Sharma v Wati HC Auckland CIV-2008-404-006367

[2011] NZHC 1930

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2008-404-006367
CIV-2008-404-006369
CIV-2008-404-006370
CIV-2008-404-006371

CIV-2008-404-006375

BETWEEN  DEO DATT SHARMA Debtor/Applicant

ANDNIRMALA WATI Creditor/Respondent

Hearing:         30 November 2011

Counsel:         Debtor/Applicant in person

AJH Witten-Hannah for Creditor/Respondent

Judgment:      30 November 2011

ORAL JUDGMENT OF RODNEY HANSEN J

Solicitors:           Witten-Hannah Howard, 187 Hurstmere Road, Takapuna, Auckland

SHARMA V WATI HC AK CIV-2008-404-006367 30 November 2011

Introduction

[1]      Dr Sharma applies for leave to appeal against my judgment delivered on

30 September 2011.[1]   In the judgment I upheld the refusal of Bell AJ to set aside five bankruptcy notices issued by Ms Wati, Dr Sharma’s former wife.  The notices were based on costs orders made against Dr Sharma in the Family Court, this Court, the Court of Appeal and the Supreme Court.

[1] Re Sharma, ex parte Wati HC Auckland CIV-2009-404-6367, 30 September 2011.

[2]      Before  Bell AJ  and  in  argument  before  me,  Dr  Sharma  argued  that  the bankruptcy notices should be set aside on the grounds that he had a counterclaim against Ms Wati and that four of the five bankruptcy notices are invalid because of non-compliance with the High Court Rules.

[3]      On  the  counterclaim  issue,  I  agreed  with  Bell  AJ  that  a  Family  Court judgment, as amended by Allan J following a successful appeal to this Court, did not create a future debt which could found a counterclaim.  I said in my judgment:[2]

Dr Sharma attempted to argue that Allan J’s judgment did not have the effect of quashing the order for payment of $177,500.  That is plainly wrong.  As noted above, Allan J’s judgment completely changed the basis on which relationship property is to be divided.   An alternative argument which he advanced at the hearing was that his entitlement to a share in the proceeds of sale of the house when Ms Wati’s right to occupation comes to an end is a debt due to him which qualifies as a counterclaim.  There is no merit in that contention either.  Bell AJ’s analysis on this issue is unassailable.  (Footnote omitted.)

[2] Ibid, at [14].

[4]      I  also  rejected  the  alternative  argument  that  the  issue  of  whether  a counterclaim existed should be determined by reference to the original Family Court judgment.  I held that the existence of a counterclaim fell to be considered at the time the application to set aside the bankruptcy notices was determined.  I ruled that this naturally followed from the provisions of s 17 of the Insolvency Act 2006 and r

24.10 of the High Court Rules.  By that time the appeal which changed the basis of

the Family Court judgment had been determined.

[5]      On the issue of the claimed non-compliance of the bankruptcy notices with the High Court Rules, I rejected Dr Sharma’s submission that the bankruptcy notices in issue should be set aside because they failed to annex certified copies of the judgments or orders.   I held that, to the extent that there were irregularities in the bankruptcy notices, s 418 of the Insolvency Act applied to cure any defects.

Principles on which leave to be granted

[6]      The application for leave to appeal is brought pursuant to s 26P(1AA) of the Judicature Act 1908 which permits a party affected by a decision following an application to review an Associate Judge’s decision to seek leave to appeal to the Court of Appeal.  Applications for leave under s 26P(1AA) are guided by the same

principles as those for second appeals under s 67 of the Judicature Act.[3]

[3] Payne v Attorney-General [2005] NZFLR 846 (CA) at [5].

[7]      Those principles are set out in Waller v Hider[4] and Snee v Snee.[5]In Waller v

[4] Waller v Hider [1998] 1 NZLR 412 (CA).

[5] Snee v Snee (1999) 13 PRNZ 609 (CA) at 612-613.

Hider it was said:[6]

[6] Waller, above n 4, at 413.

... The appeal must raise some question of law or fact capable of bona fide and serious argument in a case involving some interest, public or private, of sufficient importance to outweigh the cost and delay of the further appeal ... [T]he guiding principle must be the requirements of justice. ...

The scarce time and resources of the High Court and of this Court are not to be wasted, nor additional expense for an unsuccessful client incurred without realistic hope of benefit. ...

It  is  not  every  alleged  error  of  law  that  is  of  such  importance,  either generally or to the parties, as to justify further pursuit of litigation which has already been twice considered and ruled upon by a Court.

[8]      The  Court  of  Appeal  in  Snee  v  Snee  confirmed  these  principles  and commented:[7]

... It is the High Court, as the intermediate appellate Court, that has primary responsibility for correcting error and ensuring that justice is done to the parties.    Only  if  the  case  involves  some  wider  public  interest  will  the expense, both to the parties ... and to the Court system, of a second appeal be justified.

