Toll Networks (NZ) Ltd v Ali - [2013] NZHC 2906

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-3492 [2013] NZHC 2906

IN THE MATTER of the Insolvency Act 2006

AND

IN THE MATTER of the bankruptcy of ASHIK ALI Judgment Debtor

BETWEEN TOLL NETWORKS (NZ) LTD Judgment Creditor

ANDASHIK ALI Judgment Debtor

Hearing: 5 November 2013

Counsel: PRW Chisnall for Judgment Creditor
S Singh for Judgment Debtor

Judgment: 5 November 2013

JUDGMENT OF BREWER J

Solicitors: Gibson Sheat (Wellington) for Judgment Creditor
Singhs (Auckland) for Judgment Debtor

TOLL NETWORKS (NZ) LTD v ALI [2013] NZHC 2906 [5 November 2013]

Introduction

[1] The judgment debtor applies to set aside a bankruptcy notice. The ground is procedural defect in a case where the judgment debtor has an arguable defence such that it would be unjust for the bankruptcy notice not to be set aside.

Background

[2] The judgment debtor is the director and shareholder of AR Transport Ltd. The company is now in liquidation. The judgment creditor sued the judgment debtor personally in the District Court for approximately $40,000. AR Transport Ltd had an agreement for owner/driver services with the judgment creditor. The agreement was terminated on 13 April 2012 but, notwithstanding that, a fuel card belonging to the judgment creditor continued to be used and the sum sued for represents the amounts charged to the fuel card post termination of the agreement. The judgment creditor’s cause of action against the judgment debtor is the tort of deceit.

[3] The District Court civil procedure came to an end when the judgment debtor failed to file and serve the Defendant’s Information Capsule. Judgment (essentially by default) was obtained accordingly by the judgment creditor in the District Court at Manukau on 9 July 2013. The bankruptcy notice was served subsequently.

Submissions

[4] The judgment debtor says that he did not receive the judgment creditor’s Plaintiff’s Information Capsule. His case is that the address for service was the registered office of AR Transport Ltd, that that address changed and the company’s accountant omitted to register the change with the Companies Office.

[5] The arguable defence put forward by the judgment debtor is that the debt in question is a debt of AR Transport Ltd and not a personal debt. He submits also
that:1

1 Submissions on behalf of judgment debtor to set aside bankruptcy notice, dated 21 October
2013, at para 2.3.

The company was put into liquidation by the judgment creditor and the liquidator is in the process of selling the company assets to recover the judgment creditor’s debts and to date, no information has been provided as to the amount of outstanding debt, if any. To personally bankrupt the judgment debtor is in effect claiming recovery of the debt twice. That would be unduly harsh and unfair on the judgment debtor as he was merely an officer of the company having not provided any personal guarantees for the debt owed by the company.

[6] Counsel for the judgment creditor, in succinct and well argued submissions, makes these points:

[a] There is…

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: [2013] NZHC 2906
Decision Date: 5 November 2013

CaseChat Overview and Summary

The case involves Toll Networks (NZ) Ltd, the judgment creditor, and Ashiki Ali, the judgment debtor, who is seeking to set aside a bankruptcy notice. The dispute arose out of a personal lawsuit initiated by the judgment creditor against the judgment debtor, who is the director and shareholder of AR Transport Ltd, for approximately $40,000. The underlying claim pertains to the use of a fuel card belonging to the judgment creditor after the termination of an agreement with AR Transport Ltd. The judgment debtor applied to set aside the bankruptcy notice on the grounds of procedural defect and unjustness, given that he has an arguable defence.

The central legal issues before the court were whether there was a procedural defect in the bankruptcy notice and whether there were arguable grounds of defence to the claim. The judgment debtor argued that he did not receive the Plaintiff's Information Capsule, and that the debt in question was a corporate debt of AR Transport Ltd, not a personal debt. He further contended that it would be unjust and unfair to bankrupt him personally as he had not provided any personal guarantees for the company's debt. On the other hand, the judgment creditor argued that there was no procedural defect as the Information Capsule was correctly directed to the judgment debtor's listed address for service. They also argued that the claim was a personal one for deceit and that the inherent jurisdiction to prevent abuse of process would not be exercised unless there were procedural defects or arguable defences.

The court found that there was no procedural defect in the bankruptcy notice, as the address for service was correctly listed and served. The court also rejected the judgment debtor's arguable defence that the debt was a corporate one, noting that the tort of deceit relied on the judgment debtor's possession of the fuel card after the termination of the agreement. The court further held that there was no abuse of process and that the inherent jurisdiction to prevent such would not be exercised in the absence of procedural defects or arguable defences. The court did, however, find that the Registrar lacked jurisdiction to award interest under s 62B of the District Courts Act 1947, and thus amended the sum in the bankruptcy notice by deducting the interest amount of $2,024.58. The application to set aside the bankruptcy notice was dismissed, and the judgment creditor was awarded costs on a 2B basis.

The court ordered that the judgment debtor's application to set aside the bankruptcy notice was dismissed. The sum in the bankruptcy notice was amended by deducting the interest amount of $2,024.58, and the judgment creditor was awarded costs on a 2B basis.

Orders