Smith v Keenan
[2022] NZHC 618
•30 March 2022
IN THE HIGH COURT OF NEW ZEALAND GREYMOUTH REGISTRY
I TE KŌTI MATUA O AOTEAROA MĀWHERA ROHE
CIV-2021-418-000024
[2022] NZHC 618
UNDER the Insolvency Act 2006 IN THE MATTER
of the bankruptcy of Anthea Rose Keenan
BETWEEN
RAYMOND BRUCE SMITH
Judgment Creditor
AND
ANTHEA ROSE KEENAN
Judgment Debtor
Hearing: 28 March 2022 Appearances:
M D W King for Judgment Creditor Judgment Debtor in person
Judgment:
30 March 2022
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 30 March 2022 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
SMITH v KEENAN [2022] NZHC 618 [30 March 2022]
[1] The judgment creditor (Mr Smith) makes a creditor’s application to adjudicate the judgment debtor (Ms Keenan) bankrupt under s 13 of the Insolvency Act 2006 (the Act). Ms Keenan opposes the application.
Background
[2] Mr Smith is the Mayor of the Westland District Council. This application has its origin in a defamation proceeding brought by Mr Smith against Ms Keenan and Geoffrey King and heard in the Christchurch High Court. Ms Keenan and Mr King did not take any formal steps to defend the claim. It was determined by way of formal proof before Gendall J. In a judgment of 31 May 2021, Gendall J entered judgment against Ms Keenan and Mr King for liability for reasonable solicitor/client costs pursuant to s 24(2) Defamation Act 1992.1 The amount of those costs was subsequently fixed in a judgment of 29 June 2021. Gendall J ordered that Ms Keenan and Mr King were jointly and severally liable to pay Mr Smith costs and disbursements totalling $32,667.74.2 The judgment was sealed on 30 June 2021.
[3] Ms Keenan filed an appeal from the judgments to the Court of Appeal under CA479/2021. She did not obtain a stay of enforcement of the judgment from this Court or the Court of Appeal.
[4] Mr Smith took steps to obtain payment of his judgment. He applied for the issue of a bankruptcy notice against Ms Keenan. It was dated 6 September 2021 and was served upon Ms Keenan on 23 September 2021. Mr King paid a one-half share of the judgment sum, and the bankruptcy notice was issued only in respect of the balance of $16,333.87, which was, and remains, unpaid.
[5] Ms Keenan asserts an application to set aside the bankruptcy notice was filed on 27 September 2021. She did not in fact make such an application, but she did send an email to the Court on that date asserting that she and her husband did not owe anybody any money, were not insolvent, and should not be subject to a bankruptcy
1 Smith v King [2021] NZHC 1252 at [49].
2 Smith v King [2021] NZHC 1557 at [11].
notice. The email was not, and was not treated as, a formal application to set aside the bankruptcy notice.
[6] Mr Smith’s creditor’s application was filed on 5 November 2021, but personal service could not be effected until 15 February 2022 pursuant to an order for substituted service made by Associate Judge Lester on 2 February 2022.
[7] In the meantime, Ms Keenan decided not to pursue her appeal. It was abandoned on 30 November 2021.
[8] On 23 March 2022, once service of the creditor’s application (and accompanying documents) had been effected, Ms Keenan filed a notice of intention to oppose the creditor’s application. Her opposition is supported by her affidavit and an affidavit of Mr King. The grounds of opposition relied upon appear to be all of the following:
(a)that Ms Keenan is not insolvent;
(b)that Ms Keenan does not accept the judgment obtained by Mr Smith;
(c)that the Westland District Council never approved the litigation by Mr Smith against her;
(d)that the bankruptcy notice was issued while her appeal was pending;
(e)that she and Mr King served a document upon Mr Smith identified as a “Notice of Claim of Right” which he has ignored and which he must therefore be taken to have consented to, resulting in “an automatic default judgement [sic] and permanent and irrevocable estoppel by acquiescence” barring the bringing of any claim against her; and
(f)that she objects to Mr Smith’s counsel continuing to act for him.
