Westpac New Zealand Limited v Fuller

[2012] NZHC 869

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2011-419-543 [2012] NZHC 869

IN THE MATTER OF     the Insolvency Act 2006

AND

IN THE MATTER OF the bankruptcy of SJ Fuller

BETWEEN  WESTPAC NEW ZEALAND LIMITED Judgment Creditor

ANDSHEENA JOY FULLER Judgment Debtor

CIV-2011-419-544

IN THE MATTER OF the bankruptcy of TS Fuller

BETWEEN  WESTPAC NZ LIMITED Judgment Creditor

ANDTHOMAS SHERWOOD FULLER Judgment Debtor

Hearing:         1 May 2012

Counsel:         DJK Mitchell for judgment creditor

RL Scott for the judgment debtors

Judgment:      1 May 2012

(ORAL) JUDGMENT OF ASSOCIATE JUDGE FAIRE [on applications for adjudication]

Solicitors:           Turner Hopkins, PO Box 33 237, Takapuna

Norris Ward McKinnon, Private Bag 3098, Hamilton

WESTPAC NEW ZEALAND LIMITED V FULLER HC HAM CIV-2011-419-543 [1 May 2012]

[1]      The  judgment  creditor  applies  for  orders  adjudicating Thomas  Sherwood

Fuller and Sheena Joy Fuller bankrupts.

[2]      The applications are contained in two files.   The debt the subject of the applications was incurred by the debtors jointly.  The principal circumstances of the parties are the same as are the applicable considerations in respect of both applications.  For that reason, they are heard together and are dealt with in this one judgment.

[3]      On 11 August 2011 I delivered an oral judgment on the judgment debtors’ application to set aside bankruptcy notices.  I recorded the grounds advanced and the circumstances of the parties which, effectively, have not changed as follows:[1]

[1] Fuller v Westpac NZ Limited HC Hamilton  CIV-2011-419-543 11 August 2011.

[9]      The grounds specified in the application by Mr Fuller for the orders sought are:

(a)      He has no means to settle the debt;

(b)       If he is bankrupted he will lose his right to work as an independent contractor as he is contracted in a position of trust.  He will have no means of financial support and will have to seek emergency assistance from WINZ or Anglican Action; and

(c)       At the age of 63, if he was declared bankrupt, it would be impossible to obtain full time employment in industries he is trained in.   Those industries are real estate sales, property valuation, casual teaching or contract catering.

[10]     The grounds specified in the application by Mrs Fuller for the orders sought are:

(a)       She has no means to settle this debt other than by deduction of an affordable sum from her full time salary;

(b)       If she is adjudicated bankrupt, she will lose her job as she is employed in a position of trust.  She will have no means of financial support and will have to seek emergency assistance from WINZ or Anglican Action; and

(c)       She is 54 years of age and will find it impossible to obtain full time employment as she is not trained in any other industry.

…

[12]      In  his  affidavit  in  support,  Mr  Fuller  sets  out  his  position.    He advises that he is qualified and registered as a graduate teacher.  His attempts to get employment have been virtually unsuccessful in the teaching industry.   All he was offered was one day’s teaching at Rotoorangi School in December 2010.  He says that he can register as a valuer.  He also holds a manager’s certificate under the Sale of Liquor Act.  He says that since May 2008, the only work that he has been able  to  perform is that  of an independent contractor  doing contract hospitality catering and contract commercial cleaning.  He is concerned that if he is declared a bankrupt, which of course will not occur on this application, he would lose the opportunity to undertake any employment in industries of trust.  He says he owns no assets other than basic household items.  Somewhat surprisingly, he goes on to say that he is representing himself because he does not qualify for legal aid, although he does not say why he does not qualify for legal aid.

[13]      In her affidavit in support, Mrs Fuller sets out her position.  She has been employed full time in the healthcare industry since she was 17 years old and has never been unemployed.  Her employment is in an industry of trust.  She has no assets other than basic household items. She would have to seek emergency assistance from WINZ or Anglican Action if she were deprived of her income.  She is unable to get assistance from friends or extended family.   Once again, somewhat surprisingly she says that she is representing herself because she does not qualify for legal aid although she does not say why she does not qualify for legal aid.

