Taranaki Regional Council v White

[2020] NZHC 2140

IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY

I TE KŌTI MATUA O AOTEAROA NGĀMOTU ROHE

CIV-2019-443-38

[2020] NZHC 2140

UNDER

the Insolvency Act 2006

IN THE MATTER

of the bankruptcy of Russell Gibbs

BETWEEN

TARANAKI REGIONAL COUNCIL

Judgment Creditor

AND

RUSSELL GIBBS

Judgment Debtor

CIV-2019-443-39

UNDER

the Insolvency Act 2006

IN THE MATTER

of the bankruptcy of Haumoana White

BETWEEN

TARANAKI REGIONAL COUNCIL

Judgment Creditor

AND

HAUMOANA WHITE

Judgment Debtor

Hearing:	11 August 2020
Appearances:	Russell Gibbs and Haumoana White in person S Maskill for Taranaki Regional Council
Judgment:	24 August 2020

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

TARANAKI REGIONAL COUNCIL v GIBBS [2020] NZHC 2140 [24 August 2020]

Introduction and background

[1]    In these proceedings,  which  were  heard  together  when  called  in  the  New Plymouth list on 11 August 2020, and which can be disposed of together, the judgment debtors, Mr Russell Gibbs and Mr Haumoana White, apply pursuant to     s 309(1)(a) of the Insolvency Act 2006 for the annulment of orders bankrupting them made by this Court on 19 May 2020.

[2]    In early 2011  the  New  Zealand  Transport  Agency  applied  to  the  Taranaki Regional Council pursuant to the Resource Management Act 1991 for consent to carry out major engineering works on State Highway 3 near the road bridge over the Tongaporutu River. The application was opposed by Nga Hapū O Poutama (“Poutama”). As the name indicates, this is the hapū, or, as I understand it, collection of hapū, traditionally connected with the area. Poutama’s objection was based on concerns that the proposed works would have adverse ecological and cultural consequences for the immediate environment. The Council granted the NZTA consent on terms. Poutama appealed. The Environment Court heard the appeal in August 2013. It issued a judgment in October 2013 dismissing the appeal. In a judgment issued in November 2013 it finalised the conditions of the consent. In a judgment issued in February 2014 it made a costs award in favour of the Council against Poutama, Mr Gibbs and Mr White jointly in the sum of $20,000. Of that sum, a total of $12,000 has been paid. Mr Gibbs and Mr White say that once works began it became clear that the environmental concerns on the basis of which NZTA’s application had been opposed were eventuating — that Poutama had been right all along. As I will describe in more detail later in this judgment, Mr Gibb and Mr White say that Poutama — though themselves and others — tried to engage with the Council in relation to this but without success. Poutama, Mr Gibbs and Mr White have declined to pay the $8,000 balance of the costs award.

[3]    I pause at this point to say something about the costs award. As already said, it was made against Poutama, Mr Gibbs and Mr White jointly. Hapū is a collective noun and from a philological point of view has a perfectly clear meaning — it describes a group of individuals who are sufficiently closely connected through whakapapa to form an identifiable family grouping. However, in legal terms, a hapū

is not an entity. It is an unincorporated association, the members of which change from time to time, most obviously as individuals are born and die. Accordingly, making a costs order against a hapū would be problematic as it could only be enforced against all individual members for the time being. No doubt that is why the Environment Court in its costs judgment identified two leading members of Poutama who took prominent roles in relation to the litigation and made its costs order against Pounama and those individuals jointly. In practical terms, this ensured that the Council had two legal entities (Mr Gibbs and Mr White) against whom it could enforce the costs order, and at the same time ensured that Mr Gibbs and Mr White had a legal foundation for insisting that all members of Pouhama were collectively responsible for the costs and could if necessary be asked to contribute to these.