The law
[9]Section 13 of the Insolvency Act 2006 provides as follows:
When creditor may apply for debtor’s adjudication
A creditor may apply for a debtor to be adjudicated bankrupt if—
(a)the debtor owes the creditor $1,000 or more or, if 2 or more creditors join in the application, the debtor owes a total of $1,000 or more to those creditors between them; and
(b)the debtor has committed an act of bankruptcy within the period of 3 months before the filing of the application; and
(c)the debt is a certain amount; and
(d)the debt is payable either immediately or at a date in the future that is certain.
[10] Section 36 of the Act provides the Court may, at its discretion, adjudicate a debtor bankrupt if the creditor has established the requirements set out in s 13.
[11] Pursuant to s 37, the Court may, again at its discretion, refuse to adjudicate a debtor bankrupt if:
(a)the applicant creditor has not established the requirements set out in s 13; or
(b)the debtor is able to pay his or her debts; or
(c)it is just and equitable that the Court does not make an order of adjudication; or
(d)for any other reason an order of adjudication should not be made.
[12] A leading authority on the exercise of the Court’s discretion is Baker v Westpac Banking Corporation which, although decided under former legislation, is still applicable:3
The principles governing the exercise of the discretion under s 26 to grant or refuse an order of adjudication in bankruptcy are well settled and have been discussed by this court in recent years in Ellis v NZI Finance Ltd and McHardy v Wilkins & Davis Marinas Ltd (in receivership). It is proper for the court to consider not only the interests of those directly concerned — the petitioner,
3 Baker v Westpac Banking Corporation CA212/92, 13 July 1993 at 4 cited in
Re Commissioner of Inland Revenue, ex parte Brown [2016] NZHC 1232 at [14].
other creditors, the debtor — but also the wider public interest. A creditor who establishes the jurisdictional facts set out in s 23 is not automatically entitled to an order. On the other hand, it is for an opposing debtor to show why an order should not be made. The court will give proper weight to the commercial judgment of the petitioner but the oppressive use of the bankruptcy process may be a ground for refusing an order. Another ground may be the undoubted absence of assets but that will not necessarily preclude an order given the range of interests involved including the public interest in the continuing oversight of a bankrupt’s affairs and the disqualifications that go with bankruptcy. In the end the Court must balance the various considerations relevant to the case and determine whether the debtor has succeeded in showing that an order ought not to be made.
[13] In Re Tootell, ex parte Rabobank Australia Ltd, Associate Judge Osborne accepted the following principles applied in relation to an adjudication application: 4
·the creditor has the onus of establishing the allegations in its application;
·the Court may in its discretion refuse to adjudicate a debtor bankrupt (notwithstanding the jurisdiction is established) if it is just and equitable not to make an order or there is any other sufficient reason not to make an order;
·the debtor has the onus of satisfying the Court that either it is just and equitable or that some other sufficient reason exists for the Court not to make an order of adjudication; and
·the Court is not to refuse an order of adjudication on the grounds of expediency or convenience.
[14] Associate Judge Osborne referred to the decision of Master Williams QC in Re Epirosa, ex parte Diners Club (NZ) Ltd where the factors considered relevant to the exercise by the Court of its discretion were: 5
· What are the wishes of all affected parties, including the applying creditor, other creditors and the debtors?
· Does the debtor have the ability to meet his or her debts over time and, if so, does that meet the requirements of achieving finality within a reasonable period?
4 Re Tootell, ex parte Rabobank Australia Ltd [2013] NZHC 2975 at [6].
5 Re Epirosa, ex parte Diners Club (NZ) Ltd HC Wellington B498/91, 6 March 1992.
· What were the circumstances in which the debt was incurred, and do those circumstances suggest that the creditor is acting unreasonably in pursuing adjudication?
· Will adjudication be pointless?
· Will the debtor, if adjudicated, be rendered unable to support himself or herself?
· Does the debtor have such a standing in the community that significant issues of stigma or embarrassment will result?
Are grounds for an adjudication order established?
[15] I am satisfied that Mr Smith has established the grounds for the making of an order of adjudication under s 13 of the Act because:
(a)Ms Keenan owes him more than $1000. There is an amount of
$16,333.87 remaining unpaid under the judgment obtained by Mr Smith against Ms Keenan;
(b)Ms Keenan committed an act of bankruptcy within the period of three months before the filing of Mr Smith’s creditor’s application. The act of bankruptcy was failing to comply with the bankruptcy notice served on her on 23 September 2021.6 The date of her act of bankruptcy was 8 October 2021 and the creditor’s application was filed on 4 November 2021;
(c)the debt owing to Mr Smith is a certain amount, as stated above; and
(d)the debt is immediately payable.
