Wiri Pacific Ltd v Kelleher HC Auckland CIV 2010-404-1335
[2010] NZHC 1801
•13 August 2010
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-404-001335
UNDER the Insolvency Act 2006
IN THE MATTER OF the bankruptcy of Tiare Kelleher
BETWEEN WIRI PACIFIC LTD Judgment Creditor
ANDTIARE KELLEHER Judgment Debtor
Hearing: 13 August 2010
Appearances: J Ropati for Creditor
M Ryan for Debtor
Judgment: 13 August 2010
ORAL JUDGMENT OF ASSOCIATE JUDGE BELL [Application to set aside bankruptcy notice]
Solicitors/Counsel:
John Ropati, PO Box 90 232, Auckland Mail Centre
Haigh Lyon, PO Box 119, Auckland
M Ryan, PO Box 941, Auckland
WIRI PACIFIC LTD V T KELLEHER HC AK CIV-2010-404-001335 13 August 2010
[1] In this application to set aside a bankruptcy notice, I am sitting in Court. The bankruptcy notice was first issued on 3 March 2010. The amount payable under the bankruptcy notice is $9,030. This is the amount of a costs award the creditor obtained in the Employment Relations Authority on 28 January 2010 which was registered in the District Court under s 141 of the Employment Relations Act on
2 March 2010.
[2] The background to this matter is that the debtor brought a claim in the Employment Relations Authority for a personal grievance alleging unjustifiable constructive dismissal and unjustifiable disadvantage. The Employment Relations Authority gave its determination on 14 December 2009. It held that the debtor did not have any personal grievances for unjustifiable disadvantage or unjustifiable constructive dismissal. The creditor then applied for costs. The Employment Relations Authority made an order for costs in favour of the creditor on 28 January
2010.
[3] Section 141 of the Employment Relations Act 2000 says:
Any order made or judgment given under this Act by the Authority or the Court (including an order imposing a fine) may be filed in any District Court, and is then enforceable in the same manner as an order made or judgment given by the District Court.
[4] The creditor had the order registered in the District Court and the bankruptcy notice in this case is based on a certificate of judgment given by the District Court under s 66 of the District Courts Act, the certificate being dated 2 March 2010.
[5] In the meantime, on 21 January 2010, the debtor brought a proceeding under s 179 of the Employment Relations Act in the Employment Court, challenging the determination of the Employment Relations Authority.
[6] The creditor was not able to serve the debtor with the bankruptcy notice, despite diligent efforts by the creditor’s process server. The creditor had to apply for substituted service. The substituted service took place on 16 April 2010. On
23 April 2010, the debtor applied to the Employment Relations Authority for a stay of the order for costs pending the hearing of the proceeding in the Employment
Court. On 29 April 2010, the debtor filed the present application in this Court to set aside the bankruptcy notice.
[7] I consider the grounds set out in the application to set aside.
The creditor has not obtained final judgment against the debtor
[8] The order for costs is a final judgment for the purpose of a bankruptcy notice. The order has been registered in the District Court and is enforceable in the same way as a District Court order or judgment. The fact that the order of the Employment Relations Authority may be later set aside upon the hearing of a challenge under s 179 in an Employment Court, does not prevent the order being final. It is just the same as a determination of this Court which might later be set aside upon the hearing of an appeal. Nevertheless, a decision of this Court on the hearing of a substantive matter will be a final determination. The same principle applies to determinations of the Employment Relations Authority registered in the District Court.
The debtor has filed a challenge to the determination of the Employment
Relations Authority in the Employment Court at Auckland
[9] The fact that the debtor has filed a challenge to the determination of the Employment Relations Authority does not provide grounds to set aside the bankruptcy notice. Section 180 of the Employment Relations Act says:
The making of an election under s 179 does not operate as a stay of proceedings on the determination of the authority unless the Court, or the authority, so orders.
In other words, unless a stay is ordered, the order for costs remains enforceable notwithstanding the filing of a challenge under s 179 of the Employment Relations Act.
The debtor has applied to the Employment Relations Authority for a stay of the cost determination which is the subject of the creditor’s alleged debt, pending the hearing of the judgment debtor’s claim in the Employment Court
[10] While the debtor had applied to the Employment Relations Authority for a stay, the Employment Relations Authority had not given its decision on that when the application to set aside was filed. The order for costs remained enforceable.
The certificate of determination which the certificate of judgment issued in the Auckland District Court was based on, is not an order from the Employment Relations Authority and therefore the certificate of judgment has been issued in the absence of any jurisdiction
[11] The certificate of determination on which the District Court based its certificate of judgment is headed “Certificate of Determination”, and refers to the proceeding before the Employment Relations Authority between the debtor and the creditor. The certificate carries the seal of the Employment Relations Authority and is signed by a support officer of the Employment Relations Authority. Under s 138 of the Evidence Act 2006, I am entitled to take notice of that certificate of determination as evidence that the Employment Relations Authority has made an order for costs against the debtor. I see no basis for the claim that the certificate of judgment issued by the District Court has been issued in the absence of any jurisdiction. I also record that I am not relying on s 139 of the Evidence Act because the Employment Relations Authority has not been recognised as a court, but is an investigative body which special functions under s 157 of the Employment Relations Act.
