Strachan v Moodie - [2013] NZHC 3313

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

CIV-2013-454-000064 [2013] NZHC 3312

IN THE MATTER OF the Insolvency Act 2006

BETWEEN ELIZABETH GRACE STRACHAN Judgment Creditor

ANDROBERT ALEXANDER MOODIE Judgment Debtor

Hearing: 3 October 2013

Appearances: R A Moodie Debtor/Applicant in person
P B Churchman QC for Creditor

Judgment: 11 December 2013

JUDGMENT OF ASSOCIATE JUDGE OSBORNE
upon application to set aside bankruptcy notice

Introduction

[1] Ms Strachan obtained judgment debts against Mr Moodie in June 2012 and November 2012. As a result Mr Moodie owes Ms Strachan $222,239.18 together with judgment interest.

[2] When Mr Moodie did not pay the debts, Ms Strachan had a bankruptcy notice issued.

[3] Mr Moodie applies for an order that the bankruptcy notice be set aside upon the basis that he has a cross claim which exceeds the judgment debts.

STRACHAN v MOODIE [2014] NZHC 3312 [11 December 2013]

[4] The cross claim is the subject of an existing proceeding issued by Mr

Moodie, currently contained in its sixth amended statement of claim.1

Does Mr Moodie have such a cross claim? Setting aside a bankruptcy notice – the jurisdiction [5] Rule 24.10 provides:
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.

[6] Section 17(1)(a) of the Insolvency Act 2006 provides:

Failure to comply with bankruptcy notice

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

…

(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.

[7] Section 17(7) of the Act provides:

(7) In subsection (1)(d)(ii), cross claim means a counterclaim, set-off, or cross demand that—

(a) is equal to, or greater than, the judgment debt or the amount that the debtor has been ordered to pay; and

(b) the debtor could not use as a defence in the action or proceedings in which the judgment or the order, as the case may be, was obtained.

1 Moodie v Strachan HC Wellington CIV-2007-485-2212.

[8] The cross-claim referred to in s 17(1)(d)(ii) must be genuine and triable in the sense that the debtor can demonstrate that he or she has a claim of true substance which he or she genuinely proposes to pursue: Sharma v ANZ Banking Group (New Zealand) Ltd.2

The basis of Mr Moodie’s cross claim

[9] Mr Moodie and Ms Strachan are both qualified lawyers. From early 2005 there was a professional relationship between them in the nature of a pupilage.3 Mr Moodie was Ms Strachan’s employer.4 In late-2007, Mr Moodie constructively dismissed…

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.

Continue reading Strachan v Moodie

Details

AGLC: Strachan v Moodie [2013] NZHC 3313
Case: [2013] NZHC 3313
Decision Date: 11 December 2013

CaseChat Overview and Summary

Elizabeth Grace Strachan obtained judgment debts against Robert Alexander Moodie in June and November 2012. Mr Moodie did not pay the debts, and Ms Strachan had a bankruptcy notice issued. Mr Moodie applies for an order that the bankruptcy notice be set aside upon the basis that he has a cross claim which exceeds the judgment debts. The cross-claim referred to in s 17(1)(d)(ii) must be genuine and triable in the sense that the debtor can demonstrate that he or she has a claim of true substance which he or she genuinely proposes to pursue: Sharma v ANZ Banking Group (New Zealand) Ltd. Mr Moodie’s surviving cause of action in defamation qualifies as a genuine triable cross-demand within the formulation in Sharma v ANZ Banking Group. It is a claim of true substance which Mr Moodie is entitled to have this Court treat as one which he genuinely intends to pursue. However, the Court is not satisfied that there is a reasonable probability that Mr Moodie will succeed in recovering an award of damages of $239,774.32 or more. The effect of s 17 Insolvency Act 2006 would have been to require the Court to set aside the bankruptcy notice, even had there seemed to be an element of injustice to Ms Strachan in that course. As it is, there is no injustice to Mr Moodie. If he is unable to pay the judgment debts as required his adjudication in bankruptcy will almost inevitably follow. He will retain his entitlement to pursue his defamation claim as that is a claim which is personal to him and does not vest in the Assignee. Mr Moodie’s application to set aside his bankruptcy notice is dismissed. Mr Moodie is to pay to Ms Strachan the costs of his application on a 2B basis together with disbursements to be fixed by the Registrar, the Court certifying for Mr Churchman’s reasonable costs of travel and accommodation.

Orders