[16] In those circumstances, I must consider whether there is, in the exercise of my discretion, some reason why an order for adjudication ought not to be made. I will deal with each of the matters raised by Ms Keenan under the headings below.
6 Insolvency Act 2006, s 17.
Solvency
[17] With respect to a debtor’s ability or otherwise to pay her debts, the Court has held that evidence of sufficient weight and clarity must be provided by the debtor.7
[18] In her notice to oppose the adjudication order, Ms Keenan states “Courts are advised that I am not insolvent”. That assertion is repeated in her affidavit. However, apart from the bare assertion she is not insolvent, there is no other evidence as to her financial means or ability to pay the judgment debt. At the hearing, Ms Keenan asserted that she operates a business, owns her own home, and has good financial management skills, but there is no evidence about any of that before me. It follows that Ms Keenan has failed to establish that she is solvent.
The judgments of Gendall J
[19] Ms Keenan raises several objections to Gendall J’s judgments. She considers they were obtained fraudulently on the basis of Mr Smith’s biased and misleading affidavit evidence and says she will not be a party to lies, manipulation and deceit, nor bear any costs related to it.
[20] She considers Gendall J did not have all of the evidence before him and, most particularly, that Mr Smith had not rebutted defence points she had raised in her Notice of Claim of Right document.
[21] She also says that she did not receive notice of the hearing at which judgment was obtained.
[22] Although she abandoned her appeal, Ms Keenan considers it is incumbent upon me to obtain the file from the Court of Appeal, review it, and discuss it with my judicial colleagues to establish the truth.
[23] I do not accept any of the matters raised by Ms Keenan. Ms Keenan was served with Mr Smith’s court proceeding and she chose not to file a statement of defence to
7 Re Clarke, ex parte Commissioner of Inland Revenue HC Whangarei B151/95, 1 October 1996.
the claim. In those circumstances, Mr Smith was entitled to apply for judgment by formal proof. Under the High Court Rules no notice was required to be given to Ms Keenan of the formal proof hearing.8 Mr Smith filed a full affidavit in support of his application for judgment which attached and referred to Ms Keenan’s Notice of Claim of Right document. The judgment of Gendall J of 31 May 2021 is a substantial and considered judgment of the facts and the law. There is nothing before me to suggest the judgment was not properly and fairly obtained or is now, given Ms Keenan’s decision to abandon her appeal, open to any challenge.
The Westland District Council never approved the litigation
[24] There is nothing in this point. It was Mr Smith who brought the proceeding against Ms Keenan, not the Westland District Council.
The pending appeal
[25] Ms Keenan argues that Mr Smith should not have served the bankruptcy notice while her appeal to the Court of Appeal was pending. I understand she considers that was oppressive. I do not accept that submission. The filing of an appeal does not operate as a stay of execution of a judgment. Mr Smith was entitled to the fruits of his judgment. Once Mr Smith filed his creditor’s application, it was open to Ms Keenan to apply to halt the proceeding under s 42 of the Act, but she made no such application. In any event, the matter soon became moot as the appeal was then abandoned.
The Notice of Claim of Right Document
[26] Ms Keenan’s use of a Notice of Claim of Right document has been the subject of other judgments of the Courts.9 Ms Keenan considers the failure by Mr Smith to respond to this document once it was served upon him acted as a complete defence to his claim and also the judgment he obtained. The provenance of the document (and Ms Keenan’s belief as to its utility) is not entirely clear, but Ms Keenan made various references to common law, God’s law, and the divine law throughout her submissions.
