 July 2024

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

This judgment was delivered by me on 26 July 2024 at 4 pm Pursuant to r 11.5 of the High Court Rules.

…………………..
Registrar/Deputy Registrar

Solicitors / Counsel:
Couch Harlowe Kovacevich, Auckland Hamilton Locke, Auckland

M J Tingey, Auckland

SENIOR TRUST CAPITAL LTD v HOLMES [2024] NZHC 2060 [26 July 2024]

Introduction

[1] On 3 November 2023, the judgment creditor, Senior Trust Capital Ltd (Senior Trust) obtained summary judgment against the judgment debtor, Christopher Holmes (Mr Holmes) for $3,429,259.52.1 On 11 December 2023, Senior Trust served a bankruptcy notice on Mr Holmes requiring payment of the judgment.

[2] Mr Holmes has applied for an order setting aside the bankruptcy notice, relying on this Court’s inherent jurisdiction to do so to prevent an injustice. Mr Holmes has appealed the judgment, and the appeal was heard by the Court of Appeal on 23 July 2024, the day after the hearing of this application. The Court of Appeal has reserved judgment.

[3] Mr Holmes argues that it will be an injustice if the bankruptcy notice is permitted to stand and an act of bankruptcy occurs before the Court of Appeal delivers its judgment. This would result in an act of bankruptcy based on a judgment that may yet be overturned.

[4] Senior Trust argues that the bankruptcy notice should stand and any exercise of the Court’s discretion to defer an adjudication of bankruptcy should await the filing of a bankruptcy proceeding, which will then permit Mr Holmes an opportunity to apply for a halt of that proceeding.2

[5]The issues that I must determine are:

(a)What is the extent of the Court’s inherent jurisdiction to set aside a bankruptcy notice to prevent an injustice?

(b)Should the jurisdiction be exercised in favour of Mr Holmes?

1 Senior Trust Capital Ltd v Holmes [2023] NZHC 3108 at [84].
2 Insolvency Act 2006, ss 38 and 42.

The inherent jurisdiction to set aside a bankruptcy notice

[6] Section 17 of the Insolvency Act 2006 (the Act) prescribes the grounds for setting aside a bankruptcy notice where the debtor has a counterclaim, set off or cross demand equal to or greater than the judgment debt, which could not be set up in the proceeding in which the judgment was obtained. Mr Holmes does not rely on that statutory jurisdiction.

[7] In addition, the High Court has inherent jurisdiction to set aside a bankruptcy notice. The extent of the inherent jurisdiction was comprehensively reviewed by Master Kennedy-Grant in Re Wise,3 relevantly holding that:4
(c)The grounds on which the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2024] NZHC 2060
Decision Date: 26 July 2024

CaseChat Overview and Summary

In the High Court of New Zealand, Auckland Registry, the case of Senior Trust Capital Limited versus Holmes was heard on 22 July 2024, with the judgment delivered on 26 July 2024. The case involves Senior Trust Capital Limited, the judgment creditor, and Christopher Alan Holmes, the judgment debtor, in relation to a bankruptcy notice served on Mr Holmes. Mr Holmes has applied for an order setting aside the bankruptcy notice, arguing that it would be unjust for the bankruptcy notice to stand while his appeal against the judgment is pending. The appeal was heard by the Court of Appeal on 23 July 2024, and judgment has been reserved. Senior Trust Capital Limited opposes the application, arguing that the bankruptcy notice should stand and that any exercise of the Court's discretion to defer an adjudication of bankruptcy should await the filing of a bankruptcy proceeding.

The key legal issues before the court were the extent of the Court's inherent jurisdiction to set aside a bankruptcy notice to prevent an injustice, and whether this jurisdiction should be exercised in favour of Mr Holmes. The court examined the statutory and inherent jurisdiction to set aside a bankruptcy notice, noting that the inherent jurisdiction could be exercised to prevent injustice if there is a procedural defect or arguable grounds of defence to the claim. The court also considered whether an appeal of a judgment could be sufficient to exercise the inherent jurisdiction. The court found that while an appeal does not automatically justify an adjournment or stay of an application to set aside a bankruptcy notice, it could be a relevant factor if it raises arguable grounds of defence. Given the appeal's focus on a clause in a loan agreement, the court deemed it appropriate to adjourn the application to set aside the bankruptcy notice pending the Court of Appeal's judgment.

The court ultimately decided to adjourn the application to set aside the bankruptcy notice to 12 September 2024, to allow for the Court of Appeal's judgment on the appeal. This decision ensures that Mr Holmes will not commit an act of bankruptcy before the appeal is determined, which would otherwise be unjust if the Court of Appeal overturns the judgment. The court reserved costs for further consideration.

Orders