[4]    Mr Gibbs and Mr White say that NZTA breached the terms of its consent in carrying out the works. Poutama and the Council engaged in relation to this, and more generally in relation to the consequences of the works and the costs issue, between April and July 2019. It would seem that by the end of July any discussions or negotiations between the parties had reached a stalemate, because at that point the Council initiated enforcement steps in  respect  of  the  outstanding  costs  against  Mr Gibbs and Mr White.

[5]At the Council’s request this Court issued bankruptcy notices in August 2019.

[6]    At this point in the narrative, the Council’s proceedings against Mr Gibbs and Mr White temporarily part company and must be described separately.

The proceeding against Mr Gibbs

[7]    Between August and October 2019 the Council’s agents made attempts to serve its bankruptcy notice on Mr Gibbs.

[8]    By application dated 11 November 2019 the Council’s solicitors applied for an order for substituted service.

[9]    On 30 November 2019 this Court made such an order entitling the Council to serve the bankruptcy notice and any subsequent documentation on Mr Gibbs by:

(a)Serving Mr Gibbs’ wife, who was incorrectly named as “Marie”

Gibbs;1

(b)Emailing the documentation to Mr Gibbs at the email address generally used by Poutama and its members in dealing with the Council.

[10]   On 14 November 2019 the Council’s solicitors emailed the bankruptcy notice to Mr Gibbs at the Poutama email address.

[11]   During early December 2019 the Council’s agents made attempts to serve the bankruptcy notice on Mr Gibbs’ wife.

[12]   On 12 December 2019 the Council’s agents served the bankruptcy notice on a woman at Mr Gibbs’ address. The evidence of the process server is that the woman he served identified herself as Mr Gibbs’ wife. Mr Gibbs did not comply with the bankruptcy notice.

[13]   On 22 January 2020 the Council commenced bankruptcy proceedings against Mr Gibbs.

[14]   On 3 February 2020 the Council’s solicitors emailed the originating documentation, with the original return date, to Mr Gibbs at the Poutama email address.

[15]   During February and March 2020 the Council’s agents made attempts to serve the originating documentation on Mr Gibbs’ wife.

[16]   On 30 March 2020 the Council’s solicitors received an email apparently from Mr Gibbs sent from the Poutama email address.

[17]   On 21 April 2020 the Council applied for a variation to the existing order for substituted service entitling it to serve the originating documentation by email to the above address, in other words dispensing with service on Mr Gibbs’ wife.

1      It turns out that Mr Gibbs’ wife’s first name is not Marie. Marie Gibbs is his sister.

[18]   On 30 April 2020 this Court varied the order for substituted service accordingly, and enlarged the return date to 19 May 2020.

[19]   On 30 April 2020 the Council’s solicitors served a second set of the originating documentation, with the revised return date, by emailing the same to the Poutama email address.

[20]Mr Gibbs did not enter an appearance in the proceeding.

The proceedings against Mr White

[21]   The evidence is that the  Council’s agents served its bankruptcy notice  on  Mr White on 5 September 2019. I had understood Mr White to deny, both in his affidavit evidence and during the hearing on 11 August 2020, that the bankruptcy notice had been served on him. However, I was obviously mistaken in this because Mr White explained that he did not deny service, but was saying that he could not recall receiving the bankruptcy notice, which of course I accept. Mr White did not comply with the bankruptcy notice.

[22]   On 17 December 2019 the Council commenced bankruptcy proceedings against Mr White.

[23]   Between December 2019 and March 2020 the Council’s agents made attempts to serve the same.

[24]   On 19 March 2020 Council’s solicitors received an email apparently from  Mr White from the Poutama email address.

[25]   On 20 April 2020 the Council applied for an order for substituted service entitling it to serve the originating documentation by emailing him at the Poutama email address.

[26]On 22 April 2020 this Court made such an order.

[27]   On 30 April 2020 the Council’s solicitors served the originating documentation in accordance with the order for substituted service.

[28]Mr White did not enter an appearance in the proceeding.

Hearing

[29]   At this point, the trajectories of the Council’s proceedings against Mr Gibbs and Mr White converge again.