[4]      At the time the debtors’ application to set aside the bankruptcy notice was heard they represented themselves.  Because of that position, and anticipating that an application for their adjudication might follow, I set out in the judgment what was likely to  be the important  considerations  before the court  on  the hearing of an application for an adjudication order.  That is set out in paragraphs [19], [20], [21],

[22], [23] and [24] of the judgment.[2]    Importantly, I concluded that summary with

the following observation wherein I said:[3]

I encourage the parties, however, before any application for an adjudication order is filed, to attempt to find a solution.  Clearly, a meeting of the parties and a full disclosure of all assets and liabilities and the reasons why a legal aid application would not be successful, should be undertaken.

[2] Ibid, above n1.

[3] Ibid, at [26].

[5]      Ms   Scott,   who   has   only   recently   been   instructed   by   the   debtors, acknowledged on their behalf that the jurisdictional grounds for the making of an

order of adjudication as set out in ss 13 and 36 of the Insolvency Act 2006 had been met.  The sole inquiry, therefore, is whether the court should exercise its discretion under s 37 and refuse to adjudicate the debtors bankrupt.

[6]      In  my  judgment  of  11 August  2011  I  referred  to  s 37  and  the  relevant considerations that are applicable.

[7]      Ms Scott acknowledged that the onus remained with the judgment debtors in relation to the matters that justified the exercise of discretion to refuse to order adjudication.

[8]      The judgment debtors have deposed to having a modest amount of assets. Despite the warning given in my earlier judgment, they omitted to refer to their interest in three companies.  In addition, no detail was given as to the setting up of the trust that owns the house that the judgment debtors live in.  There is also, in the papers, a reference to Kiwisaver interests that might not yet be immediately available in partial satisfaction of the debt, but would seem to be available at sometime in the future if an order of adjudication was made.  The affidavits do not provide the type of disclose of assets and liabilities that I would have expected and, in fact invited the debtors to do in [26] of my earlier judgment.  Nor are there any specific reasons as to why the legal aid application would not be successful, particularly if it was refused on financial grounds.

[9]      The  failure  to  make  this  disclosure  leaves  me  in  some  real  doubt  as  to whether the making of orders of adjudication would, in fact, be a futile exercise in this case.   The opportunity to consider possible avenues of recovery is a consideration.  That,  of  course,  has  to  be  balanced  against  the  factors  that  the judgment  debtors  have  raised  concerning their  current  employment  status.   The evidence in relation to that, however, has not been corroborated.

[10]     I do not overlook the current ages of the debtors in this case.  However, when one gives consideration to the factors that I summarised in Eide v Colonial Mutual

Life Assurance Society Ltd[4] and which is referred to in paragraph [22] of my earlier

[4] Eide v Colonial Mutual Life Assurance Society Ltd [1998] 3 NZLR 632 (HC).

judgment in this case, I am not satisfied that the court would be justified in refusing to adjudicate the judgment debtors bankrupt in this case.5   Having said that, if, on a full investigation of their financial circumstances, the position can support an early discharge, the appropriate application could be made under s 290 of the Insolvency Act 2006.  In that circumstance the parties will obtain some guidance from the Court of Appeal’s examination of the position in ASB Bank v Hogg.6

Orders

[11]     I order that Thomas Sherwood Fuller and Sheena Joy Fuller be adjudicated bankrupts.

[12]     This order is made at 3:10pm.

Costs

[13]     The  judgment  creditor  is  entitled  to  costs  based  on  Category  2  Band B

together with disbursements as fixed by the Registrar and based on a ¼-day hearing.

JA Faire

Associate Judge

5   Fuller v Westpac NZ Ltd, above n 1.

6   ASB Bank v Hogg [1993] 3 NZLR 156 (CA).