[7] Snee, above n 5, at [21].

[9]      Dr Sharma submits that I erred in deciding that the existence or otherwise of a counterclaim must be determined by reference to Allan J’s judgment and in finding that the irregularities in the bankruptcy notices on which he relied do not justify setting the notices aside.  There is nothing in the arguments he has advanced before me today to persuade me that either issue raises a question which warrants the grant of leave.

Counterclaim

[10]     Before briefly addressing his argument in relation to the counterclaim, I set out, for convenience, the relevant parts of s 17 of the Insolvency Act and of r 24.10:

17       Failure to comply with bankruptcy notice

(1)      A debtor commits an act of bankruptcy if—

(a)       a creditor has obtained a final judgment or a final order against the debtor for any amount; and

(b)       execution  of  the  judgment  or  order  has  not  been halted by a court; and

(c)       the debtor has been served with a bankruptcy notice;

and

(d)       the debtor has not, within the time limit specified in subsection (4),—

(i)       complied   with   the   requirements   of   the notice; or

(ii)      satisfied the court that he or she has a cross claim against the creditor.

...

(4)      The time limit referred to in subsection (1)(d) is,—

(a)       if the debtor is served with the bankruptcy notice in

New Zealand, 10 working days after service; or

(b)       if the debtor is served outside New Zealand, the time specified in the order of the court permitting service outside New Zealand.

24.10   Setting aside bankruptcy notice

(1)       If an application to set aside a bankruptcy notice cannot be heard until after the expiration of the time specified in the notice as the day on which the act of bankruptcy will be complete, the time is treated as extended until the application has been determined.

(2)      An act of bankruptcy is not committed by reason only of non- compliance   with   the   notice   until   the   application   has   been determined.

[11]     Dr Sharma argues that r 24.10 does not have the effect of extending the time in which a debtor may comply with the requirements of a bankruptcy notice or prove the existence of a cross-claim.  His argument, as I understand it, is that the rule has the effect of “pausing” time so that any events occurring after filing the application to set aside the bankruptcy notices cannot be taken into account in determining whether a debtor has a valid cross-claim.

[12]     I am not persuaded that my interpretation of the effect of r 24.10 is incorrect. Section 17 provides that an act of bankruptcy will be committed if the requirements of subsection (1) are satisfied.  They, relevantly, include the requirement that within the time limit the debtor has not either complied with the notice or satisfied the Court that he or she has a cross-claim against the creditor.  That time limit is extended by r 24.10 to the time at which the application to set aside is determined.  That is when the debtor needs to satisfy the Court that he or she has a counterclaim.  In this case, the relevant time was  when Bell AJ determined the application.   By that time, Allan J’s judgment had set aside the Family Court judgment and disposed of any argument that Dr Sharma had a counterclaim.

Non-compliance

[13]     In  his  submissions  in  relation  to  the  non-compliant  bankruptcy  notices, Dr Sharma  has  reiterated  his  argument  that  the  failure  to  annex  certificates  in accordance with the Rules provides grounds to set aside the notices.   He has also introduced for the first time an argument that one of the costs orders was not in fact

made.  For that purpose he relies on a judgment of Sargisson AJ.[8]

[8] Sharma v Wati HC Auckland CIV-2008-404-3124, 28 October 2008.

[14]     I accept Mr Witten-Hannah’s submission that the judgment of Sargisson AJ is a red  herring  and  has  no  application  to  the issues  I am  required  to  determine. However, even if that were not the case, any challenge to that costs order should have been supported by an affidavit filed in support of the original application to set aside the notices.

[15]     Dr Sharma has not sought to challenge my finding that any non-compliance was of a technical nature and that s 418 of the Act applied to cure any defects in the bankruptcy notices. There is nothing to alter the view expressed in my judgment that the defects have no practical consequence.  There was no prejudice to Dr Sharma. The notices were fully effective to identify and prove the debts relied on.

Conclusion

[16]     I am satisfied that there is no question of law or fact capable of bona fide and serious  argument  which  could  warrant  the  cost  and  delay  of  a  further  appeal. Further,  the  interest  involved  is  of  a  purely  private  character,  arising  from Dr Sharma’s stubborn  refusal to honour orders for costs, including orders made following unsuccessful proceedings before the Court of Appeal and Supreme Court. He seeks to resist payment on the basis of spurious defences, relying on a right to counterclaim which, while once arguable, no longer exists, and complaints about the bankruptcy notices that are of a highly technical and unmeritorious nature.  For these reasons, the application for leave to appeal must fail.

[17]     Mrs Wati is entitled to costs on a category 2 band B basis.   Mr Witten- Hannah has handed up a schedule of costs supporting an order based on a total time of 1.55 days which, at a daily rate of $1,880, entitles Mr Witten-Hannah to costs in the sum of $3,914.