[30]   Both proceedings were called in the New Plymouth list on 19 May 2020. As neither Mr Gibbs nor Mr White had entered an appearance or taken any other steps, and neither of them were present, orders adjudicating them bankrupt were made.

The two applications

[31]Section 309(1)(a) of the Insolvency Act provides:

(1)The court may, on the application of the Assignee or any person interested, annul the adjudication if—

(a)the court considers that the bankrupt should not have been adjudicated bankrupt; or

…

[32]   Mr Gibbs and Mr White both articulate the grounds for their applications as follows:

(1)I should not have been adjudicated bankrupt;

(2)I have not committed an act of bankrupty;

(3)I was unaware of the bankruptcy proceedings against me;

(4)I have not had the opportunity to defend these bankruptcy proceedings, including counterclaim, set-off, cross demand;

(5)The adjudication affects my family, reputation, farming operation, trusteeships, and directorships.

[33]   It will be observed that the grounds set out in the applications are relatively confined. Putting aside points (1), (2) and (5), which do not take matters very far,

points (3) and (4) focus on service and whether or not there has been a miscarriage of justice because Mr Gibbs and Mr White did not have an opportunity to be heard.

[34]   Whilst their applications may be articulated in narrow terms, the same cannot be said for Mr Gibbs’ affidavit evidence (filed and served on behalf of both himself and Mr White) or their joint submissions, both of which range far and wide.

[35]As I understand their contentions, they fall into three broad categories:

(a)Those relating to the merits of the decisions of the Council and the Environment Court down to and including the Environment Court’s costs judgment of 24 February 2014;

(b)Events that have unfolded since the NZTA commenced the works, the scope of the works, the environmental consequences and the alleged refusal of the Council to engage with Poutama;

(c)Service.

[36]   Before turning to the arguments advanced by Mr Gibbs and Mr White, it is necessary to deal with a preliminary challenge made by the Council to their applications.

The application itself

[37]   The Council says that Mr Gibbs and Mr White’s application “should be dismissed as [they are] improperly made”.

[38]   Mr Maskill submitted that an application for annulment must be made by filing a statement of claim with an accompanying application for directions as to service and representation. That is correct. However, I am not prepared to dismiss Mr Gibbs and Mr White’s applications on this ground. As r 1.5(3) of the High Court Rules 2016 says the Court must not decline to deal with a matter simply because it has been commenced by the wrong originating process. I am also mindful of r 1.2, which says the objective of the High Court Rules is to secure the just, speedy, and inexpensive

determination of any proceeding. I treat their applications as if they were originating ones.

The first category of grounds — the NZTA’s application and its merits

[39]   It is well settled that an application for annulment is not an opportunity for the applicant to relitigate the proceeding in which judgment was originally obtained.2 In other words, the applicant cannot challenge the judgment upon which the adjudication was made, aside from anything else, on a judgment debtor’s adjudication, the right to do so vests in the Official Assignee.3

[40]   There may be extraordinary circumstances in which an application — conventionally in the form of a new proceeding — might be based upon some fundamental unlawfulness vitiating the original judgment, such as it having been obtained by fraud. However, there is no foundation for such an argument in this case.

The second category of grounds — the works and their scope and impact

[41]   Mr Gibbs and Mr White say that after the NZTA commenced the works, they breached the terms of the consent and many of the adverse outcomes about which Poutama expressed concern in its objection materialised. They say that whilst they attempted to raise concerns about these matters with the Council, they were rebuffed or ignored and that that constituted a breach by the Council of its obligations, most particularly its obligations to consult with tangata whenua under the Treaty of Waitangi, the Local Government Act 2002 and the Resource Management Act.

[42]   In respect of all of these matters Poutama and Mr Gibbs and Mr White may have had remedies available to them. They elected to pursue none of these. Rather they sought to pursue the informal process of attempting to persuade the Council to take an interest in what they believed was happening.