8 High Court Rules 2016, r 15.9.
9 Grant v Keenan [2021] NZDC 6820; Keenan v Grant [2021] NZHC 2950.
[27] In Keenan v Grant, Dunningham J considered the use of the Notice of Claim of Right document in the context of an appeal from a District Court decision where the District Court Judge had decided the document had no legal standing. Her Honour found that the District Court Judge was correct to take that view. She relevantly said:
[54] The Judge was clearly right to do this. The belief that statements made in a pseudo-legal document entitled a “Claim of Right” has some legal effect appears to derive from the mythology of the “Sovereign Citizen” movement. However, it has no standing in the New Zealand legal system. The procedure for making and defending a civil claim in a New Zealand Court is determined by the rules of the relevant Court. There is no scope in those rules for liability to be determined based on documents which are not anticipated or provided for as part of the formal Court process. Accordingly, the Judge was entirely right to ignore the “Claim of Right” document and the ensuing “Notice of Default of No Response” document, as neither constituted proof of the defendants’ position. The defendants needed to defend the claim (if they could) by calling evidence in Court.
[28] The position is the same in this case. If Ms Keenan did not accept Mr Smith’s claim, the appropriate course was to file a statement of defence and then call evidence at trial. She chose not to take that course. She cannot rely on the Notice of Claim of Right document to avoid the consequences of her deliberate decisions as that document has no standing in our legal system.
Mr Smith’s counsel.
[29] Mr Smith’s counsel, Mr King, has acted for Mr Smith against Ms Keenan in this and other proceedings. Ms Keenan considers Mr King has presented false evidence to the Court on behalf of Mr Smith and is involved in cover-ups of misfeasance by Mr Smith and others. Mr King showed considerable professionalism at the hearing in the face of these allegations. There is nothing before me to suggest Mr King has acted improperly, or that there are any grounds upon which Ms Keenan can object to him continuing to act for Mr Smith.
The offer of an adjournment
[30] By the conclusion of the hearing, I had formed the view that Ms Keenan has not raised any matters of substance in defence of the adjudication application. I was concerned that she is self-represented. If she has taken advice it has not been from a
lawyer but from persons who do not understand the legal system or the consequences of positions she maintains. Ms Keenan appears to have accepted false information about a range of matters, including the effectiveness of the Notice of Claim of Right document.
[31] In those circumstances, I offered her an adjournment to a later date so that she could take legal advice before I made a decision on the application. I attempted to explain that the making of an order adjudicating her bankrupt was a very serious matter which would have adverse consequences for her. She was supported by her husband and he was involved in this discussion.
[32] Unfortunately, I could not get through to Ms Keenan that an adjournment was in her interests. She is distrustful of the legal system and of lawyers. She has no intention of seeking legal advice and did not want an adjournment. She said her position is as reflected in her Notice of Claim of Right document, and she will not pay Mr Smith. In those circumstances, and reluctantly, I could see no point in adjourning the application.
Conclusion
[33] As noted above, Mr Smith has made out the grounds for the making of an order for adjudication. Ms Keenan has not raised any matter which would justify me exercising my discretion to decline to make the order. Ms Keenan is adamant that she will not pay Mr Smith. A perusal of the Court file shows that while she will engage with the legal system that is only upon her own terms. There is much email correspondence on the file reflecting this. Another example is that she will not accept the judgment of Gendall J but expects the Court to recognise her Notice of Claim of Right document.
[34] Mr King submitted that the Court could make an order adjudicating Ms Keenan bankrupt but let the order lie in Court for a period in the hope she will pay the judgment debt and costs. The making of an adjudication order involves a change in a debtor’s legal status and takes effect from the date and time the order is made. I do not consider
the approach suggested is open to me, but in any event it would serve no purpose in circumstances where Ms Keenan has made it plain she will not pay her debt.
[35] I must decide the application on what is before me and on that basis Mr Smith is entitled to an order adjudicating Ms Keenan bankrupt.
Result
[36] Mr Smith’s application is granted. There shall be an order under s 13 of the Insolvency Act adjudicating Ms Keenan bankrupt. The order is timed at 4.00pm on 30 March 2022.
[37] Mr Smith is entitled to his costs on a 2B basis plus reasonable disbursements as fixed by the Registrar.
[38] At the hearing, Ms Keenan asked me for a transcript of the hearing. I advised her that transcripts are not prepared as a matter of course but the hearing was recorded if it was later needed. She appeared to accept that but has now emailed the Registry requesting a transcript of this hearing and also of a hearing that occurred on 12 October 2021 before Dunningham J in a different proceeding. I will issue a minute in respect to that request in due course.
O G Paulsen Associate Judge
Solicitors:
Lane Neave (B M Russell), Christchurch Copy to: Ms A Keenan, Hokitika.
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