The debtor offered to provide security for costs to the Court but this was rejected by the creditor
[12] The debtor has shown that before the expiry of the bankruptcy notice, her lawyer wrote to the creditor’s lawyer advising that he had received a bank cheque from the debtor for the sum of $9,000 made out to the Ministry of Justice, advising that that would be deposited with the Employment Court as security for costs pending the hearing of the challenge in the Employment Court. This question may
go to compliance with the bankruptcy notice. The bankruptcy notice sets out a number of steps that may be taken to secure compliance. Under (b), the bankruptcy notice says:
You must secure or enter into a new formal agreement with the judgment creditor or, alternatively, obtain the High Court’s approval of terms of payment.
[13] The security which the notice is directed at is a security which ensures unconditional payment to the creditor. In this case, the debtor was not offering unconditional payment to the creditor but was offering an arrangement for funds to be held to await the outcome of the Employment Court’s determination. That was not the security in the sense intended in the bankruptcy notice.
[14] On all five grounds, at the time when the application was set aside was filed, the debtor did not have grounds to set aside the bankruptcy notice.
[15] That is not the end of the matter. The Employment Relations Authority gave a decision on the debtor’s application for a stay of execution. It gave its decision on
2 August 2010. Paragraph 13 of its decision says:
The order that Ms Kelleher pay $9000 to Wiri Pacific as a contribution to their costs, as set out in Authority Determination AA35/10 dated 28 January
2010, is stayed on the following conditions:
•The $9000 held in Ms Kelleher’s solicitors’ (Haigh Lyon) trust account is to continue to be held in that account pending agreement between the parties or order of the Employment Court.
•If it has not yet been done Ms Kelleher is to immediately file an amended statement of claim in the Court incorporating a challenge to the Authority’s costs determination.
•Ms Kelleher is to continue to prosecute her challenge as expeditiously as is practical.
[16] Mr Ropati, for the creditor, says that the second condition was satisfied on
11 August 2010 when the debtor served a copy of the amended statement of claim on the creditor. He says that the stay, therefore, did not take effect until 11 August
2010. The stance I take is that the Authority made a determination for a stay on
2 August 2010. Whether that stay was satisfied or whether the stay should be lifted is a matter for determination by the Employment Relations Authority, or by the
Employment Court hearing the challenge. It is not for this Court to determine whether the stay has been satisfied or should be lifted. Accordingly, the view I take is the stay of the Authority took effect on 2 August 2010.
[17] The next point that this is a stay that has been entered by the Employment Relations Authority. The Insolvency Act is directed at stays of execution ordered by the courts. Section 17(1)(b) refers to a certificate of judgment and says: “Execution of a judgment order has not been halted by a court”. The issue here is that the Employment Relations Authority is not a court. Authorities for that proposition are found in decisions of the Employment Court, Axiom Rolle PRP Valuation Services Ltd v Kapadia ARC79/04, a decision of 4 August 2006, and David v Employment Relations Authority (2001) 6 HRNZ 636, particularly at pp 653 to 655, paras 58 to
67. Nevertheless, the costs decision was registered in the District Court and the costs decision then has the effect of an order or judgment of the District Court. Once the Authority says that the order is no longer enforceable, then this Court can take notice of that and ought not to allow that decision for costs to be enforced in this Court.
[18] Within this Court’s residual discretion, there is power to set aside the bankruptcy notice. Under r 24.10 of the High Court Rules, once an application to set aside is filed, the bankruptcy notice is suspended. The time for compliance with the notice has not expired and in that time a stay of the order for costs has been entered. In these circumstances, the appropriate course to take is to set the bankruptcy notice aside under the Court’s residual discretion.
[19] There remains the question of costs. The creditor was within its rights to issue a bankruptcy notice when it did. It had a valid enforceable order of the Employment Relations Authority which had been registered with the District Court so as to be an enforceable as a judgment of the District Court. When the creditor obtained its bankruptcy notice, the debtor had not obtained any order staying or halting enforcement of the District Court judgment. The debtor has since succeeded having the bankruptcy notice set aside because she has since obtained a stay of the Employment Relations Authority order. In the ordinary course of events, I would regard this as a draw for the parties.
[20] However, there are two aspects to this matter which go against the debtor. The first is the matter of service of the bankruptcy notice. The affidavit sworn in support of the application for substituted service shows very diligent efforts by the process server to serve the debtor. When contact was made with the debtor, she advised the process server that she would not accept the documents and instead they should go to her lawyer. However, when the creditor’s lawyers contacted the debtor’s lawyer, he said he had no instructions to accept service. Quite clearly, this debtor has been messing the creditor around, causing the creditor unnecessary delay and expense. That is unacceptable conduct and the debtor ought to pay the costs of the substituted service application, plus the costs of service.
[21] The other matter is delay by the debtor in filing submissions. This did cause the creditor extra unnecessary work which could have been avoided if submissions had been filed on time. There ought to be some allowance for the creditor on that aspect.
[22] On the application for substituted service, I allow the creditor .8 of a day to cover the application for substituted service and the sealing of the order, and on the inconvenience caused by the late filing of submissions by the debtor, I allow the creditor .2 of a day. That .2 of a day recognises that there was some extra work which had to be carried out but it is not recognition of .4 which the creditor sought. The .8 of a day for the substituted service is under the daily rate of $1,600 a day, and the .2 is under the daily rate of $1,880 a day. My calculations are that the total is
$1,656. In addition, the creditor can recover these disbursements:
a) The filing fee on the application for substituted service;
b) The costs of advertising in the NZ Herald; and
c) The costs of the process server in attempting service on the debtor and any costs of the process server in swearing an affidavit and in later carrying out service.
[23] I order:
a) The bankruptcy notice of 3 March 2010 is set aside.
b)The debtor shall pay the creditor costs of $1,656, plus disbursements, for the items in paragraph 22.
R M Bell
Associate Judge
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