2      See for example Re Willis, ex parte Willis [2017] NZHC 2586 at [38].

3      Boater v Power [1910] 2 KB 229 (CA) at 232.

[43]   In my judgment, such matters are not capable of giving rise to cross claims on Mr Gibbs and Mr White’s parts which could have been relied on by them as defences to the Council’s claim for costs.

[44]   In short, this Court cannot treat generalised complaints of this sort relating to the way in which the Council dealt with the matter as giving rise to potential cross claims which might have been available to Mr Gibbs and Mr White in these bankruptcy proceedings.

The third category of grounds — the bankruptcy process

[45]   Mr Gibbs and Mr White are on firmer ground in advancing the arguments they do challenging the legitimacy of the process leading to their bankruptcy.

[46]   Mr Gibbs maintains that he did not know that the Council was pursuing bankruptcy proceedings until the Official Assignee notified him of his bankruptcy by letter dated 26 May 2020. Mr White for his part accepts that the Council’s bankruptcy notice was served on him on 5 September 2019, though he says he has no recollection of this, but says that he too had no knowledge of the bankruptcy proceedings until he received the Official Assignee’s letter. Both say that as a result they did not have an opportunity to defend the proceedings and that that constitutes a miscarriage of justice that the Court should have regard to in connection with their applications.

[47]   Mr Maskill for the Council submitted that, when the Court has made an order for substituted service, provided the party serving the documentation in question can establish that it effected service in compliance with the Court’s order — as the Council has certainly done in these cases — it is not open to the party served to complain that he, she or it did not receive the documentation.

[48]   In this regard, Mr Maskill referred me to this Court’s judgment in Fredrickson v Centuron Finance Ltd4 where Associate Judge Sargisson said:

[14] Insofar as Mr Piggin’s arguments challenge the nature of the order for substituted service itself, he is seeking an effective review of that order, which I cannot undertake here. Suffice it to note that in deciding whether to permit

4      Fredrickson v Centuron Finance Ltd HC Auckland, 15 December 2004 at [14].

substituted service under r 211, the Court will assess whether the proposed mode of service is likely to bring the proceeding to the attention of the debtor: Re Rewiri (2002) 16 PRNZ 415 at [15]. Thus, the aim of substituted service is not necessarily to ensure the proceedings definitely come to the attention of the debtor, only that there is a reasonable probability that they do so. Significantly, the Court was satisfied at the time that the one mode of service it prescribed was likely to satisfy the test of the bankruptcy notice and the proceeding being brought to the attention of Mr Fredrickson.

[49]   In my judgment, the position is not as absolute as Mr Maskill would have it. Certainly the passage from Associate Judge Sargisson’s judgment in Fredrickson is not authority for the contention he advances. What her Honour said in that passage is that in making an order for substituted service the court does not have to conclude that the form of service in question will ensure that the documentation reaches the intended party, merely that there is a reasonable probability that it will. That says nothing as to the consequences in a case where it is established that the documentation has not reached the party in question.

[50]I take the true position to be this:

(a)Where the Court has made an order for substituted service, and the party serving documentation establishes that it has effected service in accordance with that order, then that gives rise to an evidential presumption that the documentation has been served;

(b)It is however open to the party who or which is the subject of the order to contend that the documentation has not reached him, her or it, and that that has resulted in an injustice;

(c)The burden is on such a party to establish both that he, she or it did not receive the documentation, and that that has resulted in a miscarriage of justice because it has deprived him, her or it of the opportunity to raise a triable defence.

[51]   So far as the service of the Council’s bankruptcy notice on Mr Gibbs is concerned, the original order for substituted service required the Council physically to serve the bankruptcy notice on Mr Gibbs’ wife. It is true that Mr Gibbs’ wife was

incorrectly named as Maria Gibbs (as already said, Maria Gibbs is Mr Gibbs’ sister) but there is evidence that the  Council’s  agent  served  the  bankruptcy  notice  at  Mr Gibbs’ home on a woman who  acknowledged  that  she  was  Mr Gibbs’ wife. Mr Gibbs’ wife has not sworn an affidavit contradicting this. Second, the Council was ordered to send the bankruptcy notice to Mr Gibbs by email at an email address which the evidence establishes Mr Gibbs uses, and the evidence establishes that this was done.

