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 no procedural defect.  The judgment debtor’s response to the judgment creditor’s claim listed his address for service as 2/81 Tui Road, Papatoetoe, Auckland.   That is the address to which the judgment  creditor’s  Information  Capsule  was  directed.     If  the judgment debtor moved to another address, as he indicates he did, that does not matter.  He did not change his address for service.

[b]      There is no arguable defence.  The claim against the judgment debtor is a personal claim for deceit (a form of fraud).

[c]      The submission that it would be just and equitable to set aside the bankruptcy notice is mistimed.  A bankruptcy notice is notice of an intention to apply for a bankruptcy order.  The discretion under s 37 of  the  Insolvency  Act  2006  is  relevant  to  the  hearing  of  the application for adjudication of bankruptcy.  Other than that, there is the inherent jurisdiction of the Court to prevent an abuse of process.

Cases such as Re Wise2 and Re Dench, ex parte Gates3 are helpful in

their discussion of this jurisdiction.  However, and fundamentally, it will not be exercised unless a procedural defect in the obtaining of the judgment on which the bankruptcy notice is based exists; and/or there are arguable grounds of defence to the claim for which judgment was

given.  Even then, this last factor would be regarded cautiously.  This

2      Re Wise HC Auckland B227/95, 21 June 1995.

3      Re Dench, ex parte Gates [2013] NZHC 1133.

is not an appeal jurisdiction and, in the absence of appeal, it is not for

the Court sitting in bankruptcy to re-open judgments of other Courts.

Discussion

[7]      I am persuaded by the submissions of counsel for the judgment creditor.  I do not see a procedural defect.  An address for service is given precisely for the purpose of providing an address at which documents can be served validly.   That was the case here.

[8]      I would still consider the matter if there was clear evidence that because of the deposed fact that the Information Capsule was not actually received, judgment was entered against an untenable plaintiff’s case.  But there is no evidence of such here.  The tort of deceit relies upon allegations that the judgment debtor, the human hand behind AR Transport Ltd, had possession of the fuel card after the termination of the agreement.   That is not denied in the District Court proceeding.   It is not alleged in the materials before me.

[9]      Mr Singh has advised me today that his client now denies that there was deceit and advances the position that the fuel card was used with the authority of the judgment creditor.   But, with respect to Mr Singh, I can put no weight on such a submission from the bar.

[10]     There is an inherent jurisdiction to prevent an abuse of process.   I see no abuse of process here.   Further, the jurisdiction of the Court under s 37 of the Insolvency Act 2006 can be argued before the Judge who is requested to adjudicate the judgment debtor bankrupt.

[11]     There is one final matter.  It has been raised, professionally, responsibly and properly, by counsel for the judgment creditor.   A portion of the judgment debt ($2,024.58) consists of interest awarded pursuant to s 62B of the District Courts Act

1947.  It was awarded by the Registrar.  The Registrar lacked jurisdiction.  Only a

Judge has jurisdiction in respect of discretionary interest.

[12]     In  my  view,  this  does  not  operate  to  invalidate  the  bankruptcy  notice. Instead, I make an order amending the sum in the bankruptcy notice by deducting the interest amount of $2,024.58.

[13]     Apart  from  that,  the application  is  dismissed.    The judgment  creditor  is entitled to costs and I fix these on a 2B basis.

Brewer J