[52]   As to service of the Council’s bankruptcy notice on Mr White, while Mr White may not recall this, there is uncontradicted evidence that it was personally served on him by the Council’s agent.

[53]   In my judgement, neither Mr Gibbs nor Mr White have established to the necessary standard that they did not receive the Council’s bankruptcy notices.

[54]   Turning to the originating documentation in the two proceedings, these were sent to the Poutama email address in each case. It seems to be far more likely than not that one or either or both of Mr Gibbs and Mr White, or some other user of this email address became aware of the commencement of these proceedings against them and brought them to their attention, especially having regard to the fact that both had already been notified of the initiation of bankruptcy process by the bankruptcy notices.

[55]   One point made by Mr Gibbs and Mr White was that during the time that the originating documentation was emailed to the Poutama email address, the country was in level 4 lockdown. That however is not correct. At the time that the Council served the originating documentation in its proceeding on Mr Gibbs and Mr White (30 April 2020 in both cases) the country was in level 3 lockdown.

[56]   Against that background, Mr Gibbs and Mr White have not satisfied me to the necessary standard that they did not receive the originating documentation in the proceedings against them.

[57]   Even if I had been persuaded that Mr Gibbs and Mr White had not received the originating documentation, and had not had an opportunity to involve themselves in

those proceedings, this would not affect the outcome because, for the reasons I have already given, their evidence does not, in my judgment, establish that they could have raised triable defences to the orders sought. In particular neither of them has established that he had a cross claim capable of being put up as a defence, and neither of them has produced any evidence at all as to his financial position that might have persuaded the Court to exercise its residual discretion to decline to make the order in question.

[58]   Accordingly, I am not satisfied that either Mr Gibbs or Mr White can make out a proper basis for an order for annulment.

An obvious solution

[59]   It is not at all difficult to feel some sympathy for Mr Gibbs and Mr White. Because they took leading roles for and on behalf of their hapū, and wider community, in pursuing what, for all the Court knows, was a perfectly respectable objection to the application by the NZTA, and because they happen to be the two individuals who, on behalf of Poutama, signed the notice of appeal, they have found themselves individually responsible for costs.

[60]   From Mr Gibbs and Mr White’s point of view the net result is, as they both said to me during the course of the hearing, that they have been humiliated by their bankruptcies and that these will have very serious ramifications for them.

[61]   There is it seems to me an obvious route forward for them. In terms of the Environment Court’s judgment they are entitled to seek contributions from Poutama and pay the outstanding costs, together with any costs that may be awarded in the Council’s favour in this proceeding. Whether or not they elect to insist on other members of Poutama contributing, if they were to pay the outstanding $8,000 costs, they could renew their application to the Court for an order annulling their bankruptcies pursuant to s 309(1)(b) of the Insolvency Act. In those circumstances, their application would be almost unassailable, and in any event would be unlikely to meet any resistance.

[62]   During the course of the hearing I gave the parties an opportunity to discuss this as a possible way forward and, whilst they took time to do so, I was informed that they were unable to reach agreement. That is unfortunate.

Conclusion

[63]   The applications by Mr Gibbs and Mr White pursuant to s 309(1)(a) of the Insolvency Act 2006 are dismissed.

[64]   I have not heard the parties in relation to costs and of course there may be aspects of the case of which I am not currently aware. Accordingly, I reserve costs. I would expect the parties to be able to resolve these without further reference to the Court. However, if they are unable to do so, they may revert to the Court by memorandum in the usual way.

Associate Judge Johnston

Solicitors:
Auld Brewer Mazengarb and McEwen for judgment creditor